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AIM TAX-EXEMPT FUNDS, INC.
AIM TAX-EXEMPT CASH FUND
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM TAX-FREE INTERMEDIATE SHARES
Supplement dated December 16, 1996
to the Prospectus dated August 1, 1996
as supplemented November 5, 1996
APPROVAL OF NEW ADVISORY, ADMINISTRATIVE SERVICES AND DISTRIBUTION AGREEMENTS
On December 11, 1996, the Board of Directors (the "Board") of AIM
Tax-Exempt Funds, Inc. (the "Company") approved a new investment advisory
agreement, subject to shareholder approval, between A I M Advisors, Inc.
("AIM") and the Company with respect to AIM Tax-Exempt Cash Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Shares (the
"Funds"). Shareholders will be asked to approve the proposed advisory
agreement at an annual meeting of shareholders to be held on February 7, 1997
(the "Annual Meeting"). The Board has also approved a new administrative
services agreement with AIM and a new distribution agreement with A I M
Distributors, Inc. There are no material changes to the terms of the new
agreements, including the fees payable by the Funds. No change is anticipated
in the investment advisory or other personnel responsible for the Funds as a
result of these new agreements.
The Board has approved these new agreements because each Fund's
corresponding existing agreements will terminate upon the consummation of the
proposed merger of A I M Management Group Inc., the parent of AIM, into a
subsidiary of INVESCO plc. INVESCO plc and its subsidiaries are an independent
investment management group engaged in institutional investment management and
retail mutual fund businesses in the United States, Europe and the Pacific
region. It is contemplated that the merger will occur on February 28, 1997.
Provided that each Fund's shareholders approve the new advisory agreement at
the Annual Meeting and the merger is consummated, the new advisory agreement
with respect to each such Fund, as well as the new administrative services and
distribution agreements, will automatically become effective as of the closing
of the merger.
PROPOSED CHANGES TO FUNDAMENTAL INVESTMENT POLICIES
The Board has unanimously approved the elimination of or changes to
certain fundamental investment policies of each of the Funds, subject to
shareholder approval. Shareholders will be asked to approve these changes at
the Annual Meeting. If approved, the changes will become effective on March 1,
1997.
Each of the Funds is currently generally prohibited from investing in
other investment companies. The Board has approved the elimination of this
prohibition for each Fund and the amendment of another fundamental investment
policy that corresponds to the proposed elimination, to permit investment in
other investment companies to the extent permitted by the Investment Company
Act of 1940, and rules and regulations thereunder, and, if applicable,
exemptive orders granted by the Securities and Exchange Commission.
Reference is made to Investment Restriction No. 1, set forth on page
12 of the Prospectus. The Board has approved a change to Investment
Restriction No. 1. In the event shareholders approve the proposed changes,
effective as of March 1, 1997, Investment Restriction No. 1 will read as
follows:
(1) Neither AIM TAX-EXEMPT CASH FUND nor the INTERMEDIATE
PORTFOLIO will, with respect to 75% of its total assets, purchase the
securities of any issuer if such purchase would cause more than 5% of
the value of its total assets to be invested in the securities of such
issuer (except securities issued, guaranteed or sponsored by the U. S.
Government or its agencies and instrumentalities and, with respect to
AIM TAX-EXEMPT CASH FUND, except as permitted by Rule 2a-7, as amended
from time to time, and except that each such Fund may purchase
securities of other investment companies to the extent permitted by
applicable law or exemptive order.
For additional information regarding the proposed changes described
above, see the Funds' Statement of Additional Information dated August 1, 1996,
as supplemented December 16, 1996.
