<PAGE> 1
[AIM LOGO APPEARS HERE]
AIM TAX-FREE INTERMEDIATE
SHARES
SEMIANNUAL REPORT
SEPTEMBER 30, 1996
<PAGE> 2
AIM TAX-FREE INTERMEDIATE SHARES
For shareholders who seek a high level of income, exempt from federal taxes.
The Fund purchases high quality municipal bonds maturing in 10-1/2 years or
less.
ABOUT FUND PERFORMANCE DATA 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 Fund's average annual total return for periods ended 9/30/96 was 3.02%
for one year, 5.86% for five years, and 6.30% since the Fund's inception on
5/11/87 when calculated on maximum offering price.
o As of September 30, 1996, the Fund's 30-day distribution rate was 4.70%,
when calculated on maximum offering price. The distribution rate is equal
to the actual distributions from investment income declared for the prior
30-day period, expressed as an annual percentage. Distribution rates may
include daily dividends and short-term capital gains. Unless otherwise
indicated, distribution rates shown in this report are based on maximum
offering price.
o As of September 30, 1996, the Fund's 30-day yield was 4.21%, when
calculated on maximum offering price. The 30-day yield is calculated on the
basis of a formula defined by the SEC. The formula is based on the
portfolio's potential earnings from dividends, interest, yield-to-maturity
or yield-to-call of the bonds in the portfolio, net of all expenses and
expressed on an annualized basis.
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 The Fund's portfolio composition is subject to change, and there is no
assurance the Fund will continue to hold any security.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
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.
o An investment cannot be made in the indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the fund.
<PAGE> 3
A Message from
the Chairman
Dear Fellow Shareholder:
During periods of market volatility, I am reminded of a
[PHOTO OF story. When asked what the market was going to do, J.P.
Charles T. Bauer, Morgan reportedly replied, "It will fluctuate." Fixed-income
Chairman of investors can certainly agree with that statement: Bond
the Board of markets have undergone major shifts in momentum at least
the Fund, twice in 1996 as investors worried first about the
APPEARS HERE] possibility of recession and then about rising inflation.
Those of you who are long-time investors, and those who
are brand-new shareholders in The AIM Family of
Funds--Registered Trademark--, should recognize that periods of falling prices
in both the stock and bond markets are inevitable. Indeed, we can learn
important lessons about investing in periods of market uncertainty.
In our experience, we have observed that the best action to take is to stay
focused--not on the market, but on your own long-term goals. The market can
change from day to day. Those who try to "time" the market, over time, tend to
be less successful than those who continue to follow a disciplined investment
strategy.
Short-term volatility in financial markets may tempt some investors to
liquidate investments regardless of their personal financial objectives.
Remember that time is the best medicine for uncertain markets. The market's
performance in recent months has been driven by concerns about the possibility
of an overheated economy and rising inflation. However, the latest economic
data suggest conditions that prompted 1996's strong market performance should
continue: corporate earnings are healthy and economic growth is moderate,
without significant inflation.
You may cushion the effects of changing markets and reduce your risk
exposure in any one type of security by diversification--spreading your assets
across several kinds of investments. Prudent investors maintain a balanced
portfolio of stock and bond investments, with due consideration for their
personal financial objectives, risk tolerance, and investment time horizon.
There is one constant you can count on, regardless of changing markets--
AIM's commitment to you, our shareholders. At AIM, we take our responsibility
to you very seriously in managing a well-conceived and significantly
diversified menu of mutual funds. AIM investment management teams provide a
blend of skills, education, experience, and maturity that produces a balanced,
thoughtful approach to decision-making and quality investment products.
Consistent performance, coupled with outstanding customer service and a highly
professional staff, has helped AIM build relationships with 3.5 million
shareholders.
As always, we are ready to respond to your questions and comments. Please
call one of our representatives at 800-959-4246 if we may be of service. 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
---------------------
Remember that time is
the best medicine for
uncertain markets.
---------------------
<PAGE> 4
===================================================
AIM TAX-FREE INTERMEDIATE
SHARES CURRENT YIELD
ADVANTAGE
YIELDS AS OF 9/30/96
2-Year U.S. Treasury Note* 6.09%
5-Year U.S. Treasury Note* 6.45%
Fund 30-day yield,
taxable-equivalent** 6.97%
Fund 30-day distribution rate,
taxable-equivalent** 7.86%
===================================================
*Government securities, such as U.S. Treasury
bills, notes, and bonds, offer a high degree of
safety and are guaranteed as to the timely payment
of principal and interest if held to maturity.
Fund shares are not insured, and their value and
yield will vary with market conditions. **Taxable-
equivalent yields are calculated on net asset value
and assume the highest marginal income tax rate of
39.6%. Source: IRS, 1996.
The Managers' Overview
VOLATILE MARKETS
CHALLENGE INVESTORS
A roundtable discussion with the Fund management team for AIM Tax-Free
Intermediate Shares for the six-month reporting period ended September 30,
1996.
- -------------------------------------------------------------------------------
Q: HOW DID AIM TAX-FREE INTERMEDIATE SHARES PERFORM DURING THE REPORTING
PERIOD?
A: The Fund continued to deliver attractive tax-exempt current income. As of
September 30, 1996, the Fund's 30-day distribution rate was 4.75%, when
calculated on net asset value. Translated to taxable-equivalent yields,
the Fund's 30-day distribution rate on net asset value was 7.86%, assuming
the highest marginal federal tax rate of 39.6%. Net assets in the Fund
stood at $84.2 million as of September 30, 1996, and net asset value per
share was $10.74.
It was a difficult period for fixed-income investors, and that
accounted for the Fund's total return of 2.00% for the period, which
tracked the 2.14% total return for the Lipper Intermediate Municipal Fund
Index.
Q: WHAT WERE BOND-MARKET CONDITIONS LIKE DURING THE PAST SIX MONTHS?
A: Uncertainty dominated the bond markets as investors became concerned that
rapid economic growth would accelerate inflation. The rate of growth of
the gross domestic product (GDP) rose to 2.0% in the first quarter of 1996
and 4.7% in the second quarter, its highest level since late 1994. The
primary concern was that the Federal Reserve Board would nudge interest
rates higher to slow economic growth and forestall inflation. That drove
most bond yields higher--and prices lower--during most of the reporting
period. However, economic reports suggested that inflation was not
threatening. When the Fed met in July, August, and September, it left
interest rates unchanged each time.
Q: HOW DID MUNICIPAL SECURITIES PERFORM DURING THE REPORTING PERIOD?
A: Municipal securities fared a little better than U.S. Treasury securities.
The yield spread between long municipal securities and long U.S.
Treasuries fell to roughly 75% from the normal range of 80% to 85%. The
principal factor cushioning the municipal market continues to be the
decline in new issue supply. We observed a significant level of
refundings, particularly in June and July, and that has removed a lot of
bonds from the marketplace. The resulting relative scarcity in supply
helped cushion prices on municipal securities, and they tended to decline
less than U.S. Treasury securities in the volatile interest rate
environment.
Q: GIVEN MARKET CONDITIONS, WHAT WAS YOUR STRATEGY FOR THE FUND DURING
THE PERIOD?
A: We maintained our focus on selected intermediate-term securities that
provide net asset value stability and high income. The Fund maintained
attractive yield levels thanks to its relatively large weighting in
higher-coupon premium bonds with excellent call protection. That was
important, given that municipal issuers have taken advantage of lower
interest rates to refinance debt, which reduces the market yields
available to investors. We also looked for undervalued bonds with higher
yields to enhance the Fund's income level while preserving safety of
principal.
Of the 125 holdings in the Fund as of September 30, 1996, 76% was
invested in revenue bonds and 24% in general obligation bonds. At the end
of the reporting period, the Fund had a weighted average maturity of 4.8
years and a duration of 3.6 years. Funds with shorter maturities and
duration tend to be less sensitive to market fluctuation.
The Fund maintained its strategy of investing in quality issues. As of
September 30, 1996, approximately 60% of the portfolio's holdings were
securities rated AAA, and 100% of the portfolio was rated A or better.
Credit-enhanced securities--which are backed by insurance or
2
<PAGE> 5
escrowed with U.S. Treasuries--comprised about 53% of the portfolio. The
Fund also was managed for maximum tax-efficiency.
The Fund has an average portfolio quality rating of AA+ as measured
by Standard & Poor's Corporation (S&P) and Moody's Investor 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.
Q: WHAT IS "TAX EFFICIENCY"?
A: "Efficiency" for a tax-exempt fund refers to its ability to create
distributions that are free from federal income taxes, capital gains
taxes, and the alternative minimum tax (AMT). To manage the Fund for tax
efficiency, we avoid transactions that would result in capital gains
which are not offset by losses. Since its inception on May 11, 1987, AIM
Tax-Free Intermediate Shares distributions have been 99.9% efficient.
Q: WHAT ARE YOUR EXPECTATIONS FOR THE COMING MONTHS?
A: Mounting evidence that the U.S. economy is growing reasonably and that
inflation pressures remain modest has calmed investor concerns, at least
in the near term. Recent reports showed that GDP slowed to 2.2% in the
third quarter from 4.7% in the second quarter. The continued pace of
economic growth is the key. Many analysts and the Fed as well anticipate
that the economy will continue to slow in the months ahead.
Q: HOW LIKELY IS TAX REFORM?
A: We don't believe tax reform will be a factor in the future for several
reasons. First, there are no tax-reform bills under consideration by
Congress. If a bill is presented, we anticipate that lobbying groups will
muster an all-out assault on it. Second, the reform most mentioned--a flat
tax--actually may result in many lower- and middle-income workers paying
higher taxes--hardly a favorable outcome. Third, we think it unlikely that
the federal government will raise taxes at the same time it is shifting
more of the spending burden to the states.
================================================================================
PORTFOLIO COMPOSITION (as of 9/30/96)
================================================================================
TOP 5 BOND HOLDINGS
Number of Holdings 125
1. Lucas County Ohio Hospital Revenue
Bonds 6.75% 08/15/00 General Obligation 24%
2. Michigan State Building Auth. Refg.
Revenue Bonds 6.40% 10/01/04 Revenue 76%
3. Georgia State General Obligation
Bonds 7.10% 06/01/99 Credit Enhanced 53%
4. Louisiana State Offshore Terminal Auth.
Deepwater Port Refg. Revenue Bonds AMT 0
6.00% 09/01/01; 6.20% 09/01/03
5. South Dakota State Health & Education Average Maturity 4.8 Years
Facility Auth. Revenue Bonds 5.40%
07/01/06 Duration 3.6 Years
Fund holdings are subject to change and there is no assurance the Fund
will continue to hold any security.
================================================================================
Morningstar Ratings (as of 9/30/96)
============================================
FUNDS IN
MUNICIPAL
PERIOD RATING CATEGORY
Overall **** NA
5 Years **** 561
3 Years **** 1,013
1 Year **** 1,745
============================================
Morningstar's rating system of one (lowest)
to five (highest) stars is based on risk and
total return performance ratios for one-,
three-, five-, and 10-year periods and
considers all loads, expenses, and fees.
Ratings compare funds with similar investment
objectives and represent past performance,
which is no guarantee of comparable future
results.
-------------------
Since its inception
on May 11, 1987,
AIM Tax-Free
Intermediate Shares
distributions
have been 99.9%
tax-efficient.
-------------------
3
<PAGE> 6
Financials
SCHEDULE OF INVESTMENTS
September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
ALABAMA-0.51%
Alabama State Municipal Electric Authority;
Power Supply
Series A RB
6.30%, 09/01/01(b) AAA Aaa $ 400,000 $ 425,592
- -------------------------------------------------------------------------------------------
ARIZONA-4.57%
Arizona (State of);
Educational Loan Marketing Corp.
Series A Refunding RB
6.55%, 03/01/99 -- A 1,000,000 1,033,820
- -------------------------------------------------------------------------------------------
Cochise (County of) (Douglas Unified School
District #27); School Improvement
Series 1995
B GO
4.25%, 07/01/97(b) AAA Aaa 200,000 200,650
- -------------------------------------------------------------------------------------------
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 1,353,125
- -------------------------------------------------------------------------------------------
Mohave County Unified School District #1;
Lake Havasu
Series A GO
5.40%, 07/01/06(b) AAA Aaa 200,000 200,732
- -------------------------------------------------------------------------------------------
Phoenix (City of); Senior Lien Street and
Highway User Refunding
Series 1992 RB
6.20%, 07/01/02 AA A-1 1,000,000 1,061,230
- -------------------------------------------------------------------------------------------
3,849,557
- -------------------------------------------------------------------------------------------
ARKANSAS-2.43%
Little Rock (City of) (Baptist Medical Center);
Health Facility Hospital RB
6.70%, 11/01/04(b) AAA Aaa 1,400,000 1,513,988
- -------------------------------------------------------------------------------------------
North Little Rock (City of);
Electric System Refunding
Series 1992 A RB
6.00%, 07/01/01(b) AAA Aaa 500,000 531,020
- -------------------------------------------------------------------------------------------
2,045,008
- -------------------------------------------------------------------------------------------
CALIFORNIA-5.16%
California Statewide Communities
Development Authority
(San Gabriel Valley Medical Center);
Series 1996 A Certificates of Participation
4.00%, 09/01/97 A -- 1,000,000 999,790
- -------------------------------------------------------------------------------------------
Folsom (City of) (School Facilities Project);
Series 1993 B GO
6.00%, 08/01/02(b) AAA Aaa 500,000 532,500
- -------------------------------------------------------------------------------------------
Inglewood (City of) (Daniel Freeman Hospitals
Inc.); Insured Hospital
Series 1991 RB
6.50%, 05/01/01 A -- 400,000 420,588
- -------------------------------------------------------------------------------------------
Oakland (City of); Housing Finance Issue D-1 RB
6.70%, 01/01/98 A+ -- 180,000 183,562
- -------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
Financials
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
CALIFORNIA-(CONTINUED)
Orange (County of); Refunding Recovery
Series A RB
5.50%, 06/01/06(b) AAA Aaa $ 1,000,000 $ 1,021,710
- -------------------------------------------------------------------------------------------
Parking Authority of the City and County of
San Francisco; Parking Meter
Series 1994 RB
6.75%, 06/01/05(b) AAA Aaa 500,000 558,620
- -------------------------------------------------------------------------------------------
Regents (The) of the University of California
(Multiple Purpose Projects); Refunding
Series A RB
5.75%, 09/01/97 A A 250,000 253,328
- -------------------------------------------------------------------------------------------
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 100,000 108,272
- -------------------------------------------------------------------------------------------
West End Water Development, Treatment,
and Conservation
Joint Powers Authority; 1990 Water Facilities
Certificates of Participation
7.00%, 10/01/00 BBB+ A 250,000 266,505
- -------------------------------------------------------------------------------------------
4,344,875
- -------------------------------------------------------------------------------------------
COLORADO-0.15%
Colorado Student Obligation Bond Authority;
Student Loan Series 1985 B RB
6.125%, 12/01/98 -- A 125,000 127,605
- -------------------------------------------------------------------------------------------
CONNECTICUT-1.08%
Connecticut (State of) Development Authority;
Power and Light Series 1993 A RB
3.90%, 09/01/28(d) A-1+ VMIG-1 909,770 909,770
- -------------------------------------------------------------------------------------------
DELAWARE-0.94%
Delaware Transportation Authority;
Senior Lien Transportation System
Series 1991 RB
6.00%, 07/01/01(c)(e) AAA Aaa 750,000 794,235
- -------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA-3.11%
District of Columbia;
Series B GO
6.75%, 06/01/99(b) AAA Aaa 750,000 785,130
- -------------------------------------------------------------------------------------------
District of Columbia
(Medlantic Healthcare Group);
Series 1996 RB
6.00%, 08/15/06(b) AAA Aaa 1,550,000 1,617,874
- -------------------------------------------------------------------------------------------
District of Columbia
(The Howard University Issue);
University Series 1990 A RB
6.90%, 10/01/00 A+ A 200,000 214,350
- -------------------------------------------------------------------------------------------
2,617,354
- -------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
Financials
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
FLORIDA-0.42%
Jacksonville (City of); Excise Tax
Series 1986 A RB
7.60%, 10/01/96(c) NRR NRR $ 250,000 $ 250,000
- -------------------------------------------------------------------------------------------
Palm Beach County Solid Waste Authority; RB
7.90%, 07/01/97 A A 100,000 102,800
- -------------------------------------------------------------------------------------------
352,800
- -------------------------------------------------------------------------------------------
GEORGIA-5.93%
Albany (City of); Sewer System Series 1992 RB
6.30%, 07/01/02(b) AAA Aaa 500,000 531,035
- -------------------------------------------------------------------------------------------
Fulton (County of); Water and Sewer Refunding
Series 1992 RB
5.75%, 01/01/02 AAA Aaa 715,000 746,103
- -------------------------------------------------------------------------------------------
Georgia (State of); Series 1988 D GO
7.10%, 06/01/99 AA+ Aaa 2,000,000 2,132,300
- -------------------------------------------------------------------------------------------
Georgia State Municipal Electric Authority;
Series V RB
6.00%, 01/01/01(b) AAA Aaa 1,000,000 1,047,450
- -------------------------------------------------------------------------------------------
Metropolitan Atlanta Rapid Transit Authority;
Sales Tax Refunding Series M RB
6.15%, 07/01/02 AA- A-1 500,000 535,045
- -------------------------------------------------------------------------------------------
4,991,933
- -------------------------------------------------------------------------------------------
ILLINOIS-6.71%
Chicago (City of) (Central Public
Library Project);
Adjustable Rate Series 1988 C GO
6.10%, 01/01/99(b) AAA Aaa 500,000 517,395
- -------------------------------------------------------------------------------------------
Chicago Park District; Capital Improvement
Series 1991 GO
5.80%, 01/01/98(c) NRR NRR 750,000 764,340
- -------------------------------------------------------------------------------------------
Glenview (City of); GO
6.25%, 12/01/96 -- MIG-1 1,000,000 1,004,320
- -------------------------------------------------------------------------------------------
Illinois Health Facilities Authority
(Mercy Hospital and Medical Center);
Refunding
Series 1992 RB
6.20%, 01/01/00 A- Baa1 250,000 256,152
- -------------------------------------------------------------------------------------------
Illinois Regional Transit Authority;
Series B RB
6.30%, 06/01/04(c)(e) AAA Aaa 1,000,000 1,102,250
- -------------------------------------------------------------------------------------------
Joliet (City of); Waterworks and Sewer
Series 1991 RB
6.95%, 01/01/01(b) AAA Aaa 250,000 269,003
- -------------------------------------------------------------------------------------------
Kane (County of) Public Building Commission;
Unlimited Tax Public Building
Series B GO
6.20%, 12/01/01 -- Aa 700,000 731,500
- -------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
Financials
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
ILLINOIS-(CONTINUED)
Village of Hoffman Estates
(Park Place Apartment Project);
Series 1996 RB
5.75%, 06/01/06(e) AAA Aaa $ 1,000,000 $ 999,910
- -------------------------------------------------------------------------------------------
5,644,870
- -------------------------------------------------------------------------------------------
INDIANA-0.96%
Indiana Transportation Finance Authority;
Airport Facilities Lease Series A RB
6.00%, 11/01/01 A A 500,000 525,120
- -------------------------------------------------------------------------------------------
New Prairie School Building Corp.;
First Mortgage Refunding Series 1995 RB
4.10%, 01/05/97(b) AAA Aaa 285,000 284,926
- -------------------------------------------------------------------------------------------
810,046
- -------------------------------------------------------------------------------------------
IOWA-0.62%
Iowa Student Loan Liquidity Corp.; Student Loan
Series 1992 A RB
6.25%, 03/01/00 -- Aa1 500,000 521,735
- -------------------------------------------------------------------------------------------
KENTUCKY-0.34%
Kentucky State Turnpike Authority
(Economic Development
Road Revitalization Project); RB
7.125%, 05/15/00(c)(e) AAA Aaa 260,000 285,389
- -------------------------------------------------------------------------------------------
LOUISIANA-4.20%
Lafayette Public Power Authority;
Electric Refunding
Series 1987 RB
6.80%, 11/01/96(c)(e) NRR NRR 275,000 283,885
- -------------------------------------------------------------------------------------------
Louisiana Offshore Terminal Authority
(Loop, Inc.);
Deepwater Port Refunding
Series 1992 RB
6.00%, 09/01/01 A Baa1 1,000,000 1,047,440
- -------------------------------------------------------------------------------------------
Louisiana Offshore Terminal Authority
(Loop, Inc.);
Deepwater Port Refunding RB
6.20%, 09/01/03 A Baa1 1,000,000 1,063,340
- -------------------------------------------------------------------------------------------
Louisiana Public Facilities Authority
(Tulane University of Louisiana);
Series 1987 C RB
7.30%, 08/15/99 A A-1 270,000 281,316
- -------------------------------------------------------------------------------------------
Ouachita (Parish of) Hospital Service
District #1
(Glenwood Regional Medical Center);
Hospital Refunding Series 1996 RB
5.00%, 05/15/99 A -- 850,000 854,709
- -------------------------------------------------------------------------------------------
3,530,690
- -------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
Financials
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
MASSACHUSETTS-0.50%
New England Education Loan Marketing Corp.;
Student Loan Refunding Senior
Issue 1992 D RB
6.20%, 09/01/00 -- Aaa $ 400,000 $ 419,296
- -------------------------------------------------------------------------------------------
MICHIGAN-4.94%
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 1,117,380
- -------------------------------------------------------------------------------------------
Michigan State Building Authority; Refunding
Series I RB
6.40%, 10/01/04 AA- A-1 2,000,000 2,152,720
- -------------------------------------------------------------------------------------------
Novi Community School District; GO
5.875%, 05/01/97(b) AAA Aaa 100,000 101,193
- -------------------------------------------------------------------------------------------
Wayne County School District; Michigan School
Building Site Bond Unlimited Tax
Series 1992 GO
5.60%, 05/01/01 AA Aa 765,000 789,534
- -------------------------------------------------------------------------------------------
4,160,827
- -------------------------------------------------------------------------------------------
MINNESOTA-0.90%
Southern Minnesota Municipal Power Agency;
Power Supply System Series A RB
5.60%, 01/01/04 A A 745,000 759,572
- -------------------------------------------------------------------------------------------
MISSOURI-1.04%
Cass County School District #R-02;
Missouri Direct Deposit Program GO
4.30%, 03/01/98 AA -- 375,000 373,920
- -------------------------------------------------------------------------------------------
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 500,000 504,550
- -------------------------------------------------------------------------------------------
878,470
- -------------------------------------------------------------------------------------------
MONTANA-0.54%
Montana Higher Education Assistance Corp.;
Student Loan Series 1992 A RB
6.60%, 12/01/00 -- A 430,000 452,717
- -------------------------------------------------------------------------------------------
NEVADA-0.59%
Clark County Improvement District No. 65
(Lamb Boulevard III);
Series November 1, 1992 GO
6.20%, 12/01/02 AA- A1 120,000 123,825
- -------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 11
Financials
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
NEVADA-(CONTINUED)
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 $ 369,117
- -------------------------------------------------------------------------------------------
492,942
- -------------------------------------------------------------------------------------------
NEW JERSEY-3.40%
Gloucester County Utilities Authority;
Sewer Refunding Series 1991 RB
6.10%, 01/01/00 AA- A-1 225,000 237,123
- -------------------------------------------------------------------------------------------
Jersey City (City of)
(Qualified School Bond); GO
6.40%, 02/15/00 AA A 1,000,000 1,052,930
- -------------------------------------------------------------------------------------------
New Jersey Transportation Trust Fund Authority;
Transportation System Series 1992 A RB
5.90%, 06/15/99(c) NRR NRR 1,000,000 1,037,710
- -------------------------------------------------------------------------------------------
Trenton (City of); Fiscal Year Adjustment GO
6.10%, 08/15/02(b) AAA Aaa 500,000 532,070
- -------------------------------------------------------------------------------------------
2,859,833
- -------------------------------------------------------------------------------------------
NEW MEXICO-2.17%
Albuquerque (City of); Joint Water and Sewer
Series 1990 A RB
6.00%, 07/01/00(c)(e) AAA NRR 1,000,000 1,049,320
- -------------------------------------------------------------------------------------------
Las Cruces (City of) South Central Solid Waste
Authority; Environmental RB
6.00%, 06/01/97 -- A 260,000 262,850
- -------------------------------------------------------------------------------------------
Santa Fe (City of); Series 1994 A RB
5.50%, 06/01/03(c) AAA Aaa 500,000 515,405
- -------------------------------------------------------------------------------------------
1,827,575
- -------------------------------------------------------------------------------------------
OHIO-8.73%
Franklin (County of); 1991 Issue GO
6.30%, 12/01/01(c)(e) NRR NRR 1,500,000 1,639,575
- -------------------------------------------------------------------------------------------
Greene (County of); Water System
Series A RB
5.45%, 12/01/06(b) AAA Aaa 585,000 603,375
- -------------------------------------------------------------------------------------------
Hilliard City School District; Unlimited Tax
School Improvement Refunding
Series 1992 GO
6.05%, 12/01/00(b) AAA Aaa 500,000 530,435
- -------------------------------------------------------------------------------------------
6.15%, 12/01/01(b) AAA Aaa 250,000 267,840
- -------------------------------------------------------------------------------------------
Lucas County (St. Vincent's Medical Center);
Hospital
Series A RB
6.75%, 08/15/00(b)(e) AAA Aaa 2,000,000 2,172,980
- -------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
Financials
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
OHIO-(CONTINUED)
Miami County (Upper Valley Medical Center);
Hospital Facility Series 1996 B RB
5.00%, 05/15/98(b) AAA Aaa $ 585,000 $ 590,569
- -------------------------------------------------------------------------------------------
Ohio State Public Facilities Commission;
Mental Health Series A RB
7.00%, 12/01/97 AA- A-1 1,500,000 1,545,960
- -------------------------------------------------------------------------------------------
7,350,734
- -------------------------------------------------------------------------------------------
OKLAHOMA-2.30%
Grand River Dam Authority; Refunding
Series 1987 RB
6.45%, 06/01/97(c)(e) AAA Aaa 500,000 518,795
- -------------------------------------------------------------------------------------------
Oklahoma Housing Finance Agency;
Single Family Mortgage Series A RB
6.55%, 03/01/00(b) AAA Aaa 135,000 140,921
- -------------------------------------------------------------------------------------------
Southern Oklahoma Memorial Hospital Authority;
Hospital
Series 1993 A RB
5.60%, 02/01/00 A A 1,250,000 1,276,087
- -------------------------------------------------------------------------------------------
1,935,803
- -------------------------------------------------------------------------------------------
OREGON-3.13%
Oregon (State of) Department of Transportation
(Westside Light Rail Project); Series 1994 RB
5.00%, 06/01/97(b) AAA Aaa 1,000,000 1,007,310
- -------------------------------------------------------------------------------------------
Portland (City of); Sewer System
Series 1994 A RB
5.45%, 06/01/03 A+ A-1 1,065,000 1,105,832
- -------------------------------------------------------------------------------------------
5.55%, 06/01/04 A+ A-1 500,000 521,485
- -------------------------------------------------------------------------------------------
2,634,627
- -------------------------------------------------------------------------------------------
PENNSYLVANIA-1.56%
Pennsylvania Industrial Development Authority;
Economic Development
Series 1991 A RB
6.40%, 01/01/97(c) NRR NRR 200,000 201,080
- -------------------------------------------------------------------------------------------
6.50%, 01/01/98(c) NRR NRR 100,000 102,874
- -------------------------------------------------------------------------------------------
6.50%, 07/01/98(c) NRR NRR 150,000 155,731
- -------------------------------------------------------------------------------------------
Philadelphia Hospital & Higher Education
Facilities Authority
(St. Agnes Medical Center Hospital);
Refunding Series A RB
5.00%, 07/01/05(b) AAA Aaa 865,000 855,286
- -------------------------------------------------------------------------------------------
1,314,971
- -------------------------------------------------------------------------------------------
RHODE ISLAND-1.27%
Rhode Island (State of); Refunding
Series 1992 A GO
6.10%, 06/15/03(b) AAA Aaa 1,000,000 1,071,870
- -------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
Financials
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
SOUTH DAKOTA-2.33%
Rapid City (City of); Sales Tax
Series 1995 A RB
5.60%, 06/01/05(b) AAA Aaa $ 255,000 $ 262,737
- -------------------------------------------------------------------------------------------
South Dakota Health and Education Facility
McKennan Hospital; Refunding
Series 1996 RB
5.40%, 07/01/06(b) AAA Aaa 1,680,000 1,698,883
- -------------------------------------------------------------------------------------------
1,961,620
- -------------------------------------------------------------------------------------------
TENNESSEE-2.11%
Nashville and Davidson (County of) Health and
Education Facilities Board (Meharry
Medical College); RB
7.875%, 12/01/04(c) NRR Aaa 1,100,000 1,226,160
- -------------------------------------------------------------------------------------------
Tennessee School Board Authority (College and
University Improvement); RB
5.75%, 05/01/06 AA A-1 550,000 552,887
- -------------------------------------------------------------------------------------------
1,779,047
- -------------------------------------------------------------------------------------------
TEXAS-14.45%
Alamo Community College District;
Series 1990 GO
6.90%, 02/15/00(c)(e) NRR Aaa 500,000 536,255
- -------------------------------------------------------------------------------------------
Arlington City Hospital Authority
(Arlington Medical Center);
Hospital Authority RB
5.50%, 12/01/97(b) AAA Aaa 575,000 582,693
- -------------------------------------------------------------------------------------------
Austin (City of); Combined Utility
System Refunding
Series 1986 RB
7.20%, 05/15/98 A A 200,000 204,574
- -------------------------------------------------------------------------------------------
Clint Independent School District;
Unlimited Tax Refunding
Series 1991 GO
6.30%, 03/01/00(b) -- Aaa 185,000 193,379
- -------------------------------------------------------------------------------------------
Comal County Industrial Development Authority
(The Coleman Company, Inc. Project);
Series 1980 IDR
9.25%, 08/01/00(c) NRR NRR 665,000 730,935
- -------------------------------------------------------------------------------------------
Conroe (City of) Independent School District;
Unlimited School Tax GO
7.375%, 02/01/01(b) AAA Aaa 115,000 127,146
- -------------------------------------------------------------------------------------------
Gatesville Independent School District;
Unlimited Tax School Building and Refunding
Series 1995 RB
5.80%, 02/01/03(b) -- Aaa 485,000 511,160
- -------------------------------------------------------------------------------------------
Harris (County of); Port of Houston
Authority RB
5.75%, 05/01/02 A A 1,425,000 1,461,181
- -------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
Financials
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
TEXAS-(CONTINUED)
Harris County Health Facilities Development
Corp. (Memorial Hospital System Project);
Hospital Series 1992 RB
6.70%, 06/01/00 A- A $ 1,000,000 $ 1,056,830
- -------------------------------------------------------------------------------------------
Hays (County of); Series 1995 GO
7.75%, 08/18/97(b) AAA Aaa 175,000 180,589
- -------------------------------------------------------------------------------------------
Keller (City of) Independent School District;
Series 1994
Certificates of Participation
5.75%, 08/15/01(b) AAA Aaa 915,000 960,356
- -------------------------------------------------------------------------------------------
Kerrville (City of); Electric System Refunding
Series 1991 RB
6.375%, 11/01/01(b) AAA Aaa 185,000 197,555
- -------------------------------------------------------------------------------------------
La Marque Independent School District;
Unlimited Schoolhouse Tax
Series 1992 GO
7.50%, 08/15/99(b) AAA Aaa 575,000 624,082
- -------------------------------------------------------------------------------------------
7.50%, 08/15/02(b) AAA Aaa 750,000 856,522
- -------------------------------------------------------------------------------------------
Northside Independent School District;
School Improvement Series 1986 GO
6.90%, 02/01/97 AA- Aa 1,000,000 1,010,410
- -------------------------------------------------------------------------------------------
San Antonio (City of); Electric and Gas System
Refunding
Series 1989 A RB
7.00%, 02/01/01 AA Aa1 400,000 426,416
- -------------------------------------------------------------------------------------------
Temple (City of) (Bell County); Refunding
Series 1992 GO
5.80%, 02/01/01(b) AAA Aaa 250,000 261,632
- -------------------------------------------------------------------------------------------
Texarkana (City of); Water and Sewer Utility
Improvement
Series 1996 GO
6.75%, 02/15/98(b) AAA Aaa 280,000 289,367
- -------------------------------------------------------------------------------------------
Texas Housing Agency; Residential Mortgage
Series 1988 A RB
7.15%, 01/01/97 A+ Aa 195,000 196,027
- -------------------------------------------------------------------------------------------
Texas Municipal Power Agency; RB
5.75%, 09/01/02(c)(e) AAA Aaa 1,000,000 1,050,960
- -------------------------------------------------------------------------------------------
Texas Turnpike Authority (Addison Airport Toll
Tunnel Project); Dallas North Tollway
Series 1994 RB
6.30%, 01/01/05(b) AAA Aaa 500,000 540,270
- -------------------------------------------------------------------------------------------
Texas Water Resources Finance Authority;
Series 1989 A RB
7.25%, 08/15/97 A A 145,000 148,352
- -------------------------------------------------------------------------------------------
University of Texas System; General Tuition
Series 1986 Refunding RB
7.75%, 08/15/98(c) AAA Aaa 10,000 10,640
- -------------------------------------------------------------------------------------------
12,157,331
- -------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 15
Financials
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
UTAH-1.23%
Utah (State of) (Board of Water Resources
Program); Revolving Fund Recapitalization
Series 1992 B RB
6.10%, 04/01/02 AA -- $ 500,000 $ 533,550
- -------------------------------------------------------------------------------------------
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- -- 475,000 501,291
- -------------------------------------------------------------------------------------------
1,034,841
- -------------------------------------------------------------------------------------------
VIRGINIA-3.31%
Medical College of Hampton Roads;
General Refunding
Series 1991 B RB
5.60%, 11/15/96 A- -- 300,000 300,495
- -------------------------------------------------------------------------------------------
6.00%, 11/15/99 A- -- 605,000 626,804
- -------------------------------------------------------------------------------------------
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 535,000 543,758
- -------------------------------------------------------------------------------------------
5.40%, 11/01/05 AA Aa 500,000 511,495
- -------------------------------------------------------------------------------------------
Portsmouth (City of); Port Improvement
Unlimited Tax Refunding GO
6.40%, 11/01/03 AA- A 300,000 325,113
- -------------------------------------------------------------------------------------------
Portsmouth (City of); Public Utility Refunding
Series 1992 GO
5.90%, 11/01/01 AA- A 450,000 474,327
- -------------------------------------------------------------------------------------------
2,781,992
- -------------------------------------------------------------------------------------------
WASHINGTON-3.14%
Seattle (City of) (West Seattle Bridge);
Limited Tax Refunding Series 1991 GO
6.40%, 10/01/01 AA Aa1 250,000 269,413
- -------------------------------------------------------------------------------------------
Seattle (Port of); Series 1992 A RB
6.00%, 11/01/01 AA- A-1 500,000 526,500
- -------------------------------------------------------------------------------------------
Washington Health Care Facility Authority
(Our Lady of Lourdes Health Center);
Refunding RB
7.35%, 12/01/97(f) A+ -- 500,000 515,155
- -------------------------------------------------------------------------------------------
Washington Public Power Supply System
(Nuclear Project #1); RB
6.50%, 07/01/05(b) AAA Aaa 1,000,000 1,070,050
- -------------------------------------------------------------------------------------------
Washington Public Power Supply System
(Nuclear Project #3); Refunding
Series B RB
6.80%, 07/01/97 AA- Aa 250,000 254,710
- -------------------------------------------------------------------------------------------
2,635,828
- -------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 16
Financials
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
WISCONSIN-2.42%
Sturgeon Bay (City of); Series 1996 A Bond
Anticipation Notes
4.30%, 10/01/97 -- MIG-1 $ 1,000,000 $ 1,000,830
- -------------------------------------------------------------------------------------------
Wisconsin (State of); Series A GO
5.75%, 05/01/99 AA Aa 1,000,000 1,034,730
- -------------------------------------------------------------------------------------------
2,035,560
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-97.19% 81,796,915
- -------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.81% 2,361,885
- -------------------------------------------------------------------------------------------
NET ASSETS-100.00% $ 84,158,800
===========================================================================================
</TABLE>
Investment Abbreviations:
<TABLE>
<S> <C>
GO -- General Obligation Bonds
IDR -- Industrial Development Revenue Bonds
NRR -- Not re-rated
PCR -- Pollution Control Revenue Bonds
RB -- Revenue Bonds
</TABLE>
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) Demand security; payable on demand by the Fund at specified frequencies no
greater than thirteen months. Interest rate is redetermined periodically.
Rate shown is the rate in effect on September 30, 1996.
(e) Security has an outstanding irrevocable call or mandatory put by the issuer.
Market value and maturity 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, 1996
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $79,448,932) $ 81,796,915
- -----------------------------------------------------------------------------------------
Receivables for:
Investments sold 1,020,000
- -----------------------------------------------------------------------------------------
Capital stock sold 388,757
- -----------------------------------------------------------------------------------------
Interest 1,386,584
- -----------------------------------------------------------------------------------------
Investment for deferred compensation plan 10,130
- -----------------------------------------------------------------------------------------
Other assets 36,624
- -----------------------------------------------------------------------------------------
Total assets 84,639,010
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 311,880
- -----------------------------------------------------------------------------------------
Dividends 91,861
- -----------------------------------------------------------------------------------------
Deferred compensation plan 10,130
- -----------------------------------------------------------------------------------------
Accrued advisory fees 20,888
- -----------------------------------------------------------------------------------------
Accrued administrative service fees 3,998
- -----------------------------------------------------------------------------------------
Accrued directors' fees 1,700
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 8,357
- -----------------------------------------------------------------------------------------
Accrued operating expenses 31,396
- -----------------------------------------------------------------------------------------
Total liabilities 480,210
- -----------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 84,158,800
=========================================================================================
Capital stock, $.001 par value per share:
Authorized 1,000,000,000
- -----------------------------------------------------------------------------------------
Outstanding 7,838,987
=========================================================================================
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $ 10.74
=========================================================================================
OFFERING PRICE PER SHARE:
(Net asset value of $10.74 divided by 99.00%) $ 10.85
=========================================================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 18
Financials
STATEMENT OF OPERATIONS
For the six months ended September 30, 1996
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $ 2,280,217
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 127,914
- ----------------------------------------------------------------------------------------
Custodian fees 3,551
- ----------------------------------------------------------------------------------------
Transfer agent fees 30,732
- ----------------------------------------------------------------------------------------
Registration and filing fees 17,067
- ----------------------------------------------------------------------------------------
Administrative service fees 23,988
- ----------------------------------------------------------------------------------------
Directors' fees 3,480
- ----------------------------------------------------------------------------------------
Printing 12,373
- ----------------------------------------------------------------------------------------
Other 24,181
- ----------------------------------------------------------------------------------------
Total expenses 243,286
- ----------------------------------------------------------------------------------------
Net investment income 2,036,931
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES:
Net realized gain (loss) on sales of investment securities (29,230)
- ----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment securities (372,617)
- ----------------------------------------------------------------------------------------
Net gain (loss) on investment securities (401,847)
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 1,635,084
========================================================================================
</TABLE>
See Notes to Financial Statements.
16
<PAGE> 19
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended September 30, 1996 and the year ended March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1996 1996
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,036,931 $ 3,731,756
- --------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities (29,230) (5,848)
- --------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (372,617) 836,452
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,635,084 4,562,360
- --------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (2,082,125) (3,712,690)
- --------------------------------------------------------------------------------------------
Net increase (decrease) from capital stock transactions 1,539,394 (137,887)
- --------------------------------------------------------------------------------------------
Net increase in net assets 1,092,353 711,783
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 83,066,447 82,354,664
- --------------------------------------------------------------------------------------------
End of period $84,158,800 $83,066,447
============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $82,893,259 $81,353,865
- --------------------------------------------------------------------------------------------
Undistributed net investment income 58,153 103,347
- --------------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of investment
securities (1,140,595) (1,111,365)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 2,347,983 2,720,600
- --------------------------------------------------------------------------------------------
$84,158,800 $83,066,447
============================================================================================
</TABLE>
See Notes to Financial Statements.
17
<PAGE> 20
Financials
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Tax Exempt Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, 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
investment objective of the Fund is to generate as high a level of tax-exempt
income as is consistent with preservation of capital by investing in high
quality, intermediate-term municipal securities having a maturity of ten and
one-half years or less.
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--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 either are not readily available or are questionable 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. Realized gains and losses are computed on the
basis of specific identification of the securities sold. Interest income,
adjusted for amortization of premiums and original issue discounts, is earned
from settlement date and is recorded on the accrual basis.
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
$1,108,769, which expires, if not previously utilized, in 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
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. AIM will, if necessary, reduce its fee for any fiscal year to the
extent required so that the amount of ordinary expenses of the Fund (excluding
interest, taxes, brokerage commissions and extraordinary expenses) paid or
incurred by the Fund for such fiscal year does not exceed the applicable expense
limitations imposed by the state securities regulations 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, 1996, the Fund
reimbursed AIM $23,988 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agent and
shareholder services to the Fund. During the six months ended September 30,
1996, the Fund paid AFS $17,396 for such services.
Under the terms of a master distribution agreement between the Company and the
Fund, A I M Distributors, Inc. ("AIM Distributors") acts as the exclusive
distributor of the Shares. AIM Distributors received commissions of $12,586 from
sales of capital stock during the six months ended September 30, 1996. Such
commissions are not an expense of the Company. They are deducted from, and are
not included in, the proceeds from sales of capital stock. Certain officers and
directors of the Company are officers of AIM, AFS and AIM Distributors.
During the six months ended September 30, 1996, the Fund paid legal fees of
$1,558 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the six months ended September 30, 1996 was
$16,519,014 and $13,193,207, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of September 30, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $2,366,342
- -----------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (18,359)
- -----------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $2,347,983
===================================================================================
</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 six months ended September 30, 1996 and
the year ended March 31, 1996 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 MARCH 31, 1996
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 1,342,091 $ 14,399,287 2,173,832 $ 23,604,635
- -----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends 136,308 1,462,092 232,136 2,517,616
- -----------------------------------------------------------------------------------------------------------------------
Reacquired (1,334,925) (14,321,985) (2,428,661) (26,260,138)
- -----------------------------------------------------------------------------------------------------------------------
143,474 $ 1,539,394 (22,693) $ (137,887)
=======================================================================================================================
</TABLE>
NOTE 6-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during the six months ended September 30, 1996, each of the years in
the seven-year period ended March 31, 1996, 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, ----------------------------------------------------------------
1996 1996 1995 1994 1993
------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 10.79 $ 10.67 $ 10.62 $ 10.74 $ 10.27
- ------------------------------ ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.26 0.52 0.49 0.48 0.53
- ------------------------------ ------- ------- ------- ------- -------
Net gains (losses) on
securities (both
realized and unrealized) (0.05) 0.12 0.04 (0.10) 0.47
- ------------------------------ ------- ------- ------- ------- -------
Total from investment
operations 0.21 0.64 0.53 0.38 1.00
- ------------------------------ ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.26) (0.52) (0.48) (0.48) (0.53)
- ------------------------------ ------- ------- ------- ------- -------
Distributions from net
realized capital gains -- -- -- (0.02) --
- ------------------------------ ------- ------- ------- ------- -------
Total distributions (0.26) (0.52) (0.48) (0.50) (0.53)
- ------------------------------ ------- ------- ------- ------- -------
Net asset value, end of period $ 10.74 $ 10.79 $ 10.67 $ 10.62 $ 10.74
============================== ======= ======= ======= ======= =======
Total return(a) 2.00% 6.06% 5.17% 3.47% 10.01%
============================== ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $84,159 $83,066 $82,355 $99,757 $70,120
============================== ======= ======= ======= ======= =======
Ratio of expenses to average
net assets 0.57%(b) 0.65% 0.59% 0.61%(c) 0.38%(c)
============================== ======= ======= ======= ======= =======
Ratio of net investment
income to average net assets 4.78%(b) 4.81% 4.65% 4.37%(c) 5.00%(c)
============================== ======= ======= ======= ======= =======
Portfolio turnover rate 16% 32% 75% 26% 29%
============================== ======= ======= ======= ======= =======
<CAPTION>
MARCH 31,
-------------------------------------------------------------- APRIL 30,
1992 1991 1990 1989 1988
-------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 10.07 $ 9.89 $ 9.69 $ 9.88 $ 10.00
- ------------------------------ -------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.62 0.63 0.62 0.56 0.55
- ------------------------------ -------- ------- ------- ------- -------
Net gains (losses) on
securities (both
realized and unrealized) 0.20 0.18 0.20 (0.19) (0.12)
- ------------------------------ -------- ------- ------- ------- -------
Total from investment
operations 0.82 0.81 0.82 0.37 0.43
- ------------------------------ -------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.62) (0.63) (0.62) (0.56) (0.55)
- ------------------------------ -------- ------- ------- ------- -------
Distributions from net
realized capital gains -- -- -- -- --
- ------------------------------ -------- ------- ------- ------- -------
Total distributions (0.62) (0.63) (0.62) (0.56) (0.55)
- ------------------------------ -------- ------- ------- ------- -------
Net asset value, end of period $ 10.27 $ 10.07 $ 9.89 $ 9.69 $ 9.88
============================== ======== ======= ======= ======= =======
Total return(a) 8.39% 8.39% 8.66% 3.85% 4.46%
============================== ======== ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $ 38,773 $ 6,184 $ 5,231 $ 4,413 $ 5,594
============================== ======== ======= ======= ======= =======
Ratio of expenses to average
net assets 0.02%(c) 0.50%(c) 0.50%(c) 0.53%(c)(d) 0.50%(c)(d)
============================== ======== ======= ======= ======= =======
Ratio of net investment
income to average net assets 5.78%(c) 6.29%(c) 6.27%(c) 6.74%(c)(d) 5.86%(c)(d)
============================== ======== ======= ======= ======= =======
Portfolio turnover rate 15% 0% 12% 31% 80%
============================== ======== ======= ======= ======= =======
</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 $85,043,268.
(c) After waiver of advisory fees and/or expense reimbursements. The ratios of
expenses and net investment income prior to waivers and/or expense
reimbursements were as follows:
<TABLE>
<CAPTION>
Net Investment
Year Expenses Income
---- --------- --------------
<S> <C> <C>
1994 0.64% 4.35%
1993 0.66% 4.71%
1992 0.98% 4.81%
1991 1.79% 5.00%
<CAPTION>
Net Investment
Year Expenses Income
---- --------- --------------
<S> <C> <C>
1990 1.91% 4.86%
1989 2.09% 5.18%
1988 1.57% 4.79%
</TABLE>
(d) Annualized.
NOTE 7-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
PLC announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO PLC. AIM Management is the parent company of the Fund's advisor. The
merger is conditional on, among other things, approval by the shareholders of
INVESCO PLC and AIM Management and the shareholders of the AIM funds and the
mutual funds managed by INVESCO PLC, and is expected to take place during the
first quarter of 1997.
20
<PAGE> 23
Directors and
Officers
<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 Officer Chairman Suite 1919
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Formerly Director, President,
and Chief Executive Officer John J. Arthur A I M Advisors, Inc.
COMSAT Corporation Senior Vice President and Treasurer 11 Greenway Plaza
Suite 1919
Owen Daly II Carol F. Relihan Houston, TX 77046
Director Senior Vice President and Secretary
Cortland Trust Inc. TRANSFER AGENT
Gary T. Crum
Carl Frischling Senior Vice President A I M Fund Services, Inc.
Partner P.O. Box 4739
Kramer, Levin, Naftalis & Frankel Scott G. Lucas Houston, TX 77210-4739
Senior Vice President
Robert H. Graham CUSTODIAN
President and Chief Operating Officer Jonathan C. Schoolar
A I M Management Group Inc. Senior Vice President The Bank of New York
90 Washington Street, 11th Floor
John F. Kroeger Dana R. Sutton New York, NY 10286
Formerly Consultant Vice President and Assistant Treasurer
Wendell & Stockel Associates, Inc. COUNSEL TO THE FUND
Stuart W. Coco
Lewis F. Pennock Vice President Ballard Spahr
Attorney Andrews & Ingersoll
Melville B. Cox 1735 Market Street
Ian W. Robinson Vice President Philadelphia, PA 19103
Consultant; Former Executive
Vice President and Karen Dunn Kelley COUNSEL TO THE DIRECTORS
Chief Financial Officer Vice President
Bell Atlantic Management Kramer, Levin, Naftalis & Frankel
Services, Inc. P. Michelle Grace 919 Third Avenue
Assistant Secretary New York, NY 10022
Louis S. Sklar
Executive Vice President David L. Kite DISTRIBUTOR
Hines Interests Assistant Secretary
Limited Partnership A I M Distributors, Inc.
Nancy L. Martin 11 Greenway Plaza
Assistant Secretary Suite 1919
Houston, TX 77046
Ofelia M. Mayo
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
<PAGE> 24
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
AIM Blue Chip Fund
AIM Global Growth Fund
AIM Growth Fund
AIM InternationalEquity Fund
AIM Value Fund
AIM Weingarten Fund
[PHOTO OF ELEVEN GREENWAY PLAZA
APPEARS HERE] GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund
HIGH CURRENT INCOME
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 CT
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE
OF SAFETY
AIM Intermediate Government Fund
HIGH DEGREE OF SAFETY AND
CURRENT INCOME
AIM Management Group Inc. has provided leadership in the AIM Limited Maturity Treasury Shares
mutual fund industry since 1976 and currently manages
approximately $59 billion in assets for more than 3.5 STABILITY, LIQUIDITY, AND
million shareholders, including individual investors, CURRENT INCOME
corporate clients, and financial institutions. The AIM AIM Money Market Fund
Family of Funds--Registered Trademark-- is distributed
nationwide, and AIM today ranks among the nation's STABILITY, LIQUIDITY, AND
top 15 mutual fund companies in assets under CURRENT TAX-FREE INCOME
management, according to Lipper Analytical Services, AIM Tax-Exempt Cash Fund
Inc.
*AIM Aggressive Growth Fund was closed to new investors on July 18,
1995. For more complete information about any AIM Fund(s), 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.
[AIM LOGO APPEARS HERE] ---------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 1919 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
---------------
</TABLE>
