<PAGE> 1
AIM TAX-EXEMPT
CASH FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT SEPTEMBER 30, 1998
<PAGE> 2
The Chairman's Letter
Dear Fellow Shareholder:
AIM Tax-Exempt Cash Fund continued to provide attractive,
[PHOTO OF tax-free income during the six-month period ended September
Charles T. 30, 1998. At the end of the reporting period, the Fund
Bauer posted a seven-day effective annualized yield of 3.32% and
Chairman of a seven-day yield of 3.27%. Translated to its
the Board of taxable-equivalent, the Fund's seven-day effective
THE FUND annualized yield was 4.93% based on net asset value and
APPEARS HERE] adjusted for the highest marginal federal tax rate of
39.6%. The taxable-equivalent yield is calculated in the
same manner as the standard yield with an adjustment for
the stated, assumed tax rate.
The Fund's 4.93% 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 2.49% as of September 30, 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.
MARKET ENVIRONMENT AND OUTLOOK
Severe economic dislocations in Asia, Russia, and Latin America, combined
with political controversy in the U.S., precipitated a sharp drop in the
stock market and ignited a strong rally in the fixed-income market. The
rally, however, was largely confined to higher-rated issues. In the unsettled
market environment, investors flocked to higher-rated securities because of
their relative safety and liquidity. As higher rated issues soared in price,
their yields dropped to historic lows.
For most of the reporting period, the Federal Reserve Board (the Fed)
was focused on the strength of the domestic economy and hence was more apt to
raise rates to counteract incipient inflationary pressures. As it became
clear that world economic crises would be more serious than originally
thought, the Fed shifted its focus to providing liquidity and supporting
markets by considering lowering rates. At the end of September, just before
the reporting period ended, the Fed lowered the federal funds rate from 5.50%
to 5.25%.
Overall, the environment for fixed-income securities appears favorable.
The inflation rate has remained low despite strong economic growth over the
past few years. Now that economic growth is slowing, inflation appears to be
even less of a threat. Fed Chairman Alan Greenspan has indicated that the Fed
may further cut interest rates to prevent the economic situation from
deteriorating. Indeed, in mid October, after the reporting period ended, the
Fed further eased monetary policy.
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.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
CHAIRMAN
---------------------------
The inflation rate
has remained low despite
strong economic growth
over the past few years.
Now that economic
growth is slowing,
inflation appears to be
even less of a threat.
---------------------------
<PAGE> 3
SCHEDULE OF INVESTMENTS
September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
RATINGS(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
SHORT-TERM MUNICIPAL
OBLIGATIONS-87.00%
ALABAMA-2.50%
Alabama Industrial
Development Board
(Industrial Partners
Project); Variable/Fixed
Rate Refunding Series 1989
RB
3.75%, 01/01/07(b)(c) - VMIG-1 $1,685 $ 1,685,000
- -------------------------------------------------------------------
ALASKA-3.97%
Alaska Housing Finance Corp.;
General Mortgage Series
1991 A RB
3.60%, 06/01/26(c) A-1+ VMIG-1 480 480,000
- -------------------------------------------------------------------
Valdez (City of) Marine
Terminal (ARCO
Transportation Alaska, Inc.
Project); Adjustable
Refunding Series 1994 A RB
3.60%, 12/09/98 A-1 VMIG-1 2,200 2,200,000
- -------------------------------------------------------------------
2,680,000
- -------------------------------------------------------------------
ARIZONA-1.51%
Arizona (State of)
Transportation Board;
Highway Series A RB
5.90%, 07/01/99 AA Aa 1,000 1,017,544
- -------------------------------------------------------------------
CALIFORNIA-3.26%
Huntington Beach (City of)
(Seabridge Villas Project);
Floating Rate Multifamily
Housing Series 1985 A RB
4.00%, 02/01/10(b)(c) - VMIG-1 2,200 2,200,000
- -------------------------------------------------------------------
COLORADO-3.33%
Eagle (County of) Smith Creek
Metropolitan District;
Variable Rate Series 1997
RB
3.95%, 10/01/35(b)(c) A-1+ - 2,250 2,250,000
- -------------------------------------------------------------------
FLORIDA-7.56%
Gulf Breeze (City of)
(Florida Municipal Bond
Fund); Variable Rate Demand
Series 1995 A RB
4.10%, 03/31/21(b)(c) A-1+ - 2,300 2,300,000
- -------------------------------------------------------------------
Lee (County of) Housing
Finance Authority
(Forestwood Apartments
Project); Housing Series
1995 A RB
3.65%, 06/15/25(b)(c) A-1+ - 1,800 1,800,000
- -------------------------------------------------------------------
Putnam County Development
Authority (Seminole
Electric Cooperative, Inc.
Project); National Rural
Utilities Finance Corp.
Guaranteed Floating/ Fixed
Rate Pooled Series 1984 H-4
PCR
3.30%, 03/15/99(b) A-1+ P-1 1,000 1,000,000
- -------------------------------------------------------------------
5,100,000
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GEORGIA-3.70%
Elbert & Bowman (Counties of)
(Seaboard Farms of
Elberton); Series 1985 IDR
4.00%, 07/01/05(b)(c) A-1 - $1,000 $ 1,000,000
- -------------------------------------------------------------------
Roswell (City of) Georgia
Housing Development
Authority (Azalea Project);
Multifamily Housing
Refunding Series 1996 RB
3.65%, 06/15/25(b)(c) A-1+ - 1,500 1,500,000
- -------------------------------------------------------------------
2,500,000
- -------------------------------------------------------------------
IDAHO-2.24%
Idaho (State of); Series 1998
TAN
4.50%, 06/30/99 SP-1+ MIG-1 1,500 1,509,707
- -------------------------------------------------------------------
ILLINOIS-11.13%
Illinois Development Finance
Authority (American College
of Surgeons Project); Tax
Exempt Series 1996 RB
4.05%, 08/01/26(b)(c) A-1+ - 3,065 3,065,000
- -------------------------------------------------------------------
Illinois Health Facilities
Authority; Revolving Fund
Pooled Series D RB
3.65%, 08/01/15(b)(c) A-1+ VMIG-1 1,430 1,430,000
- -------------------------------------------------------------------
Illinois Health Facilities
Authority (Franciscan
Eldercare Project);
Adjustable Rate Refunding
Series 1996 C RB
3.70%, 05/15/26(b)(c) A-1+ - 1,420 1,420,000
- -------------------------------------------------------------------
Illinois Health Facilities
Authority
(Rush-Presbyterian-St.
Luke's Medical Center);
Series 1989 A RB
3.65%, 11/16/98(b) A-1+ VMIG-1 1,600 1,600,000
- -------------------------------------------------------------------
7,515,000
- -------------------------------------------------------------------
INDIANA-1.48%
Indiana Development Finance
Authority (Southern Indiana
Gas and Electric Project);
Series 1998 A PCR
3.65%, 03/01/99 - VMIG-1 1,000 1,000,000
- -------------------------------------------------------------------
IOWA-2.24%
Iowa School Corporations
(Iowa School Cash
Anticipation Program);
Warrant Certificate Series
1998-1999 A TRAN
4.50%, 06/25/99(b) SP-1+ MIG-1 1,500 1,508,997
- -------------------------------------------------------------------
KENTUCKY-1.49%
Kentucky Asset/Liability
Commission; General Fund
TRAN Series 1998 B
4.00%, 06/25/99 SP-1+ MIG-1 1,000 1,004,789
- -------------------------------------------------------------------
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
RATINGS(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
LOUISIANA-5.78%
DeSoto Parish (Central
Louisiana Electric Company,
Inc Project); Adjustable
Tender Refunding Series
1991 B PCR
3.50%, 07/01/18(b)(c) A-1+ VMIG-1 $2,500 $ 2,500,000
- -------------------------------------------------------------------
New Orleans International
Airport Aviation Board;
Refunding Series 1995 A RB
3.65%, 08/01/15(c)(d) A-1+ VMIG-1 1,400 1,400,000
- -------------------------------------------------------------------
3,900,000
- -------------------------------------------------------------------
MARYLAND-0.89%
Maryland Industrial
Development Financing
Authority (Liberty Medical
Center); Variable Rate
Demand/ Fixed Rate 1989
Issue Refunding RB
3.55%, 07/01/18(b)(c) - VMIG-1 600 600,000
- -------------------------------------------------------------------
MICHIGAN-1.04%
Michigan State Hospital
Finance Authority (Hospital
Equipment Loan Program);
Adjustable Series 1995 A RB
3.55%, 12/01/23(b)(c) - VMIG-1 500 500,000
- -------------------------------------------------------------------
Plymouth (Township of)
Economic Development Corp.
(Key International
Project); Variable Rate
Demand Series 1984 RB
3.30%, 07/01/04(b)(c)(e) - - 200 200,000
- -------------------------------------------------------------------
700,000
- -------------------------------------------------------------------
MINNESOTA-2.93%
Mankato (City of) (Northern
States Power Co. Project);
Floating Collateralized
Series 1985 PCR
3.75%, 03/01/11(c) AA- Aa3 500 500,000
- -------------------------------------------------------------------
Owatonna (City of) (The
Health Central System
Project); Hospital Series
1985 RB
3.65%, 08/01/14(b)(c) A-1+ - 1,480 1,480,000
- -------------------------------------------------------------------
1,980,000
- -------------------------------------------------------------------
MONTANA-1.33%
Missoula (County of)
(Washington Corp. Project);
Floating Rate Monthly
Demand Series 1984 IDR
3.51%, 11/01/04(b)(c)(e) - - 900 900,000
- -------------------------------------------------------------------
NEW HAMPSHIRE-2.07%
New Hampshire Higher
Education and Health
Facilities Authority;
Variable Rate Hospital
Series 1985 C RB
3.65%, 12/01/25(c)(d) A-1 - 1,400 1,400,000
- -------------------------------------------------------------------
OHIO-0.44%
Delaware (County of)
(Radiation Sterilizers,
Inc.); Series 1984 IDR
3.60%, 12/01/04(b)(c) A-1 - 300 300,000
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
PENNSYLVANIA-4.46%
Delaware (County of)
Industrial Development
Authority (Scotfoam Corp.
Project); Variable Rate
Demand Series 1985 IDR
3.30%, 10/01/05(b)(c)(e) - - $1,000 $ 1,000,000
- -------------------------------------------------------------------
Pennsylvania State Higher
Educational Facilities
Authority (Bryn Mawr
College); College &
University Series 1997 RB
5.00%, 12/01/98(d) AAA Aaa 1,000 1,002,274
- -------------------------------------------------------------------
Philadelphia (City of) School
District; Series 1998-1999
A TRAN
4.25%, 06/30/99(b) SP-1 MIG-1 1,000 1,004,459
- -------------------------------------------------------------------
3,006,733
- -------------------------------------------------------------------
TENNESSEE-1.76%
Industrial Development Board
of the Metropolitan
Government of Nashville &
Davidson County (Amberwood,
Ltd. Project); Multifamily
Housing Series 1993 A RB
4.27%, 07/01/13(b)(c) - VMIG-1 1,185 1,185,000
- -------------------------------------------------------------------
TEXAS-17.89%
Board of Regents of the
University of Texas System
(Permanent University
Fund); Series A Variable
Rate Notes
3.60%, 12/15/98 A-1+ VMIG-1 2,000 2,000,000
- -------------------------------------------------------------------
Harris County; Series C
Commercial Paper Notes
3.35%, 10/02/98(c) A-1+ P-1 668 667,983
- -------------------------------------------------------------------
Harris County Health
Facilities Development
Corp. (St. Lukes Episcopal
Hospital); Variable Rate
Demand Series 1997 B RB
4.10%, 02/15/27(c) A-1+ - 4,000 4,000,000
- -------------------------------------------------------------------
Houston (City of) Water and
Sewer; Series A Commercial
Paper Notes 3.40%, 02/10/99 A-1 P-1 1,000 1,000,000
- -------------------------------------------------------------------
Texas (State of); Series 1998
TRAN
4.50%, 08/31/99 SP-1+ MIG-1 1,000 1,009,552
- -------------------------------------------------------------------
Texas Public Finance
Authority; Series 1992 B
Commercial Paper Notes
3.60%, 12/08/98 A-1+ P-1 2,000 2,000,000
- -------------------------------------------------------------------
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
- -------------------------------------------------------------------
12,077,535
- -------------------------------------------------------------------
VIRGINIA-3.26%
Waynesboro (City of)
Industrial Development
Authority (Residential Care
Facilities); RB
4.10%, 12/15/28(b)(c) A-1 - 2,200 2,200,000
- -------------------------------------------------------------------
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
RATINGS(a) PAR
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WASHINGTON-0.74%
Industrial Development Corp.
of Port Townsend (Port
Townsend Paper Corp.
Project); Variable Rate
Refunding Series 1988 A RB
4.00%, 03/01/09(b)(c) - VMIG-1 $ 500 $ 500,000
- -------------------------------------------------------------------
Total Short-Term Municipal Obligations
(Cost $58,720,255) 58,720,305
- -------------------------------------------------------------------
MASTER NOTE AGREEMENT(f)-5.18%
BROKER/DEALER-5.18%
Merrill Lynch Mortgage
Capital, Inc.
6.155%, 08/16/99(d)(g)
(Cost $3,500,000) 3,500 3,500,000
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
(000) VALUE
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT(g)(h)-7.32%
Warburg, Dillon, Read
Securities, Inc.
5.52%, 10/01/98(i) (Cost $4,939,387) $4,939 $ 4,939,387
- ------------------------------------------------------------------
TOTAL INVESTMENTS-99.50% 67,159,692(j)
- ------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.50% 336,513
- ------------------------------------------------------------------
NET ASSETS-100.00% $67,496,205
- ------------------------------------------------------------------
</TABLE>
Abbreviations:
IDR - Industrial Development Revenue Bonds
PCR - Pollution Control Revenue Bonds
RB - Revenue Bonds
TAN - Tax Anticipation Notes
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").
(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 09/30/98.
(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) Interest does not qualify as exempt interest for federal tax purposes.
(g) The Portfolio 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
09/30/98.
(h) 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 value is at least 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.
(i) Joint repurchase agreement entered into 09/30/98 with a maturing value of
$1,200,184,000. Collateralized by $2,689,530,000 U.S. Government
obligations, 0% to 10.75% due 05/15/99 to 08/15/21.
(j) The cost for federal income tax purposes is $67,159,642.
See Notes to Financial Statements
4
<PAGE> 6
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (amortized cost) $ 67,159,692
- ------------------------------------------------------------
Receivables for:
Capital stock sold 226,032
- ------------------------------------------------------------
Interest 312,567
- ------------------------------------------------------------
Investment for deferred compensation plan 23,599
- ------------------------------------------------------------
Other assets 33,837
- ------------------------------------------------------------
Total assets 67,755,727
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 1,732
- ------------------------------------------------------------
Deferred compensation 23,599
- ------------------------------------------------------------
Capital stock reacquired 129,189
- ------------------------------------------------------------
Accrued administrative services fees 3,878
- ------------------------------------------------------------
Accrued advisory fees 20,596
- ------------------------------------------------------------
Accrued distribution fees 18,692
- ------------------------------------------------------------
Accrued transfer agent fees 13,617
- ------------------------------------------------------------
Accrued operating expenses 48,219
- ------------------------------------------------------------
Total liabilities 259,522
- ------------------------------------------------------------
Net assets applicable to shares outstanding $ 67,496,205
- ------------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 1,000,000,000
- ------------------------------------------------------------
Outstanding 67,465,619
- ------------------------------------------------------------
Net asset value, offering and redemption
price per share $ 1.00
- ------------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended September 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $1,267,740
- -----------------------------------------------------------
EXPENSES:
Advisory fees 116,480
- -----------------------------------------------------------
Administrative services fees 23,598
- -----------------------------------------------------------
Custodian fees 3,753
- -----------------------------------------------------------
Directors' fees and expenses 5,228
- -----------------------------------------------------------
Transfer agent fees 41,047
- -----------------------------------------------------------
Distribution fees 83,200
- -----------------------------------------------------------
Registration and filing fees 22,481
- -----------------------------------------------------------
Other 17,209
- -----------------------------------------------------------
Total expenses 312,996
- -----------------------------------------------------------
Less: Fees waived (49,920)
- -----------------------------------------------------------
Net expenses 263,076
- -----------------------------------------------------------
Net investment income 1,004,664
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
SECURITIES:
Net realized gain on sales of investment
securities 7,904
- -----------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities (110)
- -----------------------------------------------------------
Net gain on investment securities 7,794
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $1,012,458
- -----------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 7
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended September 30, 1998 and the year ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,004,664 $ 1,600,784
- -----------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 7,904 17,389
- -----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (110) 160
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,012,458 1,618,333
- -----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (1,004,999) (1,598,357)
- -----------------------------------------------------------------------------------------
Net increase (decrease) from capital stock transactions 15,554,840 (4,966,262)
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets 15,562,299 (4,946,286)
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 51,933,906 56,880,192
- -----------------------------------------------------------------------------------------
End of period $67,496,205 $51,933,906
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $67,465,619 $51,910,779
- -----------------------------------------------------------------------------------------
Undistributed net investment income 36,097 36,432
- -----------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of investment
securities (5,561) (13,465)
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 50 160
- -----------------------------------------------------------------------------------------
$67,496,205 $51,933,906
=========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Tax-Exempt Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as 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
6
<PAGE> 8
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 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 six months ended September 30, 1998,
the Fund reimbursed AIM $23,598 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 six months ended September 30, 1998, the Fund
paid AFS $20,988 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 six months ended September 30,
1998, AIM Distributors waived fees of $49,920. 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 six months ended September 30, 1998, the
Fund paid AIM Distributors $33,280 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 six months ended September 30, 1998, the Fund paid legal fees of
$2,273 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 six months ended September 30,
1998 and the year ended March 31, 1998 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Sold 211,321,453 $ 211,321,453 234,334,058 $234,334,058
- ---------------------------------------------------------------------------------
Issued as
reinvestment of
dividends 1,072,046 1,072,046 1,529,845 1,529,845
- ---------------------------------------------------------------------------------
Reacquired (196,838,659) (196,838,659) (240,830,165) (240,830,165)
- ---------------------------------------------------------------------------------
15,554,840 $ 15,554,840 (4,966,262) $ (4,966,262)
=================================================================================
</TABLE>
7
<PAGE> 9
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during the six months ended September 30, 1998 and 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,
SEPTEMBER 30, ----------------------------------------------------- DECEMBER 31,
1998 1998 1997 1996 1995 1994 1993
------------- ------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------ ------- ------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.02 0.03 0.03 0.03 0.03 0.004 0.02
- ------------------------------------------ ------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.02) (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 $ 1.00
========================================== ======= ======= ======= ======= ======= ======= =======
Total return 3.06%(a) 3.12% 2.82% 2.92% 2.54% 1.73%(a) 1.78%
========================================== ======= ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $67,496 $51,934 $56,880 $30,014 $30,365 $33,658 $35,230
========================================== ======= ======= ======= ======= ======= ======= =======
Ratio of expenses to average net assets(b) 0.79%(c) 0.83% 1.04% 1.05% 1.01% 1.00%(a) 1.00%
========================================== ======= ======= ======= ======= ======= ======= =======
Ratio of net investment income to average
net assets(d) 3.02%(c) 3.07% 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
0.94% (annualized), 0.98%, 1.19%, 1.20%, 1.16%, 1.14% (annualized) and 1.36%
for the periods 1998 - 1993.
(c) Ratios are annualized and based on average daily net assets of $66,378,302.
(d) After fee waivers and/or expense reimbursements. Ratios of income to average
net assets prior to fee waivers and/or expense reimbursements were 2.87%
(annualized), 2.92%, 2.63%, 2.82%, 2.38%, 1.61% (annualized) and 1.40% for
the periods 1998-1993.
8
<PAGE> 10
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
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Stuart W. Coco
President, Mercantile Bankshares Vice President The Bank of New York
90 Washington Street
Jack Fields Melville B. Cox 11th Floor
Chief Executive Officer Vice President New York, NY 10286
Texana Global, Inc.;
Formerly Member Karen Dunn Kelley COUNSEL TO THE FUND
of the U.S. House of Representatives Vice President
Ballard Spahr
Carl Frischling Renee A. Friedli Andrews & Ingersoll, LLP
Partner Assistant Secretary 1735 Market Street
Kramer, Levin, Naftalis & Frankel Philadelphia, PA 19103
P. Michelle Grace
Robert H. Graham Assistant Secretary COUNSEL TO THE DIRECTORS
President and Chief Executive Officer
A I M Management Group Inc. Jeffrey H. Kupor Kramer, Levin, Naftalis & Frankel
Assistant Secretary 919 Third Avenue
Prema Mathai-Davis New York, NY 10022
Chief Executive Officer, YWCA of the U.S.A.; Nancy L. Martin
Commissioner, New York City Dept. for the Assistant Secretary DISTRIBUTOR
Aging; and member of the Board of Directors,
Metropolitan Transportation Authority of Ofelia M. Mayo A I M Distributors, Inc.
New York State Assistant Secretary 11 Greenway Plaza
Suite 100
Lewis F. Pennock Lisa A. Moss
Attorney Assistant Secretary Houston, TX 77046
Ian W. Robinson Kathleen J. Pflueger
Consultant; Formerly Executive Assistant Secretary
Vice President and
Chief Financial Officer Samuel D. Sirko
Bell Atlantic Management Assistant Secretary
Services, Inc.
Stephen I. Winer
Louis S. Sklar Assistant Secretary
Executive Vice President
Hines Interests
Limited Partnership
</TABLE>
This report may be distributed only to current shareholders
or to the persons who have received a current prospectus of the Fund.
<PAGE> 11
THE AIM FAMILY OF FUNDS--REGISTERED TRADEMARK--
<TABLE>
<S> <C> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS
AIM Aggressive Growth Fund AIM Advisor International Value Fund
AIM Blue Chip Fund AIM Asian Growth Fund
AIM Capital Development Fund AIM Developing Markets Fund(1)
AIM Constellation Fund AIM Emerging Markets Fund(1)
AIM Mid Cap Equity Fund(1, A) AIM Europe Growth Fund(1)
[PHOTO OF AIM Select Growth Fund(2) AIM European Development Fund
11 GREENWAY PLAZA AIM Small Cap Growth Fund(1, B) AIM International Equity Fund
APPEARS HERE] AIM Small Cap Opportunities Fund AIM International Growth Fund(1)
AIM Value Fund AIM Japan Growth Fund(1)
AIM Weingarten Fund AIM Latin American Growth Fund(1)
AIM New Pacific Growth Fund(1)
GROWTH & INCOME FUNDS
GLOBAL GROWTH FUNDS
A I M Management Group Inc. AIM Advisor Flex Fund
has provided leadership in the AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
mutual fund industry since AIM Advisor MultiFlex Fund AIM Global Growth Fund
1976 and managed approximately AIM Advisor Real Estate Fund AIM Worldwide Growth Fund(1)
$91 billion in assets for more AIM Balanced Fund
than 5.5 million shareholders, AIM Basic Value Fund(1, C) GLOBAL GROWTH & INCOME FUNDS
including individual AIM Charter Fund
investors, corporate clients, AIM Global Growth & Income Fund(1)
and financial institutions, as INCOME FUNDS AIM Global Utilities Fund
of September 30, 1998. The AIM
Family of Funds--Registered AIM Floating Rate Fund(1) GLOBAL INCOME FUNDS
Trademark-- is distributed AIM High Yield Fund
nationwide, and AIM today is AIM High Yield Fund II AIM Emerging Markets Debt Fund(1, D)
the 11th-largest mutual fund AIM Income Fund AIM Global Government Income Fund(1)
complex in the U.S. in assets AIM Intermediate Government Fund AIM Global Income Fund
under management, according to AIM Limited Maturity Treasury Fund AIM Strategic Income Fund(1)
Strategic Insight, an
independent mutual fund TAX-FREE INCOME FUNDS THEME FUNDS
monitor.
AIM High Income Municipal Fund AIM Global Consumer Products and Services Fund(1)
AIM Municipal Bond Fund AIM Global Financial Services Fund(1)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Health Care Fund(1)
AIM Tax-Free Intermediate Fund AIM Global Infrastructure Fund(1)
AIM Global Resources Fund(1)
MONEY MARKET FUNDS AIM Global Telecommunications Fund(1)
AIM Global Trends Fund(1,E)
AIM Dollar Fund(1)
AIM Money Market Fund (1) Effective May 29, 1998, A I M
AIM Tax-Exempt Cash Fund Advisors, Inc. became advisor to
the former GT Global Funds.
(2) On May 1, 1998, AIM Growth Fund
was renamed AIM Select Growth Fund.
(A) On September 8, 1998, AIM Mid Cap
Growth Fund was renamed AIM Mid
Cap Equity Fund.
(B) On September 8, 1998, AIM Small
Cap Equity Fund was renamed AIM
Small Cap Growth Fund.
(C) On September 8, 1998, AIM America
Value Fund was renamed AIM Basic
Value Fund.
(D) On September 8, 1998, AIM Global
High Income Fund was renamed AIM
Emerging Markets Debt Fund.
(E) On September 8, 1998, AIM New
Dimension Fund was renamed AIM
Global Trends Fund. For more
complete information about any
AIM Fund(s), including sales
charges and expenses, ask your
financial consultant or
securities dealer for a free
prospectus(es). Please read the
prospectus(es) carefully before
you invest or send money.
</TABLE>
INVEST WITH DISCIPLINE--REGISTERED TRADEMARK--
