<PAGE> 1
[AIM LOGO]
[GRAPHIC COLLAGE]
AIM TAX-EXEMPT BOND FUND
OF CONNECTICUT
ANNUAL REPORT
MARCH 31, 1995
<PAGE> 2
FUNDAMENTALS
FUND OBJECTIVE
AIM Tax-Exempt Bond Fund of Connecticut seeks to earn a high level of
current income that is free of both federal and state of Connecticut
income taxes by investing at least 80% of its assets in a diversified
portfolio of municipal securities issued by the State of Connecticut and
authorities, agencies, instrumentalities, and political subdivisions of the
State of Connecticut, or other entities, the interest from which, in the
opinion of bond counsel for the issuer, is exempt from federal income taxes.
- -----------------------------------------------------------------------------
PORTFOLIO DATA
PORTFOLIO COMPOSITION TOP 5 BOND HOLDINGS
Revenue 78% 1. Guam Airport Authority
General Obligations 22 2. Connecticut State Special Tax Obligation
(Transportation Infrastructure)
3. Connecticut Housing Development Authority
(Housing Mortgage Finance Program)
Credit Enhanced 32% 4. Connecticut State Special Tax Obligation
AMT 14 (Transportation Infrastructure Sales and
Excise Tax)
5. Connecticut Development Authority
(New England Power Co.)
Number of Holdings 61
Average Maturity 13 years
Duration 5 years
- -----------------------------------------------------------------------------
This table represents a summary of the Fund's portfolio as of March 31, 1995,
the close of its fiscal year. The portfolio's composition may change and there
is no assurance the Fund will continue to hold the same securities.
GROWTH OF A
HYPOTHETICAL
$10,000
INVESTMENT
AVERAGE ANNUAL
TOTAL RETURNS
(at maximum offering price)
Since Inception (10/3/89) 6.79%
Five Years 6.89
One Year 0.79*
*5.78% excluding maximum sales charge
- -----------------------------------------------------
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Measurement Period AIM Tax-Exempt Bond Lipper Connecticut Municipal
10-3-89 - 3-31-95 Fund of Connecticut Debt Category
(In Dollars) (In Dollars)
<S> <C> <C>
10/3/89 9,524 10,000
3/90 9,789 10,361
3/91 10,613 11,127
3/92 11,622 12,117
3/93 13,082 13,711
3/94 13,560 13,948
3/95 14,346 14,781
- ---------------------------------------------------------------------------------------------
Past performance cannot guarantee comparable future results.
</TABLE>
AIM Tax-Exempt Bond Fund of Connecticut figures are historical and reflect
reinvestment of all distributions, changes in the net asset value,
and deduction of the 4.75% maximum sales charge. 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. Source: Towers Data
Systems HYPO(R).
Lipper Analytical Services, Inc., is an independent mutual
fund performance monitor. The unmanaged Lipper General Municipal Debt Funds
Category is a representative average of the performance of all Connecticut
municipal bond mutual funds. Source: Lipper Analytical Services, Inc.
An investment cannot be made in the index listed. Index results do
not reflect sales charges.
<PAGE> 3
CHAIRMAN'S LETTER
Dear Shareholder:
It is during difficult periods that a disciplined investment
strategy can demonstrate its merit. AIM Tax-Exempt Bond Fund of
[PHOTO of Connecticut's focus on selected quality Connecticut municipal
Charles T. securities of shorter maturity proved an effective defensive
Bauer posture as interest rates increased sharply during the year
Chairman of ended March 31, 1995.
the Board of The result was an attractive improvement in one-year total
the Fund] return performance to 5.78%, compared to the 3.65% one-year
average annual total return at the beginning of the period.
Performance, which includes reinvested dividends of 57.6 cents
per share without deducting the maximum sales charge of 4.75%,
would have been lower had fees not been waived.
When compared to similar funds, the Fund outperformed the Lipper Connecticut
Tax-Exempt Municipal Debt Category, which posted a total return of 5.70% for
the year ended March 31, 1995. The category, tracked by Lipper Analytical
Services, Inc., is a representative average of the performance of all
Connecticut municipal bond mutual funds. Lipper Analytical Services, Inc. is an
independent mutual fund performance monitor.
We are pleased to note the Fund's SEC yield over the 30 days ended
March 31, 1995, based on maximum offering price, was 4.68% -- a favorable
increase from 4.41% one year ago. The taxable equivalent on the SEC 30-day
effective yield was 7.75%, when adjusted for the highest marginal federal tax
rate of 39.6% for federal income taxes. For Connecticut residents, the taxable
equivalent on the SEC 30-day effective yield was 8.11%, when adjusted for the
combined highest marginal federal and Connecticut state tax rates.
The SEC yield calculation reflects the yield to maturity of the bonds in the
portfolio, and includes both interest and amortization of any discount or
premium to the face value of the bonds. The taxable equivalent yield is
calculated in the same manner as the SEC yield with an adjustment for a
stated, assumed tax rate.
The Fund's investment focus on certain less-volatile municipal securities
helped increase its SEC yield even as relative stability in share price
was maintained throughout the year. By March 31, 1995, net asset value
per share had increased to $10.71 from $10.69 at the beginning of the period.
Total assets were $38.3 million.
We are pleased with the Fund's performance during a period of extreme
volatility for fixed-income investments. As always, we are ready to respond to
your questions or comments about this report. Please call Client Services at
(800) 959-4246 during normal business hours. For automated account information
24 hours a day, call the AIM Investor Line toll-free at (800) 246-5463.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE> 4
DISCUSSION & ANALYSIS
----------
The drop in
issue supply
helped support
prices of tax-exempt
debt compared to
taxable debt.
----------
MANAGEMENT'S DISCUSSION AND ANALYSIS
By most measures, the year ended March 31, 1995, strained the patience of
fixed-income investors. The Federal Reserve Board's aggressive monetary policy
aimed at engineering a "soft landing" for the resurgent economy -- slowing
growth but not to the point of recession--drove up short-term interest rates
to almost double the levels of a year ago. The last interest rate increase
positioned the target rate for federal funds at 6% and the discount rate at
5.25%.
Predictably, the Fed's action had a profound impact on fixed-income
securities, which delivered their most disappointing performance in
recent memory. Municipal securities fared somewhat better relative to
taxable securities during most of the year as strong, stable demand coupled
with sharply falling supply helped cushion price volatility. Overall new
issue supply of municipal bonds fell to approximately $160 billion, the
lowest level since 1990, and almost one-half of 1993's $300 billion.
The drop in new issue supply helped support prices of tax-exempt debt compared
to taxable debt. By midsummer, some analysts even considered municipal bonds
too expensive relative to U.S. Treasury bonds. The relatively high prices,
along with the news in November of Orange County, California's
derivatives-related losses and subsequent bankruptcy filing, initiated a sharp
decline in prices of all tax-exempt securities in the last quarter of 1994.
Lower bond prices and encouraging economic reports in the first quarter of
1995 fueled a bond rally led by the municipal sectors. By March 31, 1995,
yields on long-term municipal bonds as measured by the Bond Buyer Municipal
Bond Index stood at 6.34% roughly the same level seen at the beginning of
April 1994.
Unfortunately, inflation concerns could not be completely arrested as long as
the dollar continued to test new lows against major world currencies. The
dollar's persistent weakness led some analysts to speculate that inflation
remains a near-term possibility, prompting renewed concerns that interest rates
would have to rise again in the coming months.
YOUR INVESTMENT PORTFOLIO
The Fund focused on quality and defensive characteristics in positioning its
portfolio during the last year. Premium bonds, bonds with short calls, and
pre-refunded bonds, all of which are less sensitive to rising interest rates,
were emphasized to reduce price volatility. Attractive issues in sectors such
as housing, transportation, and health care helped to enhance yield. Of course,
Fund holdings are subject to change as market conditions warrant.
As another defensive measure, the Fund had lowered its weighted average
maturity by year-end to 13 years, and duration was reduced to five years.
In keeping with the Fund's strategy of investing in quality, the portfolio
weighting as of March 31, 1995, was approximately 90% in securities rated
AAA to A. The Fund maintained an average portfolio quality rating of AA
as measured by Standard & Poor's Corporation (S&P) and Moody's Investors
Service (Moody's), two widely-known credit rating agencies. S&P and Moody
ratings are historical and are based on analysis of the credit quality
of the individual municipal securities in the Fund's portfolio.
OUTLOOK FOR THE FUTURE
Leading economic indicators continue to suggest healthy economic conditions and
low inflation, and the economy is widely expected to slow in the second half of
1995. The direction of the dollar remains a significant uncertainty that could
precipitate renewed inflation concerns and higher interest rates.
For the near-term, however, significant increases in interest rates appear
unlikely. Without the constant specter of rising interest rates on the
immediate horizon, the Fund is prepared to redirect its strategy from a
defensive posture to one more focused on generating income.
2
<PAGE> 5
- --------------------------------------------------------------------------------
FINANCIALS
SCHEDULE OF INVESTMENTS
March 31, 1995
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS-98.08%
EDUCATION-8.70%
Connecticut Health and Education Facilities Authority
(Quinnipiac College); RB
4.90%, Series D, 07/01/98 BBB- - $ 500,000 $ 484,785
- ------------------------------------------------------------------------------------------------
7.25%, Series 1989 B, 07/01/99(b)(c) AAA NRR 450,000 498,141
- ------------------------------------------------------------------------------------------------
Connecticut Regional School District No. 5;
Series 1992 GO
6.00%, 03/01/12(d) AAA Aaa 335,000 342,792
- ------------------------------------------------------------------------------------------------
Connecticut Regional School District No. 5
(Towns of Bethany, Orange and Woodbridge); 1992
Issue GO
5.50%, 02/15/07(d) AAA Aaa 500,000 499,100
- ------------------------------------------------------------------------------------------------
Connecticut State Higher Education Supplemental
Loan Authority (Family Education Loan
Program); Series 1990 A RB
7.50%, 11/15/10(e) - A1 1,410,000 1,507,699
- ------------------------------------------------------------------------------------------------
Total Education 3,332,517
- ------------------------------------------------------------------------------------------------
ELECTRIC-9.37%
Connecticut Development Authority (Connecticut Power &
Light Co.); Series 1993 A PCR
3.80%, 09/01/28(f)(g) A-1+ VMIG-1 1,900,000 1,900,000
- ------------------------------------------------------------------------------------------------
Connecticut Development Authority (New England Power
Co.); Series 1985 Fixed Rate PCR
7.25%, 10/15/15 A+ A1 1,600,000 1,686,528
- ------------------------------------------------------------------------------------------------
Total Electric 3,586,528
- ------------------------------------------------------------------------------------------------
GENERAL OBLIGATION-13.00%
Cheshire (Town of), Connecticut; Series 1993 GO
5.25%, 08/15/12 - Aa 200,000 190,144
- ------------------------------------------------------------------------------------------------
5.25%, 08/15/13 - Aa 630,000 595,186
- ------------------------------------------------------------------------------------------------
Chester (Town of), Connecticut; Series 1989 GO
7.00%, 10/01/05 - A 190,000 205,071
- ------------------------------------------------------------------------------------------------
Connecticut (State of); Series 1991 A, GO
6.75%, 03/01/01(b)(c) NRR NRR 480,000 529,445
- ------------------------------------------------------------------------------------------------
Connecticut (State of) (General Purpose Public
Improvement); GO
6.75%, Series 1991 A, 03/01/01(b)(c) NRR NRR 200,000 220,602
- ------------------------------------------------------------------------------------------------
6.50%, Series 1992 A, 03/15/02(b)(c) NRR NRR 300,000 328,923
- ------------------------------------------------------------------------------------------------
Mansfield (City of), Connecticut; Series 1990 GO
6.00%, 06/15/07 - A1 100,000 104,755
- ------------------------------------------------------------------------------------------------
6.00%, 06/15/08 - A1 100,000 104,258
- ------------------------------------------------------------------------------------------------
6.00%, 06/15/09 - A1 100,000 103,624
- ------------------------------------------------------------------------------------------------
New Britain (City of), Connecticut; Series 1992
Various Purpose GO
6.00%, 02/01/11(d) AAA Aaa 400,000 414,060
- ------------------------------------------------------------------------------------------------
New Haven (City of), Connecticut; Series 1992 B GO
5.25%, 12/01/95 BBB Baa 300,000 302,013
- ------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 6
FINANCIALS
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
GENERAL OBLIGATION-Continued
North Canaan (City of), Connecticut;
Series 1991 GO
6.50%, 01/15/08 - A $ 125,000 $ 134,806
- ------------------------------------------------------------------------------------------------
6.50%, 01/15/09 - A 125,000 134,323
- ------------------------------------------------------------------------------------------------
6.50%, 01/15/10 - A 125,000 133,724
- ------------------------------------------------------------------------------------------------
6.50%, 01/15/11 - A 125,000 133,552
- ------------------------------------------------------------------------------------------------
Somers (City of), Connecticut; Series 1990 Various
Purpose GO
6.00%, 12/01/10 - A1 190,000 195,240
- ------------------------------------------------------------------------------------------------
Waterbury (Town of), Connecticut (Tax Revenue
Intercept); Series 1993 Refunding GO
4.80%, 04/15/01(d) AAA Aaa 750,000 739,942
- ------------------------------------------------------------------------------------------------
Westbrook (City of), Connecticut; Series 1992 GO
6.40%, 03/15/10(d) AAA Aaa 380,000 408,903
- ------------------------------------------------------------------------------------------------
Total General Obligation 4,978,571
- ------------------------------------------------------------------------------------------------
HEALTH CARE-13.76%
Connecticut Development Authority, Parking Facility
(Hartford Hospital Realty); Series 1986 RB
6.875%, 10/01/06(d)(e) AAA Aaa 985,000 1,064,667
- ------------------------------------------------------------------------------------------------
Connecticut Health and Education Facilities Authority
(Bridgeport Hospital); 1992 Series A RB
6.625%, 07/01/18(d) AAA Aaa 500,000 522,235
- ------------------------------------------------------------------------------------------------
Connecticut Health and Education Facilities Authority
(Capital Asset); Series 1989 B RB
7.00%, 01/01/00(b) NRR NRR 200,000 211,940
- ------------------------------------------------------------------------------------------------
Connecticut Health and Education Facilities Authority
(Danbury Hospital); 1991 Series E RB
6.50%, 07/01/14(d) AAA Aaa 500,000 518,985
- ------------------------------------------------------------------------------------------------
Connecticut Health and Education Facilities Authority
(Middlesex Hospital);
1992 Series G RB
6.25%, 07/01/12(d) AAA Aaa 1,100,000 1,124,651
- ------------------------------------------------------------------------------------------------
Connecticut Health and Education Facilities Authority
(New Britain Memorial Hospital); Series 1991 A RB
7.75%, 07/01/22 BBB- - 500,000 507,475
- ------------------------------------------------------------------------------------------------
Connecticut Health and Education Facilities
Authority (St. Raphael Hospital);
1993 Series H RB
5.00%, 07/01/05(d) AAA Aaa 500,000 481,705
- ------------------------------------------------------------------------------------------------
Connecticut State Health and Education Facilities
Authority (Yale-New Haven Hospital);
Series 1990 F RB
7.10%, 07/01/25(d) AAA Aaa 775,000 835,442
- ------------------------------------------------------------------------------------------------
Total Health Care 5,267,100
- ------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
FINANCIALS
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
HOUSING-9.81%
Connecticut Housing Development Authority
(Housing Mortgage Finance Program); RB
4.90%, Series 1993 F, Sub-Series F-1, 05/15/04 AA Aa $1,000,000 $ 947,720
- ------------------------------------------------------------------------------------------------
7.55%, Series 1990 B-1, 11/15/08 AA Aa 1,230,000 1,296,715
- ------------------------------------------------------------------------------------------------
7.50%, Series 1990 A, 11/15/09(e) AA Aa 115,000 121,885
- ------------------------------------------------------------------------------------------------
7.00%, Series 1991 A-1, 11/15/09 AA Aa 250,000 264,460
- ------------------------------------------------------------------------------------------------
6.55%, Series 1991 C, Sub-Series C-3, 11/15/13 AA Aa 395,000 408,339
- ------------------------------------------------------------------------------------------------
7.125%, Series 1985 F, 11/15/18 AA Aa 195,000 201,806
- ------------------------------------------------------------------------------------------------
Connecticut (State of) (Housing Mortgage Finance
Program); Series C2 RB
6.70%, 11/15/22(e) AA Aa 500,000 514,580
- ------------------------------------------------------------------------------------------------
Total Housing 3,755,505
- ------------------------------------------------------------------------------------------------
LEASE RENTAL-1.08%
Connecticut (State of) (Middletown Courthouse
Facilities Project); 1991 Issue Lease-Rental
Revenue Certificates of Participation
6.25%, 12/15/10(d)(f) AAA Aaa 400,000 414,888
- ------------------------------------------------------------------------------------------------
Total Lease Rental 414,888
- ------------------------------------------------------------------------------------------------
RESOURCE RECOVERY-6.70%
Connecticut State Resource Recovery Authority
(American Ref-Fuel Co.-Southeastern Connecticut
Project); Series 1988 A RB
8.00%, 11/15/15(e) AA- A 500,000 545,895
- ------------------------------------------------------------------------------------------------
Connecticut State Resource Recovery Authority
(Bridgeport Resco Corp.-Ltd. Partners);
1985 Issue RB
7.625%, Project A, 01/01/09 A A 1,250,000 1,318,188
- ------------------------------------------------------------------------------------------------
8.625%, Project B, 01/01/04 A A 670,000 701,912
- ------------------------------------------------------------------------------------------------
Total Resource Recovery 2,565,995
- ------------------------------------------------------------------------------------------------
TRANSPORTATION-19.91%
Connecticut State Special Tax Obligation
(Transportation Infrastructure); RB
5.10%, Series 1992 B, 09/01/99 AA- A1 1,000,000 1,007,020
- ------------------------------------------------------------------------------------------------
6.80%, Series A, 06/01/03(c) NRR NRR 1,250,000 1,385,975
- ------------------------------------------------------------------------------------------------
6.25%, Series 1991 B, 10/01/09 AA- A1 1,000,000 1,040,740
- ------------------------------------------------------------------------------------------------
6.50%, Series 1991 B, 10/01/10 AA- A1 530,000 570,418
- ------------------------------------------------------------------------------------------------
Connecticut State Special Tax Obligation
(Transportation Infrastructure Purposes);
Second Lien RB
4.35%, Series 1 1990, 12/01/10(g) A1+ VMIG-1 400,000 400,000
- ------------------------------------------------------------------------------------------------
Connecticut State Special Tax Obligation
(Transportation Infrastructure Sales and
Excise Tax); RB
5.90%, Series 1991 B, 10/01/99 AA- A1 1,000,000 1,038,720
- ------------------------------------------------------------------------------------------------
6.80%, Series 1989 C, 12/01/99(b)(c) AAA NRR 500,000 547,575
- ------------------------------------------------------------------------------------------------
6.50%, Series 1991 B, 10/01/12 AA- A1 1,500,000 1,633,530
- ------------------------------------------------------------------------------------------------
Total Transportation 7,623,978
- ------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
FINANCIALS
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P MOODY'S PAR VALUE
<S> <C> <C> <C> <C>
WATER & SEWER-8.69%
Connecticut Development Authority (Pfizer Inc.);
Series 1982 Refunding PCR
6.55%, 02/15/13 AAA Aaa $ 250,000 $ 262,415
- ------------------------------------------------------------------------------------------------
Connecticut Development Authority Water Facility
(Bridgeport Hydraulic Co. Project);
Series 1990 Refunding RB
7.25%, 06/01/20 A - 800,000 839,664
- ------------------------------------------------------------------------------------------------
Connecticut State Clean Water Fund; Series 1991
Clean Water RB
7.00%, 01/01/11 AA+ Aa 1,100,000 1,174,437
- ------------------------------------------------------------------------------------------------
Manchester (City of) Connecticut Eighth Utilities Fire
District; Series 1991 GO
6.75%, 08/15/06 - A1 180,000 200,595
- ------------------------------------------------------------------------------------------------
South Central Connecticut Regional Water
Authority; Eighth Series 1990 A Water System RB
6.60%, 08/01/00(b)(c) NRR NRR 250,000 272,343
- ------------------------------------------------------------------------------------------------
South Central Connecticut Regional Water
Authority; Series 1988 Water System RB
6.80%, 08/01/98(b)(c) NRR NRR 535,000 576,168
- ------------------------------------------------------------------------------------------------
Total Water & Sewer 3,325,622
- ------------------------------------------------------------------------------------------------
MISCELLANEOUS-7.06%
Connecticut Development Authority (Economic
Development Projects); 1992 Series Refunding Bonds
6.00%, 11/15/08 AA- Aa 500,000 512,460
- ------------------------------------------------------------------------------------------------
Guam (Government of); Series 1994 A GO
5.50%, 08/15/97 BBB - 500,000 497,445
- ------------------------------------------------------------------------------------------------
Guam Airport Authority; Series 1993 B RB
5.00%, 10/01/96(e) BBB - 1,700,000 1,693,455
- ------------------------------------------------------------------------------------------------
Total Miscellaneous 2,703,360
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.08% 37,554,064
- ------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.92% 734,611
- ------------------------------------------------------------------------------------------------
NET ASSETS-100.00% $38,288,675
================================================================================================
</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 an escrow fund of U.S. Treasury
obligations.
(c) Subject to an irrevocable call or mandatory put.
Market value and maturity date reflect such call
or put.
(d) Secured by bond insurance.
(e) Security subject to alternative minimum tax.
(f) Secured by a letter of credit.
(g) Demand security; payable upon demand by the Fund at specified time
intervals no greater than thirteen months. Interest rate is redetermined
periodically. Rate shown is the rate in effect on March 31, 1995.
INVESTMENT ABBREVIATIONS:
GO General Obligation Bonds
NRR Not re-rated
PCR Pollution Control Revenue Bonds
RB Revenue Bonds
See Notes to Financial Statements.
6
<PAGE> 9
FINANCIALS
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (amortized cost $36,249,293) $ 37,554,064
- -----------------------------------------------------------------------------------------
Cash 27,252
- -----------------------------------------------------------------------------------------
Receivables for:
Capital stock sold 124,786
- -----------------------------------------------------------------------------------------
Interest 710,486
- -----------------------------------------------------------------------------------------
Investment for deferred compensation plan 5,731
- -----------------------------------------------------------------------------------------
Other assets 4,033
- -----------------------------------------------------------------------------------------
Total assets 38,426,352
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 21,047
- -----------------------------------------------------------------------------------------
Deferred compensation 5,731
- -----------------------------------------------------------------------------------------
Dividends 61,972
- -----------------------------------------------------------------------------------------
Accrued administrative service fees 3,809
- -----------------------------------------------------------------------------------------
Accrued distribution fees 23,298
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 408
- -----------------------------------------------------------------------------------------
Accrued operating expenses 21,412
- -----------------------------------------------------------------------------------------
Total liabilities 137,677
- -----------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 38,288,675
=========================================================================================
Capital stock, $.001 par value per share:
Authorized 1,000,000,000
- -----------------------------------------------------------------------------------------
Outstanding 3,573,524
=========================================================================================
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $ 10.71
=========================================================================================
OFFERING PRICE PER SHARE:
(Net asset value of $10.71 divided by 95.25%) $ 11.24
=========================================================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 10
FINANCIALS
STATEMENT OF OPERATIONS
For the year ended March 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $2,314,035
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 195,413
- ----------------------------------------------------------------------------------------
Custodian fees 12,133
- ----------------------------------------------------------------------------------------
Transfer agent fees 25,032
- ----------------------------------------------------------------------------------------
Directors' fees 4,851
- ----------------------------------------------------------------------------------------
Distribution fees 97,706
- ----------------------------------------------------------------------------------------
Administrative services fees 46,754
- ----------------------------------------------------------------------------------------
Other 59,175
- ----------------------------------------------------------------------------------------
Total expenses 441,064
- ----------------------------------------------------------------------------------------
Less expenses assumed by advisor (224,413)
- ----------------------------------------------------------------------------------------
Net expenses 216,651
- ----------------------------------------------------------------------------------------
Net investment income 2,097,384
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES:
Net realized gain (loss) on sales of investment securities (127,300)
- ----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 195,742
- ----------------------------------------------------------------------------------------
Net gain on investment securities 68,442
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $2,165,826
========================================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended March 31, 1995
and the three months ended March 31, 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,097,384 $ 589,239
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities (127,300) (156)
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities 195,742 (2,426,031)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 2,165,826 (1,836,948)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (2,111,073) (581,761)
- -------------------------------------------------------------------------------------------
Return of capital (19,319) --
- -------------------------------------------------------------------------------------------
Net increase (decrease) from capital stock transactions (4,107,391) (1,444,907)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (4,071,957) (3,863,616)
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 42,360,632 46,224,248
- -------------------------------------------------------------------------------------------
End of period $38,288,675 $42,360,632
===========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $37,094,637 $41,235,619
- -------------------------------------------------------------------------------------------
Undistributed net investment income (8,747) 22,950
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (101,986) (6,966)
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 1,304,771 1,109,029
- -------------------------------------------------------------------------------------------
$38,288,675 $42,360,632
===========================================================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 11
FINANCIALS
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
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 three separate portfolios; AIM Tax-Exempt Bond Fund
of Connecticut, AIM Tax-Exempt Cash Fund and the Intermediate Portfolio.
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 AIM Tax-Exempt Bond Fund of Connecticut (the "Fund"). The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations--Portfolio securities are valued based on market
quotations or at fair value determined by a pricing service approved by
the Board of Directors, provided that securities with a demand feature
exercisable within one to seven days are valued at par. Prices provided by
the pricing service represent valuations of the mean between current bid and
asked market prices which may be determined without exclusive reliance on
quoted prices and may reflect appropriate factors such as institution-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, individual trading characteristics and other market
data. Portfolio securities for which prices are not provided by the pricing
service are valued at the mean between the last available bid and asked
prices, unless the Board of Directors or its designees determines that the
mean between the last available bid and asked prices does not accurately
reflect the current market value of the security. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the supervision of the Company's
officers in accordance with methods which are specifically authorized by the
Board of Directors. Notwithstanding the above, short-term obligations with
maturities of sixty days or less are valued at amortized cost.
B. Securities Transactions and Investment Income--Securities
transactions are recorded on a trade date basis. Realized gains and losses
on sales are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
original issue discounts, is recorded as earned from settlement date and is
recorded on the accrual basis.
C. Dividends and Distributions to Shareholders--It is the policy of the
Fund to declare daily dividends from net investment income. Such dividends
are paid monthly. Net realized capital gains (including net short-term
capital gains and market discounts), if any, are distributed annually. On
March 31, 1995, $32,280 was reclassified from undistributed net investment
income to undistributed net realized gain (loss) on sales of investment
securities as of result of permanent book/tax differences. In addition,
paid-in capital was reduced by $33,591 as a result of a return of capital
distribution of $19,319 and a permanent book/tax difference of $14,272. Net
assets of the Fund were unaffected by the reclassifications discussed above.
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 gains, if any) of $67,289, which expires, if not previously
utilized, through the year 2003. In addition, the Fund intends to invest in
such municipal securities to allow it to qualify to pay to shareholders
"exempt interest dividends," as defined in the Internal Revenue Code.
9
<PAGE> 12
FINANCIALS
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement
with A I M Advisors, Inc. ("AIM"). Under the terms of the master investment
advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of
0.50% of the Fund's average daily net assets. The master investment advisory
agreement requires AIM to reduce its fee or, if necessary, make payments to the
extent required to satisfy any expense limitations imposed by securities laws
or regulations thereunder of any state in which the Fund's shares are qualified
for sale. During the year ended March 31, 1995, AIM reimbursed expenses of
$29,000 and waived advisory fees of $195,413.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to reimburse AIM for certain costs incurred in providing accounting
and shareholder services to the Fund. During the year ended March 31, 1995,
the Fund reimbursed AIM $46,754 for such services. Effective November 1, 1994,
A I M Fund Services, Inc. ("AFS") became the transfer agent for the Fund and
was paid $4,288 for such services during the five months ended March 31, 1995.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
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 pays to AIM
Distributors compensation at an annual rate of 0.25% of the Fund's average
daily net assets. The Plan is designed to compensate AIM Distributors for
certain promotional and other sales related costs, and to implement a program
which provides periodic payments to selected dealers and financial institutions
who furnish continuing personal shareholder services to their customers who
purchase and own shares of the Fund. Any amounts not paid as a service fee
under such plan would constitute an asset-based sales charge. The Plan also
imposes a cap on the total sales charges, including asset-based sales charges,
that may be paid by the Fund. During the year ended March 31, 1995, the Fund
paid AIM Distributors $97,706 as compensation under the Plan. Certain officers
and directors of the Company are officers of AIM, AFS and AIM Distributors.
AIM Distributors received commissions of $21,690 from sales of shares of the
Fund's capital stock during the year ended March 31, 1995. Such commissions
are not an expense of the Fund. They are deducted from, and are not included
in, the proceeds from sales of capital stock.
The Fund paid legal fees of $3,154 for services rendered by Reid & Priest as
counsel to the Board of Directors. Effective September 1994, the firm Kramer,
Levin, Naftalis, Nessen, Kamin & Frankel was appointed as Counsel to the Board
of Directors. The Fund paid legal fees of $605 for services rendered by that
firm as counsel to the Board of Directors. A member of that firm is a director
of the Company and, prior to September 1994, was a member of Reid & Priest.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director
who is not an "interested person" of the Company. The Company may invest
directors' fees, if so elected by a director, in mutual fund shares in
accordance with a deferred compensation plan.
NOTE 4-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the year ended March 31, 1995 was
$2,824,300 and $9,304,603, respectively. The amount of unrealized appreciation
(depreciation) of investment securities as of March 31, 1995, on a tax basis,
is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $1,488,263
----------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (183,492)
----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $1,304,771
========================================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
10
<PAGE> 13
FINANCIALS
NOTE 5-CAPITAL STOCK
Changes in capital stock outstanding for the year ended March 31, 1995 and the
three months ended March 31, 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------- -------------------------
Shares Amount Shares Amount
-------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sold 370,407 $ 3,925,610 129,232 $ 1,440,162
- -------------------------------------------------------------------- -------------------------
Issued as reinvestment of dividends 129,768 1,372,166 22,291 249,305
- -------------------------------------------------------------------- -------------------------
Reacquired (889,770) (9,405,167) (283,509) (3,134,374)
- -------------------------------------------------------------------- -------------------------
(389,595) $(4,107,391) (131,986) $(1,444,907)
==================================================================== =========================
</TABLE>
NOTE 6-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of the Fund
outstanding during the year ended March 31, 1995, the three months ended
March 31, 1994, each of the years in the four-year period ended December 31,
1993, and the period October 3, 1989 (date operations commenced) through
December 31, 1989.
<TABLE>
<CAPTION>
March 31, December 31,
------------------- ------------------------------------------------------
1995 1994 1993 1992(a) 1991 1990 1989
------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.69 $ 11.29 $ 10.65 $ 10.52 $ 10.07 $ 10.19 $10.00
- ---------------------------------- ------- ------- ------- ------- ------- ------- ------
Income from investment operations:
Net investment income 0.56 0.15 0.60 0.66 0.69 0.67 0.14
- ---------------------------------- ------- ------- ------- ------- ------- ------- ------
Net gains (losses) on securities
(both realized and unrealized) 0.04 (0.61) 0.65 0.17 0.50 (0.10) 0.16
- ---------------------------------- ------- ------- ------- ------- ------- ------- ------
Total from investment
operations 0.60 (0.46) 1.25 0.83 1.19 0.57 0.30
- ---------------------------------- ------- ------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net investment
income (0.57) (0.14) (0.60) (0.66) (0.69) (0.69) (0.11)
- ---------------------------------- ------- ------- ------- ------- ------- ------- ------
Distributions from net realized
capital gains -- -- (0.01) (0.04) (0.05) -- --
- ---------------------------------- ------- ------- ------- ------- ------- ------- ------
Returns of capital (0.01) -- -- -- -- -- --
- ---------------------------------- ------- ------- ------- ------- ------- ------- ------
Total distributions (0.58) (0.14) (0.61) (0.70) (0.74) (0.69) (0.11)
- ---------------------------------- ------- ------- ------- ------- ------- ------- ------
Net asset value, end of period $ 10.71 $ 10.69 $ 11.29 $ 10.65 $ 10.52 $ 10.07 $10.19
================================== ======= ======= ======= ======= ======= ====== ======
Total return(b) 5.78% (4.06)% 11.99% 8.22% 12.23% 5.88% 3.06%
================================== ======= ======= ======= ======= ======= ====== ======
Net assets, end of period
(000s omitted) $38,289 $42,361 $46,224 $33,110 $27,298 $16,685 $6,556
================================== ======= ======= ======= ======= ======= ====== ======
Ratio of expenses to average
net assets(c) 0.55%(d) 0.50%(e) 0.34% 0.25% 0.25% 0.25% 0.25%(e)
================================== ======= ======= ======= ======= ======= ====== ======
Ratio of net investment income to
average net assets(c) 5.37%(d) 5.32%(e) 5.42% 6.25% 6.73% 6.82% 6.21%(e)
================================== ======= ======= ======= ======= ======= ====== ======
Portfolio turnover rate 7% 2% 5% 43% 43% 57% 63%
================================== ======= ======= ======= ======= ======= ====== ======
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After waiver of advisory fees and expense reimbursements. Ratios of
expenses to average net assets prior to waiver of advisory fees and
expense reimbursements are 1.13%, 1.23% (annualized), 1.30%, 1.12%, 1.26%,
1.33%, and 1.99% (annualized) for the period 1995-89, respectively. Ratios
of net investment income to average net assets prior to waiver of advisory
fees and expense reimbursements are 4.79%, 4.59% (annualized), 4.45%,
5.38%, 5.72%, 5.74%, and 4.48% (annualized) for the period 1995-89,
respectively.
(d) Ratios are based on average daily net assets of $39,082,578.
(e) Annualized.
11
<PAGE> 14
AUDITORS' REPORT
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 Bond Fund of Connecticut (a portfolio of AIM Tax-Exempt Funds,
Inc.), including the schedule of investments, as of March 31, 1995, and the
related statement of operations for the year then ended, the statement of
changes in net assets for the year then ended and the three-month period ended
March 31, 1994, and the financial highlights for the year 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. Our procedures included confirmation of securities owned as of March
31, 1995, by correspondence with the custodian. 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 the financial highlights
referred to above present fairly, in all material respects, the financial
position of AIM Tax-Exempt Bond Fund of Connecticut as of March 31, 1995, the
results of its operations for the year then ended, changes in its net assets
for the year then ended and the three-month period ended March 31, 1994, and
the financial highlights for the year 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 5, 1995
12
<PAGE> 15
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 and Chief Executive Officer Chairman Suite 1919
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director, President, and Chief A I M Advisors, Inc.
Executive Officer John J. Arthur 11 Greenway Plaza
COMSAT Corporation Senior Vice President and Treasurer Suite 1919
Houston, TX 77046
Owen Daly II Gary T. Crum
Director Senior Vice President TRANSFER AGENT
Cortland Trust Inc. A I M Fund Services, Inc.
Carol F. Relihan P.O. Box 4739
Carl Frischling Vice President and Secretary Houston, TX 77210-4739
Partner
Kramer, Levin, Naftalis, Nessen, Dana R. Sutton CUSTODIAN
Kamin & Frankel Vice President State Street Bank & Trust Co.
and Assistant Treasurer 225 Franklin Street
Robert H. Graham Boston, MA 02110
President Stuart W. Coco
A I M Management Group Inc. Vice President COUNSEL TO THE FUND
Ballard Spahr
John F. Kroeger Melville B. Cox Andrews & Ingersoll
Formerly, Consultant Vice President 1735 Market Street
Wendell & Stockel Associates, Inc. Philadelphia, PA 19103
Karen Dunn Kelley
Lewis F. Pennock Vice President COUNSEL TO THE DIRECTORS
Attorney Kramer, Levin, Naftalis,
P. Michelle Grace Nessen, Kamin & Frankel
Ian W. Robinson Assistant Secretary 919 Third Avenue
Consultant; Former Executive New York, NY 10022
Vice President and Nancy L. Martin
Chief Financial Officer Assistant Secretary DISTRIBUTOR
Bell Atlantic Management A I M Distributors, Inc.
Services, Inc. Ofelia M. Mayo 11 Greenway Plaza
Assistant Secretary Suite 1919
Louis S. Sklar Houston, TX 77046
Executive Vice President Kathleen J. Pflueger
Hines Interests Assistant Secretary AUDITORS
Limited Partnership KPMG Peat Marwick LLP
Samuel D. Sirko 700 Louisiana
Assistant Secretary NationsBank Bldg.
Houston, TX 77002
Stephen I. Winer
Assistant Secretary
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Tax-Exempt Bond Fund of Connecticut paid ordinary dividends
in the amount of 57.06 cents per share during its tax year ended March 31,
1995. Of this amount, 100% qualified as exempt-interest dividends for federal
income tax purposes.
13
<PAGE> 16
[AIM LOGO]
A I M Distributors, Inc. BULK RATE
11 Greenway Plaza, Suite 1919 U.S. POSTAGE
Houston, Texas 77046 PAID
Houston, TX
Permit No. 2332
THE AIM FAMILY OF FUNDS(R)
AGGRESSIVE GROWTH
Aggressive Growth Fund*
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund
HIGH CURRENT INCOME
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
CURRENT TAX FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Conn. [FULL PAGE PHOTO OF AIM MANAGEMENT
AIM Tax-Free Intermediate Shares GROUP OFFICE BUILDING]
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Goverment Securities Fund
HIGH DEGREE OF SAFETY AND CURRENT INCOME
AIM Limited Maturity-Treasury Shares
STABILITY, LIQUIDITY, AND CURRENT INCOME
AIM Money Market Fund
STABILITY, LIQUIDITY, AND CURRENT TAX-FREE INCOME
AIM Tax-Exempt Cash Fund
* AIM Agressive Growth Fund was closed to new investors on
May 2, 1994. For more complete information about any AIM
Fund, including sales charges and expenses, ask your
investment broker or securities dealer for a free
prospectus(es). Please read the prospectus(es) carefully
before you invest or send money. This report may be
distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
