<PAGE> 1
[AIM LOGO APPEARS HERE]
[GRAPHIC COLLAGE APPEARS HERE]
AIM TAX-FREE
INTERMEDIATE SHARES
SEMIANNUAL REPORT
SEPTEMBER 30, 1995
<PAGE> 2
AIM TAX-FREE INTERMEDIATE SHARES
For shareholders who seek a high current level of monthly income, exempt from
federal taxes. The Fund purchases high quality municipal bonds maturing in
10-1/2 years or less.
ABOUT FUND PERFORMANCE DATA AND BENCHMARK INDEXES THROUGHOUT THIS REPORT:
o The Fund's performance is historical and reflects reinvestment of all
distributions. Unless otherwise indicated, Fund results were computed
without a sales charge. When sales charges are included, the Fund's
performance reflects the 1.00% maximum sales charge.
o The distribution rate is equal to the actual distributions from investment
income declared for the prior 30-day period, expressed as an annual
percentage of maximum offering price. Distribution rates may include daily
dividends and short-term capital gains.
o The SEC 30-day yield calculation reflects the yield to maturity of the
bonds in the portfolio, and includes both interest and amortization of any
discount or premium to the face value of the bonds.
o The taxable equivalent yield is calculated in the same manner as the 30-day
yield with an adjustment for a stated, assumed tax rate.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o Lipper Analytical Services, Inc., is an independent mutual fund performance
monitor. The unmanaged Lipper Intermediate Municipal Fund Index represents
an average of the performance of the 30 largest intermediate-term municipal
bond funds. The unmanaged Lipper General Municipal Debt Funds Index is a
representative average of the performance of the 30 largest municipal bond
mutual funds.
o An investment cannot be made in the indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 1995
<TABLE>
<CAPTION>
Without With
Sales Charge Sales Charge
------------ ------------
<S> <C> <C>
Since Inception (5/11/87) 6.70% 6.57%
Five Years 7.24 7.03
One Year 7.49 6.38
6 Months 3.95 2.89
</TABLE>
Six-month performance includes reinvested distributions of $0.2475 per share.
- --------------------------------------------------------------------------------
<PAGE> 3
CHAIRMAN'S LETTER
DEAR SHAREHOLDER:
AIM Tax-Free Intermediate Shares continued to
provide shareholders with attractive tax-exempt
[PHOTO of current income plus low volatility. As of September
Charles T. Bauer, 30, 1995, your Fund produced a 30-day distribution
Chairman of the rate of 4.66%, based on the maximum offering price,
Board of the Fund and an SEC 30-day yield of 3.91%. Translated to
APPEARS HERE] taxable equivalent yields, the Fund's 30-day
distribution rate was 7.72%, based on the maximum
offering price. The taxable equivalent of the
Fund's 30-day SEC yield was 6.47%, when adjusted
for the highest marginal federal tax rate of 39.6%.
From an investment perspective, your Fund's taxable equivalent yield
compared favorably to yields on such intermediate-term taxable securities as
two-, five-, and 10-year U.S. Treasury notes, which yielded 5.85%, 6.02%, and
6.18%, respectively, as of September 30, 1995.
Aided by stabilizing interest rates, the Fund posted a total return of
3.95% for the six-month period ended September 30, 1995. The Fund closely
tracked the performance of similar funds during the same period, as measured by
the Lipper Intermediate Municipal Fund Index, which posted a total return of
3.96%.
The Fund's investment focus on selected less-volatile, intermediate-term
municipal securities contributed to its attractive 30-day yield even as relative
stability in share price was maintained. By September 30, 1995, net asset value
per share had increased to $10.84, and net assets for the Fund were $75.8
million. In late September, the Fund increased the monthly dividend to $0.045
per share, effective with your October distribution.
For a more complete discussion of market conditions during the reporting
period, your Fund's investment strategy, and our outlook for the months ahead,
turn to the MANAGEMENT'S DISCUSSION & ANALYSIS which follows on page 2 of this
report.
Overall, your Fund has delivered solid performance for investors. While
producing attractive, tax-exempt current monthly income, the Fund has achieved
a positive total return in every fiscal year since its inception in 1987.
We are pleased to send you this semiannual report for AIM Tax-Free
Intermediate Shares. As always, we are ready to respond to your questions or
comments about this report. You may reach us by calling Client Services at
800-959-4246 during normal business hours. For automated account information 24
hours a day, call the AIM Investor Line toll-free at 800-246-5463.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE> 4
DISCUSSION & ANALYSIS
-----------------
Intermediate-term municipal
bond funds marginally
outperformed longer-term
issues in the
third quarter of 1995.
-----------------
ECONOMIC AND POLITICAL FACTORS SHAPE MUNICIPAL MARKETS IN 1995
Fixed-income investors enjoyed halcyon days in the second quarter of 1995.
Interest rates were declining, and the economy had slowed decidedly to an
annual growth rate of 1.3%. Even the U.S. dollar had regained its footing
against major world currencies and was climbing from record lows. Inflation,
which had concerned investors and the Federal Reserve Board for more than a
year, seemed to have been effectively curtailed.
Indeed, the Fed was confident enough to lower short-term interest rates in
July, cutting the federal funds rate to 5.75%. Within weeks, however, reports
of unexpected improvement in economic indicators such as employment, retail
sales, and industrial production sent bond markets reeling. Fed Chairman Alan
Greenspan announced the most likely course for the economy is "an upturn in the
growth rate . . . over the rest of this year and a moderate pace of expansion
next year." While the pace of economic growth was certainly moderate and
sustainable, reports of stronger than expected performance diminished the
likelihood that the Fed would cut interest rates again in the near future.
Like the fixed-income market as a whole, municipal securities benefited
from declining interest rates and the absence of threatening inflation. Orange
County, California, which had flagged market performance since November with
its pending bankruptcy, settled with its creditors and was no longer a focus
for investors. The drop in new issue supply continued--The Wall Street Journal
reported in October that new sales of municipal bonds were down about 10% from
last year's new issue pace of $150 billion.
However, the municipal securities market continued to lag the taxable bond
market until the third quarter of 1995. Certain factors which had helped to
support prices of municipal securities in previous months, chiefly declining
interest rates and limited supply, were largely outweighed by the growing
debate over tax reform. Specifically, a number of flat-tax proposals--which
could drastically lower income tax brackets and, in some cases, exempt all
investment income from taxation--deflated municipal markets even though no
formal proposals have been submitted before Congress. Indeed, some analysts
believe any meaningful action to reform tax legislation could be years in the
making.
By the third quarter of 1995, bond markets had stabilized and most analysts
considered the
===============================================================================
MORNINGSTAR RATINGS
(as of 9/30/95)
<TABLE>
<CAPTION>
FUNDS IN
PERIOD RATING MUNICIPAL CATEGORIES
------ ------ --------------------
<S> <C> <C>
Overall **** NA
5 Years **** 486
3 Years **** 721
</TABLE>
[CAPTION]
Morningstar's rating system of one (lowest) to five (highest) stars is based on
risk and return ratios for three-, five- , and 10-year periods and considers
all loads, expenses, and fees. Ratings compare funds of similar investment
objectives and represent past performance, which is no guarantee of comparable
future results.
===============================================================================
CURRENT YIELD ADVANTAGE
(as of 9/30/95)
<TABLE>
<S> <C>
2 Year U.S. Treasury Note* 5.85%
5 year U.S. Treasury Note* 6.02%
10-Year U.S. Treasury Note* 6.18%
Fund's 30-day SEC yield, taxable equivalent** 6.47%
Fund's 30-day distribtion rate, taxable equivalent** 7.72%
</TABLE>
*U.S. Treasury notes are guaranteed as to the timely payment of principal and
interest. Fund shares are not insured and their value will vary with market
conditions. **Taxable equivalent yields assume the highest marginal federal
income tax rate of 39.6%. Source: IRS, 1995.
See important Fund disclosure on inside front cover.
2
<PAGE> 5
===============================================================================
PORTFOLIO COMPOSITION (AS OF 9/30/95)
<TABLE>
<CAPTION>
TOP 5 BOND HOLDINGS
<S> <C>
1. Southern Oklahoma Memorial Hospital Auth. Rev.
Bonds 02/01/00
2. Lucas County Ohio Hospital Revenue Bonds
08/15/00
3. Michigan State Building Auth. Refg. Revenue Bonds
10/01/04
4. Georgia State General Obligation Bonds 06/01/99
5. Franklin County Ohio General Obligation Bonds
12/01/01
</TABLE>
[CAPTION]
The portfolio's composition may change and there is no assurance the Fund will
continue to hold the same securities.
<TABLE>
<CAPTION>
NUMBER OF HOLDINGS: 112
- -----------------------
<S> <C>
General Obligations 30%
Revenues 70%
</TABLE>
[CAPTION]
47% Credit Enhanced
0% AMT
Duration: 3.7 years
Average Maturity: 4.8 years
==============================================================================
municipal market's reaction to tax reform decidedly overdone. Investors in the
third quarter of 1995 began to take advantage of attractive values,
particularly in the intermediate-term maturity sector. As a result,
intermediate-term municipal bond funds marginally outperformed longer-term
issues for the quarter, as measured by the Lipper Intermediate Municipal Fund
Index which returned 2.28% versus 2.26% for the Lipper General Municipal Fund
Index.
YOUR INVESTMENT PORTFOLIO
The Fund was well-positioned to benefit from the favorable shift toward
intermediate-term securities during the reporting period. With 112 total
holdings as of September 30, 1995, the Fund was broadly diversified to minimize
volatility. Positions in pre-refunded and insured bonds were strong performers.
Overall, the portfolio comprised 70% revenue bonds and 30% general obligation
bonds. Premium bonds, insured bonds, and pre-refunded bonds were emphasized to
reduce price volatility. Attractive issues in sectors such as housing,
transportation, and health care helped to enhance yield. Of course, Fund
holdings are subject to change as market conditions warrant.
By the end of the reporting period, the Fund's weighted average maturity
was 4.8 years, and duration was 3.7 years. In keeping with the Fund's strategy
of investing in quality issues, the portfolio weighting as of September 30,
1995 comprised approximately 55% in securities rated AAA. Overall, 100% of the
portfolio's holdings were rated A or better. Credit-enhanced securities--which
are backed by insurance, escrowed with U.S. Treasuries, or letters of
credit--comprised about 47% of the portfolio.
The Fund maintained an average portfolio quality rating of AA+ as measured
by Standard & Poor's Corporation (S&P) and Moody's Investors Service (Moody's),
two widely known credit rating agencies. S&P and Moody ratings are historical
and are based on analysis of the credit quality of the individual municipal
securities in the Fund's portfolio.
OUTLOOK FOR THE FUTURE
At this juncture, experts are divided on the direction of the economy and
interest rates. Given that leading economic indicators continue to suggest
healthy economic conditions and low inflation, some analysts believe further
reductions in interest rates appear unlikely over the near term. However, The
Wall Street Journal reported recently that Fed Vice Chairman Alan Blinder told
Market News Service "that he favored cutting the target for the federal funds
rate, the level at which banks lend one another money, by a 'sizable' amount,
depending on the outcome of the budget debate in Washington."
Regarding the tax-reform debate, many analysts maintain that any drastic
proposals by Congress that severely diminish the tax advantages of municipal
securities would be strongly challenged by the issuers and investors. In any
event, no formal legislation has been proposed, and any meaningful action in
that direction could be years away.
While there will certainly be a continuing interest by many investors in
the current political climate or the direction of interest rates, AIM Tax-Free
Intermediate Shares believes the key to investing for the long-term is an
ongoing focus on its primary investment philosophy, and that is to generate
optimal current tax-free income with reasonable risk.
See important Fund disclosure on inside front cover.
3
<PAGE> 6
DISCUSSION & ANALYSIS
AIM TAX-FREE INTERMEDIATE SHARES
IS AN "EFFICIENCY" EXPERT
Specifically, it's 99.95% efficient. "Efficiency" for a tax-exempt fund refers
to its ability to create distributions that are free from federal income taxes,
capital gains tax, and the alternative minimum tax (AMT). Since its inception
on May 11, 1987, AIM Tax-Free Intermediate Shares distributions have been
99.95% efficient.
How does the Fund do it?
o AVOIDS "ALTERNATIVE MINIMUM TAX BONDS." The Fund avoids investing in bonds
with income subject to AMT. The AMT affects high-income
individuals--exactly those investors who may benefit most from tax-free
income.
o AVOIDS MARKET DISCOUNT BONDS. The Fund generally avoids municipal bonds
priced at a discount. When these bonds appreciate, they may give a boost to
the Fund's total return, but they also create capital gains which are
taxable to investors.
o OFFSETS CAPITAL GAINS AND LOSSES. The Fund seeks to offset capital gains in
the portfolio with capital losses. Since its inception eight years ago, the
Fund has distributed a total of $0.0182 per share in capital gains.
A HISTORY OF RELATIVE STABILITY
In addition to tax efficiency, AIM Tax-Free Intermediate Shares has
historically produced up to approximately 90% of long-term municipal bond fund
yields--without the share price volatility of long-term municipal bonds.* The
Fund attempts to reduce risk by investing primarily in investment-grade,
intermediate-term municipal bonds rated A or better by Standard & Poor's
Corporation or Moody's Investors Service credit rating agencies, with an
average portfolio maturity of 10-1/2 years or less.
The Fund's portfolio of intermediate-term municipal bonds has offered
conservative investors relative price stability compared to longer-term
municipal bonds. In addition, the Fund's broad diversification by geography,
municipality, and maturity has also helped to preserve principal values.
<TABLE>
<CAPTION>
RELATIVE PRICE STABILITY
TAX-FREE INTERMEDIATE SHARES BOND BUYER 40 INDEX
- ---------------------------- ---------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
5/11/87 $10.00 9/91 $10.20 5/11/87 $89.91 9/91 $94.75
9.89 10.23 88.34 95.16
9.93 10.22 89.18 94.50
9.98 10.33 89.53 96.50
9.90 10.33 89.68 95.63
9/87 9.59 10.33 9/87 83.00 95.13
9.59 10.27 84.31 94.53
9.65 10.30 85.44 94.97
9.79 10.35 87.66 96.00
9.97 10.43 91.50 97.28
10.05 10.65 91.46 100.34
9.89 10.53 87.87 97.47
9.88 9/92 10.55 87.75 9/92 97.13
9.79 10.44 87.28 93.75
9.82 10.53 88.84 96.91
9.86 10.58 89.09 97.69
9.77 10.65 88.96 98.44
9/88 9.86 10.88 9/88 90.62 101.84
9.90 10.74 92.43 100.22
9.78 10.78 90.03 100.88
9.81 10.78 91.53 100.84
9.90 10.87 92.34 102.50
9.77 10.81 90.56 101.66
9.69 10.94 90.00 104.13
9.82 9/93 11.03 92.31 9/93 104.94
9.79 11.01 93.53 104.41
9.94 10.93 94.50 101.59
9.99 11.02 94.94 104.13
9.86 11.09 92.72 104.78
9/89 9.77 10.86 9/89 91.50 99.41
9.84 10.62 92.09 91.56
9.86 10.64 93.69 91.38
9.99 10.67 93.44 91.16
9.92 10.61 91.28 90.47
9.95 10.67 92.00 92.19
9.89 10.67 91.22 91.91
9.84 9/94 10.56 89.06 9/94 89.13
9.91 10.45 91.38 86.06
9.93 10.33 91.75 82.94
9.96 10.38 93.16 85.28
9.91 10.49 89.25 88.19
9/90 9.88 10.62 9/90 88.22 90.97
9.94 10.67 89.22 91.19
10.01 10.68 91.50 91.09
10.01 10.82 91.28 94.06
10.05 10.76 92.06 93.13
10.11 10.81 91.59 92.95
10.07 10.85 91.63 93.67
10.10 9/95 10.84 92.59 9/95 94.18
10.11 92.97
10.07 92.09
10.09 93.13
10.16 93.88
</TABLE>
*The Fund's distribution rate at net asset value versus the average
distribution rate at net asset value of all general municipal bond funds ranked
by Lipper Analytical Services, Inc. since the Fund's inception. As of 9/30/95,
the Lipper universe comprised 240 general municipal bond funds, with average
portfolio maturities of approximately 14.20 years. Source: Lipper Analytical
Services, Inc..
The Bond Buyer 40 Index is a group of 40 unmanaged municipal securities
widely regarded by investors to be representative of the long-term municipal
securities market. The average price of the index represents the simple average
dollar price of the 40 bonds; the average maturity of the index is
approximately 29 years. Source: Bloomberg.
All values are month-end.
See important Fund disclosure on inside front cover.
4
<PAGE> 7
- --------------------------------------------------------------------------------
FINANCIALS
SCHEDULE OF INVESTMENTS
September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS-99.45%
ALABAMA-0.57%
Alabama State Municipal Electric Authority;
Power Supply Series A RB
6.30%, 09/01/01(b) AAA Aaa $ 400,000 $ 433,948
- --------------------------------------------------------------------------------------------
ARIZONA-4.41%
Cochise (County of) (Douglas Unified School
District #27);
School Improvement Series 1995 B GO
4.25%, 07/01/97(b) AAA Aaa 200,000 201,122
- --------------------------------------------------------------------------------------------
Maricopa County Gilbert Unified School District
#41 (Project of 1988); School Improvement
Series 1992 E GO
6.20%, 07/01/02(c) AAA Aaa 1,250,000 1,357,150
- --------------------------------------------------------------------------------------------
Phoenix (City of); Senior Lien Street and
Highway User
Refunding Series 1992 RB
6.20%, 07/01/02 AA A-1 1,000,000 1,083,920
- --------------------------------------------------------------------------------------------
Pinal County Industrial Development Authority
(Magma Copper Co. Project); Series 1984 PCR
4.80%, 12/01/09(d) A-1+ P-1 700,000 700,000
- --------------------------------------------------------------------------------------------
3,342,192
- --------------------------------------------------------------------------------------------
ARKANSAS-2.75%
Little Rock (City of) (Baptist Medical Center);
Health Facility RB
6.70%, 11/01/04(b) AAA Aaa 1,400,000 1,548,176
- --------------------------------------------------------------------------------------------
North Little Rock (City of); Electric System
Refunding Series 1992 A RB
6.00%, 07/01/01(b) AAA Aaa 500,000 538,060
- --------------------------------------------------------------------------------------------
2,086,236
- --------------------------------------------------------------------------------------------
CALIFORNIA-4.84%
California State Public Works Board (State Pool
Program); Energy Efficiency Series 1986 A RB
7.30%, 03/01/01 BBB+ A 1,250,000 1,289,150
- --------------------------------------------------------------------------------------------
Folsom (City of) (School Facilities Project);
Series 1993 B GO
6.00%, 08/01/02(b) AAA Aaa 500,000 537,840
- --------------------------------------------------------------------------------------------
Inglewood (City of) (Daniel Freeman Hospital
Inc.); Insured Hospital Series 1991 RB
6.50%, 05/01/01 A -- 400,000 423,280
- --------------------------------------------------------------------------------------------
Oakland (City of); Housing Finance Issue D-1 RB
6.70%, 01/01/98 A+ -- 205,000 211,712
- --------------------------------------------------------------------------------------------
Parking Authority of the City and County of San
Francisco; Parking Meter Series 1994 RB
6.75%, 06/01/05(b) AAA Aaa 500,000 566,750
- --------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
CALIFORNIA-(CONTINUED)
Regents (The) of the University of California
(Multiple Purpose Projects); Refunding Series
A RB
5.75%, 09/01/97 A- A $ 250,000 $ 257,625
- --------------------------------------------------------------------------------------------
State Public Works Board of the State of
California (Department of Corrections)
(State Prison-Madera County);
Lease Series 1990 A RB
7.00%, 09/01/00 A- A 100,000 109,925
- --------------------------------------------------------------------------------------------
West End Water Development, Treatment, and
Conservation Joint Powers Authority;
1990 Water Facilities
Certificates of Participation
7.00%, 10/01/00 BBB+ A 250,000 270,128
- --------------------------------------------------------------------------------------------
3,666,410
- --------------------------------------------------------------------------------------------
COLORADO-1.99%
Aspen (City of) Public Facility Authority;
Lease Purchase and Sublease Agreement
Series 1995 RB
4.20%, 09/01/96(b) AAA Aaa 240,000 240,480
- --------------------------------------------------------------------------------------------
Colorado Student Obligation Bond Authority;
Student Loan Series 1985 B RB
6.125%, 12/01/98 -- A 160,000 164,293
- --------------------------------------------------------------------------------------------
Englewood (City of) (The Marks Apartments);
Multifamily Housing Series 1985 A RB
4.35%, 12/15/97(d) A+ -- 1,100,000 1,100,000
- --------------------------------------------------------------------------------------------
1,504,773
- --------------------------------------------------------------------------------------------
DELAWARE-1.06%
Delaware Transportation Authority; Senior Lien
Transportation System Series 1991 RB
6.00%, 07/01/01(c)(e) AAA Aaa 750,000 804,345
- --------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA-1.35%
District of Columbia (The Howard University
Issue);
University Series 1990 A RB
6.90%, 10/01/00 AA- A-1 200,000 218,446
- --------------------------------------------------------------------------------------------
District of Columbia; Series B GO
6.75%, 06/01/99(b) AAA Aaa 750,000 801,765
- --------------------------------------------------------------------------------------------
1,020,211
- --------------------------------------------------------------------------------------------
FLORIDA-2.12%
Dade (County of); Special Series 1986 GO
6.70%, 10/01/03(b) AAA Aaa 1,000,000 1,044,220
- --------------------------------------------------------------------------------------------
Jacksonville (City of); Excise Tax Series
1986 A RB
7.60%, 10/01/96(c) NRR NRR 250,000 258,910
- --------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
FLORIDA-(CONTINUED)
Palm Beach County Solid Waste Authority; RB
7.90%, 07/01/97 A A $ 100,000 $ 106,576
- --------------------------------------------------------------------------------------------
Pinellas County Health Facilities Authority
(Pooled Hospital Loan Program); Refunding
Program Series 1985 RB
4.80%, 12/01/15(d) A-1 VMIG-1 200,000 200,000
- --------------------------------------------------------------------------------------------
1,609,706
- --------------------------------------------------------------------------------------------
GEORGIA-7.52%
Albany (City of); Sewer System Series 1992 RB
6.30%, 07/01/02(b) AAA Aaa 500,000 542,115
- --------------------------------------------------------------------------------------------
Fulton (County of); Water and Sewer Refunding
Series 1992 RB
5.75%, 01/01/02(b) AAA Aaa 715,000 763,506
- --------------------------------------------------------------------------------------------
Georgia (State of); Series 1988 D GO
7.10%, 06/01/99 AA+ Aaa 2,000,000 2,182,760
- --------------------------------------------------------------------------------------------
Georgia Hospital Finance Authority (Georgia
Pooled Hospital Loan Program); Series
1991 RB
4.80%, 03/01/01(d) A-1 VMIG-1 600,000 600,000
- --------------------------------------------------------------------------------------------
Georgia State Municipal Electric Authority;
Series V RB
6.00%, 01/01/01(b) AAA Aaa 1,000,000 1,062,550
- --------------------------------------------------------------------------------------------
Metropolitan Atlanta Rapid Transit Authority;
Sales Tax Refunding Series M RB
6.15%, 07/01/02 AA- A-1 500,000 542,030
- --------------------------------------------------------------------------------------------
5,692,961
- --------------------------------------------------------------------------------------------
ILLINOIS-5.73%
Chicago (City of) (Central Public Library
Project); Adjustable Rate Series 1988
C GO
6.10%, 01/01/99(b) AAA Aaa 500,000 525,685
- --------------------------------------------------------------------------------------------
Chicago Park District; Capital Improvement
Series 1991 GO
5.80%, 01/01/98 AA- A-1 750,000 772,605
- --------------------------------------------------------------------------------------------
Chicago Public Building Commission; Building
Series 1985-A RB
8.00%, 01/01/96(c) NRR Aaa 50,000 50,490
- --------------------------------------------------------------------------------------------
Glenview (City of); GO
6.25%, 12/01/96 -- MIG-1 1,000,000 1,018,760
- --------------------------------------------------------------------------------------------
Illinois Development Finance Authority;
Refunding Series 1993 A RB
4.55%, 06/01/04(d) A-1+ -- 500,000 500,000
- --------------------------------------------------------------------------------------------
Illinois Health Facilities Authority (Mercy
Hospital and Medical Center); Refunding
Series 1992 RB
6.20%, 01/01/00 A- Baa1 250,000 257,275
- --------------------------------------------------------------------------------------------
Illinois State Toll Highway Authority; Toll
Highway Refunding Series 1993 B RB
4.25%, 01/01/10(d)(f) A-1+ VMIG-1 200,000 200,000
- --------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
ILLINOIS-(CONTINUED)
Joliet (City of); Waterworks and Sewer Series
1991 RB
6.95%, 01/01/01(b) AAA Aaa $ 250,000 $ 275,595
- --------------------------------------------------------------------------------------------
Kane (County of) Public Building Commission;
Unlimited Tax Public Building Series B GO
6.20%, 12/01/01 -- Aa 700,000 741,895
- --------------------------------------------------------------------------------------------
4,342,305
- --------------------------------------------------------------------------------------------
INDIANA-0.70%
Indiana Transportation Finance Authority;
Airport Facilities Lease Series A RB
6.00%, 11/01/01 A A 500,000 527,500
- --------------------------------------------------------------------------------------------
IOWA-0.69%
Iowa Student Loan Liquidity Corp.;
Student Loan Series 1992 A RB
6.25%, 03/01/00 -- Aa1 500,000 521,615
- --------------------------------------------------------------------------------------------
KENTUCKY-0.38%
Kentucky State Turnpike Authority (Economic
Development Road Revitalization Project); RB
7.125%, 05/15/00(c)(e) AAA Aaa 260,000 291,309
- --------------------------------------------------------------------------------------------
LOUISIANA-3.05%
Lafayette Public Power Authority; Electric
Refunding Series 1987 RB
6.80%, 11/01/00 A A 275,000 289,655
- --------------------------------------------------------------------------------------------
Louisiana (State of); Refunding Series B GO
8.00%, 05/01/96(c) NRR NRR 200,000 204,516
- --------------------------------------------------------------------------------------------
Louisiana Offshore Terminal Authority (Loop,
Inc.); Deepwater Port Refunding Series
1992 RB
6.00%, 09/01/01 A A3 1,000,000 1,052,640
- --------------------------------------------------------------------------------------------
Louisiana Public Facilities Authority (Tulane
University of Louisiana); Series 1987 C RB
7.30%, 08/15/99 A A-1 270,000 288,571
- --------------------------------------------------------------------------------------------
Orleans Parish School Board; Public School
Refunding Series 1991 GO
6.625%, 02/01/02(b) AAA Aaa 475,000 476,235
- --------------------------------------------------------------------------------------------
2,311,617
- --------------------------------------------------------------------------------------------
MASSACHUSETTS-0.56%
New England Education Loan Marketing Corp.;
Student Loan Refunding Senior Issue 1992 D RB
6.20%, 09/01/00 -- Aaa 400,000 426,548
- --------------------------------------------------------------------------------------------
MICHIGAN-5.45%
Dearborn (City of) Economic Development Corp.
(Oakwood Obligated Group); Hospital Series
1991 A RB
6.95%, 08/15/01(c)(e) AAA Aaa 1,000,000 1,137,590
- --------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 11
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
MICHIGAN-(CONTINUED)
Michigan State Building Authority; Refunding
Series I RB
6.40%, 10/01/04 AA- A-1 $ 2,000,000 $ 2,185,140
- --------------------------------------------------------------------------------------------
Wayne County School District; Michigan School
Building Site Bond Unlimited Tax Series
1992 GO
5.60%, 05/01/01 AA Aa 765,000 803,747
- --------------------------------------------------------------------------------------------
4,126,477
- --------------------------------------------------------------------------------------------
MINNESOTA-2.49%
Minnesota Housing Finance Agency; Housing
Development Series 1979 A RB
6.50%, 02/01/96 AA A-1 320,000 322,173
- --------------------------------------------------------------------------------------------
Western Minnesota Municipal Power Agency;
Refunding Series A RB
6.65%, 01/01/01 A A1 1,500,000 1,564,530
- --------------------------------------------------------------------------------------------
1,886,703
- --------------------------------------------------------------------------------------------
MISSOURI-0.67%
State Environmental Improvement and Energy
Resource Authority (City of Branson Project)
(State Revolving Fund Program); Water Series
1995 A PCR
5.00%, 07/01/99(b) AAA Aaa 500,000 509,000
- --------------------------------------------------------------------------------------------
MONTANA-0.63%
Montana Higher Education Assistance Corp.;
Student Loan Series 1992 A RB
6.60%, 12/01/00 -- A 450,000 476,685
- --------------------------------------------------------------------------------------------
NEVADA-0.66%
Clark County Improvement District No. 65 (Lamb
Boulevard III); Series November 1, 1992 GO
6.20%, 12/01/02 A+ A 120,000 123,841
- --------------------------------------------------------------------------------------------
Nevada (State of) (Nevada Municipal Bond Bank
Project Nos. 38-39); Limited Tax Series 1992
A GO
6.00%, 07/01/01(c) NRR NRR 350,000 373,541
- --------------------------------------------------------------------------------------------
497,382
- --------------------------------------------------------------------------------------------
NEW JERSEY-3.83%
Gloucester County Utilities Authority; Sewer
Refunding Series 1991 RB
6.10%, 01/01/00 AA- A-1 225,000 239,724
- --------------------------------------------------------------------------------------------
Jersey City (City of) (Qualified School Bond);
GO
6.40%, 02/15/00 AA A 1,000,000 1,077,320
- --------------------------------------------------------------------------------------------
New Jersey Transportation Trust Fund Authority;
Transportation System Series 1992 A RB
5.90%, 06/15/99(c) NRR NRR 1,000,000 1,050,590
- --------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
NEW JERSEY-(CONTINUED)
Trenton (City of); Fiscal Year Adjustment GO
6.10%, 08/15/02(b) AAA Aaa $ 500,000 $ 537,290
- --------------------------------------------------------------------------------------------
2,904,924
- --------------------------------------------------------------------------------------------
NEW MEXICO-2.09%
Albuquerque (City of); Joint Water and Sewer
Series 1990 A RB
6.00%, 07/01/00(c)(e) AAA NRR 1,000,000 1,063,320
- --------------------------------------------------------------------------------------------
Santa Fe (City of); Series 1994 A RB
5.50%, 06/01/03(b) AAA Aaa 500,000 517,315
- --------------------------------------------------------------------------------------------
1,580,635
- --------------------------------------------------------------------------------------------
NORTH CAROLINA-0.65%
North Carolina Eastern Municipal Power Agency;
Power System Refunding Series 1986 A RB
7.50%, 01/01/00 BBB+ A 475,000 491,791
- --------------------------------------------------------------------------------------------
OHIO-9.64%
Franklin (County of); 1991 Issue GO
6.30%, 12/01/01(c)(e) NRR NRR 1,500,000 1,657,965
- --------------------------------------------------------------------------------------------
Greater Cleveland Regional Transit Authority
(Waterfront Transit Line Project);
Certificates of Participation Series 1995 RB
6.50%, 07/01/97(b) AAA Aaa 1,000,000 1,038,490
- --------------------------------------------------------------------------------------------
Hilliard City School District; Unlimited Tax
School Improvement Refunding Series 1992 GO
6.05%, 12/01/00(b) AAA Aaa 500,000 537,425
6.15%, 12/01/01(b) AAA Aaa 250,000 271,813
- --------------------------------------------------------------------------------------------
Lucas County (St. Vincent's Medical Center);
Hospital Series A RB
6.75%, 08/15/20(b) AAA Aaa 2,000,000 2,203,580
- --------------------------------------------------------------------------------------------
Ohio State Public Facilities Commission; Mental
Health Series A RB
7.00%, 12/01/97 A+ A-1 1,500,000 1,596,525
- --------------------------------------------------------------------------------------------
7,305,798
- --------------------------------------------------------------------------------------------
OKLAHOMA-4.29%
Grand River Dam Authority; Refunding Series
1987 RB
6.45%, 06/01/97(c)(e) AAA Aaa 500,000 527,965
- --------------------------------------------------------------------------------------------
Oklahoma Housing Finance Agency; Single Family
Mortgage Series A RB
6.55%, 03/01/00(b) AAA Aaa 155,000 162,953
- --------------------------------------------------------------------------------------------
Southern Oklahoma Memorial Hospital Authority;
Hospital Series 1993 A RB
5.60%, 02/01/00 A A 2,500,000 2,562,375
- --------------------------------------------------------------------------------------------
3,253,293
- --------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
OREGON-3.50%
Oregon (State of) Department of Transportation
(Westside Light Rail Project); Fund Series
1994 RB
5.00%, 06/01/97(b) AAA Aaa $ 1,000,000 $ 1,017,280
- --------------------------------------------------------------------------------------------
Portland (City of); Sewer System Series 1994
A RB
5.45%, 06/01/03 A+ A-1 1,065,000 1,110,923
5.55%, 06/01/04 A+ A-1 500,000 523,750
- --------------------------------------------------------------------------------------------
2,651,953
- --------------------------------------------------------------------------------------------
PENNSYLVANIA-0.62%
Pennsylvania Industrial Development Authority;
Economic Development Series 1991 A RB
6.40%, 01/01/97(c) NRR NRR 200,000 205,130
6.50%, 01/01/98(c) NRR NRR 100,000 104,972
6.50%, 07/01/98(c) NRR NRR 150,000 158,237
- --------------------------------------------------------------------------------------------
468,339
- --------------------------------------------------------------------------------------------
RHODE ISLAND-2.76%
Rhode Island (State of); Refunding Series 1992
A GO
6.10%, 06/15/03(b) AAA Aaa 1,000,000 1,088,120
- --------------------------------------------------------------------------------------------
Rhode Island Student Loan Authority; Student
Loan Refunding Series 1992 RB
5.40%, 12/01/95 -- A 1,000,000 1,001,380
- --------------------------------------------------------------------------------------------
2,089,500
- --------------------------------------------------------------------------------------------
SOUTH DAKOTA-0.35%
Rapid City (City of); Sales Tax Series 1995
A RB
5.60%, 06/01/05(b) AAA Aaa 255,000 263,627
- --------------------------------------------------------------------------------------------
TEXAS-14.85%
Alamo Community College District; Series
1990 GO
6.90%, 02/15/00(c)(e) NRR Aaa 500,000 547,030
- --------------------------------------------------------------------------------------------
Arlington City Hospital Authority (Arlington
Medical Center); RB
5.50% 12/01/97(b) AAA Aaa 575,000 588,444
- --------------------------------------------------------------------------------------------
Austin (City of); Combined Utility System
Refunding Series 1986 RB
7.20%, 05/15/98 A A 200,000 207,334
- --------------------------------------------------------------------------------------------
Clint Independent School District; Unlimited
Tax Refunding Series 1991 GO
6.30%, 03/01/00(b) -- Aaa 185,000 195,343
- --------------------------------------------------------------------------------------------
Comal County Industrial Development Authority
(The Coleman Company, Inc. Project); Series
1980 IDR
9.25%, 08/01/00(c) NRR NRR 835,000 943,759
- --------------------------------------------------------------------------------------------
Conroe (City of) Independent School District;
Unlimited School Tax GO
7.375%, 02/01/01(b) -- Aaa 115,000 128,701
- --------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
TEXAS-(CONTINUED)
Gatesville Independent School District;
Unlimited Tax School Building and Refunding
Series 1995 RB
5.80%, 02/01/03(b) -- Aaa $ 485,000 $ 513,082
- --------------------------------------------------------------------------------------------
Harris County Health Facilities Development
Corp. (Memorial Hospital System Project);
Hospital Series 1992 RB
6.70%, 06/01/00 A- A 1,000,000 1,068,070
- --------------------------------------------------------------------------------------------
Harris County Industrial Development Corp.
(Exxon Project); Series 1984 B PCR
4.60%, 03/01/24(d) A-1+ Aaa 300,000 300,000
- --------------------------------------------------------------------------------------------
Hays (County of); Series 1995 GO
7.75%, 08/15/97(b) AAA Aaa 175,000 186,758
- --------------------------------------------------------------------------------------------
Keller (City of) Independent School District;
Certificates of Participation Series 1994 RB
5.75%, 08/15/01(b) AAA Aaa 915,000 958,426
- --------------------------------------------------------------------------------------------
Kerrville (City of); Electric System Refunding
Series 1991 RB
6.375%, 11/01/01(b) AAA Aaa 185,000 200,897
- --------------------------------------------------------------------------------------------
La Marque Independent School District; Unlimited
Schoolhouse Tax Series 1992 GO
7.50%, 08/15/02(b) AAA Aaa 750,000 871,448
7.50%, 08/15/99(b) AAA Aaa 575,000 635,295
- --------------------------------------------------------------------------------------------
Northside Independent School District; School
Improvement Series 1986 GO
6.90%, 02/01/97 AA- Aa 1,000,000 1,036,330
- --------------------------------------------------------------------------------------------
San Antonio (City of); Electric and Gas System
Refunding Series 1989 A RB
7.00%, 02/01/01 AA Aa1 400,000 434,668
- --------------------------------------------------------------------------------------------
Temple (City of) (Bell County); Refunding Series
1992 GO
5.80%, 02/01/01(b) AAA Aaa 250,000 265,098
- --------------------------------------------------------------------------------------------
Texas Housing Agency; Residential Mortgage
Series 1988 A RB
7.15%, 01/01/97 A+ Aa 195,000 199,895
- --------------------------------------------------------------------------------------------
Texas Municipal Power Agency; RB
5.75%, 09/01/02(c)(e) AAA Aaa 1,000,000 1,061,274
- --------------------------------------------------------------------------------------------
Texas Turnpike Authority (Addison Airport Toll
Tunnel Project); Dallas North Tollway Series
1994 RB
6.30%, 01/01/05(b) AAA Aaa 500,000 541,810
- --------------------------------------------------------------------------------------------
Texas Water Resources Finance Authority; Series
1989 A RB
7.25%, 08/15/97 A A 150,000 157,971
- --------------------------------------------------------------------------------------------
University of Texas System; General Tuition
Series 1986 RB
7.75%, 08/15/96(c)(e) AAA Aaa 190,000 199,899
7.75%, 08/15/98(c) AAA Aaa 10,000 10,920
- --------------------------------------------------------------------------------------------
11,252,452
- --------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 15
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
UTAH-2.47%
Intermountain Power Agency; Power Supply
Refunding Series 1986 F RB
7.00%, 07/01/01 AA- Aa $ 500,000 $ 519,015
- -------------------------------------------------------------------------------------------
Salt Lake (County of) (Service Station Holdings
Inc. Project -- The British Petroleum Co.);
Refunding Series 1994 PCR
4.45%, 02/01/08(d) A-1+ P-1 300,000 300,000
- -------------------------------------------------------------------------------------------
Utah (State of) (Board of Water Resources
Program); Revolving Fund Recapitalization
Series 1992 B RB
6.10%, 04/01/02 AA -- 500,000 541,675
- -------------------------------------------------------------------------------------------
Utah Municipal Finance Cooperative (Pooled
Capital Improvement Financing Program)
(University Hospital Project); Local
Government Series August 1, 1991 RB
6.50%, 05/15/99 AA- -- 475,000 511,746
- -------------------------------------------------------------------------------------------
1,872,436
- -------------------------------------------------------------------------------------------
VIRGINIA-3.29%
Medical College of Hampton Roads; General
Refunding Series 1991 B RB
5.60%, 11/15/96 A- -- 300,000 305,196
6.00%, 11/15/99 A- -- 605,000 636,611
- -------------------------------------------------------------------------------------------
Norfolk (City of) Redevelopment and Housing
Authority (State Board for Community
Colleges - Tidewater); Educational Facility
Series 1995 RB
5.30%, 11/01/04 AA Aa 535,000 548,530
5.40%, 11/01/05 AA Aa 500,000 516,455
- -------------------------------------------------------------------------------------------
Portsmouth (City of); Public Utility Refunding
Series 1992 GO
5.90%, 11/01/01 AA- A 450,000 482,400
- -------------------------------------------------------------------------------------------
2,489,192
- -------------------------------------------------------------------------------------------
WASHINGTON-2.10%
Seattle (City of) (West Seattle Bridge); Limited
Tax Refunding Series 1991 GO
6.40%, 10/01/01 AA+ Aa1 250,000 273,877
- -------------------------------------------------------------------------------------------
Seattle (Port of); Series 1992 A RB
6.00%, 11/01/01 AA- A-1 500,000 533,165
- -------------------------------------------------------------------------------------------
Washington Health Care Facility Authority (Our
Lady of Lourdes Health Center); Refunding RB
7.35%, 12/01/97(f) A -- 500,000 527,060
- -------------------------------------------------------------------------------------------
Washington Public Power Supply System (Nuclear
Project Number 3); Refunding Series B RB
6.80%, 07/01/97 AA Aa 250,000 260,230
- -------------------------------------------------------------------------------------------
1,594,332
- -------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 16
- --------------------------------------------------------------------------------
FINANCIALS
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
WISCONSIN-1.39%
Wisconsin (State of) Series A GO
5.75%, 05/01/99 AA Aa $ 1,000,000 $ 1,049,560
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-99.45% 75,345,755
- -------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.55% 413,171
- -------------------------------------------------------------------------------------------
NET ASSETS-100.00% $ 75,758,926
===========================================================================================
</TABLE>
INVESTMENT ABBREVIATIONS:
GO - General Obligation Bonds
IDR - Industrial Development Revenue Bonds
NRR - Not re-rated
PCR - Pollution Control Revenue Bonds
RB - Revenue Bonds
Notes to Schedule of Investments:
(a) Ratings assigned by Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P"). NRR indicates a security that is
not re-rated subsequent to funding of an escrow fund (consisting of U.S.
Treasury obligations); this funding is pursuant to an advance refunding of
the security.
(b) Secured by bond insurance.
(c) Secured by an escrow fund of U.S. Treasury obligations.
(d) Payable on 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 September 30, 1995.
(e) Subject to an outstanding irrevocable call or mandatory put by the issuer.
Market value and date reflect such call or put.
(f) Secured by a letter of credit.
See Notes to Financial Statements.
14
<PAGE> 17
- --------------------------------------------------------------------------------
FINANCIALS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (amortized cost $72,323,504) $ 75,345,755
- -----------------------------------------------------------------------------------------
Cash 46,527
- -----------------------------------------------------------------------------------------
Receivables for:
Capital stock sold 427,479
- -----------------------------------------------------------------------------------------
Interest 1,184,956
- -----------------------------------------------------------------------------------------
Investment for deferred compensation plan 5,375
- -----------------------------------------------------------------------------------------
Other assets 40,286
- -----------------------------------------------------------------------------------------
Total assets 77,050,378
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,039,881
- -----------------------------------------------------------------------------------------
Capital stock reacquired 105,002
- -----------------------------------------------------------------------------------------
Dividends 102,858
- -----------------------------------------------------------------------------------------
Deferred compensation plan 5,375
- -----------------------------------------------------------------------------------------
Accrued advisory fees 18,432
- -----------------------------------------------------------------------------------------
Accrued administrative service fees 3,472
- -----------------------------------------------------------------------------------------
Accrued directors' fees 1,206
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 4,643
- -----------------------------------------------------------------------------------------
Accrued operating expenses 10,583
- -----------------------------------------------------------------------------------------
Total liabilities 1,291,452
- -----------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 75,758,926
=========================================================================================
Capital stock, $.001 par value per share:
Authorized 1,000,000,000
- -----------------------------------------------------------------------------------------
Outstanding 6,988,379
=========================================================================================
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $10.84
=========================================================================================
OFFERING PRICE PER SHARE:
(Net asset value of $10.84 divided by 99.00%) $10.95
=========================================================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 18
- --------------------------------------------------------------------------------
FINANCIALS
STATEMENT OF OPERATIONS
For the six months ended September 30, 1995
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $ 2,135,247
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 114,892
- ----------------------------------------------------------------------------------------
Custodian fees 15,026
- ----------------------------------------------------------------------------------------
Transfer agent fees 26,797
- ----------------------------------------------------------------------------------------
Registration and filing fees 12,934
- ----------------------------------------------------------------------------------------
Administrative service fees 21,929
- ----------------------------------------------------------------------------------------
Directors' fees 2,564
- ----------------------------------------------------------------------------------------
Printing 15,616
- ----------------------------------------------------------------------------------------
Professional fees 12,266
- ----------------------------------------------------------------------------------------
Other 18,466
- ----------------------------------------------------------------------------------------
Total expenses 240,490
- ----------------------------------------------------------------------------------------
Net investment income 1,894,757
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES:
Net realized gain (loss) on sales of investment securities (41,464)
- ----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 1,138,103
- ----------------------------------------------------------------------------------------
Net gain on investment securities 1,096,639
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 2,991,396
========================================================================================
</TABLE>
See Notes to Financial Statements.
16
<PAGE> 19
- --------------------------------------------------------------------------------
FINANCIALS
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended September 30, 1995
and the year ended March 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1995 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,894,757 $ 4,401,553
- ----------------------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities (41,464) (1,102,920)
- ----------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 1,138,103 1,255,198
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,991,396 4,553,831
- ----------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (1,756,384) (4,304,084)
- ----------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on investment securities -- (28,666)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) from capital stock transactions (7,830,750) (17,623,430)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (6,595,738) (17,402,349)
- ----------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 82,354,664 99,757,013
- ----------------------------------------------------------------------------------------------------------
End of period $ 75,758,926 $82,354,664
==========================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 73,661,002 $81,491,752
- ----------------------------------------------------------------------------------------------------------
Undistributed net investment income 222,654 84,281
- ----------------------------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of
investment securities (1,146,981) (1,105,517)
- ----------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 3,022,251 1,884,148
- ----------------------------------------------------------------------------------------------------------
$ 75,758,926 $82,354,664
==========================================================================================================
</TABLE>
See Notes to Financial Statements.
17
<PAGE> 20
- --------------------------------------------------------------------------------
FINANCIALS
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Tax Exempt Funds, Inc. (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 three separate portfolios; the Intermediate
Portfolio, AIM Tax-Exempt Cash Fund and AIM Tax-Exempt Bond Fund of
Connecticut. Matters affecting each portfolio are voted on exclusively by the
shareholders of such portfolio. The assets, liabilities, and operations of each
portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Intermediate Portfolio (the "Fund").
The Fund currently offers one class of shares, AIM Tax-Free Intermediate Shares
(the "Shares").
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
A. Security Valuations--Portfolio securities are valued based on market
quotations or at fair value determined by a pricing service approved by the
Company's Board of Directors, provided that securities with a demand feature
exercisable within one to seven days are valued at par. Prices provided by
the pricing service represent valuations of the mean between current bid and
asked market prices which may be determined without exclusive reliance on
quoted prices and may reflect appropriate factors such as institution-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, individual trading characteristics and other market
data. Portfolio securities for which prices are not provided by the pricing
service are valued at the mean between the last available bid and asked
prices, unless the Board of Directors or its designees determines that the
mean between the last available bid and asked prices does not accurately
reflect the current market value of the security. Securities for which market
quotations are not readily available are valued at fair value as determined
in good faith by or under the supervision of the Company's officers in
accordance with methods which are specifically authorized by the Board of
Directors. Notwithstanding the above, short-term obligations with maturities
of sixty days or less are valued at amortized cost.
B. Securities Transactions and Investment Income--Securities transactions are
recorded on a trade date basis. Interest income, adjusted for amortization of
premiums and original issue discounts on investments, is earned from
settlement date and is recorded on the accrual basis. Discounts, other than
original issue discounts, are amortized to unrealized appreciation for
financial reporting purposes. Realized gains and losses are computed on the
basis of specific identification of the securities sold.
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 (which may
be carried forward to offset future taxable capital gains, if any) of
$603,150, which expires, if not previously utilized, in the year 2003. The
Fund cannot distribute capital gains to shareholders until the tax loss
carryforwards have been utilized. In addition, the Fund intends to invest in
such municipal securities to allow it to qualify to pay "exempt interest
dividends," as defined in the Internal Revenue Code.
18
<PAGE> 21
- --------------------------------------------------------------------------------
FINANCIALS
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 0.30% of
the first $500 million of the Fund's average daily net assets, plus 0.25% of the
Fund's average daily net assets in excess of $500 million, but not in excess of
$1 billion, plus 0.20% of the Fund's average daily net assets in excess of $1
billion. The investment advisory agreement requires AIM to reduce its fee or, if
necessary, make payments to the extent required to satisfy any expense
limitations imposed by securities laws or regulations thereunder in any state in
which the Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain costs incurred in providing accounting
services to the Fund. During the six months ended September 30, 1995, the Fund
reimbursed AIM $21,929 for such services. A I M Fund Services, Inc. ("AFS") was
paid $17,373 for transfer agency services during the six months ended September
30, 1995.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Shares. AIM Distributors received commissions of $8,196 from sales of Shares
during the six months ended September 30, 1995. Such commissions are not an
expense of the Company. They are deducted from, and are not included in, the
proceeds from sales of Shares. Certain officers and directors of the Company are
officers of AIM, AFS and AIM Distributors.
During the six months ended September 30, 1995, the Fund paid legal fees of
$1,527 for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & 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-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the six months ended September 30, 1995 was $9,181,490
and $13,074,688, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of September 30, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $3,031,368
- ----------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (9,117)
- ----------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $3,022,251
==================================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
19
<PAGE> 22
- --------------------------------------------------------------------------------
FINANCIALS
NOTE 5-CAPITAL STOCK
Changes in capital stock outstanding for the six months ended September 30, 1995
and the year ended March 31, 1995 were as follows:
<TABLE>
<CAPTION>
September 30, March 31,
1995 1995
-------------------------- --------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 761,305 $ 8,223,101 1,622,139 $ 17,104,803
- ------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends 107,919 1,164,812 261,976 2,765,599
- ------------------------------------------------------------------------------------------------------------------------
Reacquired (1,599,051) (17,218,663) (3,561,084) (37,493,832)
- ------------------------------------------------------------------------------------------------------------------------
(729,827) $ (7,830,750) (1,676,969) $(17,623,430)
========================================================================================================================
</TABLE>
NOTE 6-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of the Fund
outstanding during the six months ended September 30, 1995, each of the years in
the six-year period ended March 31, 1995, the eleven months ended March 31, 1989
and the period May 11, 1987 (date operations commenced) through April 30, 1988.
<TABLE>
<CAPTION>
March 31,
September 30, --------------------------------------------------------------------------- April 30,
1995 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 10.67 $ 10.62 $ 10.74 $ 10.27 $ 10.07 $ 9.89 $ 9.69 $ 9.88 $10.00
- -------------------- ------- ------- ------- ------- ------- ------ ------ ------ ------
Income from
investment
operations:
Net investment
income 0.27 0.49 0.48 0.53 0.62 0.63 0.62 0.56 0.55
- -------------------- ------- ------- ------- ------- ------- ------ ------ ------ ------
Net gains (losses)
on securities
(both realized
and unrealized) 0.15 0.04 (0.10) 0.47 0.20 0.18 0.20 (0.19) (0.12)
- -------------------- ------- ------- ------- ------- ------- ------ ------ ------ ------
Total from
investment
operations 0.42 0.53 0.38 1.00 0.82 0.81 0.82 0.37 0.43
- -------------------- ------- ------- ------- ------- ------- ------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.25) (0.48) (0.48) (0.53) (0.62) (0.63) (0.62) (0.56) (0.55)
- -------------------- ------- ------- ------- ------- ------- ------ ------ ------ ------
Distributions from
net realized
capital gains -- -- (0.02) -- -- -- -- -- --
- -------------------- ------- ------- ------- ------- ------- ------ ------ ------ ------
Total
distributions (0.25) (0.48) (0.50) (0.53) (0.62) (0.63) (0.62) (0.56) (0.55)
- -------------------- ------- ------- ------- ------- ------- ------ ------ ------ ------
Net asset value,
end of period $ 10.84 $ 10.67 $ 10.62 $ 10.74 $ 10.27 $10.07 $ 9.89 $ 9.69 $ 9.88
- -------------------- ======= ======= ======= ======= ======= ====== ====== ====== ======
Total return(a) 3.95% 5.17% 3.47% 10.01% 8.39% 8.39% 8.66% 3.85% 4.46%
==================== ======= ======= ======= ======= ======= ====== ====== ====== ======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s
omitted) $75,759 $82,355 $99,757 $70,120 $38,773 $6,184 $5,231 $4,413 $5,594
==================== ======= ======= ======= ======= ======= ====== ====== ====== ======
Ratio of expenses to
average net assets 0.63%(b) 0.59% 0.61%(c) 0.38%(c) 0.02%(d) 0.50%(d) 0.50%(d) 0.53%(d)(e) 0.50%(d)(e)
==================== ======= ======= ======= ======= ======= ====== ====== ====== ======
Ratio of net
investment income
to average net
assets 4.95%(b) 4.65% 4.37%(c) 5.00%(c) 5.78%(d) 6.29%(d) 6.27%(d) 6.74%(d)(e) 5.86%(d)(e)
==================== ======= ======= ======= ======= ======= ====== ====== ====== ======
Portfolio turnover
rate 12.79% 74.98% 25.92% 29.33% 14.57% 0.00% 12.19% 31.16% 79.69%
==================== ======= ======= ======= ======= ======= ====== ====== ====== ======
</TABLE>
(a) Does not deduct sales charges and for periods less than one year, total
return is not annualized.
(b) Ratios are annualized and based on average net assets of $76,385,207.
(c) After waiver of advisory fees.
(d) After waiver of advisory fees and expense reimbursements.
(e) Annualized.
20
<PAGE> 23
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman and Chief Executive Chairman Suite 1919
Officer Houston, TX 77046
A I M Management Group Inc. Robert H. Graham
President INVESTMENT ADVISOR
Bruce L. Crockett
Director, President, and Chief John J. Arthur A I M Advisors, Inc.
Executive Officer Senior Vice President and 11 Greenway Plaza
COMSAT Corporation Treasurer Suite 1919
Houston, TX 77046
Owen Daly II Gary T. Crum
Director Senior Vice President TRANSFER AGENT
Cortland Trust Inc.
Carol F. Relihan A I M Fund Services, Inc.
Carl Frischling Vice President and Secretary P.O. Box 4739
Partner Houston, TX 77210-4739
Kramer, Levin, Naftalis, Nessen, Dana R. Sutton
Kamin & Frankel Vice President CUSTODIAN
and Assistant Treasurer
Robert H. Graham The Bank of New York
President Stuart W. Coco 110 Washington Street
A I M Management Group Inc. Vice President New York, NY 10286
John F. Kroeger Melville B. Cox COUNSEL TO THE FUND
Formerly, Consultant Vice President
Wendell & Stockel Associates, Inc. Ballard Spahr
Karen Dunn Kelley Andrews & Ingersoll
Lewis F. Pennock Vice President 1735 Market Street
Attorney Philadelphia, PA 19103
P. Michelle Grace
Ian W. Robinson Assistant Secretary COUNSEL TO THE DIRECTORS
Consultant, Former Executive
Vice President and Nancy L. Martin Kramer, Levin, Naftalis,
Chief Financial Officer Assistant Secretary Nessen, Kamin & Frankel
Bell Atlantic Management 919 Third Avenue
Services, Inc. Ofelia M. Mayo New York, NY 10022
Assistant Secretary
Louis S. Sklar DISTRIBUTOR
Executive Vice President Kathleen J. Pflueger
Hines Interests Assistant Secretary A I M Distributors, Inc.
Limited Partnership 11 Greenway Plaza
Samuel D. Sirko Suite 1919
Assistant Secretary Houston, TX 77046
Stephen I. Winer
Assistant Secretary
</TABLE>
<PAGE> 24
A I M Distributors, Inc. ---------------
[AIM LOGO 11 Greenway Plaza, Suite 1919 BULK RATE
APPEARS HERE] Houston, Texas 77046 U.S. POSTAGE
PAID
Houston, TX
THE AIM FAMILY OF FUNDS(R) Permit No. 2332
---------------
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH [FULL PAGE PHOTO OF
AIM Global Utilities Fund** AIM MANAGEMENT GROUP
HIGH CURRENT INCOME OFFICE BUILDING]
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Conn.
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund***
HIGH DEGREE OF SAFETY AND CURRENT INCOME
AIM Limited Maturity Treasury Shares
STABILITY, LIQUIDITY, AND CURRENT INCOME
AIM Money Market Fund
STABILITY, LIQUIDITY, AND CURRENT TAX-FREE INCOME
AIM Tax-Exempt Cash Fund
*AIM Aggressive Growth Fund was closed to new investors on July 18, 1995.
**On May 1, 1995, AIM Utilities Fund broadened its investment strategy to
permit up to 80% of its total assets to be invested in foreign securities, and
was renamed AIM Global Utilities Fund. ***On September 25, 1995, AIM Government
Securities Fund became AIM Intermediate Government Fund.
For more complete information about any AIM Funds, including sales charges and
expenses, ask your financial consultant or securities dealer for a free
prospectus(es). Please read the prospectus(es) carefully before you invest or
send money.
