<PAGE> 1
[AIM LOGO APPEARS HERE]
AIM TAX-FREE
INTERMEDIATE SHARES
ANNUAL REPORT
MARCH 31, 1997
<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 AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Tax-Free Intermediate Shares' performance figures are historical
and reflect reinvestment of all distributions and changes in net asset
value. Unless otherwise indicated, the Fund's performance is computed
at net asset value without a sales charge. When sales charges are
included in performance figures, performance reflects the maximum
1.00% sales charge.
o During the fiscal year ended 3/31/97, the Fund paid distributions of
$0.5175 per share.
o 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 annualized distribution rate reflects the Fund's most
recent monthly dividend distribution multiplied by 12 and divided by
the most recent month-end net asset value.
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 is subject to change and there is no assurance
the Fund will continue to hold any particular security.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Lehman Brothers Municipal Bond Index is an unmanaged composite
representing an approximation of the performance of investment-grade
municipal bonds. Index performance is from 5/31/87 to 3/31/97.
o The unmanaged Lipper Intermediate Municipal Fund Index represents an
average of the performance of the 30 largest intermediate-term
municipal bond funds tracked by Lipper Analytical Services, Inc., an
independent mutual funds performance monitor.
o 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.
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
The Chairman's Letter
Dear Fellow Shareholder:
Concerns over higher interest rates and surprisingly strong
economic growth dominated bond market performance during the
[PHOTO of year ended March 31, 1997. Bond investors were well served
Charles T. by holding portfolios of relatively short duration, such as
Bauer, AIM Tax-Free Intermediate Shares.
Chairman of As 1997 proves to be yet another volatile year for
the Board of investing, it is ever more important to remain focused on
the Fund, your personal investment objectives. There are a few basic
APPEARS HERE] strategies that may help you stay on track. First, you
should keep a long-term outlook. If you leave your money
invested over the long term, you can help avoid the results
of the volatility that generally accompanies financial
markets over the short term. Those who try to "time" the
market--move money in and out of the market based on some
gauge of future market performance--tend to be less successful than investors
using disciplined, long-term investment strategies. That's because no one, not
even expert market watchers, can consistently predict what the market will do
next.
Another strategy, diversification, may help you cushion the effects of
a volatile market and enhance your return potential. A mutual fund is already
diversified because it invests in many securities. You can diversify even
further by placing some of your assets in several different types of domestic
and international funds that may include stocks, bonds, and money market
securities.
Finally, no matter what your investment goals or time horizon, it
makes good sense to review your portfolio regularly with your financial
consultant. In rapidly changing markets, you need an investment professional on
your side who can explain what is happening and how your portfolio may be
affected. Your financial consultant can help you create and follow a regular
investment plan--investing a certain amount of money at regular intervals--that
can help you stay on track regardless of day-to-day market activity.
At AIM, we meet the challenge of changing financial markets through
the consistent application of disciplined investment strategies that have
served our shareholders well for more than 20 years. We are pleased that AIM
funds, overall, have turned in attractive, and often impressive performance
when measured against benchmark indexes and peer group performance.
AIM/INVESCO MERGER FINALIZED
We are pleased to announce that the merger of A I M Management Group Inc. and
INVESCO plc was concluded on February 28, 1997. AIM is now part of one of the
world's largest independent investment management groups with approximately
$160 billion in assets under management as of March 31, 1997.
The merger creates a company with the financial strength necessary to
meet your needs in an increasingly competitive financial services environment,
both in the United States and worldwide. Though now under one holding company,
AIM and INVESCO will continue to operate as separate entities. Therefore, this
merger will not change the portfolio management, investment style, or name of
any of the AIM funds you own. The merger's completion begins a new and
promising era for AIM, one we believe will yield exciting opportunities.
We appreciate the trust you have placed in us and we look forward to
our continued close association. If you have any questions or comments about
this report, we invite you to call Client Services at 800-959-4246 during
normal business hours. For automated account information 24 hours a day, call
the AIM Investor Line at 800-246-5463. We also invite you to visit AIM's
award-winning Web site at http://www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
- --------------------------------------------------------------------------------
The annual shareholder meeting of AIM Tax-Exempt Funds, Inc., and AIM Tax-Free
Intermediate Shares was held on February 7, 1997. For details of the business
transacted at that meeting, please see Supplementary Proxy Information -
Shareholder Meeting after the Financial Statements in this report.
- --------------------------------------------------------------------------------
---------------
In rapidly changing markets,
you need an investment
professional on your side
who can explain what is
happening and how your
portfolio may be affected.
---------------
<PAGE> 4
The Managers' Overview
FUND PROVIDES SOLID INCOME
DESPITE VOLATILE MARKET
A roundtable discussion with the Fund management team for
AIM Tax-Free Intermediate Shares for the fiscal year ended March 31, 1997.
- --------------------------------------------------------------------------------
Q. HOW DID AIM TAX-FREE INTERMEDIATE SHARES PERFORM DURING THE REPORTING
PERIOD?
A. The Fund continued to provide competitive federally tax-exempt current
income. As of March 31, 1997, the Fund's 30-day distribution rate was
4.75%. Translated into its taxable equivalent, the Fund's 30-day
distribution rate at net asset value was 7.86%, assuming the highest
marginal tax rate of 39.6%. The Fund's 30-day yield was 3.55%, when
calculated at maximum offering price. Its 30-day taxable equivalent yield
was 5.88%, assuming the highest marginal federal tax rate of 39.6%.
During the fiscal year covered by this report, the Fund posted a total
return of 4.33%, besting the 4.18% total return of the Lipper Intermediate
Municipal Fund Index.
Preservation of principal is one of the Fund's primary goals. Despite
volatile market conditions during the reporting period, net asset value per
share remained within a range of $10.64 to $10.87, thus continuing the
Fund's history of relative price stability as shown on the accompanying
chart.
Q. WHAT WERE THE MAJOR TRENDS IN THE BOND MARKET DURING THE FISCAL YEAR?
A. Volatility dominated fixed-income markets. The year opened with bond
prices declining and yields rising, a trend that continued until September.
The market then staged a rally that lasted until December when bond prices
again began to fall. Bond prices resumed an upward climb at the end of
January, only to go into a mid-February decline that lasted through the end
of the reporting period. The volatility that characterized the market was
reflected in the yield of the five-year U.S. Treasury note, which ranged
from a high of 6.85% in June to a low of 5.83% in November before closing
the year at 6.75%.
Q. WHAT PROMPTED SUCH MARKET VOLATILITY?
A. Concerns that the Federal Reserve Board would raise interest rates to slow
rapid economic growth and contain inflation kept investors on edge for most
of the year. The regular release of economic data, which might provide
clues on the central bank's impending actions, often produced significant
fluctuations in the market. Despite healthy economic growth in the last
three quarters of 1996, however, there was little evidence of inflationary
pressures. Consequently, the Fed left interest rates unchanged in the last
half of 1996.
But early in 1997, there were heightened concerns that wage
pressures--the product of a tight job market--might ignite inflation.
During the fiscal year ended March 31, 1997, the average hourly wage
increased at an annualized rate of 4.0%. In congressional testimony, Fed
Chairman Alan Greenspan stressed the "importance of acting
promptly--ideally pre-emptively--to keep inflation low." On March 25, the
Fed increased the federal funds rate--the rate banks charge each other for
overnight loans--from 5.25% to 5.50%. Immediately, investors began
speculating whether this was the first in a series of rate increases and
that perpetuated market volatility.
STABILITY OF NET ASSET VALUE
May 1987-March 1997
<TABLE>
<S> <C>
5/11/87 $10.00
9.93
9.59
9.79
3/88 9.89
9.82
9.86
9.81
3/89 9.69
9.94
9.77
9.99
3/90 9.89
9.93
9.88
10.01
3/91 10.07
10.07
10.23
10.33
3/92 10.27
10.43
10.55
10.58
3/93 10.74
10.87
11.03
11.02
3/94 10.62
10.61
10.56
10.38
3/95 10.67
10.76
10.84
10.92
3/96 10.79
10.72
10.74
10.80
</TABLE>
Source: Towers Data Systems HYPO--Registered Trademark--. There is no guarantee
the Fund will maintain a constant NAV. Investment return will vary so that you
may have a gain or a loss when you sell shares. Past performance cannot
guarantee comparable future results.
2
<PAGE> 5
Q. HOW DID MUNICIPAL SECURITIES PERFORM DURING THE REPORTING PERIOD?
A. Early in the reporting period, talk of a possible flat tax, which would
eliminate the federal tax-exempt status of municipal bonds, kept investors
jittery. However, after a flat tax ceased to be an issue, municipal bonds
performed quite well and to a certain extent seemed less sensitive to
inflation concerns than taxable fixed-income securities.
For most of the year, municipal bonds provided better total returns
than taxable U.S. Treasury securities. A general lackof new issues
throughout much of the period tended to keep municipal bond prices
relatively high. As a result, municipal bonds tended to decline less in
value than U.S. Treasuries in the volatile market environment.
Q. GIVEN MARKET CONDITIONS, WHAT WAS YOUR STRATEGY FOR THE FUND DURING THE
PERIOD?
A. We maintained our focus on revenue bonds, whose creditworthiness tends to
be less sensitive to the political environment than general obligation
bonds.
As of March 31, 1997, the Fund was 71% invested in revenue bonds and
29% invested in general obligation bonds. The portfolio had a weighted
average maturity of 4.6 years and a duration of 3.6 years. Funds with
shorter duration tend to be less sensitive to market fluctuations.
The Fund also continued to invest in high quality issues with good
liquidity. As of March 31, 1997, approximately 76% 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
escrowed with U.S. Treasuries--comprised about 47% of the portfolio.
The Fund had an average portfolio quality rating of AA+ as measured by
Standard & Poor's Corporation (S&P) and Moody's Investors Service, Inc.,
two widely known credit rating agencies. S&P and Moody's ratings are
historical and are based on analysis of the credit quality of the
individual municipal securities in the Fund's portfolio.
Q. IN RECENT YEARS, HAS THE FUND PAID ANY TAXABLE DISTRIBUTIONS?
A. No, because the Fund is managed for maximum tax efficiency.
"Efficiency" for a tax-exempt fund refers to its ability to pay
distributions that are free from federal income and capital gains taxes. To
manage the Fund for tax efficiency, we make every effort to avoid
transactions that would result in capital gains that are not offset by
capital losses. For the past three fiscal years, the Fund has paid no
taxable distributions.
Q. DO YOU THINK A FLAT TAX WILL BE APPROVED?
A. Although talk of a flat tax resurfaced in 1997, we believe the chances one
will be adopted are relatively slim. For one, it could mean higher taxes
for most Americans. Secondly, no flat-tax bill has been formally proposed.
If one were to be proposed, it would most likely encounter significant
opposition from various lobbying groups. Finally, with more and more of the
spending burdens being shifted to the states, it is unlikely the federal
government would hinder the ability of the states to raise money by
eliminating the tax-exempt status of municipal bonds.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. Although the economy continues to grow at a healthy pace, inflation remains
moderate. Consumer prices rose just 2.8% for the year ended March 31, 1997,
according to the U.S. Department of Labor. If such an environment can be
sustained, it should prove favorable for the financial markets.
However, some analysts warn that if economic growth doesn't
decelerate, it could ultimately lead to inflation, and that could cause the
Fed to continue tightening monetary policy. Market observers will be closely
watching leading economic indicators over the next few months to predict
whether the Fed will raise interest rates again. The release of key data,
such as employment information, could cause dramatic, short-term
fluctuations in the market. In such a scenario, investors should remain
focused on their long-term objectives.
<TABLE>
<CAPTION>
====================================================================================
PORTFOLIO COMPOSITION
- ------------------------------------------------------------------------------------
As of 3/31/97
NUMBER OF HOLDINGS 169
<S> <C>
TOP 5 BOND HOLDINGS
1. New York (City of) Municipal
Assistance Corp.
5.25% 07/01/03
PIE CHART
2. Louisiana (State of) GENERAL OBLIGATION 29%
6.00% 04/15/07 REVENUE 71%
3. Hawaii (State of)
6.00% 03/01/07
4. Oklahoma State Turnpike Authority
7.875% 01/01/99 AVERAGE MATURITY 4.6 YEARS
DURATION 3.6 YEARS
5. Nassau (County of)
5.15% 03/01/07
====================================================================================
</TABLE>
Please keep in mind the Fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
3
<PAGE> 6
LONG-TERM PERFORMANCE
AIM TAX-FREE INTERMEDIATE SHARES VS. BENCHMARK INDEX
The chart below compares your Fund to a benchmark index. It is intended to give
you a general idea of how your Fund performed compared to the bond market over
the period 5/11/87 - 3/31/97. It is important to understand the difference
between your Fund and an index. Your Fund's total return is shown with a sales
charge and includes Fund expenses and management fees. An index measures the
performance of a hypothetical portfolio, in this case the Lehman Brothers
Municipal Bond Index. Unlike your Fund, the index is not managed; therefore,
there are no sales charges, expenses or fees. You cannot invest in an index.
But if you could buy all the securities that make up a particular index, you
would incur expenses that would affect the return on your investment.
=============================================================================
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------------------
5/11/87-3/31/97
<TABLE>
<CAPTION>
AIM Tax-Free Intermediate Shares Lehman Bros. Muni Bond Index
<S> <C> <C>
5/11/87 $9,901 $10,000
3/88 10,307 10,847
3/89 10,745 11,627
3/90 11,670 12,855
3/91 12,643 14,040
3/92 13,706 15,445
3/93 15,077 17,380
3/94 15,601 17,782
3/95 16,407 19,104
3/96 17,401 20,705
3/97 18,155 21,835
</TABLE>
======================================
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------
As of 3/31/97, including sales charges
<TABLE>
<S> <C>
Inception (5/11/87) 6 .22%
5 Years 5 .57%
1 Year 3 .29%*
</TABLE>
*4.33% excluding sales charges
Your Fund's total return includes sales charges, expenses, and management fees.
For Fund performance calculations and descriptions of indexes cited on this
page, please refer to the inside front cover.
4
<PAGE> 7
MARKETS LOOK TO INDICATORS TO SEE
WHICH WAY THE ECONOMIC WIND BLOWS
Every month, the government releases reports of key economic indicators--the
harbingers of the business cycle considered so vital to financial markets. Have
you ever wondered why economic indicators are so important? We asked Gary
Beauchamp, AIM's Economic Strategist, to discuss a few widely followed
indicators that may be of interest to investors.
GROSS DOMESTIC PRODUCT (GDP)
GDP measures the final output of goods and services produced in the United
States in one year, which makes it the broadest measure of economic
performance. Initial estimates are released about a month after the close of
each quarter.
Financial markets react strongly to the GDP number because it
indicates the pace of economic activity. For instance, if the GDP is growing at
a faster rate than in previous periods, it's an indication that the economy may
be heating up. Rapid growth strains the economy, and that drives up prices and
interest rates. The resulting inflation erodes corporate profits and the value
of financial securities. Conversely, growth that is too slow causes prices and
profits to fall, and that drives up unemployment and dries up demand.
EMPLOYMENT DATA
When the various economic indicators are mixed, many analysts consider
employment data to be the most important. An increase in employment, a decrease
in initial jobless claims, or a decrease in unemployment can bode well for the
economy. However, an unusually low level of unemployment, such as the 4.9% rate
reported for the month of April 1997, can signal the potential for inflation.
INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION
Monthly industrial production and capacity utilization indicators report the
efficiency of economic productivity. The index of industrial production
measures changes in the output of the mining, manufacturing, and gas and
electric utilities sectors of the economy. Capacity utilization is the rate at
which industrial production sectors operate--it is an indicator of industry's
current physical limits.
Together, these indicators can reveal expansion or contraction in the
economy before the GDP. High levels are positive; but maximum levels of
industrial production and capacity utilization can indicate inordinate strain
on the economy, which can lead to inflation. Conversely, low levels of capacity
utilization often generate increased productivity efficiency, and that can
signal an upturn in the economy from recession.
HOUSING STARTS
Released monthly by the U.S. Department of Commerce, the housing starts figure
is an estimate of the number of new homes and apartments under construction
within a stated period. The housing starts figure is sensitive to changes in
interest rates and reported levels of new home sales--another indicator of
consumer confidence. When consumers feel secure about the direction of the
economy, they are more likely to make long-term financial commitments like home
mortgages. Conversely, housing starts tend to fall well before the onset of
recession. One of the most volatile indicators, housing start figures often
vary widely from month to month and are sometimes substantially revised.
INDEX OF LEADING ECONOMIC INDICATORS
The U.S. Commerce Department tracks the performance of the economy by measuring
changes in the business cycle--the alternating progression of the economy from
periods of expansion when business is growing to periods of contraction when
business activity slows and unemployment increases.
Every month, the Commerce Department compiles its composite index of
leading economic indicators. Leading indicators are those factors that have
shown the tendency to signal change before the economy makes a major turn. The
index measures changes in such factors as stock prices, new orders for durable
goods, contracts and orders for plant and equipment, and average weekly claims
for state unemployment compensation. Positive changes in the index signal
improvement in the economy. Negative changes are understood to be warnings that
the economy might contract.
"The composite index of leading economic indicators is not the square root of
the universe. There is no single index or formula that provides all the answers
to the problems of business forecasting."
Michael B. Lehman, The Business One Irwin Guide to Using The Wall Street
Journal
5
<PAGE> 8
SCHEDULE OF INVESTMENTS
March 31, 1997
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ALABAMA-0.24%
Alabama State Municipal Electric
Authority; Power Supply
Series A RB
6.30%, 09/01/01(b) AAA Aaa $ 400 $ 422,600
- -------------------------------------------------------------------------
ALASKA-5.77%
Alaska Housing Finance Corp.;
General Mortgage Series A RB
3.45%, 06/01/26(c)(d) AAA VMIG1 8,000 8,000,000
- -------------------------------------------------------------------------
Anchorage (City of); School
Series 1994 GO
5.50%, 07/01/06(b) AAA Aaa 1,950 1,998,087
- -------------------------------------------------------------------------
9,998,087
- -------------------------------------------------------------------------
ARIZONA-2.63%
Arizona (State of); Educational
Loan Marketing Corp.
Series A Refunding RB
6.55%, 03/01/99 -- A 1,000 1,030,980
- -------------------------------------------------------------------------
Cochise (County of);
Series 1990 Certificates of
Participation
4.15%, 08/01/98(b) AAA Aaa 180 179,968
- -------------------------------------------------------------------------
Maricopa County Gilbert Unified
School District #41 (Project of
1988); School Improvement
Series 1992 E GO
6.20%, 07/01/02(e) AAA Aaa 1,250 1,339,137
- -------------------------------------------------------------------------
Mesa Industrial Development
Authority (Western Health
Network-Mesa Lutheran Project);
Health Care Facilities
Refunding
Series 1988 B1 RB
7.50%, 01/01/04(b) AAA Aaa 700 740,922
- -------------------------------------------------------------------------
Mohave County Unified School
District #1; Lake Havasu Series
A GO
5.40%, 07/01/06(b) AAA Aaa 200 202,596
- -------------------------------------------------------------------------
Phoenix (City of); Senior Lien
Street and Highway User
Refunding
Series 1992 RB
6.20%, 07/01/02 AA A1 1,000 1,067,000
- -------------------------------------------------------------------------
4,560,603
- -------------------------------------------------------------------------
ARKANSAS-1.17%
Little Rock (City of) (Baptist
Medical Center); Health
Facility Hospital RB
6.70%, 11/01/04(b) AAA Aaa 1,400 1,509,172
- -------------------------------------------------------------------------
North Little Rock (City of);
Electric System Refunding
Series 1992 A RB
6.00%, 07/01/01(b) AAA Aaa 500 527,260
- -------------------------------------------------------------------------
2,036,432
- -------------------------------------------------------------------------
CALIFORNIA-2.48%
Folsom (City of) (School
Facilities Project);
Series 1994 B GO
6.00%, 08/01/02(b) AAA Aaa 500 527,870
- -------------------------------------------------------------------------
Inglewood (City of) (Daniel
Freeman Hospital Inc.); Insured
Hospital
Series 1991 RB
6.50%, 05/01/01 A -- 400 418,716
- -------------------------------------------------------------------------
Oakland (City of); Housing
Finance
Issue D-1 RB
6.70%, 01/01/98 A+ -- 165 166,983
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) 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 $ 1,028,910
- -------------------------------------------------------------------------
Parking Authority of the City and
County of San Francisco;
Parking Meter
Series 1994 RB
6.75%, 06/01/05(b) AAA Aaa 500 556,230
- -------------------------------------------------------------------------
Rancho Mirage Joint Powers
Authority (Eisenhower Medical
Center);
Series A Certificate of
Participation
5.10%, 07/01/07(b) AAA Aaa 1,000 984,260
- -------------------------------------------------------------------------
Regents (The) of the University
of California (Multiple Purpose
Projects); Refunding
Series A RB
5.75%, 09/01/97 A A2 250 251,573
- -------------------------------------------------------------------------
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 100 107,230
- -------------------------------------------------------------------------
West End Water Development,
Treatment, and Conservation
Joint Powers Authority; 1990
Water Facilities
Certificate of Participation
7.00%, 10/01/00 BBB+ A 250 264,045
- -------------------------------------------------------------------------
4,305,817
- -------------------------------------------------------------------------
COLORADO-0.05%
Colorado Student Obligation Bond
Authority; Student Loan
Series 1985 B RB
6.125%, 12/01/98 -- A 80 81,169
- -------------------------------------------------------------------------
CONNECTICUT-0.07%
Connecticut (State of) Special
Tax Obligation; Second Lien
Transportation and
Infrastructure Purpose S-1 RB
3.40%, 12/01/10(c)(d) AA- VMIG1 130 130,000
- -------------------------------------------------------------------------
DELAWARE-0.45%
Delaware Transportation
Authority; Senior Lien
Transportation System
Series 1991 RB
6.00%, 07/01/01(e)(f) AAA Aaa 750 786,173
- -------------------------------------------------------------------------
DISTRICT OF COLUMBIA-3.35%
District of Columbia; Refunding
Series B GO
6.75%, 06/01/99(b) AAA Aaa 750 778,897
- -------------------------------------------------------------------------
District of Columbia;
Series B GO
6.125%, 06/01/03(b) AAA Aaa 3,020 3,186,523
- -------------------------------------------------------------------------
District of Columbia (Medlantic
Healthcare Group);
Series 1996 A RB
6.00%, 08/15/06(b) AAA Aaa 1,550 1,632,677
- -------------------------------------------------------------------------
District of Columbia (The Howard
University Issue); University
Series 1990 A RB
6.90%, 10/01/00 A+ A3 200 213,098
- -------------------------------------------------------------------------
5,811,195
- -------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
FLORIDA-3.71%
Dade (County of) School District;
Refunding
Series 1996 GO
6.00%, 07/15/06(b) AAA Aaa $1,900 $ 2,035,185
- -------------------------------------------------------------------------
Dade (County of); Water and Sewer
RB
5.00%, 10/01/99(b) AAA Aaa 225 228,049
- -------------------------------------------------------------------------
Palm Beach County Solid Waste
Authority; RB
7.90%, 07/01/97 A A2 100 100,939
- -------------------------------------------------------------------------
Palm Beach County Solid Waste
Authority; Refunding Series
1997 A RB
5.50%, 10/01/06(b) AAA Aaa 4,000 4,068,000
- -------------------------------------------------------------------------
6,432,173
- -------------------------------------------------------------------------
GEORGIA-3.89%
Albany (City of); Sewer System
Series 1992 RB
6.30%, 07/01/02(e) AAA Aaa 500 533,645
- -------------------------------------------------------------------------
Chatham (County of) Hospital
Authority (Memorial Medical
Center); Refunding Series 1996
A RB
5.10%, 01/01/07(b) AAA Aaa 1,000 989,330
- -------------------------------------------------------------------------
Dekalb Private Hospital Authority
(Egleston Children's Hospital
at Emory University, Inc.
Project); Series 1994 A RB
3.45%, 03/01/24(c)(d) AA- VMIG1 800 800,000
- -------------------------------------------------------------------------
Fulton (County of); Water and
Sewer Refunding Series 1992 RB
5.75%, 01/01/02(b) AAA Aaa 715 744,680
- -------------------------------------------------------------------------
Georgia (State of);
Series 1988 D GO
7.10%, 06/01/99 AA- Aaa 2,000 2,105,120
- -------------------------------------------------------------------------
Georgia State Municipal Electric
Authority; Series V RB
6.00%, 01/01/01(b) AAA Aaa 1,000 1,040,240
- -------------------------------------------------------------------------
Metropolitan Atlanta Rapid
Transit Authority; Sales Tax
Refunding
Series M RB
6.15%, 07/01/02 AA- A1 500 532,115
- -------------------------------------------------------------------------
6,745,130
- -------------------------------------------------------------------------
HAWAII-3.05%
Hawaii (State of); Refunding
Series 1997 GO
6.00%, 03/01/07(b) AAA Aaa 5,000 5,281,250
- -------------------------------------------------------------------------
ILLINOIS-5.83%
Chicago (City of) (Central Public
Library Project); Adjustable
Rate
Series 1988 C GO
6.10%, 01/01/99(b) AAA Aaa 500 513,150
- -------------------------------------------------------------------------
Chicago (City of);
Series 1997 GO
6.00%, 01/01/06(b) AAA Aaa 500 525,620
- -------------------------------------------------------------------------
Chicago Park District; Capital
Improvement
Series 1991 GO
5.80%, 01/01/98(e) AA- A1 750 759,585
- -------------------------------------------------------------------------
Illinois Development Finance
Authority Chicago Symphony
Project; RB
3.50%, 06/01/31(c)(d) AA- VMIG1 756 756,000
- -------------------------------------------------------------------------
Illinois Educational Facilities
Authority (Augustana College);
Series 1997 RB
4.80%, 10/01/99(b) AAA -- 375 376,920
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ILLINOIS-(CONTINUED)
Illinois Health Facilities
Authority (Mercy Hospital and
Medical Center); Refunding
Series 1992 RB
6.20%, 01/01/00 A- Baa1 $ 250 $ 255,013
- -------------------------------------------------------------------------
Illinois Health Facilities
Authority;
Series D RB
3.50%, 08/01/15(c)(d) AA- VMIG1 1,150 1,150,000
- -------------------------------------------------------------------------
Illinois Health Facilities
Authority (Children's Memorial
Hospital Project); Series 1985
B RB
3.50%, 11/01/15(c)(d) AA- VMIG1 2,050 2,050,000
- -------------------------------------------------------------------------
Illinois Regional Transit
Authority; Series B RB
6.30%, 6/01/04(e)(f) AAA Aaa 1,000 1,092,670
- -------------------------------------------------------------------------
Joliet (City of); Waterworks and
Sewer Series 1991 RB
6.95%, 01/01/01(b) AAA Aaa 250 266,785
- -------------------------------------------------------------------------
Kane (County of) Public Building
Commission; Unlimited Tax
Public Building Series B GO
6.20%, 12/01/01 -- Aa 700 725,746
- -------------------------------------------------------------------------
Kankakee County School District
#111; GO
5.40%, 01/01/07(b) -- Aaa 625 628,837
- -------------------------------------------------------------------------
Village of Hoffman Estates (Park
Place Apartment Project);
Series 1996 RB
5.75%, 06/01/06(f) AAA Aaa 1,000 1,000,550
- -------------------------------------------------------------------------
10,100,876
- -------------------------------------------------------------------------
INDIANA-5.65%
Frankfort Middle School Building
Corp.; Refunding Series 1996 RB
5.20%, 01/10/07(b) AAA Aaa 295 295,870
- -------------------------------------------------------------------------
Indiana Transportation Finance
Authority; Airport Facilities
Lease Series A RB
6.00%, 11/01/01 A A2 500 521,660
- -------------------------------------------------------------------------
Indiana Transportation Finance
Authority; Highway Series A RB
5.50%, 06/01/07(b) AAA Aaa 1,000 1,024,160
- -------------------------------------------------------------------------
South Bend Redevelopment
Authority (College Football
Hall of Fame Project); Series
1994 RB
3.45%, 02/01/19(c)(d) AAA VMIG1 7,950 7,950,000
- -------------------------------------------------------------------------
9,791,690
- -------------------------------------------------------------------------
IOWA-4.91%
Iowa Higher Education Loan
Authority; Private College
Facilities Series 1985 RB
3.45%, 12/01/15(c)(d) AAA VMIG1 8,000 8,000,000
- -------------------------------------------------------------------------
Iowa Student Loan Liquidity
Corp.; Student Loan Series 1992
A RB
6.25%, 03/01/00 -- Aa1 500 517,390
- -------------------------------------------------------------------------
8,517,390
- -------------------------------------------------------------------------
KENTUCKY-0.39%
Kentucky State Turnpike Authority
(Economic Development Road
Revitalization Project); RB
7.125%, 05/15/00(e)(f) AAA Aaa 260 281,593
- -------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
KENTUCKY-(CONTINUED)
Western Kentucky University;
Consolidated Educational
Buildings Refunding Series M RB
4.70%, 05/01/99(b) AAA Aaa $ 390 $ 393,510
- -------------------------------------------------------------------------
675,103
- -------------------------------------------------------------------------
LOUISIANA-5.97%
Jefferson Parish School Board;
Sales and Use Tax RB
6.00%, 02/01/04(b) AAA Aaa 1,720 1,803,110
- -------------------------------------------------------------------------
Louisiana (State of); Series A GO
6.00%, 04/15/07(b) AAA Aaa 5,000 5,309,500
- -------------------------------------------------------------------------
Louisiana Offshore Terminal
Authority (Loop, Inc.);
Deepwater Port Refunding Series
1992 RB
6.00%, 09/01/01 A Baa1 1,000 1,042,300
- -------------------------------------------------------------------------
Louisiana Offshore Terminal
Authority (Loop, Inc.);
Deepwater Port Refunding RB
6.20%, 09/01/03 A Baa1 1,000 1,058,330
- -------------------------------------------------------------------------
Louisiana Public Facilities
Authority (Tulane University of
Louisiana); Series 1987 C RB
7.30%, 08/15/99 A A1 270 277,825
- -------------------------------------------------------------------------
Ouachita (Parish of) Hospital
Service District #1 (Glenwood
Regional Medical Center);
Hospital Refunding Series 1996
RB
5.00%, 05/15/99 A -- 850 853,162
- -------------------------------------------------------------------------
10,344,227
- -------------------------------------------------------------------------
MASSACHUSETTS-4.57%
Massachusetts Health &
Educational Facilities
Authority (Harvard University
Issue); Series I RB
3.30%, 08/01/17(c) AAA VMIG1 7,500 7,500,000
- -------------------------------------------------------------------------
New England Education Loan
Marketing Corp.; Student Loan
Refunding Senior Issue 1992 D
RB
6.20%, 09/01/00 -- Aaa 400 417,531
- -------------------------------------------------------------------------
7,917,531
- -------------------------------------------------------------------------
MICHIGAN-8.35%
Dearborn (City of) Economic
Development Corp. (Oakwood
Obligated Group); Hospital
Series 1991 A RB
6.95%, 08/15/01(e)(f) AAA Aaa 1,000 1,102,890
- -------------------------------------------------------------------------
Detroit (City of) School
District; GO
5.60%, 05/01/01 AA Aa2 765 784,821
- -------------------------------------------------------------------------
Grand Rapids Water Supply;
Refunding RB
3.30%, 01/01/20(c)(d) AAA VMIG1 5,400 5,400,000
- -------------------------------------------------------------------------
Michigan State Building
Authority; Refunding Series I
RB
6.40%, 10/01/04 AA- A1 2,000 2,141,820
- -------------------------------------------------------------------------
Michigan State Hospital Finance
Authority; Series A RB
3.55%, 12/01/23(c)(d) -- VMIG1 4,000 4,000,000
- -------------------------------------------------------------------------
Michigan State Strategic Fund;
Refunding Series 1988 PCR
3.65%, 04/15/18(c) -- Aaa 742 741,500
- -------------------------------------------------------------------------
North Muskegon School District;
GO
7.00%, 05/01/98(b) AAA Aaa 200 205,980
- -------------------------------------------------------------------------
Novi Community School District;
GO
5.875%, 05/01/97(b) AAA Aaa 100 100,159
- -------------------------------------------------------------------------
14,477,170
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MINNESOTA-0.44%
Southern Minnesota Municipal
Power Agency; Power Supply
System Series A RB
5.60%, 01/01/04 A+ A2 $ 745 $ 757,889
- -------------------------------------------------------------------------
MISSOURI-0.51%
Cass County School District
#R-02; Missouri Direct Deposit
Program GO
4.30%, 03/01/98 AA -- 375 376,718
- -------------------------------------------------------------------------
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 500 503,120
- -------------------------------------------------------------------------
879,838
- -------------------------------------------------------------------------
MONTANA-0.26%
Montana Higher Education
Assistance Corp.; Student Loan
Series 1992 A RB
6.60%, 12/01/00 -- A 425 447,746
- -------------------------------------------------------------------------
NEVADA-0.28%
Clark County Improvement District
No. 65 (Lamb Boulevard III);
Series 1992 GO
6.20%, 12/01/02 AA- A1 120 123,812
- -------------------------------------------------------------------------
Nevada (State of) (Nevada
Municipal Bond Bank Project
Nos. 38-39); Limited Tax Series
1992 A GO
6.00%, 07/01/01(e) AA -- 350 365,512
- -------------------------------------------------------------------------
489,324
- -------------------------------------------------------------------------
NEW JERSEY-1.64%
Gloucester County Utilities
Authority; Sewer Refunding
Series 1991 RB
6.10%, 01/01/00 AA- A-1 225 235,420
- -------------------------------------------------------------------------
Jersey City (City of) (Qualified
School Bond); GO
6.40%, 02/15/00 AA A3 1,000 1,048,580
- -------------------------------------------------------------------------
New Jersey Transportation Trust
Fund Authority; Transportation
System Series 1992 A RB
5.90%, 06/15/99(e) NRR Aaa 1,000 1,030,410
- -------------------------------------------------------------------------
Trenton (City of); Fiscal Year
Adjustment GO
6.10%, 08/15/02(b) AAA Aaa 500 527,015
- -------------------------------------------------------------------------
2,841,425
- -------------------------------------------------------------------------
NEW MEXICO-1.05%
Albuquerque (City of);
Joint Water and Sewer
Series 1990 A RB
6.00%, 07/01/00(e)(f) AAA -- 1,000 1,039,220
- -------------------------------------------------------------------------
Las Cruces (City of) South
Central Solid Waste Authority;
Environmental RB
6.00%, 06/01/97 -- A 260 260,673
- -------------------------------------------------------------------------
Santa Fe (City of); Series 1994 A
RB
5.50%, 06/01/03(e) AAA Aaa 500 514,945
- -------------------------------------------------------------------------
1,814,838
- -------------------------------------------------------------------------
NEW YORK-12.26%
Nassau (County of); GO
5.15%, 03/01/07(b) AAA Aaa 5,000 4,992,050
- -------------------------------------------------------------------------
New York (City of); Refunding
Series D GO
5.60%, 11/01/05 BBB+ Baa1 5,000 4,982,900
- -------------------------------------------------------------------------
New York (City of); Series G GO
5.90%, 02/01/05 BBB+ Baa1 1,150 1,170,056
- -------------------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW YORK-(CONTINUED)
New York (City of) Municipal
Assistance Corp.; Series I RB
5.25%, 07/01/03 AA- Aa2 $5,500 $ 5,590,200
- -------------------------------------------------------------------------
New York (State of) Dormitory
Authority; Mental Health
Facilities Series A RB
6.00%, 02/15/05 BBB+ Baa1 1,000 1,023,170
- -------------------------------------------------------------------------
6.00%, 08/15/07 BBB+ Baa1 1,775 1,798,075
- -------------------------------------------------------------------------
New York (State of) Medical Care
Facilities Financing Agency;
Hospital & Nursing Home Series
1995 A RB
5.60%, 02/15/05(b) AAA -- 1,665 1,703,112
- -------------------------------------------------------------------------
21,259,563
- -------------------------------------------------------------------------
OHIO-4.42%
Franklin (County of); 1991 Issue
GO
6.30%, 12/01/01(e)(f) NRR -- 1,500 1,621,485
- -------------------------------------------------------------------------
Greene (County of); Water System
Series A RB
5.45%, 12/01/06(b) AAA Aaa 585 597,735
- -------------------------------------------------------------------------
Hilliard City School District;
School Improvement Refunding
Series 1992 GO
6.05%, 12/01/00(b) AAA Aaa 500 526,025
- -------------------------------------------------------------------------
6.15%, 12/01/01(b) AAA Aaa 250 265,103
- -------------------------------------------------------------------------
Lucas County (St. Vincent's
Medical Center); Hospital
Series A RB
6.75%, 08/15/00(b)(f) AAA Aaa 2,000 2,147,380
- -------------------------------------------------------------------------
Lucas County Health Facilities
(Lutheran Homes Society
Project); RB
3.45%, 11/01/19(c)(d) AA -- 390 390,000
- -------------------------------------------------------------------------
Miami County (Upper Valley
Medical Center); Refunding
Hospital Facility Series 1996 B
RB
5.00%, 05/15/98(b) AAA Aaa 585 588,691
- -------------------------------------------------------------------------
Ohio State Public Facilities
Commission; Mental Health
Series A RB
7.00%, 12/01/97 AA- Aa3 1,500 1,526,385
- -------------------------------------------------------------------------
7,662,804
- -------------------------------------------------------------------------
OKLAHOMA-5.17%
Grand River Dam Authority;
Refunding Series 1987 RB
6.45%, 06/01/97(e)(f) AAA Aaa 500 512,010
- -------------------------------------------------------------------------
Norman (City of) Hospital
Authority; Refunding Series A
RB
5.20%, 09/01/06(b) AAA Aaa 310 308,388
- -------------------------------------------------------------------------
5.30%, 09/01/07(b) AAA Aaa 1,090 1,088,212
- -------------------------------------------------------------------------
Norman (City of) Utilities
Authority; RB
5.10%, 11/01/06 AAA Aaa 500 493,645
- -------------------------------------------------------------------------
Oklahoma Housing Finance Agency;
Single Family Mortgage Series A
RB
6.55%, 03/01/00(b) AAA Aaa 130 134,961
- -------------------------------------------------------------------------
Oklahoma State Turnpike
Authority; RB
7.875%, 01/01/99(e)(f) AAA -- 4,780 5,145,766
- -------------------------------------------------------------------------
Southern Oklahoma Memorial
Hospital Authority; Hospital
Series 1993 A RB
5.60%, 02/01/00 A A 1,250 1,280,037
- -------------------------------------------------------------------------
8,963,019
- -------------------------------------------------------------------------
OREGON-1.51%
Oregon (State of) Department of
Transportation (Westside Light
Rail Project); Series 1994 RB
5.00%, 06/01/97(b) AAA Aaa 1,000 1,001,940
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
OREGON-(CONTINUED)
Portland (City of); Sewer System
Series 1994 A RB
5.45%, 06/01/03 A+ A1 $1,065 $ 1,100,315
- -------------------------------------------------------------------------
5.55%, 06/01/04 A+ A1 500 519,390
- -------------------------------------------------------------------------
2,621,645
- -------------------------------------------------------------------------
PENNSYLVANIA-3.09%
Pennsylvania Industrial
Development Authority; Economic
Development Series 1991 A RB
6.50%, 01/01/98(e) NRR NRR 100 101,623
- -------------------------------------------------------------------------
6.50%, 07/01/98(e) NRR NRR 150 153,852
- -------------------------------------------------------------------------
York (City of); Pooled Financing
RB
3.50%, 09/01/26(c)(d) A+ -- 5,100 5,100,000
- -------------------------------------------------------------------------
5,355,475
- -------------------------------------------------------------------------
RHODE ISLAND-0.62%
Rhode Island (State of);
Refunding Series 1992 A GO
6.10%, 06/15/03(b) AAA Aaa 1,000 1,063,950
- -------------------------------------------------------------------------
SOUTH DAKOTA-1.14%
Rapid City (City of); Sales Tax
Series 1995 A RB
5.60%, 06/01/05(b) AAA Aaa 255 264,093
- -------------------------------------------------------------------------
South Dakota Health and Education
Facility McKennan Hospital;
Refunding Series 1996 RB
5.40%, 07/01/06(b) AAA Aaa 1,680 1,703,033
- -------------------------------------------------------------------------
1,967,126
- -------------------------------------------------------------------------
TENNESSEE-1.42%
Knoxville (City of); Refunding
Series B GO
4.85%, 05/01/99 AA- A1 700 710,885
- -------------------------------------------------------------------------
Nashville and Davidson (County
of) Health and Education
Facilities Board (Meharry
Medical College); RB
7.875%, 12/01/04(e) NRR Aaa 1,100 1,205,963
- -------------------------------------------------------------------------
Tennessee School Board Authority
(College and University
Improvement); RB
5.75%, 05/01/06 AA A1 550 551,545
- -------------------------------------------------------------------------
2,468,393
- -------------------------------------------------------------------------
TEXAS-9.48%
Alamo Community College District;
Series 1990 GO
6.90%, 02/15/00(e)(f) AA Aaa 500 529,415
- -------------------------------------------------------------------------
Austin (City of); Combined
Utility System Refunding Series
1986 RB
7.20%, 05/15/98(e) NRR NRR 25 25,828
- -------------------------------------------------------------------------
Series 1986 RB
7.20%, 05/15/98 A A 175 177,361
- -------------------------------------------------------------------------
Clint Independent School
District; Unlimited Tax
Refunding Series 1991 GO
6.30%, 03/01/00(b) -- Aaa 185 191,434
- -------------------------------------------------------------------------
Comal County Industrial
Development Authority (The
Coleman Company, Inc. Project);
Series 1980 IDR
9.25%, 08/01/00(e) NRR NRR 665 719,038
- -------------------------------------------------------------------------
Conroe (City of) Independent
School District; Unlimited
School Tax GO
7.375%, 02/01/01(b) AAA Aaa 115 125,525
- -------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS-(CONTINUED)
Dallas (City of); Waterwork &
Sewer System Series A RB
5.50%, 10/01/05 AA Aa $1,000 $ 1,004,970
- -------------------------------------------------------------------------
Gatesville Independent School
District; Unlimited Tax School
Building and Refunding Series
1995 RB
5.80%, 02/01/03(b) -- Aaa 485 508,610
- -------------------------------------------------------------------------
Harris (County of); Port of
Houston Authority RB
5.75%, 05/01/02 A A 1,565 1,596,926
- -------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Memorial
Hospital System Project);
Hospital Series 1992 RB
6.70%, 06/01/00(e) A- A2 1,000 1,057,130
- -------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (School
Health Care System Project);
Series B RB
4.00%, 07/01/98 AA Aa3 840 838,942
- -------------------------------------------------------------------------
5.10%, 07/01/06 AA Aa3 1,000 985,440
- -------------------------------------------------------------------------
Hays (County of); Series 1995 GO
7.75%, 08/15/97(b) AAA Aaa 175 177,396
- -------------------------------------------------------------------------
Keller (City of) Independent
School District; Series 1994
Certificates of Participation
5.75%, 08/15/01(b) AAA Aaa 915 953,201
- -------------------------------------------------------------------------
Kerrville (City of); Electric
System Refunding Series 1991 RB
6.375%, 11/01/01(b) AAA Aaa 185 196,137
- -------------------------------------------------------------------------
La Marque Independent School
District; Unlimited Schoolhouse
Tax Series 1992 GO
7.50%, 08/15/99(b) AAA Aaa 575 616,204
- -------------------------------------------------------------------------
7.50%, 08/15/02(b) AAA Aaa 750 845,497
- -------------------------------------------------------------------------
Plano Independent School
District; GO
5.80%, 02/15/05(b) AAA Aaa 2,025 2,109,665
- -------------------------------------------------------------------------
San Antonio (City of); Electric
and Gas System Refunding Series
1989 A RB
7.00%, 02/01/01 AA Aa1 400 421,696
- -------------------------------------------------------------------------
Temple (City of) (Bell County);
Refunding Series 1992 GO
5.80%, 02/01/01(b) AAA Aaa 250 259,690
- -------------------------------------------------------------------------
Texarkana (City of); Water and
Sewer Utility Improvement
Series 1996 GO
6.75%, 02/15/98(b) AAA Aaa 280 286,740
- -------------------------------------------------------------------------
Texas (State of); Refunding
Series A GO
6.00%, 10/01/06 AA Aa 1,000 1,070,170
- -------------------------------------------------------------------------
Texas Municipal Power Agency; RB
5.75%, 09/01/02(e)(f) AAA Aaa 1,000 1,040,880
- -------------------------------------------------------------------------
Texas Turnpike Authority (Addison
Airport Toll Tunnel Project);
Dallas North Tollway Series
1994 RB
6.30%, 01/01/05(b) AAA Aaa 500 538,605
- -------------------------------------------------------------------------
Texas Water Resources Finance
Authority; Series 1989 A RB
7.25%, 08/15/97 A A 140 141,372
- -------------------------------------------------------------------------
University of Texas System;
General Tuition Series 1986
Refunding RB
7.75%, 08/15/98(e) AA+ Aa1 10 10,482
- -------------------------------------------------------------------------
16,428,354
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
UTAH-1.22%
Salt Lake (City of) Municipal
Building Authority; Series A RB
6.50%, 10/15/00 A+ A1 $ 570 $ 593,142
- -------------------------------------------------------------------------
Utah (State of) (Board of Water
Resources Program); Revolving
Fund Recapitalization Series
1992 B RB
6.10%, 04/01/02 AA -- 500 529,470
- -------------------------------------------------------------------------
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 -- 475 496,090
- -------------------------------------------------------------------------
Utah Water Financing Agency;
Series A RB
4.40%, 10/01/99(b) AAA Aaa 500 497,665
- -------------------------------------------------------------------------
2,116,367
- -------------------------------------------------------------------------
VIRGINIA-1.44%
Henrico (County of) Industrial
Development Authority
(Hermitage Project); Health
Facilities RB
3.80%, 05/01/24(c)(d) -- VMIG1 30 29,500
- -------------------------------------------------------------------------
Medical College of Hampton Roads;
General Refunding Series 1991 A
RB
6.00%, 11/15/99 A- -- 605 623,065
- -------------------------------------------------------------------------
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 535 545,331
- -------------------------------------------------------------------------
5.40%, 11/01/05 AA Aa 500 513,085
- -------------------------------------------------------------------------
Portsmouth (City of); Port
Improvement Unlimited Tax
Refunding GO
6.40%, 11/01/03 AA- A 300 323,046
- -------------------------------------------------------------------------
Portsmouth (City of); Public
Utility Refunding Series 1992
GO
5.90%, 11/01/01 AA- A 450 470,669
- -------------------------------------------------------------------------
2,504,696
- -------------------------------------------------------------------------
WASHINGTON-3.90%
King (County of); Series A RB
5.80%, 01/01/05 AA+ Aa1 1,000 1,050,100
- -------------------------------------------------------------------------
Seattle (City of) (West Seattle
Bridge); Limited Tax Refunding
Series 1991 GO
6.40%, 10/01/01 AA+ Aa1 250 266,830
- -------------------------------------------------------------------------
Seattle (Port of); Series 1992 A
RB
6.00%, 11/01/01 AA- A-1 500 522,910
- -------------------------------------------------------------------------
Snohomish (County of) Public
Utilities District # 1; RB
5.70%, 01/01/06(b) AAA Aaa 4,000 4,148,240
- -------------------------------------------------------------------------
Washington Health Care Facility
Authority (Our Lady of Lourdes
Health Center); Refunding RB
7.35%, 12/01/97(d) A -- 500 508,575
- -------------------------------------------------------------------------
Washington Public Power Supply
System (Nuclear Project #3);
Refunding Series B RB
6.80%, 07/01/97 AA- Aa1 250 251,725
- -------------------------------------------------------------------------
6,748,380
- -------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WISCONSIN-3.62%
Middleton (City of); GO
4.00%, 03/01/99 -- Aa2 $1,000 $ 995,420
- -------------------------------------------------------------------------
Sturgeon Bay (City of); Series
1996 A Bond Anticipation Notes
4.30%, 10/01/97 -- MIG-1 1,000 1,000,390
- -------------------------------------------------------------------------
Wisconsin (State of); Series A GO
5.75%, 05/01/99 AA Aa 1,000 1,027,480
- -------------------------------------------------------------------------
Wisconsin Health and Educational
Facilities Authority
(Marshfield Clinic); RB
5.20%, 02/15/07(b) AAA Aaa 3,310 3,247,242
- -------------------------------------------------------------------------
6,270,532
- -------------------------------------------------------------------------
TOTAL INVESTMENTS-116.00% 201,075,980
- -------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(16.00%) (27,734,200)
- -------------------------------------------------------------------------
NET ASSETS-100.00% $173,341,780
=========================================================================
</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. Ratings are not covered by Independent Auditors' Report.
(b) Secured by bond insurance.
(c) 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 March 31, 1997.
(d) Secured by a letter of credit.
(e) Secured by an escrow fund of U.S. Treasury obligations.
(f) Security has an outstanding irrevocable call or mandatory put by the
issuer. Market value and maturity date reflect such call or put.
See Notes to Financial Statements.
11
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$199,440,470) $ 201,075,980
- ---------------------------------------------------------
Receivables for:
Capital stock sold 220,266
- ---------------------------------------------------------
Interest 2,171,711
- ---------------------------------------------------------
Investment for deferred compensation plan 12,379
- ---------------------------------------------------------
Other assets 44,562
- ---------------------------------------------------------
Total assets 203,524,898
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 29,476,663
- ---------------------------------------------------------
Capital stock reacquired 242,356
- ---------------------------------------------------------
Dividends 349,164
- ---------------------------------------------------------
Deferred compensation plan 12,379
- ---------------------------------------------------------
Accrued advisory fees 43,785
- ---------------------------------------------------------
Accrued administrative service fees 11,154
- ---------------------------------------------------------
Accrued directors' fees 2,400
- ---------------------------------------------------------
Accrued transfer agent fees 10,750
- ---------------------------------------------------------
Accrued operating expenses 34,467
- ---------------------------------------------------------
Total liabilities 30,183,118
- ---------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $ 173,341,780
=========================================================
Capital stock, $.001 par value per share:
Authorized 1,000,000,000
- ---------------------------------------------------------
Outstanding 16,154,571
=========================================================
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE $ 10.73
- ---------------------------------------------------------
OFFERING PRICE PER SHARE:
(Net asset value of $10.73 divided by
99.00%) $ 10.84
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended March 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $ 4,790,956
- --------------------------------------------------------
EXPENSES:
Advisory fees 276,828
- --------------------------------------------------------
Custodian fees 7,156
- --------------------------------------------------------
Transfer agent fees 61,732
- --------------------------------------------------------
Registration and filing fees 35,266
- --------------------------------------------------------
Administrative service fees 52,666
- --------------------------------------------------------
Directors' fees 7,508
- --------------------------------------------------------
Other 77,082
- --------------------------------------------------------
Total expenses 518,238
- --------------------------------------------------------
Net investment income 4,272,718
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Net realized gain on sales of investment
securities 7,036
- --------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities (1,085,090)
- --------------------------------------------------------
Net gain (loss) on investment
securities (1,078,054)
- --------------------------------------------------------
Net increase in net assets resulting from
operations $ 3,194,664
========================================================
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 15
STATEMENT OF CHANGES IN NET ASSETS
For the years ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,272,718 $ 3,731,756
- -----------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities 7,036 (5,848)
- -----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (1,085,090) 836,452
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,194,664 4,562,360
- -----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (4,406,557) (3,712,690)
- -----------------------------------------------------------------------------------------
Distributions from capital (21,485) --
- -----------------------------------------------------------------------------------------
Net increase (decrease) from capital stock transactions 91,508,711 (137,887)
- -----------------------------------------------------------------------------------------
Net increase in net assets 90,275,333 711,783
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 83,066,447 82,354,664
- -----------------------------------------------------------------------------------------
End of period $173,341,780 $83,066,447
- -----------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $172,821,545 $81,353,865
- -----------------------------------------------------------------------------------------
Undistributed net investment income (10,946) 103,347
- -----------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of investment
securities (1,104,329) (1,111,365)
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 1,635,510 2,720,600
- -----------------------------------------------------------------------------------------
$173,341,780 $83,066,447
=========================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
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.
13
<PAGE> 16
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. On March 31, 1997
$21,485, was reclassified from undistributed net investment income to
paid-in-capital due to distributions in excess of net investment income. In
addition, $19,546 was reclassified from net investment income to paid in
capital due to permanent book/tax differences. Net assets of the Fund were
unaffected by the reclassifications discussed above.
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 $1,118,055, 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.
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 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 year ended March 31, 1997, the Fund reimbursed
AIM $52,666 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 year ended March 31, 1997, the Fund
paid AFS $38,819 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 $21,018 from
sales of capital stock during the year ended March 31, 1997. 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 year ended March 31, 1997, the Fund paid legal fees of $4,122 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-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the year ended March 31, 1997, the Fund did not borrow under the line of
credit agreement. The funds which are parties to the line of credit are charged
a commitment fee of 0.08% on the unused balance of the committed line. The
commitment fee is allocated among such funds based on their respective average
net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the year ended March 31, 1997 was $94,982,995 and
$22,629,475, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of March 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $2,095,498
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (459,988)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $1,635,510
=========================================================
Investments have the same cost for tax and financial
statement purposes.
</TABLE>
NOTE 6-CAPITAL STOCK
Changes in capital stock outstanding for the years ended March 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 11,037,256 $119,260,028 2,173,832 $ 23,604,635
- --------------------- ---------- ------------ ---------- ------------
Issued as
reinvestment of
dividends 277,497 2,985,870 232,136 2,517,616
- --------------------- ---------- ------------ ---------- ------------
Reacquired (2,855,695) (30,737,187) (2,428,661) (26,260,138)
- --------------------- ---------- ------------ ---------- ------------
8,459,058 $ 91,508,711 (22,693) $ (137,887)
========== ============ ========== ============
</TABLE>
14
<PAGE> 17
NOTE 7- FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during each of the years in the eight-year period ended March 31,
1997, the eleven months ended March 31, 1989 and the period May 11, 1987 (date
operations commenced) through April 30, 1988.
<TABLE>
<CAPTION>
MARCH 31,
--------------------------------------------------------
1997 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 0.50 0.52 0.49 0.48 0.53
- ---------------------------- -------- ------- ------- ------- -------
Net gains (losses) on
securities (both
realized and
unrealized) (0.04) 0.12 0.04 (0.10) 0.47
============================ ======== ======= ======= ======= =======
Total from
investment
operations 0.46 0.64 0.53 0.38 1.00
============================ ======== ======= ======= ======= =======
Less distributions:
Dividends from net
investment income (0.52) (0.52) (0.48) (0.48) (0.53)
- ---------------------------- -------- ------- ------- ------- -------
Distributions from net
realized capital gains -- -- -- (0.02) --
- ---------------------------- -------- ------- ------- ------- -------
Total distributions (0.52) (0.52) (0.48) (0.50) (0.53)
- ---------------------------- -------- ------- ------- ------- -------
Net asset value, end of
period $10.73 $10.79 $10.67 $10.62 $10.74
============================ ======== ======= ======= ======= =======
Total return(a) 4.33% 6.06% 5.17% 3.47% 10.01%
============================ ======== ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $173,342 $83,066 $82,355 $99,757 $70,120
============================ ======== ======= ======= ======= =======
Ratio of expenses to average
net assets 0.56%(b) 0.65% 0.59% 0.61%(c) 0.38%(c)
============================ ======== ======= ======= ======= =======
Ratio of net investment
income to average net
assets 4.63%(b) 4.81% 4.65% 4.37%(c) 5.00%(c)
============================ ======== ======= ======= ======= =======
Portfolio turnover rate 26% 32% 75% 26% 29%
============================ ======== ======= ======= ======= =======
<CAPTION>
----------------------------------------- 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 based on average net assets of $92,275,955.
(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
Period ended 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%
1990 1.91% 4.86%
1989 2.09% 5.18%
1988 1.57% 4.79%
</TABLE>
(d) Annualized.
15
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Tax-Exempt Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Tax-Free Intermediate Shares (a
portfolio of AIM Tax-Exempt Funds, Inc.), including the
schedule of investments, as of March 31, 1997, and the
related statement of operations for the year then ended,
the statement of changes in net assets for each of the
years in the two-year period then ended and the financial
highlights for each of the years in the eight-year period
then ended, the eleven-month period ended March 31, 1989,
and the period May 11, 1987 (date operations commenced)
through April 30, 1988. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on
these financial statements and the financial highlights
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of March 31, 1997, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Tax-Free
Intermediate Shares as of March 31, 1997, the results of
its operations for the year then ended, changes in its net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years
in the eight-year period then ended, the eleven-month
period ended March 31, 1989, and the period May 11, 1987
(date operations commenced) through April 30, 1988, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
May 2, 1997
- --------------------------------------------------------------------------------
SUPPLEMENTAL PROXY INFORMATION -- SHAREHOLDER MEETING
An annual meeting of shareholders of the Company was held on February 7, 1997.
The meeting was held for the following purposes:
(1) To elect directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson, and Louis Sklar.
(2) To approve a new Investment Advisory Agreement between the Company and AIM.
(3) To approve the elimination of the fundamental investment policy prohibiting
or restricting investments in other investment companies and/or the
amendment of certain related fundamental investment policies.
(4) Ratification of KPMG Peat Marwick LLP as independent accountants for the
Company's fiscal year ended March 31, 1997.
The following votes were cast with respect to each item:
<TABLE>
<CAPTION>
Votes
Director/Matter Votes for Against Abstentions
--------------- --------- ------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 29,429,450 0 563,009
Bruce L. Crockett........................................... 29,437,312 0 555,147
Owen Daly II................................................ 29,429,450 0 563,009
Carl Frischling............................................. 29,437,312 0 555,147
Robert H. Graham............................................ 29,437,312 0 555,147
John F. Kroeger............................................. 29,432,862 0 559,597
Lewis F. Pennock............................................ 29,449,040 0 543,419
Ian W. Robinson............................................. 29,431,702 0 560,757
Louis Sklar................................................. 29,436,693 0 555,766
(2) Approval of the new Investment Advisory Agreement........... 4,569,375 50,352 195,643
(3) Elimination of Fundamental Investment Policy................ 3,536,636 118,629 199,712
(4) KPMG Peat Marwick LLP....................................... 28,993,166 98,416 900,876
</TABLE>
16
<PAGE> 19
Directors & Officers
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham http://www.aimfunds.com
Bruce L. Crockett President
Formerly Director, President, and INVESTMENT ADVISOR
Chief Executive Officer John J. Arthur
COMSAT Corporation Senior Vice President and Treasurer A I M Advisors, Inc.
11 Greenway Plaza
Owen Daly II Gary T. Crum Suite 100
Director Senior Vice President Houston, TX 77046
Cortland Trust Inc.
Carol F. Relihan TRANSFER AGENT
Jack Fields Senior Vice President and Secretary
Formerly Member of the A I M Fund Services, Inc.
U.S. House of Representatives Dana R. Sutton P.O. Box 4739
Vice President and Assistant Treasurer Houston, TX 77210-4739
Carl Frischling
Partner Stuart W. Coco CUSTODIAN
Kramer, Levin, Naftalis & Frankel Vice President
The Bank of New York
Robert H. Graham Melville B. Cox 90 Washington Street, 11th Floor
President and Chief Executive Vice President New York, NY 10286
Officer
A I M Management Group Inc. Karen Dunn Kelley COUNSEL TO THE FUND
Vice President
John F. Kroeger Ballard Spahr
Formerly Consultant P. Michelle Grace Andrews & Ingersoll
Wendell & Stockel Associates, Inc. Assistant Secretary 1735 Market Street
Philadelphia, PA 19103
Lewis F. Pennock David L. Kite
Attorney Assistant Secretary COUNSEL TO THE TRUSTEES
Nancy L. Martin Kramer, Levin, Naftalis & Frankel
Ian W. Robinson Assistant Secretary 919 Third Avenue
Consultant; Former Executive New York, NY 10022
Vice President and Ofelia M. Mayo
Chief Financial Officer Assistant Secretary DISTRIBUTOR
Bell Atlantic Management
Services, Inc. Kathleen J. Pflueger A I M Distributors, Inc.
Assistant Secretary 11 Greenway Plaza
Suite 100
Louis S. Sklar Samuel D. Sirko Houston, TX 77046
Executive Vice President Assistant Secretary
Hines Interests AUDITORS
Limited Partnership Stephen I. Winer
Assistant Secretary KPMG Peat Marwick LLP
700 Louisiana
NationsBank Bldg.
Houston, TX 77002
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
We are required by Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end as to the federal tax status of dividends paid by the
Fund during its fiscal year ended March 31, 1997.
AIM Tax-Free Intermediate Shares paid ordinary dividends in the amounts of
$0.5155 per share during its tax year ended March 31, 1997. Of this amount,
100% qualified as tax-exempt interest dividends for federal income tax
purposes.
For the purpose of preparing your annual federal income tax returns, however,
you should report the amounts as reflected on the appropriate Form 1099-DIV.
<PAGE> 20
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
[PHOTO OF AIM Aggressive Growth Fund*
11 Greenway Plaza AIM Capital Development Fund
APPEARS HERE] AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
AIM Blue Chip Fund
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
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 Limited Maturity Treasury Shares
STABILITY, LIQUIDITY, AND CURRENT INCOME
AIM Money Market Fund
A I M Management Group Inc. has provided leadership in STABILITY, LIQUIDITY, AND CURRENT TAX-FREE INCOME
the mutual fund industry since 1976 and managed AIM Tax-Exempt Cash Fund
approximately $70 billion in assets for more than 3.5
million shareholders, including individual investors,
corporate clients, and financial institutions, as of *AIM Aggressive Growth Fund was closed to new investors
May 12, 1997. The AIM Family of Funds--Registered on July 18, 1995. For more complete information about
Trademark-- is distributed nationwide, and AIM today any AIM Fund(s), including sales charges and expenses,
ranks among the nation's top 15 mutual fund companies ask your financial consultant or securities dealer for
in assets under management, according to Lipper a free prospectus(es). Please read the prospectus(es)
Analytical Services, Inc. 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 100 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
--------------------
</TABLE>
