<PAGE> 1
[AIM LOGO APPEARS HERE]
AIM TAX-EXEMPT CASH FUND
ANNUAL REPORT MARCH 31, 1998
<PAGE> 2
The Chairman's Letter
Dear Fellow Shareholder:
AIM Tax-Exempt Cash Fund continued to provide attractive,
tax-free income during the fiscal year ended March 31, 1998.
At the end of the reporting period, the Fund posted a
seven-day effective annualized yield of 3.17% and a
[PHOTO OF seven-day yield of 3.12%. Translated to its
Charles T. taxable-equivalent, the Fund's seven-day effective
Bauer, annualized yield was 4.74% based on net asset value and
Chairman of adjusted for the highest marginal federal tax rate of 39.6%.
the Board of The taxable-equivalent yield is calculated in the same
THE FUND manner as the standard yield with an adjustment for the
APPEARS HERE] stated, assumed tax rate.
The Fund's 4.74% taxable-equivalent seven-day effective
annualized yield compared favorably to popular bank money
market deposit accounts. The Bank Rate Monitor, which
tracks yields on bank money market deposit accounts,
reported the seven-day average yield on those accounts
stood at 2.50% as of March 31, 1998. Bank money market deposit accounts are
insured by the FDIC as to interest and principal. As with any money market
mutual fund, an investment in the Fund is neither insured nor guaranteed by the
U.S. government, the FDIC, or a bank, and there can be no assurance that the
Fund will be able to maintain a stable net asset value of $1.00 per share.
The Fund maintained its strict adherence to an investment discipline of
purchasing only securities of superior credit quality. Specifically, the Fund
invests only in "Eligible Securities" as defined in Rule 2a-7 under the
Investment Company Act of 1940. "Eligible Securities" are securities rated in
one of the two highest categories by two nationally recognized statistical
rating organizations, or, if unrated, are determined by the Fund's Board of
Directors to be of comparable quality to a rated security that meets such
quality standards.
The low-inflation, falling-interest-rate environment that prevailed for much
of the fiscal year caused the value of fixed-income investments to appreciate
throughout most of the reporting period. For the 12-month period ended March 31,
consumer prices rose just 1.4% and the Federal Reserve Board (the Fed) left
interest rates unchanged. Borrowing costs actually declined as the year
progressed as it became increasingly evident that inflation was not a serious
threat.
Fixed-income securities also were given a boost by last summer's agreement
to balance the federal budget and the turmoil that hit world stock markets in
the fall. Investors began shifting more assets into fixed-income securities
after global stock markets plunged in October following the Asian currency
devaluations. Early in 1998, however, the rally began to lose some of its
momentum as the economy continued to grow at a healthy pace, dampening prospects
that the Fed would lower interest rates in the immediate future. Yields, which
plunged to their lowest levels in decades in January, climbed in February and
March, but were still relatively low at the end of the reporting period.
OUTLOOK
If the economy continues to grow at a steady pace and inflation remains low,
such conditions should bode well for fixed-income securities. With inflation at
bay and the full impact of the Asian currency crisis still uncertain, the Fed
could opt to leave monetary policy unchanged in the months ahead. In his
late-February testimony to Congress, Fed Chairman Alan Greenspan noted that the
deflationary effects of turmoil in Asia could offset the inflationary pressures
from strong domestic spending and a tight U.S. labor market. If the Fed decides
to leave interest rates unchanged in the near future, we expect yields to remain
within a relatively narrow range around their current levels. If yields rise,
however, we believe the Fund is in a favorable position to take advantage of
such a trend by investing in higher income-generating securities.
We are pleased to send you this report on the performance of AIM Tax-Exempt
Cash Fund. As always, we welcome your comments about this report or about this
Fund. You may reach us by calling Client Services at 800-959-4246 during normal
business hours. For automated account information 24 hours a day, call the AIM
Investor Line toll-free at 800-246-5463.
----------------------------------------
The low-inflation, falling-interest-rate
environment that prevailed for much of
the fiscal year caused the value of
fixed-income investments to appreciate
throughout most of the reporting period.
----------------------------------------
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE> 3
SCHEDULE OF INVESTMENTS
March 31, 1998
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATIONS-98.08%
ALABAMA-2.27%
Alabama Industrial
Development Board
(Industrial Partners
Project); Variable/Fixed
Rate Refunding Series
1989 RB
3.85%, 01/01/07(b)(c) - VMIG-1 $ 1,180 $ 1,180,000
- -----------------------------------------------------------------
ALASKA-4.81%
Alaska Housing Finance
Corp.; General Mortgage
Series 1991 A RB
3.70%, 06/01/26(c) A-1+ VMIG-1 2,500 2,500,000
- -----------------------------------------------------------------
COLORADO-5.87%
Colorado Housing Finance
Authority (Grant Plaza
Project); Multifamily
Mortgage Series 1991 A RB
3.775%, 11/01/09(b)(c) - VMIG-1 800 800,000
- -----------------------------------------------------------------
Eagle (County of) Smith
Creek Metropolitan
District; Variable Rate
Series 1997 RB
3.50%, 10/01/35(b)(c) A-1+ - 2,250 2,250,000
- -----------------------------------------------------------------
3,050,000
- -----------------------------------------------------------------
FLORIDA-9.44%
Gulf Breeze (City of)
(Florida Municipal Bond
Fund); Variable Rate
Demand Series 1995 A RB
3.80%, 03/31/21(b)(c) A-1 - 2,400 2,400,000
- -----------------------------------------------------------------
Pinellas (County of) Health
Facilities Authority
(Hospital Loan Program);
Refunding Pooled Series
1985 RB
3.70%, 12/01/15(b)(c) A-1 VMIG-1 2,500 2,500,000
- -----------------------------------------------------------------
4,900,000
- -----------------------------------------------------------------
GEORGIA-9.44%
Dekalb Private Hospital
Authority (Egleston
Children's Hospital at
Emory University);
Variable Rate Series 1994
A Revenue Anticipation
Certificates
3.70%, 03/01/24(b)(c) A-1+ VMIG-1 2,400 2,400,000
- -----------------------------------------------------------------
Elbert & Bowman (Counties
of) (Seaboard Farms of
Elberton); Series 1985
IDR
3.70%, 07/01/05(b)(c) A-1 - 1,000 1,000,000
- -----------------------------------------------------------------
Roswell (City of) Georgia
Housing Development
Authority (Azalea
Project); Multifamily
Housing Series 1996 RB
3.70%, 06/15/25(b)(c) A-1+ - 1,500 1,500,000
- -----------------------------------------------------------------
4,900,000
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
HAWAII-3.86%
Honolulu (City and County
of); Refunding Series 1
GO
5.25%, 06/01/98 AA Aa2 $ 2,000 $ 2,005,403
- -----------------------------------------------------------------
ILLINOIS-6.58%
Cook (County of) (Village
of South Barrington);
Variable Rate Demand
Series 1997 GO
3.70%, 12/01/15(b)(c) A-1+ - 2,000 2,000,000
- -----------------------------------------------------------------
Illinois Health Facilities
Authority (Franciscan
Eldercare Project);
Adjustable Rate Refunding
Series 1996 C RB
3.75%, 05/15/26(b)(c) A-1+ - 1,420 1,420,000
- -----------------------------------------------------------------
3,420,000
- -----------------------------------------------------------------
INDIANA-4.62%
Indiana Development Finance
Authority (Southern
Indiana Gas and Electric
Project); Series 1998 A
PCR
3.65%, 03/01/99(c) - VMIG-1 1,000 1,000,000
- -----------------------------------------------------------------
Indianapolis (City of)
(Children's Museum
Project); Economic
Development Floating Rate
Series 1995 RB
3.65%, 10/01/25(b)(c) A-1+ - 1,400 1,400,000
- -----------------------------------------------------------------
2,400,000
- -----------------------------------------------------------------
IOWA-2.89%
Iowa (State of) School
Corporations
(Corporations of Iowa
School Cash Anticipation
Program) Warrant
Certificate Series 1997-
1998 A TRAN
4.50%, 06/26/98(b) SP-1+ MIG-1 1,500 1,502,382
- -----------------------------------------------------------------
MARYLAND-1.16%
Maryland Industrial
Development Financing
Authority (Liberty
Medical Center); Variable
Rate Demand/Fixed Rate
1989 Issue Refunding RB
3.70%, 07/01/18(b)(c) - VMIG-1 600 600,000
- -----------------------------------------------------------------
MICHIGAN-2.50%
Michigan State Hospital
Finance Authority
(Hospital Equipment Loan
Program); Adjustable
Series 1995 A RB
3.75%, 12/01/23(b)(c) - VMIG-1 600 600,000
- -----------------------------------------------------------------
Michigan Strategic Fund
(Consumer's Power Corp.);
Variable Rate Demand
Series 1988 A PCR
3.80%, 04/15/18(b)(c) - P-1 500 500,000
- -----------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MICHIGAN-(CONTINUED)
Plymouth (Township of)
Economic Development
Corp. (Key International
Project); Variable Rate
Demand Series 1984 RB
3.50%, 07/01/04(b)(c)(e) - - $ 200 $ 200,000
- -----------------------------------------------------------------
1,300,000
- -----------------------------------------------------------------
MINNESOTA-0.96%
Mankato (City of) (Northern
States Power Co.
Project); Floating
Collateralized Series
1985 PCR
3.80%, 03/01/11(c) AA- Aa3 500 500,000
- -----------------------------------------------------------------
MONTANA-1.73%
Missoula (County of)
(Washington Corp.
Project); Floating Rate
Monthly Demand Series
1984 IDR
3.46%, 11/01/04(b)(c)(e) - - 900 900,000
- -----------------------------------------------------------------
NEW HAMPSHIRE-2.70%
New Hampshire Higher
Education and Health
Facilities Authority;
Variable Rate Hospital
Series 1985 C RB
3.70%, 12/01/25(c)(d) A-1 - 1,400 1,400,000
- -----------------------------------------------------------------
NEW MEXICO-1.93%
Albuquerque (City of)
School District No. 12;
Series 1997 GO
4.50%, 08/01/98 AA Aa2 1,000 1,002,866
- -----------------------------------------------------------------
NEW YORK-2.89%
New York State
Environmental Quality
1986; Variable Interest
Rate Series 1997 A GO
3.30%, 04/20/98(b) A-1+ VMIG-1 1,500 1,499,766
- -----------------------------------------------------------------
NORTH CAROLINA-2.70%
Alamance (County of)
Industrial Facilities and
Pollution Control
Financing Authority
(Science Manufacturing,
Inc. Project); Series
1985 IDR
3.85%, 04/01/15(b)(c) - P-1 1,400 1,400,000
- -----------------------------------------------------------------
OHIO-0.58%
Delaware (County of)
(Radiation Sterilizers,
Inc.); Series 1984 IDR
3.60%, 12/01/04(b)(c) A-1 - 300 300,000
- -----------------------------------------------------------------
OKLAHOMA-2.86%
Oklahoma Water Resource
Board (State Loan
Program); Series 1994 A
RB
3.55%, 09/01/98(f) A-1+ - 1,485 1,485,000
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
OREGON-3.85%
Klamath Falls (City of)
(Salt Caves
Hydroelectric);
Adjustable/Fixed Rate RB
4.50%, Series 1986 C
05/01/98(f)(g) SP-1+ - $ 1,000 $ 1,000,494
- -----------------------------------------------------------------
4.50%, Series E
05/01/98(f)(g) SP-1+ - 1,000 1,000,600
- -----------------------------------------------------------------
2,001,094
- -----------------------------------------------------------------
PENNSYLVANIA-1.93%
Delaware (County of)
Industrial Development
Authority (Scotfoam Corp.
Project); Variable Rate
Demand Series 1985 IDR
3.50%, 10/01/05(b)(c)(e) - - 1,000 1,000,000
- -----------------------------------------------------------------
RHODE ISLAND-1.93%
Rhode Island (State of)
Industrial Facilities
Authority (Blackstone
Valley Electric Co.);
Variable Rate Series 1984
RB
3.70%, 12/01/14(b)(c) A-1 - 1,000 1,000,000
- -----------------------------------------------------------------
SOUTH CAROLINA-3.85%
York (County of) (North
Carolina Electric
Membership Corp.); Pooled
Series 1984 N-4 PCR
3.50%, 09/15/98(b)(c) A-1+ VMIG-1 2,000 2,000,000
- -----------------------------------------------------------------
TENNESSEE-2.35%
Industrial Development
Board of the Metropolitan
Government of Nashville &
Davidson County
(Amberwood, Ltd.
Project); Multifamily
Housing Series 1993 A RB
3.97%, 07/01/13(b)(c) - VMIG-1 1,220 1,220,000
- -----------------------------------------------------------------
TEXAS-10.72%
Harris County Health
Facilities Development
Corp.(St. Lukes Episcopal
Hospital); Variable Rate
Demand Series 1997 B RB
3.75%, 02/15/27(c) A-1+ - 2,000 2,000,000
- -----------------------------------------------------------------
Houston (City of); Series
1997 TRAN
4.50%, 06/30/98 SP-1+ MIG-1 1,000 1,001,544
- -----------------------------------------------------------------
Montgomery (County of); GO
7.25%, 09/01/98(d) AAA Aaa 1,150 1,166,626
- -----------------------------------------------------------------
Trinity River Industrial
Development Authority
(Radiation Sterilizers,
Inc. Project); Variable
Rate Demand Series 1985 A
IDR
3.60%, 11/01/05(b)(c) A-1 - 1,400 1,400,000
- -----------------------------------------------------------------
5,568,170
- -----------------------------------------------------------------
VIRGINIA-0.77%
Henrico (County of)
Industrial Development
Authority (Hermitage
Project); Variable Rate
Health Facilities Series
1994 RB
4.00%, 05/01/24(b)(c) - VMIG-1 400 400,000
- -----------------------------------------------------------------
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WASHINGTON-0.96%
Industrial Development
Corp. of Port Townsend
(Port Townsend Paper
Corp. Project); Variable
Rate Refunding Series
1988 A RB
3.65%, 03/01/09(b)(c) - VMIG-1 $ 500 $ 500,000
- -----------------------------------------------------------------
WISCONSIN-1.93%
Wisconsin (State of); Tax
Anticipation Notes
4.50%, 06/15/98 SP-1+ MIG-1 1,000 1,001,288
- -----------------------------------------------------------------
Total Short-Term Municipal Obligations 50,935,969
- -----------------------------------------------------------------
MASTER NOTE AGREEMENT(h)-3.85%
BROKER/DEALER-3.85%
Merrill Lynch Mortgage
Capital Inc.
6.425%, 08/17/98(i) - - 2,000 2,000,000
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
COMMERCIAL PAPER(h)(j)-4.25%
ASSET-BACKED
SECURITIES-4.25%
Receivables Capital Corp.
5.60%, 04/22/98 A-1+ P-1 $ 2,219 $ 2,211,751
- -----------------------------------------------------------------
REPURCHASE AGREEMENT(h)(k)-4.59%
Goldman, Sachs & Co., Inc.
5.95%, 04/01/98(l) 2,381,681
- -----------------------------------------------------------------
TOTAL INVESTMENTS-110.77% 57,529,401(m)
- -----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(10.77)% (5,595,495)
- -----------------------------------------------------------------
NET ASSETS-100.00% $51,933,906
- -----------------------------------------------------------------
</TABLE>
Abbreviations:
GO - General Obligation Bonds
IDR - Industrial Development Revenue Bonds
PCR - Pollution Control Revenue Bonds
RB - Revenue Bonds
TRAN - Tax and Revenue Anticipation Notes
Notes to Schedule of Investments:
(a)Ratings assigned by Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's"). Ratings are not covered by Independent
Auditors' Report.
(b)Secured by a letter of credit.
(c)Demand security; payable upon demand by the Fund at specified time intervals
no greater than thirteen months. Interest rates are redetermined
periodically. Rate shown is the rate in effect on 03/31/98.
(d)Secured by bond insurance.
(e)Unrated; determined by the investment advisor to be of comparable quality to
the rated securities in which the Fund may invest, pursuant to guidelines for
the determination of quality adopted by the Board of Directors and followed
by the investment advisor.
(f)Security has an irrevocable call or mandatory put by the issuer. Maturity
date reflects such call or put.
(g)Secured by an escrow fund of U.S. Treasury obligations.
(h)Interest does not qualify as exempt interest for federal tax purposes.
(i)The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon two business days' notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
03/31/98.
(j)Commercial paper traded on a discount basis. In such case the Interest rate
shown represents the rate of discount paid or received at the time of
purchase by the Fund.
(k)Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market as being 102% of the sales price of the repurchase
agreement. The investments in some repurchase agreements are through
participation in joint accounts with other mutual funds, private accounts,
and certain non-registered investment companies managed by the investment
advisor or its affiliates.
(l)Joint repurchase agreement entered into 03/31/98 with a maturing value of
$1,000,165,278. Collateralized by $955,257,000 U.S. Government obligations,
0% to 14.00% due 04/16/98 to 11/15/27 with an aggregate market value at
03/31/98 of $1,030,343,277.
(m)Also represents costs for federal income tax purposes.
See Notes to Financial Statements
3
<PAGE> 6
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (amortized cost) $ 57,529,401
- ------------------------------------------------------------
Receivables for:
Capital stock sold 389,450
- ------------------------------------------------------------
Interest 356,850
- ------------------------------------------------------------
Investment for deferred compensation plan 22,252
- ------------------------------------------------------------
Other assets 23,187
- ------------------------------------------------------------
Total assets 58,321,140
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,400,000
- ------------------------------------------------------------
Dividends 2,225
- ------------------------------------------------------------
Deferred compensation 22,252
- ------------------------------------------------------------
Capital stock reacquired 3,891,444
- ------------------------------------------------------------
Accrued administrative services fees 3,768
- ------------------------------------------------------------
Accrued advisory fees 15,330
- ------------------------------------------------------------
Accrued distribution fees 13,073
- ------------------------------------------------------------
Accrued transfer agent fees 6,593
- ------------------------------------------------------------
Accrued operating expenses 32,549
- ------------------------------------------------------------
Total liabilities 6,387,234
- ------------------------------------------------------------
Net assets applicable to shares outstanding $ 51,933,906
- ------------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 1,000,000,000
- ------------------------------------------------------------
Outstanding 51,910,779
============================================================
Net asset value, offering and redemption
price per share $ 1.00
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended March 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $2,034,814
- -----------------------------------------------------------
EXPENSES:
Advisory fees 182,302
- -----------------------------------------------------------
Administrative services fees 38,545
- -----------------------------------------------------------
Custodian fees 7,164
- -----------------------------------------------------------
Directors' fees and expenses 9,259
- -----------------------------------------------------------
Transfer agent fees 54,715
- -----------------------------------------------------------
Distribution fees 130,216
- -----------------------------------------------------------
Registration and filing fees 44,927
- -----------------------------------------------------------
Other 45,032
- -----------------------------------------------------------
Total expenses 512,160
- -----------------------------------------------------------
Less: Fees waived (78,130)
- -----------------------------------------------------------
Net expenses 434,030
- -----------------------------------------------------------
Net investment income 1,600,784
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
SECURITIES:
Net realized gain on sales of investment
securities 17,389
- -----------------------------------------------------------
Net unrealized appreciation of investment
securities 160
- -----------------------------------------------------------
Net gain on investment securities 17,549
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $1,618,333
===========================================================
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 7
STATEMENT OF CHANGES IN NET ASSETS
For the years ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,600,784 $ 998,764
- ---------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 17,389 7,711
- ---------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities 160 (741)
- ---------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,618,333 1,005,734
- ---------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (1,598,357) (996,476)
- ---------------------------------------------------------------------------------------
Net increase (decrease) from capital stock transactions (4,966,262) 26,856,591
- ---------------------------------------------------------------------------------------
Net increase (decrease) in net assets (4,946,286) 26,865,849
- ---------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 56,880,192 30,014,343
- ---------------------------------------------------------------------------------------
End of period $51,933,906 $56,880,192
=======================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $51,910,779 $56,877,041
- ---------------------------------------------------------------------------------------
Undistributed net investment income 36,432 34,005
- ---------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of investment
securities (13,465) (30,854)
- ---------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 160 --
- ---------------------------------------------------------------------------------------
$51,933,906 $56,880,192
=======================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Tax-Exempt Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Company is organized as a Maryland corporation
consisting of four separate portfolios: AIM Tax-Exempt Cash Fund, AIM High
Income Municipal Fund, AIM Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free
Intermediate Fund. 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 AIM Tax-Exempt Cash Fund (the "Fund"). The
investment objective of the Fund is to earn the highest level of current income
free from federal income taxes that is consistent with safety of principal and
liquidity.
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. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations--The Fund's securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter assumes a
constant amortization to maturity of premiums or original issue discounts.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date,
adjusted for amortization of premiums and discounts on investments, and is
recorded on the accrual basis. Discounts, other than original issue, are
amortized to unrealized appreciation for financial reporting purposes. It is
the policy of the Fund to declare daily dividends from net investment income.
Such dividends are paid monthly.
C. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $16,205 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2004. The Fund cannot
5
<PAGE> 8
distribute capital gains to shareholders until the tax loss carryforwards
have been utilized.
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 investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.35% of the Fund's
average daily net assets.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended March 31, 1998, the Fund
reimbursed AIM $38,545 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 agency
services to the Fund. During the year ended March 31, 1998, the Fund paid AFS
$35,613 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") pursuant to which AIM Distributors
serves as the distributor for the Fund. The Company has also adopted a plan
pursuant to Rule 12b-1 under the 1940 Act (the "Plan") with respect to the Fund
whereby the Fund will pay AIM Distributors up to a maximum annual rate of 0.25%
of the Fund's average daily net assets as compensation for services related to
the sale and distribution of the Fund's shares. Currently, AIM Distributors has
voluntarily elected to waive a portion of its compensation payable by the Fund
such that the compensation paid pursuant to the Plan equals 0.10% per annum of
the Fund's average daily net assets. During the year ended March 31, 1998, AIM
Distributors waived fees of $78,130. This waiver may be rescinded by AIM
Distributors at any time without further notice to investors. The Plan provides
that of the aggregate amount payable under the Plan, payments to dealers and
other financial institutions that provide continuing personal shareholder
services to their customers who purchase and own shares of the Fund in amounts
of up to 0.25% of the average daily net assets of the Fund attributable to the
customers of such dealers or financial institutions may be characterized as a
service fee, and that payments to dealers and other financial institutions in
excess of such amount and payments to AIM Distributors would be characterized as
an asset-based sales charge. The Plan also imposes a cap on the total amount of
sales charges, including asset-based sales charges, that may be paid by the
Company with respect to the Fund. As a result of AIM Distributors' waiver of
compensation due from the Fund, payments to dealers and other financial
institutions by that Fund will be limited to 0.10% of the Fund's average daily
net assets. During the year ended March 31, 1998, the Fund paid AIM Distributors
$52,086 as compensation pursuant to the Plan. Certain officers and directors of
the Company are officers and directors of AIM, AFS and AIM Distributors.
During the year ended March 31, 1998, the Fund paid legal fees of $3,069 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the Fund's
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 invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-CAPITAL STOCK
Changes in capital stock outstanding during the years ended March 31, 1998 and
1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Sold 234,334,058 $ 234,334,058 96,643,811 $ 96,643,811
- ----------------- ------------ ------------- ------------ ------------
Issued as
reinvestment of
dividends 1,529,845 1,529,845 948,679 948,679
- ----------------- ------------ ------------- ------------ ------------
Reacquired (240,830,165) (240,830,165) (70,735,899) (70,735,899)
- ----------------- ------------ ------------- ------------ ------------
(4,966,262) $ (4,966,262) 26,856,591 $ 26,856,591
================= ============ ============= ============ ============
</TABLE>
6
<PAGE> 9
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during each of the years in the four-year period ended March 31,
1998, the three months ended March 31, 1994 and the year ended December 31,
1993.
<TABLE>
<CAPTION>
MARCH 31,
----------------------------------------------------- DECEMBER 31,
1998 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------- ------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.03 0.03 0.03 0.03 0.004 0.02
- ---------------------------------------------------------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.03) (0.03) (0.03) (0.03) (0.004) (0.02)
- ---------------------------------------------------------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========================================================== ======= ======= ======= ======= ======= =======
Total return 3.12% 2.82% 2.92% 2.54% 1.73%(a) 1.78%
========================================================== ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $51,934 $56,880 $30,014 $30,365 $33,658 $35,230
========================================================== ======= ======= ======= ======= ======= =======
Ratio of expenses to average net assets(b) 0.83%(c) 1.04% 1.05% 1.01% 1.00%(a) 1.00%
========================================================== ======= ======= ======= ======= ======= =======
Ratio of net investment income to average net assets(d) 3.07%(c) 2.78% 2.97% 2.53% 1.75%(a) 1.76%
========================================================== ======= ======= ======= ======= ======= =======
</TABLE>
(a) Annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.98%, 1.19%, 1.20%, 1.16%, 1.14% (annualized) and 1.36% for the periods
1998 - 1993.
(c) Ratios are based on average daily net assets of $52,086,316.
(d) After fee waivers and/or expense reimbursements. Ratios of income to average
net assets prior to fee waivers and/or expense reimbursements were 2.92%,
2.63%, 2.82%, 2.38%, 1.61% (annualized) and 1.40% for the periods 1998-1993.
7
<PAGE> 10
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-Exempt Cash Fund (a portfolio of AIM Tax-Exempt Funds, Inc.), including the
schedule of investments, as of March 31, 1998, 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 four year period then ended, the three-month period
ended March 31, 1994, and the year ended December 31, 1993. 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 and the financial highlights. Our procedures included confirmation of
securities owned as of March 31, 1998, 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-Exempt Cash Fund as of March 31, 1998, 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
four-year period then ended, the three-month period ended March 31, 1994, and
the year ended December 31, 1993, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
May 1, 1998
8
<PAGE> 11
Directors & Officers
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
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
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II TRANSFER AGENT
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
Director, AEGEON USA; CUSTODIAN
Formerly Vice Chairman and President, Stuart W. Coco
Mercantile-Safe Deposit & Trust Co.; and Vice President The Bank of New York
President, Mercantile Bankshares 90 Washington Street
Melville B. Cox 11th Floor
Jack Fields Vice President New York, NY 10286
Chief Executive Officer
Texana Global, Inc.; Karen Dunn Kelley COUNSEL TO THE FUND
Formerly Member Vice President
of the U.S. House of Representatives Ballard Spahr
Renee A. Bamford Andrews & Ingersoll, LLP
Carl Frischling Assistant Secretary 1735 Market Street
Partner Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel P. Michelle Grace
Assistant Secretary COUNSEL TO THE DIRECTORS
Robert H. Graham
President and Chief Executive Officer Jeffrey H. Kupor Kramer, Levin, Naftalis & Frankel
A I M Management Group Inc. Assistant Secretary 919 Third Avenue
New York, NY 10022
John F. Kroeger Nancy L. Martin
Formerly Consultant Assistant Secretary DISTRIBUTOR
Wendell & Stockel Associates, Inc.
Ofelia M. Mayo A I M Distributors, Inc.
Lewis F. Pennock Assistant Secretary 11 Greenway Plaza
Attorney Suite 100
Lisa A. Moss Houston, TX 77046
Ian W. Robinson Assistant Secretary
Consultant; Formerly Executive AUDITORS
Vice President and Kathleen J. Pflueger
Chief Financial Officer Assistant Secretary KPMG Peat Marwick LLP
Bell Atlantic Management 700 Louisiana
Services, Inc. Samuel D. Sirko Houston, TX 77002
Assistant Secretary
Louis S. Sklar
Executive Vice President Stephen I. Winer
Hines Interests Assistant Secretary
Limited Partnership
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Tax-Exempt Cash Fund paid ordinary dividends in the amount of $0.0308 per
share to shareholders during the Fund's tax year ended March 31, 1998. Of this
amount, 84.61% qualified as 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> 12
<TABLE>
<CAPTION>
<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Asian Growth Fund
AIM Capital Development Fund
AIM Constellation Fund
AIM European Development Fund
AIM Global Aggressive Growth Fund
GROWTH OF CAPITAL
AIM Advisor International Value Fund
AIM Blue Chip Fund
AIM Global Growth Fund
[PHOTO OF AIM International Equity Fund
11 GREENWAY PLAZA AIM Select Growth Fund
APPEARS HERE] AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME OR INCOME WITH CAPITAL GROWTH
AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund
AIM Charter Fund
AIM Global Utilities Fund
HIGH CURRENT INCOME OR CURRENT INCOME
AIM High Yield Fund
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM High Income Municipal Fund
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Fund
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund
A I M Management Group Inc. has provided leadership in the AIM Money Market Fund
mutual fund industry since 1976 and managed approximately AIM Tax-Exempt Cash Fund
$89 billion in assets for more than 3.9 million
shareholders, including individual investors, corporate *AIM Aggressive Growth Fund was closed to new investors on
clients, and financial institutions as of March 31, 1998. June 5, 1997. For more complete information about any AIM
The AIM Family of Funds--Registered Trademark-- is Fund(s), including sales charges and expenses, ask your
distributed nationwide, and AIM today ranks among the financial consultant or securities dealer for a free
nation's top 15 mutual fund companies in assets under prospectus(es). Please read the prospectus(es) carefully
management, according to Lipper Analytical Services, Inc. before you invest or send money.
INVEST WITH DISCIPLINE(SM)
</TABLE>
