<PAGE>
[AIM LOGO APPEARS HERE] Dear Shareholder:
[PHOTO of During the last six months, severe economic
Charles T. Bauer, dislocations in Asia, Russia, and Latin
Chairman of the America, combined with political controversy
LETTER Board of the Fund, in the U.S., precipitated a sharp drop in the
TO OUR APPEARS HERE] U.S. stock market and ignited a strong rally in
SHAREHOLDERS the U.S. fixed-income market. The rally,
however, was largely confined to fixed-income securities with
higher credit-quality ratings. In the unsettled market
environment, investors flocked to higher-rated securities
because of their relative safety and liquidity. As
higher-rated, fixed-income issues soared in price, their yields
dropped to historic lows.
For most of the reporting period, the Federal Reserve Board
(the Fed) was focused on the strength of the domestic economy
and hence was more apt to raise rates to counteract incipient
inflationary pressures. As it became clear that world economic
crises would be more serious than originally thought, the Fed
shifted its focus to providing liquidity and supporting markets
by considering lowering rates. At the end of September, just
before the reporting period ended, the Fed lowered the federal
funds rate from 5.50% to 5.25%.
YOUR INVESTMENT PORTFOLIO
For the six-month period ended September 30, 1998, Cash Reserve
Portfolio, Private Investment Class, outperformed its
competitive benchmarks, as shown in the table. The Portfolio
also maintained the quality of its holdings, consistent with its
AAAm credit quality rating, the highest given by Standard &
Poor's Corporation (S&P), a widely known credit rating agency.
During the reporting period, Moody's Investors Service, Inc.,
(Moody's) another widely known credit rating agency, assigned
the Fund its highest rating, Aaa. S&P and Moody's ratings are
historical and are based on an analysis of the Portfolio's
credit quality, composition, management, and weekly portfolio
reviews.
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 by investing in high-
quality, short-term municipal obligations. It invests solely in
securities rated "First Tier" as defined in Rule 2a-7 under the
Investment Company Act of 1940. Net assets of the Private
Investment Class of the Portfolio stood at $72.96 million at the
end of the reporting period.
An investment in a money market fund is not guaranteed or
insured by the Federal Department of Insurance Corporation or
any other government agency. Although a money market fund seeks
to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
Yields as of 9/30/98
Average Seven-Day
Monthly Yield Yield
Cash Reserve Portfolio
Private Investment Class 3.09% 3.44%
IBC Stockbroker and General Purpose 2.93% 3.21%
IBC All Tax-Free Money Fund Averages(TM) 2.93% 3.23%
- -------------------------------------------------------------------------------
OUTLOOK FOR THE FUTURE
Overall, the environment for fixed-income securities appears
favorable. The inflation rate has remained low despite strong
economic growth over the past few years. Now that economic
growth is slowing, inflation appears to be even less of a
threat. Fed Chairman Alan Greenspan has indicated
(continued)
<PAGE>
that the Fed may further cut interest rates to prevent the
economic situation from deteriorating. Indeed, in mid October,
after the reporting period ended, the Fed further eased monetary
policy. Additional rate cuts could prove beneficial for fixed-
income securities.
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
<PAGE>
SCHEDULE OF INVESTMENTS
September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATIONS - 106.72%
ALABAMA - 1.76%
Birmingham (City of); Series 1998 GO
4.00%, 06/01/11(b)(c) A-1 VMIG-1 $4,000 $ 4,000,000
- -------------------------------------------------------------------------------
Birmingham (City of)
(YMCA-Birmingham); Public Park and
Recreation Board RB
4.00%, 06/01/16(b)(c) -- VMIG-1 3,210 3,210,000
- -------------------------------------------------------------------------------
Huntsville (City of); Series A Warrants
5.25%, 02/01/99 AA Aa 7,060 7,096,716
- -------------------------------------------------------------------------------
Marshall (County of); Special Obligation
School Refunding Series 1994 Warrants
4.05%, 02/01/12(b)(c) A-1+ -- 2,695 2,695,000
- -------------------------------------------------------------------------------
17,001,716
- -------------------------------------------------------------------------------
ALASKA - 1.30%
Alaska Housing Finance Corp.; General
Mortgage Series 1991 A RB
3.60%, 06/01/26(b) A-1+ VMIG-1 12,572 12,572,000
- -------------------------------------------------------------------------------
ARIZONA - 1.86%
Apache (County of) Industrial Development
Authority (Tucson Electric); Series 1983
C IDR
3.60%, 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
3.70%, 12/01/02(b)(c) A-1+ -- 5,500 5,500,000
- -------------------------------------------------------------------------------
17,900,000
- -------------------------------------------------------------------------------
ARKANSAS - 0.72%
Arkansas Hospital Equipment Finance
Authority (Baptist Health Project);
Hospital Equipment RB
4.10%, 11/01/10(b)(d) A-1+ -- 7,000 7,000,000
- -------------------------------------------------------------------------------
CALIFORNIA - 0.31%
Huntington Beach (City of) (Seabridge
Villas Project); Floating Rate
Multifamily Housing Series 1985 A RB
4.00%, 02/01/10(b)(c) -- VMIG-1 3,000 3,000,000
- -------------------------------------------------------------------------------
COLORADO - 1.06%
Colorado (State of) General Fund; Series
1998 A TRAN
4.00%, 06/25/99 SP-1+ -- 5,000 5,014,800
- -------------------------------------------------------------------------------
Colorado Housing Finance Authority
(Coventry Village Project); Multifamily
Housing Refunding Series 1996 B RB
3.70%, 10/15/16(b)(c) A-1+ -- 5,270 5,270,000
- -------------------------------------------------------------------------------
10,284,800
- -------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
RATING (a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
CONNECTICUT - 1.73%
Connecticut (State of) (Transportation
Infrastructure Purpose S-1); Special Tax
Obligation RB
3.55%, 12/01/10(b)(c) A-1+ VMIG-1 $ 5,060 $ 5,060,000
- -------------------------------------------------------------------------------
Connecticut (State of) Power and Light
Development Authority; Series 1993 A RB
3.60%, 09/01/28(b)(c) A-1+ VMIG-1 11,633 11,633,000
- -------------------------------------------------------------------------------
16,693,000
- -------------------------------------------------------------------------------
FLORIDA - 5.72%
Gulf Breeze (City of) (Florida Muncipal
Bond Fund); Variable Rate Demand Series
1995 A RB
4.10%, 03/31/21(b)(c) A-1+ -- 12,310 12,310,000
- -------------------------------------------------------------------------------
Hillsborough (County of) Industrial
Development Authority (Tampa Electric Co.
Project); Refunding Series 1990 PCR
3.90%, 09/01/25(b) -- VMIG-1 4,800 4,800,000
- -------------------------------------------------------------------------------
Hillsborough (County of) Industrial
Development Authority (Tampa Electric Co.
Gannon Coal Conversion Project);
Refunding Series 1992 PCR
4.20%, 05/15/18(b) A-1+ VMIG-1 5,150 5,150,000
- -------------------------------------------------------------------------------
Jacksonville (City of) Florida Educational
Facilities Authority (Jacksonville
University Project); Education Facilities
Series
1998 RB
3.95%, 10/01/22(b)(c) A-1 -- 7,000 7,000,000
- -------------------------------------------------------------------------------
Lee (County of) Housing Finance Authority
(Forestwood Apartments
Project); Housing Series 1995 A RB
3.65%, 06/15/25(b)(c) A-1+ -- 4,426 4,426,000
- -------------------------------------------------------------------------------
Miami (City of) Florida Health Facilities
Authority (Mercy Hospital Project);
Refunding Health Facilities Series 1998
RB
3.55%, 08/01/20(b)(c) A-1+ VMIG-1 8,690 8,690,000
- -------------------------------------------------------------------------------
Putnam County Development Authority
(Seminole Electric Cooperative, Inc.
Project); National Rural Utilities
Finance Corp. Guaranteed Floating/Fixed
Rate Pooled Series 1984 H-1 PCR
3.65%, 03/15/14(b)(c) A-1+ P-1 3,865 3,865,000
- -------------------------------------------------------------------------------
Putnam County (Seminole Electric
Cooperative, Inc. Project); National
Rural Utilities Guaranteed Semiannual
Adjustable Pooled Series 1984 H-4 PCR
3.30%, 03/15/99(c) A-1+ P-1 9,000 9,000,000
- -------------------------------------------------------------------------------
55,241,000
- -------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GEORGIA - 6.23%
Cobb (County of) Georgia School District;
Series 1998 GO
4.00%, 12/31/98 -- MIG-1 $ 3,500 $ 3,503,367
- -------------------------------------------------------------------------------
Cobb (County of) Housing Authority
(Greenhouse Frey Apartment
Project); Multifamily Housing RB
3.65%, 09/15/26(b)(c) A-1+ -- 5,000 5,000,000
- -------------------------------------------------------------------------------
Decatur County Bainbridge Industrial De-
velopment Authority (Kaiser
Agriculture Chemical Inc. Project); Se-
ries 1985 IDR
3.80%, 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
3.65%, 06/15/25(b)(c) A-1+ -- 6,400 6,400,000
- -------------------------------------------------------------------------------
Dekalb Private Hospital Authority (Egles-
ton Childrens Hospital at Emory Univer-
sity); Variable Rate Demand Series 1994
A RAN
3.55%, 03/01/24(b)(c) A-1+ VMIG-1 100 100,000
- -------------------------------------------------------------------------------
Development Authority of Cobb County (In-
stitute of Nuclear Power
Operations Project); Series 1998 RB
4.05%, 02/01/13(b)(c) -- Aa3 9,170 9,170,000
- -------------------------------------------------------------------------------
Development Authority of Floyd County
(Shorter College
Project); Series 1998 RB
4.00%, 06/01/17(b)(c) A-1+ -- 4,000 4,000,000
- -------------------------------------------------------------------------------
Fulton (County of) Housing Authority
(Spring Creek Crossing Project); Multi-
family Housing Refunding Series RB
3.65%, 10/01/24(b)(c) A-1+ -- 5,000 5,000,000
- -------------------------------------------------------------------------------
Gwinnett (County of) Housing Authority
(Greens Apartment
Project); Variable Rate Demand
Multifamily Housing Series 1995 RB
3.65%, 06/15/25(b)(c) A-1+ -- 10,300 10,300,000
- -------------------------------------------------------------------------------
Municipal Electric Authority of Georgia
(Project 1); Subordinated Money Market
Municipal Bonds Series 1985 A
3.60%, 11/10/98(c) A-1+ VMIG-1 7,385 7,385,000
- -------------------------------------------------------------------------------
Roswell (City of) Housing Development Au-
thority (Azalea
Project); Multifamily Housing Refunding
Series 1996 RB
3.65%, 06/15/25(b)(c) A-1+ -- 3,700 3,700,000
- -------------------------------------------------------------------------------
Savannah (City of) Housing Authority
(Somerset Place Project);
Variable Rate Demand Multifamily Housing
Series 1996 A RB
3.50%, 06/15/26(b)(c) A-1+ -- 3,500 3,500,000
- -------------------------------------------------------------------------------
60,158,367
- -------------------------------------------------------------------------------
IDAHO - 0.58%
Idaho (State of); Series 1998 TAN
4.50%, 06/30/99 SP-1+ MIG-1 2,000 2,012,943
- -------------------------------------------------------------------------------
Power (County of) (FMC Corporation Proj-
ect); PCR
4.00%, 12/01/10(b)(c) -- VMIG-1 3,600 3,600,000
- -------------------------------------------------------------------------------
5,612,943
- -------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ILLINOIS - 6.75%
Burbank (City of) (Service Merchandise
Co. Inc. Project); Floating Rate Monthly
Demand Industrial Building Series 1984
RB
3.65%, 09/15/24(b)(c) A-1+ -- $ 2,800 $ 2,800,000
- -------------------------------------------------------------------------------
East Peoria (City of) (Radnor/East Peoria
Partnership Project);
Multifamily Housing Series 1983 RB
4.25%, 06/01/08(b)(c) -- Aa3 5,445 5,445,000
- -------------------------------------------------------------------------------
Illinois (State of); Series 1998 GO
4.25%, 06/01/99(d) AAA Aaa 7,000 7,030,279
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(Adventist Health System/Sunbelt Obli-
gated Group); Variable Rate Demand Se-
ries 1997 A RB
4.05%, 11/15/27(b)(d) A-1+ VMIG-1 5,000 5,000,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(American College of Surgeons Project);
Tax Exempt Series 1996 RB
4.05%, 08/01/26(b)(c) A-1+ -- 5,621 5,621,000
- -------------------------------------------------------------------------------
Illinois Development Finance Authority
(Jewish Charities Revenue
Anticipation Note Progam); Variable Rate
Demand
Series 1998-1999 A RAN
4.05%, 06/30/99(b)(c) A-1+ -- 5,600 5,600,000
- -------------------------------------------------------------------------------
Illinois Educational Facilities Authority
(Northwestern University);
Adjustable Rate Series 1988 RB
3.70%, 03/01/28(b) A-1+ VMIG-1 6,450 6,450,000
- -------------------------------------------------------------------------------
Illinois Health Facilities Authority; Re-
volving Fund Pooled Series D RB
3.65%, 08/01/15(b)(c) A-1+ VMIG-1 1,069 1,069,000
- -------------------------------------------------------------------------------
Oak Forest (City of) (Homewood Pool); Se-
ries 1989 RB
3.65%, 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
3.65%, 09/15/26(b)(c) A-1+ -- 23,180 23,180,000
- -------------------------------------------------------------------------------
65,195,279
- -------------------------------------------------------------------------------
INDIANA - 4.34%
Auburn (City of) (Sealed Power Corp.
Project); Variable Rate Demand Economic
Development Series 1985 RB
3.45%, 07/01/10(b)(c) -- VMIG-1 1,200 1,200,000
- -------------------------------------------------------------------------------
Indiana (State of) (Advance Funding Pro-
gram); Series 1998 A-2 RB
4.00%, 01/20/99 SP-1+ MIG-1 10,000 10,008,835
- -------------------------------------------------------------------------------
Indiana Development Finance Authority
(Southern Indiana Gas and
Electric Project); Series 1998 A PCR
3.65%, 03/01/99 -- VMIG-1 16,000 16,000,000
- -------------------------------------------------------------------------------
Indianapolis (City of) (Jewish Community
Campus Project); Variable Rate Economic
Development RB
3.65%, 04/01/05(b)(c) -- VMIG-1 2,195 2,195,000
- -------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
RATING (a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
INDIANA - (CONTINUED)
Indianapolis (City of); Local Improvement
Series 1998 RB
4.25%, 01/11/99 SP-1+ -- $ 2,400 $ 2,403,938
- -------------------------------------------------------------------------------
Petersburg (City of) (Indianapolis Power
and Light Co. Project); Adjustable Rate
Tender Securities Series 1995 B PCR
3.65%, 01/01/23(b)(d) A-1+ VMIG-1 6,000 6,000,000
- -------------------------------------------------------------------------------
Sullivan (City of) National Rural
Utilities Cooperative Finance Corp.
(Hoosier Energy Rural Electric
Cooperative, Inc.); Series
1985 L-6 RB
3.40%, 12/08/98(c) AA- A-1 4,100 4,100,000
- -------------------------------------------------------------------------------
41,907,773
- -------------------------------------------------------------------------------
IOWA - 2.37%
Iowa Finance Authority (Iowa Health
Systems Corp.); Adjustable Rate Hospital
Facilities Series 1998 B RB
3.50%, 07/01/20(b)(d) A-1+ VMIG-1 5,000 5,000,000
- -------------------------------------------------------------------------------
3.50%, 01/01/28(b)(d) A-1+ VMIG-1 4,300 4,300,000
- -------------------------------------------------------------------------------
Iowa Higher Education Loan Authority;
Private College Facility RB
3.75%, 12/01/15(b)(d) A-1+ VMIG-1 5,000 5,000,000
- -------------------------------------------------------------------------------
Iowa School Corporations (Iowa School
Cash Anticipation Program); Warrant
Certificates Series 1998-1999 A TRAN
4.50%, 06/25/99(c) SP-1+ MIG-1 8,500 8,550,986
- -------------------------------------------------------------------------------
22,850,986
- -------------------------------------------------------------------------------
KANSAS - 1.10%
Burlington (City of) National Rural
Utilities-Cooperative Power Corp.
(Kansas Electric Power Cooperative
Inc.); Series 1985 C-1 RB
3.40%, 12/08/98(c) AA- Aa3 5,610 5,610,000
- -------------------------------------------------------------------------------
Mission (City of) (Silverwood Apartment
Project); Multifamily RB
3.65%, 09/15/26(b)(c) A-1+ -- 5,000 5,000,0000
- -------------------------------------------------------------------------------
10,610,000
- -------------------------------------------------------------------------------
KENTUCKY - 2.89%
Kentucky Asset/Liability Commission;
General Fund TRAN
4.00%, Series 1998 B 06/25/99 SP-1+ MIG-1 2,000 2,009,578
- -------------------------------------------------------------------------------
4.50%, Series 1998 A 06/25/99 SP-1+ MIG-1 5,000 5,032,836
- -------------------------------------------------------------------------------
Kentucky Economic Development Finance
Authority (Catholic Healthcare Project);
Hospital Facilities Series 1998 A RB
3.50%, 12/01/27(b)(c) AA- Aa2 10,000 10,000,000
- -------------------------------------------------------------------------------
Mayfield (City of) (Kentucky League of
Cities Funding Trust Pooled Lease
Financing Program); Variable Rate Multi-
City Lease Series 1996 RB
3.70%, 07/01/26(b)(c) A-1 VMIG-1 4,100 4,100,000
- -------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
RATING (a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
KENTUCKY - (CONTINUED)
Mason (County of) (East Kentucky Power
Cooperative Inc. Project); National
Rural Utilities Cooperative Finance
Corp. Guaranteed Floating/Fixed Rate
Series 1984 B-1 PCR
3.65%, 10/15/14(b)(c) A-1+ -- $ 6,745 $ 6,745,000
- -------------------------------------------------------------------------------
27,887,414
- -------------------------------------------------------------------------------
LOUISIANA - 4.94%
Jefferson (Parish of) Sales Tax District;
Special Sales Tax and Refunding Series
1998 RB
4.00%, 12/01/98(c) AAA Aaa 2,500 2,500,976
- -------------------------------------------------------------------------------
Louisiana Public Facilities Authority
(Sisters of Charity of the Incarnate
Word); Unit Priced Demand Adjustable
Series 1997 E RB
3.55%, 07/01/23(b) A-1+c VMIG-1 9,700 9,700,000
- -------------------------------------------------------------------------------
Louisiana Public Facilities Authority
(Willis-Knighton Medical Center
Project); RB
3.60%, Hospital Series 1995
09/01/25(b)(d) A-1+ VMIG-1 17,500 17,500,000
- -------------------------------------------------------------------------------
3.60%, Hospital Series 1997
09/01/27(b)(d) A-1+ VMIG-1 3,600 3,600,000
- -------------------------------------------------------------------------------
New Orleans (City of); Aviation Board
Series B RB
3.65%, 08/01/16(b)(d) A-1+ VMIG-1 4,935 4,935,000
- -------------------------------------------------------------------------------
New Orleans International Airport
Aviation Board; Refunding Series 1995 A
RB
3.65%, 08/01/15(b)(d) A-1+ VMIG-1 9,500 9,500,000
- -------------------------------------------------------------------------------
47,735,976
- -------------------------------------------------------------------------------
MAINE - 0.12%
Maine Health and Higher Educational
Facilities Authority; Series 1998 B RB
3.70%, 07/01/99(c) AAA -- 1,120 1,120,000
- -------------------------------------------------------------------------------
MARYLAND - 0.54%
Morgan Stanley Float Program, Maryland
State Health & Higher Educational
Facilities Authority (Maryland Health
Upper Chesapeake Hospital Project);
Floating Rate Trust Certificates Series
1998 A 39 RB
4.17%, 01/01/28(b)(c) -- VMIG-1 5,215 5,215,000
- -------------------------------------------------------------------------------
MASSACHUSETTS - 2.59%
Commonwealth of Massachusetts; Variable
Rate Demand Refunding GO
3.55%, 09/01/16(b) A-1+ VMIG-1 20,000 20,000,000
- -------------------------------------------------------------------------------
3.90%, 09/01/16(b) A-1+ VMIG-1 5,000 5,000,000
- -------------------------------------------------------------------------------
25,000,000
- -------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MICHIGAN - 2.34%
Jackson County Economic Development
Corp. (Sealed Power Corp.); Economic
Development Variable Refunding RB
3.45%, 10/01/19(b)(c) -- VMIG-1 $ 1,000 $ 1,000,000
- ------------------------------------------------------------------------------
Michigan (State of); Municipal Bond Au-
thority RB
4.25%, Series 1998 D-1, 08/27/99 SP-1+ -- 3,500 3,520,442
- ------------------------------------------------------------------------------
4.25%, Series 1998 D-2, 08/27/99(c) SP-1+ -- 3,000 3,017,521
- ------------------------------------------------------------------------------
Michigan State Hospital Finance
Authority (Hospital Equipment Loan
Program); Adjustable Series 1996 A RB
3.55%, 12/01/23(b)(c) -- VMIG-1 6,100 6,100,000
- ------------------------------------------------------------------------------
Michigan Strategic Fund (260 Brown St.
Associates Project); Convertible
Variable Rate Demand Limited Obligation
Series 1985 RB
3.50%, 10/01/15(b)(c) -- VMIG-1 3,500 3,500,000
- ------------------------------------------------------------------------------
Michigan Strategic Fund (The Detroit
Edison Company PCB Project); Adjustable
Rate Demand Limited Obligation Series
1995 CC RB
4.20%, 09/01/30(b)(c) A-1+ P-1 5,400 5,400,000
- ------------------------------------------------------------------------------
22,537,963
- ------------------------------------------------------------------------------
MINNESOTA - 2.42%
Becker (City of) (Northern States Power
Co. Project); Adjustable Series 1992-A
PCR
3.75%, 10/27/98 A+ A1 10,400 10,400,000
- ------------------------------------------------------------------------------
Bloomington (City of) Port Authority
(Mall of America Project); Special Tax
Revenue Series 1996 B RB
4.05%, 02/01/13(b)(c) A-1+ VMIG-1 1,200 1,200,000
- ------------------------------------------------------------------------------
Mankato (City of) (Northern States Power
Co. Project); Floating Collateralized
Series 1985 PCR
3.75%, 03/01/11(b)(d) AA- Aa3 2,900 2,900,000
- ------------------------------------------------------------------------------
Minneapolis (City of) Community
Development Agency (Walker Methodist
Health Systems); Adjustable Refunding
Series 1995 RB
3.80%, 04/01/10(b)(c) A-1 -- 5,700 5,700,000
- ------------------------------------------------------------------------------
Minnesota (State of); Housing Finance
Agency Single Family Mortgage Series G
RB
4.15%, 12/01/98(e) A-1+ VMIG-1 2,000 2,001,131
- ------------------------------------------------------------------------------
Red Wing (City of) Industrial
Development Authority (Northern States
Power Co.); Floating Rate
Collateralized Series 1985 PCR
3.75%, 03/01/11(b)(d) AA- A1 1,200 1,200,000
- ------------------------------------------------------------------------------
23,401,131
- ------------------------------------------------------------------------------
MISSOURI - 4.88%
Kansas City (Sleepy Hollow Apartment
Project); Multifamily Housing Series
1996 RB
3.65%, 09/15/26(b)(c) A-1+ -- 7,500 7,500,000
- ------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MISSOURI - (CONTINUED)
Missouri Health & Educational
Facilities Authority (Cox Health
Systems); Insured Variable Rate Demand
Health Facilities Refunding Series
1997 RB
4.00%, 06/01/15(b)(d) A-1+ VMIG-1 $ 6,400 $ 6,400,000
- -----------------------------------------------------------------------------
Missouri Health & Educational
Facilities Authority (Stowers
Institute for Medical Research);
Series 1998 RB
4.00%, 04/01/38(b)(c) A-1+ -- 22,000 22,000,000
- -----------------------------------------------------------------------------
Missouri Health & Educational
Facilities Authority (The Washington
University); Educational Facilities
Series D RB
4.00%, 09/01/30(b) A-1+ VMIG-1 3,400 3,400,000
- -----------------------------------------------------------------------------
Missouri State Development Finance
Board (Science City Union Station);
Infrastructure Facilities Series A RB
3.80%, 12/01/98(c) AA- Aa3 2,850 2,850,435
- -----------------------------------------------------------------------------
Morgan Stanley Float Program,
(University of Missouri Health
System); Floating Rate Trust
Certificates Series 40 1998 RB
4.17%, 11/01/28(b)(d)(f) -- VMIG-1 4,995 4,995,000
- -----------------------------------------------------------------------------
47,145,435
- -----------------------------------------------------------------------------
NEW HAMPSHIRE - 1.46%
New Hampshire Business Finance
Authority (Wheelabrator Concord
Company, L.P. Project); Adjustable
Rate Resource Recovery Refunding
Series 1997 A RB
3.50%, 01/01/18(b)(c) A-1+ -- 8,700 8,700,000
- -----------------------------------------------------------------------------
New Hampshire Housing Finance Authority
(EQR-Bond Partnership-Manchester
Project); Multifamily Housing
Refunding Series 1996 RB
3.65%, 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
3.55%, 01/01/09(b)(c) A-1+ -- 400 400,000
- -----------------------------------------------------------------------------
14,100,000
- -----------------------------------------------------------------------------
NEW MEXICO - 0.52%
New Mexico (State of); Series 1998-1999
TRAN
4.25%, 06/30/99 SP-1+ MIG-1 5,000 5,023,379
- -----------------------------------------------------------------------------
NEW YORK - 17.85%
Eagle Tax Exempt Trust; Class A COP(f)
4.07%, Series 97C4703 01/01/01(b)(g) A-1+c -- 10,800 10,800,000
- -----------------------------------------------------------------------------
4.12%, Series 1993 F 08/01/06(b) A-1+c -- 20,850 20,850,000
- -----------------------------------------------------------------------------
4.12%, Series 1993 E 08/01/06(b) A-1+c -- 15,000 15,000,000
- -----------------------------------------------------------------------------
4.12%, Series 943802 05/01/07(b) A-1+c -- 17,800 17,800,000
- -----------------------------------------------------------------------------
4.12%, Series 943901 06/15/07(b)(d) A-1+c -- 15,175 15,175,000
- -----------------------------------------------------------------------------
4.07%, Series 97C4703 07/01/10(b)(g) A-1+c -- 495 495,000
- -----------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW YORK - (CONTINUED)
Eagle Tax Exempt Trust; Class A
COP(f) - (continued)
4.07%, Series 97C4702 01/01/20(b) A-1+c -- $ 9,900 $ 9,900,000
- -----------------------------------------------------------------------------
4.12%, Series 950901 06/01/21(b)(g) A-1+c -- 13,315 13,315,000
- -----------------------------------------------------------------------------
4.12%, Series 943207 07/01/29(b)(d) A-1+c -- 14,850 14,850,000
- -----------------------------------------------------------------------------
Eagle Tax Exempt Trust (Washington
Public Power Supply System Project No.
2); Series 964703 Class A COP
4.12%, 07/01/11(b)(d)(f) A-1+c -- 5,870 5,870,000
- -----------------------------------------------------------------------------
Eagle Tax Exempt Trust (Washington
State); Series 984701 Class A GO
4.12%, 05/01/18(b)(f) A-1+c -- 14,400 14,400,000
- -----------------------------------------------------------------------------
Long Island Power Authority Electrical
System; Subordinated Series 2 RB
3.50%, 05/01/33(b)(c) A-1+ VMIG-1 5,400 5,400,000
- -----------------------------------------------------------------------------
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
4.10%, 02/15/29(b)(c)(f) A-1+c -- 9,700 9,700,000
- -----------------------------------------------------------------------------
Merrill Lynch Group Float Program, New
York State Mortgage Agency; Floating
Option Tax-Exempt Receipts Series PT
158 RB
4.14%, 04/01/12(b)(c)(f) -- VMIG-1 2,845 2,845,000
- -----------------------------------------------------------------------------
New York (City of); Series 1994
Adjustable Rate Subseries A-4 GO
4.00%, 08/01/21(b)(c) A-1+ VMIG-1 8,500 8,500,000
- -----------------------------------------------------------------------------
New York (City of); Series 1994
Subseries H-3 GO
3.75%, 10/29/98(c) A-1+ VMIG-1 7,500 7,500,000
- -----------------------------------------------------------------------------
172,400,000
- -----------------------------------------------------------------------------
NORTH CAROLINA - 2.91%
North Carolina (State of) Medical Care
Commission (Lexington Memorial
Hospital Project); Variable Rate
Hospital Series 1997 RB
4.10%, 04/01/10(b)(c) -- VMIG-1 4,600 4,600,000
- -----------------------------------------------------------------------------
North Carolina (State of) Medical Care
Commission (Pooled Financing Project);
Variable Rate Hospital Series 1996 A
RB
4.10%, 10/01/16(b)(c) -- VMIG-1 10,500 10,500,000
- -----------------------------------------------------------------------------
North Carolina Medical Care Commission
Retirement Community (Adult
Communities Total Services Inc.);
Variable Rate Demand Series 1996 RB
4.00%, 11/15/09(b)(c) A-1+ -- 5,655 5,655,000
- -----------------------------------------------------------------------------
North Carolina Municipal Power Agency
(Catawba Project); Tax Exempt
Commercial Notes Series 1A
3.60%, 12/09/98(c) A-1+ P-1 7,298 7,298,000
- -----------------------------------------------------------------------------
28,053,000
- -----------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
OHIO - 1.63%
Akron-Summit (County of); Library
Improvement Bonds Series 1998 A GO
4.00%, 12/01/98(c) -- Aaa $2,000 $ 2,001,443
- -------------------------------------------------------------------------------
Franklin (County of) (Bricker & Eckler
Building Co. Project); Variable Rate
Demand Series 1984 IDR
4.25%, 11/01/14(b)(c) -- P-1 8,400 8,400,000
- -------------------------------------------------------------------------------
Lorain (County of) (Catholic Healthcare
Partners); Adjustable Rate Hospital
Facilities Series 1998 A RB
3.50%, 12/01/27(b)(d) A-1+ VMIG-1 3,000 3,000,000
- -------------------------------------------------------------------------------
Marion (County of) (Pooled Lease Program);
Hospital RB
4.05%, 10/01/22(b)(c) A-1+ -- 1,355 1,355,000
- -------------------------------------------------------------------------------
Ohio Housing Finance Agency (Kenwood
Congregate Retirement Community Project);
Variable Rate Demand Multifamily Housing
Series 1985 RB
3.50%, 12/01/15(b)(c) -- VMIG-1 956 956,000
- -------------------------------------------------------------------------------
15,712,443
- -------------------------------------------------------------------------------
OREGON - 0.86%
Klamath Falls (City of) (Salt Caves
Hydroelectric); Adjustable/Fixed RB
3.80%, Series 1986 D, 05/03/99(e)(g) SP-1+ -- 5,670 5,672,216
- -------------------------------------------------------------------------------
Multnoma (County of) (Portland Public
School District); Series 1998 TRAN
4.25%, 06/30/99 SP-1+ MIG-1 2,600 2,611,211
- -------------------------------------------------------------------------------
8,283,427
- -------------------------------------------------------------------------------
PENNSYLVANIA - 2.36%
Delaware County Industrial Development
Authority (Henderson-Radnor Joint Venture
Project); Limited Obligation Series 1985
IDR
4.15%, 04/01/15(b)(c) -- Aa3 810 810,000
- -------------------------------------------------------------------------------
Montour (County of) Geisinger Authority
Health System (Obligation Group); Series
A RB
5.30%, 07/01/99 AA Aa2 1,000 1,011,921
- -------------------------------------------------------------------------------
Montour (County of) Geisinger Authority
Health System (Penn State Geisinger
Health System); Series 1998 B RB
4.15%, 08/15/28(b) A-1+ VMIG-1 7,100 7,100,000
- -------------------------------------------------------------------------------
Pennsylvania Higher Educational Facilities
Authority (Carnegie Mellon University);
Variable Rate Refunding Series 1995 C RB
4.15%, 11/01/29(b) A-1+ -- 3,000 3,000,000
- -------------------------------------------------------------------------------
Philadelphia (City of) School District;
Series 1998-1999 A TRAN
4.25%, 06/30/99(c) SP-1+ MIG-1 1,500 1,506,687
- -------------------------------------------------------------------------------
Quakertown Hospital Authority (HPF Group);
Series 1985 A RB
3.75%, 07/01/05(b)(c) -- VMIG-1 9,300 9,300,000
- -------------------------------------------------------------------------------
22,728,608
- -------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TENNESSEE - 2.36%
Health and Educational Facilities Board of
the Metropolitan Government of Nashville
and Davidson County (Vanderbilt
University); Adjustable Rate Series 1985
A RB
3.75%, 01/15/99 A-1+ VMIG-1 $4,000 $ 4,000,000
- -------------------------------------------------------------------------------
Knox (County of) Industrial Development
Board (Weisgarber Partners); Floating
Rate Series 1984 IDR
3.65%, 12/01/14(b)(c) A-1+ -- 700 700,000
- -------------------------------------------------------------------------------
Industrial Development Board of the
Metropolitan Government of Nashville and
Davidson County (Amberwood, Ltd.
Project); Multifamily Housing RB
4.27%, Series 1993 A 07/01/13(b)(c) -- VMIG-1 2,135 2,135,000
- -------------------------------------------------------------------------------
4.27%, Series 1993 B 07/01/13(b)(c) A-1 VMIG-1 1,825 1,825,000
- -------------------------------------------------------------------------------
Shelby (County of) Health Educational and
Housing Facility Board (Wyndridge
Housing); Variable Rate Demand
Multifamily Housing Refunding RB
3.65%, 10/01/24(b)(c) A-1+ -- 14,135 14,135,000
- -------------------------------------------------------------------------------
22,795,000
- -------------------------------------------------------------------------------
TEXAS - 13.86%
Angelina & Neches River Authority
Industrial Development Corp.
(Temple Inland Marine); Solid Waste
Adjustable Rate Series 1984 B RB
4.10%, 05/01/14(b)(c) -- P-1 3,400 3,400,000
- -------------------------------------------------------------------------------
Bexar (County of) Texas Housing Finance
Authority (Altamonte Apt. Project);
Series 1996 RB
3.65%, 09/15/26(b)(c) A-1+ -- 5,800 5,800,000
- -------------------------------------------------------------------------------
Bexar (County of) Texas Housing Finance
Authority (Fountainhead Apartments);
Multifamily RB
3.65%, 09/15/26(b)(c) A-1+ -- 5,000 5,000,000
- -------------------------------------------------------------------------------
Fort Worth (City of) Water & Sewer System;
Series A Commercial Paper Notes
3.40%, 01/19/99 A-1+ P-1 4,000 4,000,000
- -------------------------------------------------------------------------------
Harris (County of); Series 1998 TAN
4.25%, 02/26/99 SP-1+ MIG-1 5,000 5,013,893
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp.; ACES Greater Houston
Pooled Health Series 1985 A RB
3.60%, 11/01/25(b)(c) A-1 -- 2,600 2,600,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Baylor College of
Medicine Project); Medical Facilities
Series 1997 RB
3.65%, 06/01/27(b) A-1+ -- 9,000 9,000,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Buckner Retirement
Services, Inc. Project); Series 1996 RB
4.10%, 08/15/26(b)(c) -- VMIG-1 5,000 5,000,000
- -------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS - (CONTINUED)
Harris County Health Facilities
Development Corp. (Gulf Coast Regional
Blood Center Project); Series 1992 Blood
Center RB
4.05%, 04/01/17(b)(c) A-1 -- $ 3,350 $ 3,350,000
- -------------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Texas Children's
Hospital); Series 1989 B-2 RB
3.65%, 10/01/19(b) -- VMIG-1 17,500 17,500,000
- -------------------------------------------------------------------------------
Houston (City of); Series 1998 TRAN
4.25%, 06/30/99 SP-1+ MIG-1 5,000 5,025,183
- -------------------------------------------------------------------------------
Houston (City of); Tax and Revenue
Certificates Obligation Series F RB
3.90%, 03/01/99 AA- Aa3 2,140 2,141,236
- -------------------------------------------------------------------------------
Houston (City of) Water and Sewer; Series
A Commercial Paper Notes
3.40%, 02/10/99 A-1 P-1 9,000 9,000,000
- -------------------------------------------------------------------------------
Lower Colorado River Authority; Revenue
Refunding Junior Lien Bonds Third
Supplemental Series 1996 RB
3.50%, 01/01/13(b)(d) A-1+ VMIG-1 8,200 8,200,000
- -------------------------------------------------------------------------------
San Antonio (City of) Electric & Gas
System; Series A Commercial Paper Notes
3.55%, 02/11/99 A-1+ P-1 10,000 10,000,000
- -------------------------------------------------------------------------------
Texas (State of); Series 1998 TRAN
4.50%, 08/31/99 SP-1+ MIG-1 9,000 9,085,968
- -------------------------------------------------------------------------------
Texas Department of Housing and Community
Affairs; SFM Tax Exempt Refunding Series
B Commercial Paper Notes
3.50%, 10/09/98(c) A-1+ -- 9,205 9,205,000
- -------------------------------------------------------------------------------
3.60%, 10/09/98(c) A-1+ -- 12,635 12,635,000
- -------------------------------------------------------------------------------
Texas Municipal Gas Corp.; Senior Lien
Gas Reserve Series 1998 RB
3.55%, 01/15/23(b)(c) A-1+ VMIG-1 3,935 3,935,000
- -------------------------------------------------------------------------------
Texas Water Development Board; State
Revolving Fund Senior Lien Series RB
5.00%, 07/15/99 AAA Aa1 1,800 1,818,607
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
133,859,887
- -------------------------------------------------------------------------------
VERMONT - 1.05%
Vermont (State of); Series 1990 B GO
6.50%, 02/01/99 AA- Aa2 2,000 2,018,375
- -------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
VERMONT - (CONTINUED)
Vermont Educational and Health
Building Finance Authority (VHA
New England); Variable Rate
Hospital RB
3.65%, Series B 12/01/25(b)(d) A-1 -- $ 1,000 $ 1,000,000
- --------------------------------------------------------------------------
3.65%, Series E 12/01/25(b)(d) A-1 -- 2,500 2,500,000
- --------------------------------------------------------------------------
3.65%, Series F 12/01/25(b)(d) A-1+ -- 2,100 2,100,000
- --------------------------------------------------------------------------
3.65%, Series G 12/01/25(b)(d) A-1+ -- 2,560 2,560,000
- --------------------------------------------------------------------------
10,178,375
- --------------------------------------------------------------------------
VIRGINIA - 2.14%
Industrial Development Authority
of the City of Lynchburg (VHA
Mid-Atlantic States, Inc.)
Capital Asset Financing Program;
Variable Rate Hospital Series
1985 F RB
3.65%, 12/01/25(b)(d) A-1 -- 6,700 6,700,000
- --------------------------------------------------------------------------
Norfolk (City of) Industrial
Development Authority (Pooled
Financing Program - Sentara
Health Systems); Commercial Paper
Notes Series 1997 RB
3.60%, 11/13/98 A-1+ VMIG-1 6,000 6,000,000
- --------------------------------------------------------------------------
Waynesboro (City of) Industrial
Development Authority
(Residential Care Facilities); RB
4.10%, 12/01/28(b)(c) A-1 -- 8,000 8,000,000
- --------------------------------------------------------------------------
20,700,000
- --------------------------------------------------------------------------
WASHINGTON - 0.32%
Industrial Development Corp. of
Port Townsend (Port Townsend
Paper Corp. Project); Series 1988
A Variable Rate Refunding RB
4.00%, 03/01/09(b)(c) -- VMIG-1 3,100 3,100,000
- --------------------------------------------------------------------------
WEST VIRGINIA - 1.50%
West Virginia Hospital Finance
Authority (VHA Mid-Atlantic
States, Inc. Capital Asset
Financing Program); RB
3.65%, Series 1985 B
12/01/25(b)(d) A-1+ -- 3,000 3,000,000
- --------------------------------------------------------------------------
3.65%, Series 1985 C
12/01/25(b)(d) A-1+ -- 3,500 3,500,000
- --------------------------------------------------------------------------
3.65%, Series 1985 H
12/01/25(b)(d) A-1 -- 8,000 8,000,000
- --------------------------------------------------------------------------
14,500,000
- --------------------------------------------------------------------------
WISCONSIN - 1.35%
Wisconsin (State of); TAN
4.50%, 06/15/99 SP-1+ MIG-1 13,000 13,084,324
- --------------------------------------------------------------------------
TOTAL INVESTMENTS - 106.72% 1,030,589,226(h)
- --------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES - (6.72%) (64,868,631)
- --------------------------------------------------------------------------
NET ASSETS - 100.00% $ 965,720,595
- --------------------------------------------------------------------------
</TABLE>
15
<PAGE>
ABBREVIATIONS:
<TABLE>
<C> <S> <C> <C>
COP Certificates of Participation RAN Revenue Anticipation Notes
GO General Obligation Bonds RB Revenue Bonds
IDR Industrial Development Revenue Bonds TAN Tax Anticipation Notes
PCR Pollution Control Revenue Bonds 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").
(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 09/30/98.
(c) Secured by a letter of credit.
(d) Secured by bond insurance.
(e) Subject to an irrevocable call or mandatory put by the issuer. Par value
and maturity date reflect such call or put.
(f) 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
complexities and potential risks that may not be present where a municipal
security is owned directly.
(g) Secured by an escrow fund of U.S. Treasury obligations.
(h) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
16
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (amortized cost) $1,030,589,226
- ------------------------------------------------------------------------
Cash 54,177
- ------------------------------------------------------------------------
Receivables for:
Investments sold 5,870,062
- ------------------------------------------------------------------------
Interest 5,348,262
- ------------------------------------------------------------------------
Investment for deferred compensation plan 36,668
- ------------------------------------------------------------------------
Other assets 64,253
- ------------------------------------------------------------------------
Total assets 1,041,962,648
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 73,196,625
- ------------------------------------------------------------------------
Dividends 2,766,736
- ------------------------------------------------------------------------
Deferred compensation 36,668
- ------------------------------------------------------------------------
Accrued administrative services fees 5,452
- ------------------------------------------------------------------------
Accrued advisory fees 139,161
- ------------------------------------------------------------------------
Accrued directors' fees 3,005
- ------------------------------------------------------------------------
Accrued transfer agent fees 16,271
- ------------------------------------------------------------------------
Accrued distribution fees 16,065
- ------------------------------------------------------------------------
Accrued operating expenses 62,070
- ------------------------------------------------------------------------
Total liabilities 76,242,053
- ------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 965,720,595
========================================================================
NET ASSETS:
Institutional Shares $ 892,758,095
========================================================================
Private Investment Class $ 72,962,500
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Shares:
Authorized 3,000,000,000
========================================================================
Outstanding 892,756,573
========================================================================
Private Investment Class:
Authorized 1,000,000,000
========================================================================
Outstanding 72,962,374
========================================================================
Net asset value, offering and redemption price per share $1.00
========================================================================
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
STATEMENT OF OPERATIONS
For the six months ended September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest income $18,890,217
- ------------------------------------------------------------------
EXPENSES:
Advisory fees 1,171,722
- ------------------------------------------------------------------
Administrative services fees 32,109
- ------------------------------------------------------------------
Transfer agent fees 83,230
- ------------------------------------------------------------------
Custody fees 14,325
- ------------------------------------------------------------------
Directors' fees 6,999
- ------------------------------------------------------------------
Distribution fees (Note 2) 190,346
- ------------------------------------------------------------------
Other expenses 81,934
- ------------------------------------------------------------------
Total expenses 1,580,665
- ------------------------------------------------------------------
Less: Fees waived and expenses assumed (414,233)
- ------------------------------------------------------------------
Net expenses 1,166,432
- ------------------------------------------------------------------
Net investment income 17,723,785
- ------------------------------------------------------------------
Net realized gain on sales of investments 4,129
- ------------------------------------------------------------------
Net increase in net assets resulting from operations $17,727,914
==================================================================
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended September 30, 1998 and the year ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 17,723,785 $ 36,533,922
- -----------------------------------------------------------------------------
Net realized gain on sales of investments 4,129 9,664
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 17,727,914 36,543,586
- -----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Shares (16,521,562) (34,792,247)
- -----------------------------------------------------------------------------
Private Investment Class (1,202,223) (1,741,675)
- -----------------------------------------------------------------------------
Capital stock transactions - net:
Institutional Shares (4,149,559) (69,673,016)
- -----------------------------------------------------------------------------
Private Investment Class (7,500,237) 42,918,457
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets (11,645,667) (26,744,895)
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 977,366,262 1,004,111,157
- ----------------------------------------------------------------------------
End of period $ 965,720,595 $ 977,366,262
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in):
Institutional Shares $ 892,756,573 $ 896,906,132
- -----------------------------------------------------------------------------
Private Investment Class 72,962,374 80,462,611
- -----------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of
investments 1,648 (2,481)
- -----------------------------------------------------------------------------
$ 965,720,595 $ 977,366,262
=============================================================================
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(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. Net realized capital gains (including net short-term capital
gains and market discounts), if any, are distributed annually.
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 $85,975 (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 expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable 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, 1998, AIM reduced its advisory fee from the Fund
by $319,060.
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,
1998, the Fund reimbursed AIM $32,109 for such services.
20
<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, 1998, the Private Investment
Class paid $95,173 as compensation to FMC under the Plan. FMC waived fees of
$95,173 during the same period.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agent and
shareholder services to the Fund. During the six months ended September 30,
1998, the Fund paid AFS $83,230 for such services.
During the six months ended September 30, 1998, the Fund paid legal fees of
$2,872 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,
1998 and the year ended March 31, 1998 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 MARCH 31, 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sold:
Institutional Shares 3,290,499,360 $3,290,499,360 5,302,472,459 $5,302,472,459
- ---------------------------------------------------------------------------------------
Private Investment
Class 261,616,207 261,616,207 484,657,926 484,657,926
- ---------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Shares 1,179,051 1,179,051 2,107,154 2,107,154
- ---------------------------------------------------------------------------------------
Private Investment
Class 1,088,184 1,088,184 1,514,378 1,514,378
- ---------------------------------------------------------------------------------------
Redeemed:
Institutional Shares (3,295,827,970) (3,295,827,970) (5,374,252,629) (5,374,252,629)
- ---------------------------------------------------------------------------------------
Private Investment
Class (270,204,628) (270,204,628) (443,253,847) (443,253,847)
- ---------------------------------------------------------------------------------------
Net increase
(decrease) (11,649,796) $ (11,649,796) (26,754,559) $ (26,754,559)
=======================================================================================
</TABLE>
21
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Private Investment
Class capital stock outstanding during the six months ended September 30, 1998
and each of the years in the five-year period ended March 31, 1998.
<TABLE>
<CAPTION>
MARCH 31,
SEPTEMBER 30, -------------------------------------------
1998 1998 1997 1996 1995 1994
------------- ------- ------- ------- ------- -------
<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 0.03 0.02
- ----------------------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.02) (0.03) (0.03) (0.03) (0.03) (0.02)
- ----------------------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======================= ======= ======= ======= ======= ======= =======
Total return 3.21%(a) 3.29% 3.07% 3.41% 2.80% 2.07%
======================= ======= ======= ======= ======= ======= =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $72,963 $80,462 $37,544 $35,139 $29,286 $16,601
======================= ======= ======= ======= ======= ======= =======
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) 3.16%(c) 3.24% 3.02% 3.35% 2.89% 2.05%
======================= ======= ======= ======= ======= ======= =======
</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
0.76% (annualized), 0.77%, 0.83%, 0.76%, 1.17% and 1.15% for the periods
1998-1994, respectively.
(c) Ratios are annualized and based on average net assets of $75,930,655.
(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 2.85% (annualized), 2.92%, 2.65%, 3.04%, 2.17% and
1.35% for the periods 1998-1994, respectively.
22
<PAGE>
23
<PAGE>
<TABLE>
<S> <C>
DIRECTORS
Charles T. Bauer Robert H. Graham Tax-Free
Bruce L. Crockett Prema Mathai-Davis Investments Co.
Owen Daly II Lewis F. Pennock (TFIC)
Edward K. Dunn, Jr. Ian W. Robinson
Jack Fields Louis S. Sklar
Carl Frischling
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
Renee A. Friedli Assistant Secretary SEPTEMBER 30, 1998
P. Michelle Grace Assistant Secretary
Jeffrey H. Kupor Assistant Secretary
Nancy L. Martin Assistant Secretary
Ofelia M. Mayo Assistant Secretary
Lisa A. Moss 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 LLP
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 Fund Services, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
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>
