<PAGE>
[AIM LOGO APPEARS HERE] Dear Shareholder:
--Registered Trademark--
[PHOTO OF The past year was disappointing for many bond
Charles T. Bauer, investors as the Federal Open Market Committee
Chairman of the (the FOMC) hiked interest rates three times in
LETTER Board of the Fund 1999 and twice in early 2000 in a preemptive
TO OUR APPEARS HERE] effort to contain inflation--inflation that to
SHAREHOLDERS date has remained fairly low. As oil prices
tripled from early 1999 to early 2000, and as the stock market's
rise caused many Americans to spend more freely, inflation fears
were rekindled and the Fed was obliged to remain vigilant. During
the period, the U.S. Treasury announced plans to begin buying
back high-coupon long-term federal debt. This buyback caused some
investors to worry about scarcity in the years ahead, prompting
increased demand for 30-year Treasury bonds, causing their yields
to decline.
Despite rate increases that hurt some bond buyers, municipal-
bond investors fared better; yield spreads between municipals and
Treasuries were at the best levels in years. Indeed, as the
reporting period drew to a close, many new issues of investment-
grade municipal bonds offered investors yields that approached
(and sometimes exceeded) comparable Treasury yields. As a result,
many municipal-bond investors enjoyed tax-free income approaching
or exceeding that provided by taxable securities.
Issuance of municipal bonds declined by 18% from 1998 to 1999,
from $321.0 billion to $263.3 billion; issuance during the first
quarter of 2000 was down 50% from year-earlier levels. States and
municipalities benefited from the nation's robust economy,
collecting more income and property-tax revenues--thereby
reducing their need to issue debt. This decline in issuance
resulted in greater demand for (and better performance by)
municipal bonds. While municipals performed relatively poorly
during 1999, they outperformed other fixed-income security types
during the first quarter of 2000.
YOUR INVESTMENT PORTFOLIO
For the fiscal year ended March 31, 2000, the performance of the
portfolio's Reserve Class was quite competitive; its average
monthly yield was 2.78%, and its seven-day yield was 2.81% as of
March 31, 2000. Net assets of the Reserve Class stood at $23.3
million at the close of the fiscal year.
The Cash Reserve portfolio continues to hold the highest
credit-quality ratings given by three nationally known credit-
rating agencies: AAAm from Standard & Poor's, Aaa from Moody's
and AAA from Fitch IBCA. These historical ratings are based on an
analysis of the portfolio's credit quality, composition,
management and weekly portfolio reviews. AIM is the largest
multi-fund complex to have all its institutional money market
portfolios awarded the highest rating by three nationally
recognized ratings agencies, according to IBC Financial Data,
Inc.
(continued)
<PAGE>
The Cash Reserve Portfolio invests solely in securities rated
"first-tier" as defined in Rule 2a-7 under the Investment
Company Act of 1940. It seeks to generate as high a level of
federally tax-exempt income as is consistent with the
preservation of capital and the maintenance of liquidity by
investing in high-quality short-term municipal obligations. An
investment in a money market fund such as the Cash Reserve
Portfolio is neither insured nor guaranteed by the Federal
Deposit 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
investing in the fund.
OUTLOOK
We remain generally optimistic about the direction of the
economy, and we believe that the FOMC may soon be ready for a
break in its string of anti-inflationary interest-rate
increases. To preserve its nonpartisan image, the Fed typically
avoids dramatically increasing interest rates shortly before a
presidential election. (On May 16, shortly after the reporting
period closed, the Fed raised the federal funds rate to 6.5%.)
We also remain generally optimistic about bond markets in
general and tax-exempt municipal bonds in particular. While
bonds performed relatively poorly in 1999, it is rare that bond
markets suffer bad years back-to-back. Also, the Treasury's
stated intention of issuing less debt while retiring more
expensive issues may force individuals searching for fixed-
income instruments to seek out the municipal market. Demographic
trends favor bonds as well. Every 10 seconds, another "baby
boomer" turns 50, and his or her thoughts turn to retirement.
With 80 million "boomers" approaching retirement, they are
likely preparing to shift some of their assets from equity to
fixed-income products. We are pleased to send you this report
about your investment. AIM is committed to customer service and
the primary goals of safety, liquidity and yield in
institutional fund management. We would be pleased to respond to
any questions or comments you might have about this report or
your investment. Please contact one of our representatives at
800-659-1005 if we may help.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 2000
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATIONS -
100.98%
ALABAMA - 1.49%
Alabama (State of) Water Pollution
Control Authority; Refunding Series
1997 RB
4.50%, 08/15/00(b) AAA Aaa $ 2,340 $ 2,343,962
-----------------------------------------------------------------------------
Birmingham (City of) (YMCA-Birmingham);
Public Park and Recreation Board VRD
Series 1996 RB (LOC-Amsouth Bank of
Alabama)
4.00%, 06/01/16(c) -- VMIG-1 2,945 2,945,000
-----------------------------------------------------------------------------
Mobile (County of) Alabama Board School
of Commissioners; Capital Outlay Series
1996 Wts.
4.75%, 03/01/01(b) AAA Aaa 3,000 3,013,280
-----------------------------------------------------------------------------
Morgan Stanley Float Program, Jefferson
(County of) Sewer Improvement; Floating
Rate Trust Certificates VRD Series 124
1999 Wts. RB
3.98%, 07/01/08(b)(c)(d) A-1c -- 1,400 1,400,000
-----------------------------------------------------------------------------
Northern Alabama Environmental
Improvement Authority (Reynolds Metals
Co.); VRD Series 1985 PCR (LOC-Bank of
Nova Scotia)
4.10%, 12/01/00(c) -- P-1 6,400 6,400,000
-----------------------------------------------------------------------------
16,102,242
-----------------------------------------------------------------------------
ALASKA - 0.46%
Valdez Marine (BP Pipelines Inc.
Project); Floating Rate Treasury VRD
Series 1999 A28 Reg D Term RB
4.05%, 12/01/25(c)(d) -- VMIG-1 5,000 5,000,000
-----------------------------------------------------------------------------
ARIZONA - 1.17%
Mesa Industrial Development Authority
(Discovery Health Systems); VRD Series
1999 B RB
3.85%, 01/01/29(b)(c) A-1+ VMIG-1 2,700 2,700,000
-----------------------------------------------------------------------------
Pima (County of) Arizona Industrial
Authority (Tuscon Electric Power Co.);
Floating Monthly VRD Series 1982 RB
3.90%, 12/01/22(c) A-1+ VMIG-1 10,000 10,000,000
-----------------------------------------------------------------------------
12,700,000
-----------------------------------------------------------------------------
CALIFORNIA - 0.28%
Huntington Beach (City of) (Seabridge
Villas Project); Floating Rate
Multifamily Housing VRD Series 1985 A
RB (LOC-Bank of America)
4.00%, 02/01/10(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 - 3.19%
Colorado (State of) Health Facilities
Authority (Catholic Health
Initiatives); VRD Series 2000 B RB
4.05%, 12/01/20(c) A-1 VMIG-1 $10,000 $ 10,000,000
-----------------------------------------------------------------------------
Eagle Ranch Metro District Golf Course;
VRD Series 1999 B RB (LOC-Societe
Generale)
3.95%, 10/15/18(c) A-1+ -- 3,900 3,900,000
-----------------------------------------------------------------------------
Moffat (County of) (National Rural
Utility Cooperative); VRD Series 1984
PCR
3.95%, 07/01/10(c) A-1+ VMIG-1 14,700 14,700,000
-----------------------------------------------------------------------------
Pitkin (County of) Industrial
Development (Aspen Skiing Co. Project);
Refunding VRD Series 1994 A IDR (LOC-
First National Bank)
4.00%, 04/01/16(c) A-1+ -- 5,890 5,890,000
-----------------------------------------------------------------------------
34,490,000
-----------------------------------------------------------------------------
CONNECTICUT - 0.78%
Connecticut (State of) Development
Authority (Corporation for Independent
Living Project); Health Care VRD Series
1990 RB (LOC-Chase Manhattan Bank)
3.75%, 07/01/15(c) -- VMIG-1 3,334 3,334,000
-----------------------------------------------------------------------------
Connecticut (State of) (Transportation
Infrastructure Purpose S-1); Special
Tax Obligation VRD Series RB
3.85%, 12/01/10(c) A-1+ VMIG-1 2,595 2,595,000
-----------------------------------------------------------------------------
Connecticut (State of) Special Tax
Obligation (JP Morgan PUTTERS); VRD
Series 114 1999 A RB
3.81%, 10/01/09(b)(c)(d) -- VMIG-1 2,464 2,464,000
-----------------------------------------------------------------------------
8,393,000
-----------------------------------------------------------------------------
DELAWARE - 1.05%
University of Delaware; VRD Series 1998 RB
3.90%, 11/01/23(c) A-1+ -- 9,500 9,500,000
-----------------------------------------------------------------------------
Wilmington (City of); Unlimited Tax
Series 1990 GO
6.75%, 05/15/00(b)(f) AAA Aaa 1,815 1,858,680
-----------------------------------------------------------------------------
11,358,680
-----------------------------------------------------------------------------
FLORIDA - 7.18%
Capital Trust Agency (Reliance Community
Revitalization Project); Multifamily
Housing VRD Series RB
4.00%, 12/01/32(b)(c) A-1+ -- 51,631 51,631,000
-----------------------------------------------------------------------------
Gulf Breeze (City of) Healthcare
Facilities (Heritage Health Care
Project); VRD Series 1999 RB
4.00%, 01/01/24(b)(c) -- VMIG-1 7,000 7,000,000
-----------------------------------------------------------------------------
Jacksonville (City of) Capital Project;
VRD Series 1999 2 RB
3.95%, 10/01/22(b)(c) A-1 -- 10,950 10,950,000
-----------------------------------------------------------------------------
Palm Beach (County of) (Jewish Community
Campus Project); VRD Series 2000 RB
(LOC-Northern Trust Co.)
3.90%, 03/01/30(c) A-1+ -- 4,000 4,000,000
-----------------------------------------------------------------------------
Seminole (County of) Florida School
District; Series 1999 TAN
4.00%, 07/28/00 -- MIG-1 4,000 4,001,054
-----------------------------------------------------------------------------
77,582,054
-----------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GEORGIA - 3.79%
Cobb (County of) Development Authority
(Institute of Nuclear Power Operations);
VRD Series 1998 IDR (LOC-Suntrust Bank)
3.95%, 02/01/13(c) -- Aa3 $ 4,970 $ 4,970,000
-------------------------------------------------------------------------------
Cobb (County of) Georgia School District;
Ltd. Tax Series 2000 GO
4.38%, 12/29/00 -- MIG-1 5,000 5,014,606
-------------------------------------------------------------------------------
Cobb (County of) Kennestone Hospital
Authority (Equipment Pool Project);
Anticipation Certificates
VRD Series 1999 RB
4.00%, 04/01/26(b)(c) A-1+ VMIG-1 15,000 15,000,000
-------------------------------------------------------------------------------
Decatur County Bainbridge Industrial
Development Authority
(Kaiser Agriculture Chemical Inc.
Project); VRD Series 1985 IDR (LOC-
Harris Trust & Savings Bank)
3.90%, 12/01/02(c)(e) -- -- 2,100 2,100,000
-------------------------------------------------------------------------------
Dekalb (County of) Private Hospital
Authority (Egleston Childrens Hospital
at Emory University); VRD Series 1994 A
RAN (LOC-Suntrust Bank)
3.85%, 03/01/24(c) A-1+ VMIG-1 2,371 2,371,000
-------------------------------------------------------------------------------
Floyd (County of) Development Authority
(Shorter College Project); VRD Series
1998 RB (LOC-Suntrust Bank)
4.00%, 06/01/17(c) A-1+ -- 4,000 4,000,000
-------------------------------------------------------------------------------
Fulton (County of) Georgia Development
Authority Educational Facilities
(Friends of High Meadows Project); VRD
Series 2000 RB
3.95%, 01/01/20(c) A-1+ -- 4,000 4,000,000
-------------------------------------------------------------------------------
Gwinnett (County of) Housing Authority
(Post Chase Project); Multifamily
Housing VRD Series 1997 RB
3.90%, 06/01/25(c) A-1+ -- 3,500 3,500,000
-------------------------------------------------------------------------------
40,955,606
-------------------------------------------------------------------------------
IDAHO - 0.28%
Idaho (State of); Unlimited Tax Series
1999 TAN
4.25%, 06/30/00 SP-1+ MIG-1 3,000 3,006,058
-------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ILLINOIS - 13.64%
Bear Stearns Municipal Securities Trust
Certificates (Illinois Sales Tax); Class
A VRD Series 1998-25 RB
3.98%, 03/15/07(c)(d) A-1 -- $10,000 $ 10,000,000
-------------------------------------------------------------------------------
Bear Stearns Municipal Securities Trust
Certificates (Illinois State Toll Highway
Authority); Class A VRD Series 1998-67 RB
3.98%, 02/15/12(b)(c)(d) A-1 -- 11,700 11,700,000
-------------------------------------------------------------------------------
Chicago (City of), Ltd. Tax Notes Series
1999 GO (LOC-Westdeutsche Landesbank
Girozentrale)
4.00%, 01/26/01 A-1+ VMIG-1 10,000 10,000,000
-------------------------------------------------------------------------------
East Peoria (City of) (Radnor/East Peoria
Partnership Project); Multifamily Housing
VRD Series 1983 RB (LOC-Bank of Nova
Scotia)
4.15%, 06/01/08(c) -- Aa3 5,085 5,085,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(American College of Surgeons Project);
Tax Exempt VRD Series 1996 RB
(LOC-Northern Trust Co.)
3.95%, 08/01/26(c) A-1+ -- 7,917 7,917,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(Chicago Commons Association Project);
VRD Series 1999 RB (LOC-Bank of America)
4.00%, 01/01/29(c) A-1+ -- 5,500 5,500,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(Jewish Charities Program); VRD Series
2000 B (LOC-Harris Trust & Savings Bank)
4.00%, 06/30/00(c) A-1+ -- 6,990 6,990,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(Local Government Financing Program); VRD
Series 1999 A RB
4.00%, 09/01/29(b)(c) -- VMIG-1 10,000 10,000,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(Metropolitan Family Services); VRD
Series 1999 RB (LOC-Bank of America)
4.00%, 01/01/29(c) A-1+ -- 9,700 9,700,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(The Uno-Ven Co. Project); Refunding VRD
Series 1994 PCR
3.95%, 09/01/08(c) A-1 P-1 6,900 6,900,000
-------------------------------------------------------------------------------
Illinois Educational Facilities Authority
(The Adler Planetarium); VRD Series 1997
RB (LOC-Bank of America)
3.90%, 04/01/31(c) A-1+ -- 4,400 4,400,000
-------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Blessing Hospital); VRD Series 1999 B RB
4.00%, 11/15/29(b)(c) A-1 VMIG-1 17,000 17,000,000
-------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Illinois - (continued)
Illinois Health Facilities Authority
(Northwestern Memorial Hospital); VRD
Series 1995 RB
4.00%, 08/15/25(c) A-1+ VMIG-1 $ 2,400 $ 2,400,000
-------------------------------------------------------------------------------
Illinois Development Finance Authority
(Proctor Hospital Project); VRD Series
1996 RB
3.95%, 01/01/12(c) A-1 -- 3,200 3,200,000
-------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Resurrection Health Care); VRD Series
1999 B RB
3.95%, 05/15/29(c) A-1+ VMIG-1 13,615 13,615,000
-------------------------------------------------------------------------------
Illinois Health Facilities Authority;
Revolving Fund Pooled VRD Series 1985 D
RB (LOC-Bank One Illinois N.A.)
3.90%, 08/01/15(c) A-1 VMIG-1 4,200 4,200,000
-------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Swedish Covenant Hospital); Refunding
VRD Series 1998 A RB
3.85%, 08/15/27(c) A-1 VMIG-1 2,100 2,100,000
-------------------------------------------------------------------------------
Illinois Health Facilities Authority (The
University of Chicago Hospitals); VRD
Series 1998 RB
4.00%, 08/01/26(c) A-1 VMIG-1 7,795 7,795,000
-------------------------------------------------------------------------------
Illinois (State of) Regional
Transportation Authority (Cook Dupage
Lake Co.); Refunding Unlimited Tax
Series 1999 GO
5.00%, 06/01/00(b) AAA Aaa 4,990 5,000,891
-------------------------------------------------------------------------------
University of Illinois; MERLOTS VRD
Series 2000 S RB
4.05%, 04/01/30(b)(c)(d) -- VMIG-1 3,900 3,900,000
-------------------------------------------------------------------------------
147,402,891
-------------------------------------------------------------------------------
INDIANA - 3.60%
Auburn (City of) (Sealed Power Corp.
Project); Economic Development VRD
Series 1985 RB (LOC-NBD Bank)
3.90%, 07/01/10(c) -- VMIG-1 1,200 1,200,000
-------------------------------------------------------------------------------
Indiana Health Facility Financing
Authority (Ascension Health Credit); VRD
Series 1999 B RB
3.90%, 11/15/39(c) A-1+ VMIG-1 13,200 13,200,000
-------------------------------------------------------------------------------
Indiana State Development Finance
Authority (USX Corp. Project); Refunding
Environmental Improvement Series 1998 RB
(LOC-Scotia Bank)
4.05%, 10/05/00(f) A-1 VMIG-1 5,000 5,000,000
-------------------------------------------------------------------------------
Indiana (State of); Bond Bank Notes
4.75%, Series 2000 A-1 07/26/00 SP-1+ MIG-1 6,000 6,016,016
-------------------------------------------------------------------------------
4.75%, Series 2000 A-2 01/18/01 SP-1+ MIG-1 10,000 10,046,123
-------------------------------------------------------------------------------
Indianapolis (City of); Local Public
Improvement Bond Bank Notes Series 1999 G
4.50%, 07/10/00 SP-1+ -- 3,450 3,455,533
-------------------------------------------------------------------------------
38,917,672
-------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
IOWA - 0.65%
Iowa School Corporation (Iowa School Cash
Anticipation Program); Warrant
Certificates
4.00%, Series 1999 A 06/23/00(b) SP-1+ MIG-1 $ 2,000 $ 2,003,379
-------------------------------------------------------------------------------
4.75%, Series 2000 02/01/01(b) SP-1+ MIG-1 5,000 5,028,092
-------------------------------------------------------------------------------
7,031,471
-------------------------------------------------------------------------------
KANSAS - 0.15%
Olathe (City of); Unlimited Tax Series
194 1999 GO
3.75%, 04/01/00(b) AAA Aaa 1,660 1,660,048
-------------------------------------------------------------------------------
KENTUCKY - 1.30%
Kentucky Interlocal School Transportation
Association; Series 1999 TRAN
4.00%, 06/30/00 SP-1+ MIG-1 14,000 14,015,482
-------------------------------------------------------------------------------
LOUISIANA - 0.65%
Louisiana Public Facilities Authority
(Christus Health); Series 1999 B
Commercial Paper Notes
3.65%, 04/06/00(b) A-1 VMIG-1 7,000 7,000,000
-------------------------------------------------------------------------------
MARYLAND - 2.36%
Anne Arundel (County of) Maryland; GO
Commercial Paper Notes
4.05%, 07/07/00 A-1+ P-1 8,000 8,000,000
-------------------------------------------------------------------------------
Maryland Health & Higher Educational
Facilities Authority Pooled Loan
Program; VRD Series 1994 D
(LOC-Bank of America NA)
3.95%, 01/01/29(c) A-1+ -- 9,255 9,255,000
-------------------------------------------------------------------------------
Morgan Stanley Float Program, Washington
Suburban Sanitary District; Floating
Rate Trust Certificates Unlimited Tax
VRD Series 246 GO
4.01%, 06/01/09(c)(d) -- VMIG-1 8,305 8,305,000
-------------------------------------------------------------------------------
25,560,000
-------------------------------------------------------------------------------
MASSACHUSETTS - 0.23%
Worcester Massachusetts Municipal Purpose
Loan; Ltd. Tax Series 1998 B GO
4.50%, 11/01/00(b) AAA Aaa 2,510 2,517,043
-------------------------------------------------------------------------------
MICHIGAN - 5.22%
Bear Stearns Municipal Securities Trust
Certificates, Detroit (City of) Sewage
Disposal Systems; VRD Series 1999-81
Class A RB
3.98%, 10/01/02(b)(c)(d)(f) A-1 -- 15,000 15,000,000
-------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Michigan - (continued)
Dearborn Michigan Economic Development
(Henry Ford Village Inc.); Ltd. Tax
Obligation VRD Series 1998 RB
(LOC-Comerica Bank)
3.95%, 10/01/23(c)(e) -- -- $10,000 $ 10,000,000
-----------------------------------------------------------------------------
Detroit (City of) Water Supply System;
Sr. Lien MERLOTS VRD Series 2000 D
4.05%, 07/01/29(b)(c)(d) -- VMIG-1 10,000 10,000,000
-----------------------------------------------------------------------------
Jackson County Economic Development
Corp. (Sealed Power Corp.); Economic
Development Refunding VRD
Series 1984 RB (LOC-NBD Bank)
3.90%, 10/01/19(c) -- VMIG-1 1,000 1,000,000
-----------------------------------------------------------------------------
Michigan (State of); Municipal Bond
Authority Series 1999 B-1 RB
4.25%, 08/25/00 SP-1+ -- 2,000 2,005,000
-----------------------------------------------------------------------------
Michigan Strategic Fund (260 Brown St.
Associates Project); Convertible VRD
Ltd. Obligation Series 1985 RB
(LOC-Comerica Bank)
3.80%, 10/01/15(c) -- VMIG-1 3,400 3,400,000
-----------------------------------------------------------------------------
Morgan Stanley Float Program, Michigan
State Hospital Finance Authority
(Ascension Health); Floating Rate
Trust Certificates VRD Series 98-180
4.01%, 11/15/06(c)(d) A-1+c -- 15,000 15,000,000
-----------------------------------------------------------------------------
56,405,000
-----------------------------------------------------------------------------
MINNESOTA - 2.02%
Metropolitan Council (Minneapolis-St.
Paul Metro Area Transit); Unlimited
Tax Series 2000 A GO
5.00%, 02/01/01 AAA Aaa 2,250 2,263,879
-----------------------------------------------------------------------------
Rochester Health Care Facility;
Commercial Paper Notes
3.90%, 05/04/00 A-1+ -- 9,600 9,600,000
-----------------------------------------------------------------------------
Rochester Health Care Facility (Mayo
Foundation); Series 2000 C Commercial
Paper Notes
3.70%, 05/25/00 A-1+ -- 10,000 10,000,000
-----------------------------------------------------------------------------
21,863,879
-----------------------------------------------------------------------------
MISSISSIPPI - 1.11%
Mississippi (State of) Hospital
Equipment & Facility Authority;
Commercial Paper Notes (North
Mississippi Health Services Series);
3.90%, 05/16/00 A-1+ VMIG-1 12,000 12,000,000
-----------------------------------------------------------------------------
MISSOURI - 1.74%
Bear Stearns Municipal Securities Trust
Certificates, Health & Educational
Facilities of Missouri; 1998-41 Class
A VRDN Series (SSM Healthcare)
3.98%, 08/01/05(b)(c)(d) A-1+c -- 13,835 13,835,000
-----------------------------------------------------------------------------
Missouri Health & Educational
Facilities Authority (Washington
University); VRD Series 2000 C RB
4.00%, 03/01/40(c) A-1+ VMIG-1 5,000 5,000,000
-----------------------------------------------------------------------------
18,835,000
-----------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW MEXICO - 0.93%
New Mexico (State of); Series 1999 TRAN
4.00%, 06/30/00 SP-1+ MIG-1 $10,000 $ 10,018,321
--------------------------------------------------------------------------------
NEW YORK - 9.85%
Eagle Tax Exempt Trust; Class A COP(d)
3.96%, VRD Series 1993 E 08/01/06(c) A-1+c -- 15,000 15,000,000
--------------------------------------------------------------------------------
3.96%, VRD Series 1993 F 08/01/06(c) A-1+c -- 20,850 20,850,000
--------------------------------------------------------------------------------
3.96%, VRD Series 943901 06/15/07(b)(c) A-1+c -- 15,175 15,175,000
--------------------------------------------------------------------------------
3.96%, VRD Series 97C4702 01/01/20(c) A-1+c -- 9,900 9,900,000
--------------------------------------------------------------------------------
3.96%, VRD Series 964703
07/01/11(b)(c)(g) A-1+c -- 5,870 5,870,000
--------------------------------------------------------------------------------
3.96%, VRD Series 97C4703 01/01/01(c)(g) A-1+c -- 11,295 11,295,000
--------------------------------------------------------------------------------
Eagle Tax Exempt Trust (Houston Water and
Sewer); VRD Series 974305 Class A
3.96%, 12/01/27(b)(c)(d) A-1+c AAA 14,005 14,005,000
--------------------------------------------------------------------------------
Eagle Tax Exempt Trust (Washington State);
VRD Series 984701 Class A
3.96%, 05/01/18(c)(d) A-1+c -- 14,400 14,400,000
--------------------------------------------------------------------------------
106,495,000
--------------------------------------------------------------------------------
NORTH CAROLINA - 2.32%
Beaufort (County of) Industrial Facilities
& Pollution Control Financing Authority
(Texas Gulf Inc.); Series 1982 PCR
(LOC-UBS AG)
4.30%, 09/01/00(f) AA+ Aa1 5,000 5,000,000
--------------------------------------------------------------------------------
Mecklenburg (County of) (The YMCA); Lease
VRD Series 1996 RB (LOC-Wachovia Bank of
North Carolina)
4.00%, 02/01/16(c) A-1+ -- 4,900 4,900,000
--------------------------------------------------------------------------------
North Carolina Medical Care Community
Hospital (ACES Pooled Financing Project);
VRD Series 1985 RB
3.85%, 12/01/25 (b)(c) A-1 VMIG-1 15,150 15,150,000
--------------------------------------------------------------------------------
25,050,000
--------------------------------------------------------------------------------
OHIO - 0.19%
Marion (County of) (Pooled Lease Program);
Hospital Improvement VRD Series 1992 RB
(LOC-Bank One Akron NA)
3.97%, 10/01/22(c) A-1 -- 1,165 1,165,000
--------------------------------------------------------------------------------
Ohio Housing Financing Agency (Kenwood
Congregate Retirement Community Project);
Multifamily Housing VRD Series 1985 RB
(LOC-Morgan Guaranty Trust)
3.95%, 12/01/15(c) -- VMIG-1 856 856,000
--------------------------------------------------------------------------------
2,021,000
--------------------------------------------------------------------------------
OKLAHOMA - 2.90%
Oklahoma Development Financing Authority
(Oklahoma Hospital Association); VRD
Series 1999 A RB
4.00%, 06/01/29(b)(c) A-1+ -- 20,000 20,000,000
--------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Oklahoma - (continued)
Oklahoma (State of) Water Reserve Board
(State Loan Program);
4.10%, VRD Series 1999 RB
09/01/00(b)(c)(f) A-1+c -- $ 4,000 $ 4,000,000
-------------------------------------------------------------------------------
4.05%, VRD Series 1995 RB
09/01/24(b)(c)(f) A-1+ -- 7,370 7,370,000
-------------------------------------------------------------------------------
31,370,000
-------------------------------------------------------------------------------
OREGON - 0.46%
Oregon State Housing & Community Services
Department; Single Family Mortgage
Series 1999 C RB
3.15%, 04/13/00 -- MIG-1 5,000 5,000,000
-------------------------------------------------------------------------------
PENNSYLVANIA - 6.09%
Allegheny (County of); Refunding
Unlimited Tax VRD Series 2000
C-50 GO
3.65%, 05/01/27(b)(c) A-1+c VMIG-1 35,045 35,045,000
-------------------------------------------------------------------------------
Bucks (County of) Industrial Development
Authority (Christian Life Center
Project); VRD Series 1999 RB
(LOC-First Union National Bank)
3.95%, 09/01/19(c)(e) -- -- 3,535 3,535,000
-------------------------------------------------------------------------------
Delaware County Industrial Development
Authority (Henderson-Radnor Joint
Venture Project); Ltd. Obligation VRD
Series 1985 IDR (LOC-First Union National
Bank)
4.15%, 04/01/15(c) -- Aa3 720 720,000
-------------------------------------------------------------------------------
Emmaus General Authority (State Loan
Program); VRD Series 2000 A RB
4.00%, 03/01/30(b)(c) A-1 -- 5,000 5,000,000
-------------------------------------------------------------------------------
Franklin (County of) Industrial
Development Authority (Chambersburg
Hospital); Health Care VRD
Series 2000 RB
3.96%, 12/01/24(b)(c) A-1 Aaa 5,500 5,500,000
-------------------------------------------------------------------------------
Lancaster (County of) Hospital Authority
(Bretheren Village Health Center); VRD
Series 2000 RB (LOC-Suntrust Bank)
3.94%, 06/15/20(c) A-1+ -- 7,825 7,825,000
-------------------------------------------------------------------------------
Lancaster (County of); Unlimited Tax VRD
Series 2000 GO
3.94%, 05/01/30(b)(c) A-1+ Aaa 3,700 3,700,000
-------------------------------------------------------------------------------
York (City of) General Authority; Pooled
Financing VRD Series 1996 RB
(LOC-First Union National Bank)
3.95%, 09/01/26(c) A-1 -- 4,481 4,481,000
-------------------------------------------------------------------------------
65,806,000
-------------------------------------------------------------------------------
SOUTH CAROLINA - 2.47%
South Carolina (State of) Jobs Economic
Development Authority (The Methodist
Home Project); Health Facilities VRD
Series 1994 RB (LOC-Bank of America NA)
4.05%, 12/01/14(c) A-1+ -- 5,200 5,200,000
-------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
South Carolina - (continued)
South Carolina (State of) Public Service
Authority (Santee Cooper); Commercial
Paper Notes
3.55%, 04/10/00 A-1+ P-1 $15,000 $ 15,000,000
-------------------------------------------------------------------------------
South Carolina (State of) Public Service
Authority; MERLOTS VRD Series 2000 L RB
4.05%, 01/01/22(b)(c)(d) -- VMIG-1 6,500 6,500,000
-------------------------------------------------------------------------------
26,700,000
-------------------------------------------------------------------------------
TENNESSEE - 4.07%
Clarksville Public Building Authority
(Pooled Financing Municipal Building
Funding); VRD Series 1999 RB (LOC-Bank of
America NA)
4.00%, 06/01/29(c) -- VMIG-1 20,450 20,450,000
-------------------------------------------------------------------------------
Hamilton (County of) (Tennessee Aquarium);
VRD Series 1999 RB
4.00%, 07/01/21(c) A-1+ -- 5,500 5,500,000
-------------------------------------------------------------------------------
Industrial Development Board of the
Metropolitan Government of Nashville and
Davidson Counties (Amberwood, Ltd.
Project); Multifamily Housing Refunding
IDR (LOC-Commerzbank AG)
4.16%, VRD Series 1993 A 07/01/13(c) A-1+ VMIG-1 2,095 2,095,000
-------------------------------------------------------------------------------
4.16%, VRD Series 1993 B 07/01/13(c) A-1+ VMIG-1 1,790 1,790,000
-------------------------------------------------------------------------------
Sevier (County of) Public Building
Authority (Local Government Public
Improvement);
4.00%, VRD Series 2000 IV B-6 RB
06/01/20(b)(c) -- VMIG-1 7,700 7,700,000
-------------------------------------------------------------------------------
4.00%, VRD Series 1999 IV A-2 RB
06/01/25(b)(c) -- VMIG-1 6,500 6,500,000
-------------------------------------------------------------------------------
44,035,000
-------------------------------------------------------------------------------
TEXAS - 15.98%
Austin (City of) (Travis & Williamson
Counties); Combined Utility Systems
Series 1998 A Commercial Paper Notes
3.85%, 04/17/00 A-1+ P-1 22,344 22,344,000
-------------------------------------------------------------------------------
Bexar (County of) Texas Housing Finance
Authority (Fountainhead Apartments);
Refunding Multifamily Housing VRD
Series 1996 RB
3.90%, 09/15/26(c) A-1+ -- 11,621 11,621,000
-------------------------------------------------------------------------------
Bowie (County of) Texas Industrial
Development Corp. (Wehco Media Inc.); VRD
Series 1985 IDR (LOC-Bank of New York)
4.05%, 11/01/25(c) A-1+ -- 3,500 3,500,000
-------------------------------------------------------------------------------
Dallas Area Rapid Transit (DART); Sales
Tax Revenue Commercial Paper Notes Series
1998 B (LOC-Westdeutsche Landesbank
Girozentrale)
3.90%, 05/08/00 A-1+ P-1 5,513 5,513,000
-------------------------------------------------------------------------------
Dallas (City of) Water & Sewer; Commercial
Paper Notes
3.85%, 04/04/00 A-1+ P-1 18,482 18,482,000
-------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<C>
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); Blood Center
VRD Series 1992 RB (LOC-Texas Commerce
Bank NA)
3.90%, 04/01/17(c) A-1+ -- $ 3,050 $ 3,050,000
-----------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Methodist Hospital
Project); Hospital VRD Series 1994 RB
3.95%, 12/01/25(b)(c) A-1+ -- 4,700 4,700,000
-----------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (The YMCA-Houston);
VRD Series 1999 RB (LOC-Bank One Texas
NA)
4.00%, 07/01/34(c) -- VMIG-1 5,600 5,600,000
-----------------------------------------------------------------------------
Harris (County of) Toll Road; Refunding
Sub Lien Unlimited Tax Series 1995 A GO
6.00%, 08/15/00 AA VMIG-1 2,470 2,490,800
-----------------------------------------------------------------------------
Houston (City of) Water and Sewer
Systems; Floating Rate Treasury VRD
Series A29 1999 Reg D RB
4.00%, 12/01/15(b)(c)(d) -- VMIG-1 4,300 4,300,000
-----------------------------------------------------------------------------
Houston (City of) Water and Sewer
Systems; Series A Commercial Paper
Notes
3.90%, 05/22/00 A-1 P-1 20,000 20,000,000
-----------------------------------------------------------------------------
Plano Texas; Refunding & Improvement
Ltd. Tax Series 1992 GO
5.20%, 09/01/00(b) AAA Aaa 5,000 5,026,998
-----------------------------------------------------------------------------
San Antonio (City of) Texas Water;
Refunding Series 1992 RB
5.90%, 05/15/00(b) AAA Aaa 2,050 2,055,652
-----------------------------------------------------------------------------
San Antonio (City of) Texas Electric &
Gas System; Refunding Series 1991 B RB
5.00%, 02/01/01(g) AA Aa1 2,250 2,263,540
-----------------------------------------------------------------------------
San Antonio (City of) Texas Electric &
Gas System; Series A Commercial Paper
Notes
3.95%, 05/11/00 A-1+ P-1 12,500 12,500,000
-----------------------------------------------------------------------------
Texas (State of) Public Finance
Authority; Series 1993 A GO
Commercial Paper Notes
3.60%, 04/10/00 A-1+ P-1 13,800 13,800,000
-----------------------------------------------------------------------------
3.80%, 06/12/00 A-1+ P-1 9,195 9,195,000
-----------------------------------------------------------------------------
Texas (State of); Series 1999 A TRAN
4.50%, 08/31/00 SP-1+ MIG-1 24,000 24,076,891
-----------------------------------------------------------------------------
Trinity River Industrial Development
Authority (Radiation Sterilizers, Inc.
Project); (LOC-Comerica Bank)
3.95%, VRD Series 1985 A IDR
11/01/05(c) A-1 -- 500 500,000
-----------------------------------------------------------------------------
3.95%, VRD Series 1985 B IDR
11/01/05(c) A-1 -- 1,650 1,650,000
-----------------------------------------------------------------------------
172,668,881
-----------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
UTAH - 0.32%
Intermountain Power Agency, Utah Power
Supply; VRD Series 1985 E RB
4.08%, 09/15/00(b)(c)(f) A-1+ VMIG-1 $ 2,500 $ 2,500,000
-----------------------------------------------------------------------------
Utah Associated Municipal Power System
(The Hunter Project); Refunding Series
1994 RB
4.35%, 07/01/00(b) AAA Aaa 1,000 1,001,835
-----------------------------------------------------------------------------
3,501,835
-----------------------------------------------------------------------------
VIRGINIA - 1.18%
Alexandria Industrial Development
Authority (Pooled Loan Program); VRD
Series 1996 A RB (LOC-Bank of America
NA)
4.00%, 07/01/26(c) A-1+ -- 12,710 12,710,000
-----------------------------------------------------------------------------
WISCONSIN - 0.49%
Wausau (City of) School District;
Series 1999 BAN
3.45%, 06/01/00 -- MIG-1 4 395
-----------------------------------------------------------------------------
Wisconsin Health & Educational
Facilities Authority (Ascension
Health); Credit Series 1999 A RB
4.50%, 11/15/00 AA Aa2 2,285 2,290,447
-----------------------------------------------------------------------------
Wisconsin (State of); Unlimited Tax
Series 1996 A GO
5.00%, 05/01/00 AA Aa2 3,000 3,002,359
-----------------------------------------------------------------------------
5,293,201
-----------------------------------------------------------------------------
WYOMING - 1.39%
Uinta (County of) (Chevron USA Inc.
Project); Refunding VRD Series 1993 PCR
3.85%, 08/15/20(c) -- P-1 15,000 15,000,000
-----------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.98% (Cost
$1,091,465,364)(h) 1,091,465,364
-----------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.98%) (10,557,921)
-----------------------------------------------------------------------------
NET ASSETS - 100.00% $1,080,907,443
-----------------------------------------------------------------------------
</TABLE>
14
<PAGE>
INVESTMENT ABBREVIATIONS:
BAN Bond Anticipation Notes
COP Certificates of Participation
GO General Obligation Bonds
Gtd. Guaranteed
IDR Industrial Development Revenue Bonds
LOC Letter of Credit
Ltd. Limited
MERLOTS Municipal Exempt Receipts Liquidity Optional Tender
PCR Pollution Control Revenue Bonds
PUTTERS Putable Tax Exempt Receipts
RAN Revenue Anticipation Notes
RB Revenue Bonds
Sr. Senior
Sub. Subordinate
TAN Tax Anticipation Notes
TRAN Tax and Revenue Anticipation Notes
VRD Variable Rate Demand
Wts. Warrants
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Ratings assigned by Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P"). Ratings are not covered by
Independent Auditor's Report.
(b) Secured by bond insurance provided by one of the following companies:
AMBAC, FGIC, FSA or MBIA.
(c) Demand security, payable upon demand by the Fund at specified time
intervals no greater than thirteen months. Interest rate is redetermined
periodically. Rate shown is the rate in effect on 03/31/00.
(d) 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.
(e) 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.
(f) Subject to an irrevocable call or mandatory put by the issuer. Value and
maturity date reflect such call or put.
(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.
15
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at value (amortized cost) $1,091,465,364
----------------------------------------------------------------------------
Cash 19,324,736
----------------------------------------------------------------------------
Receivables for:
Investments sold 5,386,833
----------------------------------------------------------------------------
Interest 7,468,060
----------------------------------------------------------------------------
Investment for deferred compensation plan 52,247
----------------------------------------------------------------------------
Other assets 85,930
----------------------------------------------------------------------------
Total assets 1,123,783,170
----------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 39,303,187
----------------------------------------------------------------------------
Dividends 3,214,030
----------------------------------------------------------------------------
Deferred compensation 52,247
----------------------------------------------------------------------------
Accrued administrative services fees 13,422
----------------------------------------------------------------------------
Accrued advisory fees 109,738
----------------------------------------------------------------------------
Accrued transfer agent fees 28,476
----------------------------------------------------------------------------
Accrued distribution fees 33,399
----------------------------------------------------------------------------
Accrued operating expenses 121,228
----------------------------------------------------------------------------
Total liabilities 42,875,727
----------------------------------------------------------------------------
Net assets applicable to shares outstanding $1,080,907,443
============================================================================
NET ASSETS:
Institutional Class $ 964,396,339
============================================================================
Private Investment Class $ 83,453,671
============================================================================
Cash Management Class $ 6,177,627
============================================================================
Reserve Class $ 23,283,221
============================================================================
Resource Class $ 3,596,585
============================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Institutional Class:
Authorized 3,000,000,000
----------------------------------------------------------------------------
Outstanding 964,394,960
============================================================================
Private Investment Class:
Authorized 1,000,000,000
----------------------------------------------------------------------------
Outstanding 83,450,956
============================================================================
Cash Management Class:
Authorized 1,000,000,000
----------------------------------------------------------------------------
Outstanding 6,177,545
============================================================================
Reserve Class:
Authorized 1,000,000,000
----------------------------------------------------------------------------
Outstanding 23,281,300
============================================================================
Resource Class:
Authorized 1,000,000,000
----------------------------------------------------------------------------
Outstanding 3,596,950
============================================================================
Net asset value, offering and redemption price per share for
all classes $1.00
============================================================================
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
STATEMENT OF OPERATIONS
For the year ended March 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $38,158,829
------------------------------------------------------------------
EXPENSES:
Advisory fees 2,457,696
------------------------------------------------------------------
Administrative services fees 142,533
------------------------------------------------------------------
Transfer agent fees 182,602
------------------------------------------------------------------
Custodian fees 55,569
------------------------------------------------------------------
Directors' fees 12,545
------------------------------------------------------------------
Distribution Fees:
Private Investment Class 426,258
------------------------------------------------------------------
Cash Management Class 6,661
------------------------------------------------------------------
Reserve Class 203,369
------------------------------------------------------------------
Resource Class 2,093
------------------------------------------------------------------
Registration and filing fees 217,249
------------------------------------------------------------------
Other expenses 151,148
------------------------------------------------------------------
Total expenses 3,857,723
------------------------------------------------------------------
Less: Fees waived and expenses assumed (1,207,670)
------------------------------------------------------------------
Net expenses 2,650,053
------------------------------------------------------------------
Net investment income 35,508,776
------------------------------------------------------------------
Net realized gain (loss) on sales of investments (532)
------------------------------------------------------------------
Net increase in net assets resulting from operations $35,508,244
==================================================================
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 35,508,776 $ 34,628,129
-----------------------------------------------------------------------------
Net realized gain (loss) on sales of
investments (532) 8,745
-----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 35,508,244 34,636,874
-----------------------------------------------------------------------------
Distributions to shareholders from net
investment income:
Institutional Class (32,180,120) (32,079,516)
-----------------------------------------------------------------------------
Private Investment Class (2,570,746) (2,486,438)
-----------------------------------------------------------------------------
Cash Management Class (218,513) (62,175)
-----------------------------------------------------------------------------
Reserve Class (505,734) --
-----------------------------------------------------------------------------
Resource Class (33,663) --
-----------------------------------------------------------------------------
Capital stock transactions - net:
Institutional Class (108,197,093) 175,685,921
-----------------------------------------------------------------------------
Private Investment Class (7,153,879) 10,142,224
-----------------------------------------------------------------------------
Cash Management Class (961,187) 7,138,732
-----------------------------------------------------------------------------
Reserve Class 23,281,300 --
-----------------------------------------------------------------------------
Resource Class 3,596,950 --
-----------------------------------------------------------------------------
Net increase (decrease) in net assets (89,434,441) 192,975,622
-----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,170,341,884 977,366,262
-----------------------------------------------------------------------------
End of period $1,080,907,443 $1,170,341,884
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in):
Institutional Class $ 964,471,249 $1,072,668,342
-----------------------------------------------------------------------------
Private Investment Class 83,457,398 90,611,277
-----------------------------------------------------------------------------
Cash Management Class 6,178,307 7,139,494
-----------------------------------------------------------------------------
Reserve Class 23,281,300 --
-----------------------------------------------------------------------------
Resource Class 3,596,950 --
-----------------------------------------------------------------------------
Undistributed net realized gain (loss) on
sales of investments (77,761) (77,229)
-----------------------------------------------------------------------------
$1,080,907,443 $1,170,341,884
=============================================================================
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
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 currently offers six different classes of shares, the
Institutional Class, the Private Investment Class, the Personal Investment
Class, the Cash Management Class, the Reserve Class and the Resource 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. Security Valuations - The Fund's securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter, assumes a
constant amortization to maturity of any discount or premiums.
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. Distributions - It is the policy of the Fund to declare daily dividends from
net investment income. Such distributions 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 $77,230 (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.
During the year ended March 31, 2000, AIM waived advisory fees of $952,116.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the year ended March 31, 2000, AIM was
paid $142,533 for such services.
Under the terms of a master distribution agreement between Fund Management
Company ("FMC") and the Fund, FMC acts as the exclusive distributor of the
Fund's shares. The Fund 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 Personal Investment Class, the Cash Management Class, the
Reserve Class, and the Resource Class of the Portfolio. The Plan provides that
the Private Investment
19
<PAGE>
Class, the Personal Investment Class, the Cash Management Class, the Reserve
Class, and the Resource Class pay up to a 0.50%, 0.75%, 0.10%, 1.00%, and
0.20%, respectively, of the average daily net assets attributable to such
class. Of this amount, the Fund may pay an asset-based sales charge to FMC and
the Fund may pay a service fee of (a) 0.25% of the average daily net assets of
each of the Private Investment Class, Personal Investment Class, and the
Reserve Class, (b) 0.10% of the average daily net assets of the Cash Management
Class and (c) 0.20% of the average daily net assets of the Resource Class, to
selected banks, 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, the Personal Investment Class, the
Cash Management Class, the Reserve Class, or the Resource 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 each class. Currently, FMC has elected to waive a portion of its
compensation payable by the Fund such that the compensation paid pursuant to
the Plan with respect to the Private Investment Class, the Personal Investment
Class, the Cash Management Class, the Reserve Class, and the Resource Class
equals 0.25%, 0.50%, 0.08%, 0.80% and 0.16%, respectively, of the average daily
net assets attributable to such class. For the year ended March 31, 2000, the
Private Investment Class, the Cash Management Class, the Reserve Class and the
Resource Class paid $213,129, $5,329, $162,695 and $1,674, respectively, as
compensation to FMC under the Plan. FMC waived fees of $255,554 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. For the year ended March 31, 2000, the Fund
paid AFS $143,898 for such services.
During the year ended March 31, 2000, the Fund paid legal fees of $5,756 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP 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 directors who are not
an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended March 31, 2000 and
1999 were as follows:
<TABLE>
<CAPTION>
2000 1999
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Institutional Class 6,322,728,466 $ 6,322,728,466 7,257,933,597 $ 7,257,933,597
--------------------------------------------------------------------------------------------
Private Investment
Class 370,686,399 370,686,399 580,913,749 580,913,749
--------------------------------------------------------------------------------------------
Cash Management Class* 103,822,089 103,822,089 13,152,591 13,152,591
--------------------------------------------------------------------------------------------
Reserve Class** 195,924,640 195,924,640 -- --
--------------------------------------------------------------------------------------------
Resource Class*** 18,257,101 18,257,101 -- --
--------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Institutional Class 2,285,592 2,285,592 1,929,870 1,929,870
--------------------------------------------------------------------------------------------
Private Investment
Class 2,041,123 2,041,123 2,254,362 2,254,362
--------------------------------------------------------------------------------------------
Cash Management Class* 175,159 175,159 41,812 41,812
--------------------------------------------------------------------------------------------
Reserve Class** 456,780 456,780 -- --
--------------------------------------------------------------------------------------------
Resource Class*** 22,084 22,084 -- --
--------------------------------------------------------------------------------------------
Redeemed:
Institutional Class (6,433,211,151) (6,433,211,151) (7,084,177,546) (7,084,177,546)
--------------------------------------------------------------------------------------------
Private Investment
Class (379,881,401) (379,881,401) (573,025,887) (573,025,887)
--------------------------------------------------------------------------------------------
Cash Management Class* (104,958,435) (104,958,435) (6,055,671) (6,055,671)
--------------------------------------------------------------------------------------------
Reserve Class** (173,100,120) (173,100,120) -- --
--------------------------------------------------------------------------------------------
Resource Class*** (14,682,235) (14,682,235) -- --
--------------------------------------------------------------------------------------------
Net increase (decrease) (89,433,909) $ (89,433,909) 192,966,877 $ 192,966,877
============================================================================================
</TABLE>
* The Cash Management Class commenced sales on January 4, 1999.
** The Reserve Class commenced sales on June 1, 1999.
*** The Resource Class commenced sales on April 6, 1999.
20
<PAGE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Reserve Class
capital stock outstanding during the period June 1, 1999 (date sales commenced)
through March 31, 2000.
<TABLE>
<CAPTION>
2000
-------
<S> <C>
Net asset value, beginning of period $ 1.00
---------------------------------------------------- -------
Income from investment operations:
Net investment income 0.02
---------------------------------------------------- -------
Less distributions from net investment income (0.02)
---------------------------------------------------- -------
Net asset value, end of period $ 1.00
---------------------------------------------------- -------
Total return(a) 2.10%
---------------------------------------------------- -------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $23,283
---------------------------------------------------- -------
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.00%(b)
---------------------------------------------------- -------
Without fee waivers and/or expense reimbursements 1.29%(b)
---------------------------------------------------- -------
Ratio of net investment income to average net assets 2.45%(b)
---------------------------------------------------- -------
</TABLE>
(a) Not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $24,404,278.
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Tax-Free Investments Co.:
We have audited the accompanying statement of assets and liabilities of the
Cash Reserve Portfolio (a Portfolio of Tax-Free Investments Co.), including the
schedule of investments, as of March 31, 2000, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years or periods in the five-year period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of March 31, 2000, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Cash Reserve Portfolio as of March 31, 2000, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
or periods in the five-year period then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
May 1, 2000
Houston, Texas
22
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DIRECTORS
Charles T. Bauer Carl Frischling Tax-Free
Bruce L. Crockett Robert H. Graham Investments Co.
Owen Daly II Prema Mathai-Davis (TFIC)
Edward K. Dunn, Jr. Lewis F. Pennock
Jack M. Fields Louis S. Sklar
OFFICERS
Charles T. Bauer Chairman
Robert H. Graham President
Gary T. Crum Sr. Vice President Cash Reserve
Carol F. Relihan Sr. Vice President & Secretary Portfolio
Dana R. Sutton Vice President & Treasurer ------------------------------------------
Melville B. Cox Vice President Reserve ANNUAL
Karen Dunn Kelley Vice President Class REPORT
J. Abbott Sprague Vice President
Mary J. Benson Assistant Vice President & Assistant Treasurer
Sheri Morris Assistant Vice President & Assistant Treasurer
Renee A. Friedli Assistant Secretary
P. Michelle Grace Assistant Secretary
Nancy L. Martin Assistant Secretary MARCH 31, 2000
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
[LOGO APPEARS HERE]
Fund Management Company
INVESTMENT ADVISOR
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
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 LLP
919 Third Avenue
New York, NY 10022
TRANSFER AGENT
A I M Fund Services, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
AUDITORS
KPMG LLP
700 Louisiana
Houston, TX 77002
This report may be distributed only to current shareholders or
to persons who have received a current prospectus.
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TFIC-AR-4
