<PAGE> 1
As filed with the Securities and Exchange Commission on October 7, 1997
1933 Act Reg. No. 33-66242
1940 Act Reg. No. 811-7890
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
Post-Effective Amendment No. 6 X
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 7 X
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(Check appropriate box or boxes.)
AIM TAX-EXEMPT FUNDS, INC.
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(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
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Charles T. Bauer
11 Greenway Plaza, Suite 100, Houston, TX 77046
(Name and Address of Agent for Service)
Copy to:
Samuel D. Sirko, Esquire Martha J. Hays, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll
11 Greenway Plaza, Suite 100 1735 Market Street, 51st Floor
Houston, Texas 77046 Philadelphia, Pennsylvania 19103-7599
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this
Amendment
It is proposed that this filing will become effective (check appropriate box)
---- immediately upon filing pursuant to paragraph (b)
---- on (date) pursuant to paragraph (b)
---- 60 days after filing pursuant to paragraph (a)(1)
---- on (date) pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2)
---- on (date) pursuant to paragraph (a)(2) of Rule 485.
(Continued on next page)
<PAGE> 2
If appropriate, check the following box:
____ This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Registrant continues its election to register an indefinite number of its shares
of Common Stock under Rule 24f-2 under the Investment Company Act of 1940, and
filed its Rule 24f-2 Notice for the fiscal year ended March 31, 1997 on May 28,
1997.
<PAGE> 3
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
FORM N-1A ITEM PROSPECTUS CAPTION
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<S> <C> <C>
Part A
Item 1. Cover Page.............................................................................Cover Page
Item 2. Synopsis......................................................Summary; Table of Fees and Expenses
Item 3. Condensed Financial Information...................................................... Performance
Item 4. General Description of Registrant.................................Cover Page; Summary; Investment
Program; Management; General Information
Item 5. Management of the Fund...............................................Summary; Investment Program;
Management; General Information
Item 5A. Management's Discussion of Fund Performance........................................Not applicable
Item 6. Capital Stock and Other Securities..............Summary; Management; Organization of the Company;
Dividends, Distributions and Tax Matters;
General Information
Item 7. Purchase of Securities Being Offered..........................Management; How to Purchase Shares;
Terms and Conditions of Purchase of the
AIM Funds; Special Plans; Exchange
Privilege; Determination of Net Asset Value
Item 8. Redemption or Repurchase......................................How To Redeem Shares; Special Plans
Item 9. Pending Legal Proceedings..........................................................Not Applicable
STATEMENT OF ADDITIONAL INFORMATION CAPTION
-------------------------------------------
Part B
Item 10. Cover Page.............................................................................Cover Page
Item 11. Table of Contents...............................................................Table of Contents
Item 12. General Information and History.................................Introduction; General Information
About the Company
Item 13. Investment Objectives and Policies.............Investment Program and Restrictions;Description of
Money Market Instruments; Ratings of Securities
Item 14. Management of the Fund.......................Management - Directors and officers, - Remuneration
of Directors, - AIM Funds Retirement Plan for Eligible
Directors/Trustees, - Deferred Compensation Agreements
Item 15. Control Persons and Principal
Holders of Securities........................Miscellaneous Information - Control Persons
and Principal Holders of Securities
Item 16. Investment Advisory and Other Services.....................Investment Advisory and Other Services
Item 17. Brokerage Allocation and Other Practices...................................Portfolio Transactions
Item 18. Capital Stock and Other Securities..........................General Information About the Company
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered.......................General Information About the Company;
How to Purchase and Redeem Shares;
Determination of Net Asset Value
Item 20. Tax Status................................................Dividend, Distributions and Tax Matters
Item 21. Underwriters...............................................Investment Advisory and Other Services
Item 22. Calculation of Performance Data...........................................Performance Information
Item 23. Financial Statements.........................................................Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE> 4
[APPLICATION INSIDE]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
Subject to Completion dated October 7, 1997
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
AIM TAX-EXEMPT FUNDS, INC.
AIM HIGH INCOME MUNICIPAL FUND
PROSPECTUS
DECEMBER , 1997
AIM HIGH INCOME MUNICIPAL FUND (the "Fund") is a diversified, series
investment portfolio of AIM Tax-Exempt Funds, Inc. (the "Company"), an
open-end, series, management investment company. The Fund seeks to
achieve a high level of current income which is exempt from federal
income taxes by investing in a diversified portfolio of municipal
securities. THE FUND MAY INVEST UP TO 100% OF ITS NET ASSETS IN LOWER
RATED DEBT SECURITIES, COMMONLY REFERRED TO AS "JUNK BONDS." JUNK BONDS
ARE CONSIDERED TO BE SPECULATIVE WITH REGARD TO THE PAYMENT OF INTEREST
AND RETURN OF PRINCIPAL. PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS
ASSOCIATED WITH AN INVESTMENT IN THIS FUND. FOR A DISCUSSION OF CERTAIN
RISK FACTORS ASSOCIATED WITH THE FUND, SEE "INVESTMENT PROGRAM -- RISK
FACTORS REGARDING NON-INVESTMENT GRADE DEBT SECURITIES" AND "APPENDIX
A -- DESCRIPTIONS OF RATING CATEGORIES."
This Prospectus sets forth basic information that a prospective investor
should know about the Fund before investing. It should be read and
retained for future reference. A Statement of Additional Information,
dated December , 1997, has been filed with the United States
Securities and Exchange Commission (the "SEC") and is incorporated
herein by reference. The Statement of Additional Information is
available without charge upon written request to the Company at P.O. Box
4739, Houston, Texas 77210-4739 or by calling (800) 347-4246. The SEC
maintains a Web site at http://www.sec.gov that contains the Statement
of Additional Information, material incorporated by reference, and other
information regarding the Company. Additional information about the Fund
may also be obtained from http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF
THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
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<S> <C> <C> <C>
SUMMARY.................................... 2 Terms and Conditions of Purchase of
THE FUND................................... 4 the AIM Funds...................... A-2
Table of Fees and Expenses............... 4 Special Plans......................... A-9
Performance.............................. 5 Exchange Privilege.................... A-11
Investment Program....................... 5 How to Redeem Shares.................. A-13
Management............................... 9 Determination of Net Asset Value...... A-17
Organization of the Company.............. 11 Dividends, Distributions and Tax
INVESTOR'S GUIDE TO THE AIM Matters............................ A-18
FAMILY OF FUNDS--Registered Trademark--.. A-1 General Information................... A-20
Introduction to The AIM Family of APPENDIX A.............................. A-21
Funds................................. A-1 APPLICATION INSTRUCTIONS................ B-1
How to Purchase Shares................... A-1
</TABLE>
SUMMARY
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THE FUND. AIM Tax-Exempt Funds, Inc. (the "Company") is a Maryland
corporation organized as an open-end series management investment company.
Currently, the Company has four separate series portfolios. This Prospectus
relates to AIM HIGH INCOME MUNICIPAL FUND (the "Fund"). The Company also offers
other classes of shares in three other investment portfolios, AIM TAX-EXEMPT
CASH FUND, AIM TAX-FREE INTERMEDIATE FUND and AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT (collectively with AIM HIGH INCOME MUNICIPAL FUND, the "Funds"),
each of which pursues unique investment objectives. Shares of the other Funds of
the Company have different sales charges and expenses, which may affect
performance. To obtain information about the other Funds of the Company call
(800) 347-4246.
MANAGEMENT. A I M Advisors, Inc. ("AIM") serves as the Fund's investment
advisor pursuant to a Master Investment Advisory Agreement (the "Advisory
Agreement"). AIM, together with its subsidiaries, manages or advises 56
investment company portfolios. As of October 1, 1997, the total assets advised
or managed by AIM or its subsidiaries were approximately $83.2 billion. Under
the terms of the Advisory Agreement, AIM supervises all aspects of the Fund's
operations and provides investment advisory services to the Fund. As
compensation for these services, AIM receives a fee based on the Fund's average
daily net assets. Under a Master Administrative Services Agreement, AIM may be
reimbursed by the Fund for its costs of performing, or arranging for the
performance of, certain accounting and other administrative services for the
Fund. Under a Transfer Agency and Service Agreement, A I M Fund Services, Inc.
("AFS"), AIM's wholly owned subsidiary and a registered transfer agent, receives
a fee for its provision of transfer agency, dividend distribution and
disbursement, and shareholder services to the Fund.
MULTIPLE DISTRIBUTION SYSTEM. Investors may select Class A, Class B or
Class C shares of the Fund which are offered by this Prospectus at an offering
price that reflects differing sales charges and expense levels. See "Terms and
Conditions of Purchase of the AIM Funds -- Sales Charges and Dealer
Concessions."
Class A Shares -- Shares are offered at net asset value plus any
applicable initial sales charge.
Class B Shares -- Shares are offered at net asset value, without an
initial sales charge, and are subject to a maximum contingent deferred
sales charge of 5% on certain redemptions made within six years from the
date such shares were purchased. Class B shares automatically convert to
Class A shares of the Fund eight years following the end of the calendar
month in which a purchase was made. Class B shares are subject to higher
expenses than Class A shares.
Class C Shares -- Shares are offered at net asset value, without an
initial sales charge, and are subject to a contingent deferred sales charge
of 1% on certain redemptions made within one year from the date such shares
were purchased.
SUITABILITY FOR INVESTORS. The Multiple Distribution System permits an
investor to choose the method of purchasing shares that is most beneficial given
the amount of the purchase, the length of time the shares are expected to be
held, whether dividends will be paid in cash or reinvested in additional shares
of the Fund and other circumstances. Investors should consider whether, during
the anticipated life of their investment in the Fund, the accumulated
distribution fees and any applicable contingent deferred sales charges on Class
B shares prior to conversion or on Class C shares would be less than the initial
sales charge and accumulated distribution fees on Class A shares purchased at
the same time, and to what extent such differential would be offset by the
higher return on Class A shares. To assist investors in making this
determination, the table under the caption "Table of Fees and Expenses" sets
forth examples of the charges applicable to each class of shares. Class A shares
will normally be more beneficial than Class B or Class C shares to the investor
who qualifies for reduced initial sales charges, as described below. Therefore,
A I M Distributors, Inc. ("AIM Distributors") will reject any order for purchase
of more than $250,000 for Class B shares.
2
<PAGE> 6
PURCHASING SHARES. Initial investments in any class of shares must be at
least $500 and additional investments must be at least $50. The minimum initial
investment is modified for investments through tax-qualified retirement plans
and accounts initially established with an Automatic Investment Plan. The
distributor of the Fund's shares is A I M Distributors, Inc., P.O. Box 4739,
Houston, Texas 77210-4729. See "How to Purchase Shares" and "Special Plans."
EXCHANGE PRIVILEGE. The Fund is one of several mutual funds distributed by
AIM Distributors (collectively, "The AIM Family of Funds"). Class A, Class B and
Class C shares of the Fund may be exchanged for shares of other funds in The AIM
Family of Funds in the manner and subject to the policies and charges set forth
herein. See "Exchange Privilege."
REDEEMING SHARES. Holders of Class A shares may redeem all or a portion of
their shares at net asset value on any business day, generally without charge. A
contingent deferred sales charge of 1% may apply to certain redemptions of Class
A shares, where purchases of $1 million or more were made at net asset value.
See "How to Redeem Shares -- Contingent Deferred Sales Charge Program for Large
Purchases."
Holders of Class B shares may redeem all or a portion of their shares at
net asset value on any business day, less a contingent deferred sales charge for
redemptions made within six years from the date such shares were purchased.
Class B shares redeemed after six years from the date such shares were purchased
will not be subject to any contingent deferred sales charge. See "How to Redeem
Shares -- Multiple Distribution System."
Holders of Class C shares may redeem all or a portion of their shares at
net asset value on any business day, less a 1% contingent deferred sales charge
for redemptions made within one year from the date such shares were purchased.
See "How to Redeem Shares -- Multiple Distribution System."
DISTRIBUTIONS. The Fund will declare dividends from net investment income
on a daily basis and will pay such dividends on a monthly basis. The Fund will
also make distributions of realized capital gains, if any, on an annual basis.
Dividends and distributions of the Fund may be reinvested at net asset value
without payment of a sales charge in the Fund's shares or may be invested in
shares of the other funds in The AIM Family of Funds. See "Dividends,
Distributions and Tax Matters" and "Special Plans."
RISK FACTORS. The Fund seeks to meet its investment objective by investing
in non-investment grade debt securities, commonly known as "junk bonds."
Investments in such securities, while generally providing greater income and
opportunity for gain, may be subject to greater risks than higher rated
securities. Such risks may include: greater market price volatility, limited
liquidity under certain circumstances, greater sensitivity to adverse economic
changes and individual issuer developments, and certain other risks. See
"Investment Program -- Risk Factors Regarding Non-Investment Grade Debt
Securities." Investors should carefully consider the relative risks and rewards
of investing in the Fund prior to investing, and should not consider an
investment in the Fund to represent a complete investment program.
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, La Familia AIM de
Fondos and La Familia AIM de Fondos and Design are registered service marks and
aimfunds.com and Invest With Discipline are service marks of A I M Management
Group Inc.
3
<PAGE> 7
THE FUND
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TABLE OF FEES AND EXPENSES
The following table is designed to help an investor in the Fund understand
the various costs that an investor will bear, both directly and indirectly. The
fees and expenses set forth in the table are based on the estimated average net
assets of the respective classes of the Fund for the first period of operation.
The rules of the SEC require that the maximum sales charge be reflected in the
table, even though certain investors may qualify for reduced sales charges. See
"How to Purchase Shares."
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
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<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on purchase of shares (as a %
of offering price)..................................... 4.75% None None
Maximum sales load on reinvested dividends and
distributions.......................................... None None None
Deferred sales load (as a % of lower of original purchase
price or
redemption proceeds)................................... None* 5.0% 1.0%
Redemption fee............................................ None None None
Exchange fee.............................................. None None None
Annual Fund Operating Expenses (as a % of average net
assets)
Management fees........................................... 0.60% 0.60% 0.60%
Rule 12b-1 distribution plan payments..................... 0.25% 1.00% 1.00%
Other expenses............................................ 0.15% 0.15% 0.15%
---- ---- ----
Total fund operating expenses..................... 1.00% 1.75% 1.75%
==== ==== ====
</TABLE>
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* Purchases of $1 million or more are not subject to an initial sales charge.
However, a contingent deferred sales charge of 1% applies to certain
redemptions made within 18 months from the date such shares were purchased.
See the Investor's Guide, under the caption "How to Redeem
Shares -- Contingent Deferred Sales Charge Program for Large Purchases."
EXAMPLES. You would pay the following expenses on a $1,000 investment in
Class A shares of the Fund, assuming (1) a 5% annual return and (2) redemption
at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................... $57
3 Years..................................................... $78
</TABLE>
The above examples assume payment of a sales charge at the time of
purchase; actual expenses may vary for purchases of $1 million or more, which
are made at net asset value and are subject to a contingent deferred sales
charge for 18 months from the date such shares were purchased.
You would pay the following expenses on a $1,000 investment in Class B
shares of the Fund, assuming (1) a 5% annual return and (2) redemption at the
end of each time period:
<TABLE>
<S> <C>
1 Year...................................................... $68
3 Years..................................................... $85
</TABLE>
You would pay the following expenses on the same $1,000 investment in Class
B shares, assuming no redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................... $18
3 Years..................................................... $55
</TABLE>
You would pay the following expenses on a $1,000 investment in Class C
shares of the Fund, assuming (1) a 5% annual return and (2) redemption at the
end of each time period:
<TABLE>
<S> <C>
1 Year...................................................... $28
3 Years..................................................... $55
</TABLE>
You would pay the following expenses on the same $1,000 investment in Class
C shares, assuming no redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................... $18
3 Years..................................................... $55
</TABLE>
As a result of 12b-1 distribution plan payments, a long-term shareholder of
the Fund may pay more than the economic equivalent of the maximum front-end
sales charges permitted by rules of the National Association of Securities
Dealers, Inc. Given the maximum front-end and contingent deferred sales charges
and the Rule 12b-1 distribution plan payments applicable to Class A shares,
4
<PAGE> 8
Class B shares and Class C shares of the Fund, it is estimated that it would
require a substantial number of years to exceed the maximum permissible
front-end sales charges.
The above examples should not be considered representative of the Fund's
actual or future expenses, which may be greater or less than those shown. In
addition, while the examples assume a 5% annual return, the Fund's actual
performance will vary and may result in an actual return that is greater or less
than 5%. The examples assume reinvestment of all dividends and distributions and
that the percentage amounts for total fund operating expenses remain the same
for each year.
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PERFORMANCE
The Fund's performance may be quoted in advertising in terms of yield or
total return. Both types of performance are based on historical results and are
not intended to indicate future performance. All advertisements for the Fund
will disclose the maximum sales charge (including deferred sales charges)
imposed on purchases of the Fund's shares. If any advertised performance data
does not reflect the maximum sales charge, such advertisement will disclose that
the sales charge has not been deducted in computing the performance data, and
that, if reflected, the maximum sales charge would reduce the performance
quoted. See the Statement of Additional Information for further details
concerning performance comparisons used in advertisements by the Fund. Further
information regarding the Fund's performance will be contained in the Fund's
annual report to shareholders, which will be available upon request and without
charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. Standardized total return
for Class A shares reflects the deduction of the maximum front-end sales charge
at the time of purchase. Standardized total return for Class B shares reflects
the deduction of the maximum applicable contingent deferred sales charge on a
redemption of shares held for the period. Standardized total return for Class C
shares reflects the deduction of a 1% contingent deferred sales charge, if
applicable, on a redemption of shares held for one year.
The Fund's total return shows its overall change in value, including
changes in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT
VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS
ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of
overall performance, the Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
Yield is computed in accordance with standardized formulas described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, yield
information may not provide a basis for comparison with investments which pay a
fixed rate of interest for a stated period of time. Yield reflects investment
income net of expenses over the relevant period attributable to a Fund share,
expressed as an annualized percentage of the maximum offering price per share
for Class A shares, and net asset value for Class B and Class C shares.
Yield is a function of the type and quality of the Fund's investments, the
maturity of the securities held in the Fund's portfolio and the operating
expense ratio of the Fund. A shareholder's investment in the Fund is not insured
or guaranteed. These factors should be carefully considered by the investor
before making an investment in the Fund. A tax-equivalent yield is calculated in
the same manner as the standard yield with an adjustment for a stated, assumed
tax rate. The Fund may also demonstrate the effect of such tax-equivalent
adjustments generally by comparing various yield levels with their corresponding
tax-equivalent yields, given a stated tax rate.
From time to time and in its discretion, AIM or its affiliates may waive
all or a portion of advisory or distribution fees and/or assume certain expenses
of the Fund. Such practices will have the effect of increasing the Fund's yield
and total return.
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INVESTMENT PROGRAM
The Fund's objective is to achieve a high level of current income which is
exempt from federal income taxes. There can be no assurance that the Fund will
achieve its objective. The Fund will pursue its objective by investing, under
normal market conditions, at least 80% of its net assets in a diversified
portfolio of municipal securities which are rated BBB/Baa or lower by Standard &
Poor's Ratings Services ("S&P") or Moody's Investors Service, Inc. ("Moody's")
or another nationally recognized statistical rating organization ("NRSRO")(or
which are unrated but determined by AIM to be of comparable quality to such
securities), and which are exempt from federal income taxes (including the
alternative minimum tax). "Municipal securities" include debt obligations of
states, territories or possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities,
issued for a wide range of public facilities such as airports, highways,
bridges, schools, hospitals, housing, mass transportation, streets and water and
sewer works.
5
<PAGE> 9
Also included in "municipal securities" are municipal lease obligations,
which may take the form of a lease, an installment purchase or a conditional
sales contract. Municipal lease obligations are issued by state and local
governments and authorities to acquire land, equipment and facilities such as
state and municipal vehicles, telecommunications and computer equipment, and
other capital assets. The Fund may purchase these obligations directly, or it
may purchase participation interests in such obligations. Municipal leases are
generally subject to greater risks than general obligation or revenue bonds.
State laws set forth requirements that states or municipalities must meet in
order to issue municipal obligations, and such obligations may contain a
covenant by the issuer to budget for, appropriate, and make payments due under
the obligation. However, certain municipal lease obligations may contain
"non-appropriation" clauses which provide that the issuer is not obligated to
make payments on the obligation in future years unless funds have been
appropriated for this purpose each year. Accordingly, such obligations are
subject to "non-appropriation" risk. While municipal leases are secured by the
underlying capital asset, it may be difficult to dispose of such assets in the
event of non-appropriation or other default. The Company's Board of Directors is
responsible for developing and establishing guidelines and procedures for
determining the liquidity and valuation of municipal lease obligations, as well
as the credit quality and cancellation risk of unrated municipal lease
obligations.
Debt securities which are rated BB/Ba or lower by S&P or Moody's or another
NRSRO (and unrated securities which AIM determines to be of comparable quality)
are considered to have speculative characteristics and may involve risks which
are not presented by investments in higher-rated debt securities. See "Risk
Factors Regarding Non-Investment Grade Debt Securities" below for further
information regarding such investments.
DIVERSIFICATION AND CONCENTRATION. As a fundamental policy which may not be
changed without shareholder approval, the Fund will not, with respect to 75% of
its total assets, invest more than 5% of its total assets in the securities of
any single issuer. The Fund considers investments in municipal securities not to
be subject to concentration policies and may invest a relatively high percentage
of its total assets in municipal securities issued by entities having similar
characteristics. The issuers may be located in the same geographic area or may
pay their interest obligations from revenue of similar projects such as
hospitals, utilities systems and housing finance agencies. This may make the
Fund's investments more susceptible to similar economic, political or regulatory
influences. The Fund may invest more than 25% of its total assets in municipal
securities with similar characteristics, such as industrial development revenue
bonds, including pollution control revenue bonds, housing finance agency bonds
or hospital bonds. The Fund may not, however, invest more than 25% of its total
assets in industrial development revenue bonds, including pollution control
revenue bonds, issued for companies in the same industry. Sizeable investments
in such securities could involve an increased risk to the Fund if any of such
issuers or any such related projects or facilities experience financial
difficulties.
The Fund may, but does not currently intend to, invest more than 25% of its
total assets in securities whose issuers are located in the same state. The Fund
may invest its assets without regard to the maturity of the various securities
it purchases, and will not seek to maintain any particular average portfolio
maturity.
TEMPORARY DEFENSIVE INVESTMENTS. As a temporary defensive measure, or for
cash management purposes, the Fund may invest all or a portion of its assets
from time to time in cash, bankers' acceptances, certificates of deposit,
repurchase agreements, master notes, time deposits, commercial paper and taxable
and tax-exempt municipal securities. The Fund may also invest for temporary
defensive purposes all or a portion of its assets in securities issued by the
United States government, its agencies or instrumentalities, and
investment-grade taxable and tax-exempt municipal securities. Interest income
from certain of the foregoing types of investments may be taxable to
shareholders as ordinary income.
TAXABLE INVESTMENTS. Under normal market conditions, the Fund may invest up
to 20% of its total assets in taxable securities (including municipal securities
the interest from which constitutes a preference item for federal alternative
minimum tax purposes). Such taxable securities may include securities issued by
the United States government, its agencies or instrumentalities, bank and
corporate obligations and short-term fixed income securities.
DEFAULTED SECURITIES. The Fund may invest up to 10% of its total assets in
defaulted securities. In order to enforce its rights in defaulted securities the
Fund may be required to participate in various legal proceedings or take
possession of and manage assets securing the issuer's obligations on the
defaulted securities. This could increase the Fund's operating expenses and
adversely affect its net asset value. Any income derived from the ownership or
operation of such assets would not be tax-exempt. The ability of a holder of a
defaulted tax-exempt security to enforce the terms of that security in a
bankruptcy proceeding may be more limited than would be the case with respect to
securities of private issuers.
ILLIQUID SECURITIES, BORROWING AND OTHER INVESTMENT COMPANIES. The Fund
will not invest more than 15% of its net assets in securities which are
illiquid. Illiquid securities include those which have no readily available
market price quotations and which cannot be sold within seven days in the normal
course of business at approximately the amount at which the Fund has valued
them, as well as restricted securities and repurchase obligations maturing in
more than seven days. Certain municipal lease obligations and certain
unregistered securities under the Securities Act of 1933 may be determined to be
liquid under guidelines adopted by the Board of Directors, and would therefore
not be subject to this 15% limitation. The Fund may borrow from banks, provided
that such borrowing does not exceed 33 1/3% of the value of its total assets.
The Fund will not invest in additional securities while borrowings in excess of
5% of its total assets are outstanding. The foregoing 33 1/3% and 5% borrowing
limitations are fundamental policies which may not be changed without
shareholder approval. The Fund may invest in other investment companies to
6
<PAGE> 10
the extent permitted by the Investment Company Act of 1940, and the rules and
regulations thereunder, and (if applicable) exemptive orders granted by the SEC.
WHEN ISSUED OR DELAYED DELIVERY SECURITIES. The Fund may purchase
securities on a "when-issued" basis, which means that delivery of and payment
for the securities is not fixed at the date of purchase, but is set after the
securities are issued (normally within 45 days after the date of the
transaction). The Fund may also purchase and sell securities on a delayed
delivery basis. The payment obligation and the interest rate that will be
received on the delayed delivery securities are fixed at the time the buyer
enters into the delayed delivery commitment. The Fund will only enter into
commitments to purchase when-issued or delayed delivery securities with the
intention of actually acquiring such securities; however, the Fund may sell such
securities before the settlement date if AIM deems such action to be advisable.
If the Fund purchases a when-issued security, its custodian bank will
segregate liquid assets in an amount equal to the when-issued commitment. If the
market value of such securities declines below the value of the commitment,
additional liquid assets will be segregated on a daily basis so that the market
value of the segregated assets will equal the amount of the Fund's when-issued
commitments. To the extent cash and securities are segregated, they will not be
available for new investments or to meet redemptions of Fund shares. Securities
purchased on a delayed delivery basis may require a similar segregation of
liquid assets. For a more complete description of when-issued and delayed
delivery securities see the Statement of Additional Information.
STANDBY COMMITMENTS. The Fund may acquire standby commitments from banks or
other municipal securities dealers with respect to securities in its portfolio
or that are being purchased by the Fund. Standby commitments generally increase
the cost of the acquisition of the underlying security, thereby reducing the
yield. Standby commitments depend upon the issuer's ability to fulfill its
obligation upon demand. Although no definitive creditworthiness criteria are
used for this purpose, AIM reviews the creditworthiness of the banks and other
municipal securities dealers from which the Fund obtains standby commitments in
order to evaluate those risks.
INDEXED SECURITIES. The Fund may invest in indexed securities the value of
which is linked to interest rates, commodities, indices or other financial
indicators. Most indexed securities are short to intermediate term fixed income
securities whose values at maturity (principal value) or interest rates rise or
fall according to changes in the value of one or more specified underlying
instruments. Indexed securities may be positively or negatively indexed (i.e.,
their principal value or interest rates may increase or decrease if the
underlying instrument appreciates), and may have return characteristics similar
to direct investments in the underlying instrument or to one or more options on
the underlying instrument. Indexed securities may be more volatile than the
underlying instrument itself and could involve the loss of all or a portion of
the principal amount of the indexed security.
INVERSE FLOATING RATE OBLIGATIONS. The Fund may invest in inverse floating
rate obligations or residual interest bonds, or other obligations or
certificates related to such securities which have similar features. These types
of obligations generally have floating or variable interest rates that move in
the opposite direction of short-term interest rates, and generally increase or
decrease in value in response to changes in short-term interest rates at a rate
which is a multiple (typically two) of the rate at which long-term fixed-rate
tax-exempt securities increase or decrease in response to such changes. As a
result, such obligations have the effect of providing investment leverage and
may be more volatile than long-term fixed-rate tax-exempt securities.
ZERO-COUPON AND PAY-IN-KIND SECURITIES. The Fund may, but does not
currently intend to, invest in zero-coupon or pay-in-kind securities. These
securities are debt securities that do not make regular cash interest payments.
Zero-coupon securities are sold at a deep discount to their face value.
Pay-in-kind securities pay interest through the issuance of additional
securities. Because zero-coupon and pay-in-kind securities do not pay current
cash income, the price of these securities can be volatile when interest rates
fluctuate. While these securities do not pay current cash income, federal tax
law requires the holders of zero-coupon and pay-in-kind securities to include in
income each year the portion of the original issue discount (or deemed discount)
and other non-cash income on such securities accrued during that year. In order
to qualify as a "regulated investment company" under the Internal Revenue Code
of 1986 and to avoid certain excise taxes, the Fund may be required to
distribute a portion of such discount and income, and may be required to dispose
of other portfolio securities, which could occur during periods of adverse
market prices, in order to generate sufficient cash to meet these distribution
requirements.
OPTIONS ON SECURITIES AND WARRANTS. The Fund may write (sell) "covered" put
and call options on fixed income securities. Call options written by the Fund
give the holder the right to buy the underlying securities from the Fund at a
fixed exercise price up to a stated expiration date or, in the case of certain
options, on such date. Put options written by the Fund give the holder the right
to sell the underlying securities to the Fund at a fixed price up to a stated
expiration date or, in the case of certain options, on such date. Call options
are "covered" by the Fund when it owns the underlying securities, and put
options are "covered" by the Fund when it has segregated liquid assets which can
be sold promptly to satisfy any obligation of the Fund to purchase the
underlying securities. The Fund may also write straddles (combinations of puts
and calls on the same underlying security).
The Fund may purchase detachable call options on municipal securities,
which are options issued by an issuer of the underlying municipal securities
that give the holder the right to purchase the securities at a fixed price,
either up to a stated time in the future, or in some cases, on a particular
future date. The Fund may purchase warrants on fixed income securities. A
warrant on a fixed income security is a long-dated call option giving to the
holder the right, but not the obligation, to purchase a fixed income security of
a specific description (from the issuer) on a certain date or dates at a fixed
exercise price.
7
<PAGE> 11
INTEREST RATE FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may purchase
and sell futures contracts on fixed income securities or indices of such
securities, or purchase and sell options thereon, in order to hedge the value of
its portfolio against changes in market conditions. A futures contract is an
agreement between two parties to buy and sell a security for a set price on a
future date. Generally, the Fund may elect to close a position in a futures
contract by taking an opposite position which will operate to terminate the
Fund's position in the original futures contract. There are risks associated
with investments in futures contracts and options on such contracts. During
certain market conditions, purchases and sales of futures contracts may not
completely offset a decline or rise in the value of the Fund's portfolio, and it
may not always be possible to execute a buy or sell order at the desired price,
or to close out an open position, due to market conditions, limits on open
positions and/or daily price fluctuations. Changes in the market value of the
Fund's portfolio may differ substantially from the changes anticipated by the
Fund when hedged positions were established, and unanticipated price movements
in a futures contract may result in a loss substantially greater than the Fund's
initial investment in the contract. Successful use of futures contracts and
related options depends upon AIM's ability to predict correctly movements in the
direction of the applicable markets. No assurance can be given that AIM's
judgment in this respect will be correct.
The Fund may not purchase or sell futures contracts, or purchase or sell
related options, if immediately thereafter the sum of the amount of margin
deposits and premiums on open positions with respect to futures contracts and
related options would exceed 5% of the market value of the Fund's total assets.
See the Statement of Additional Information for a description of the Fund's
investments in futures contracts and options on futures contracts, including
certain additional risks.
RISK FACTORS REGARDING NON-INVESTMENT GRADE DEBT SECURITIES. The Fund
intends to invest a significant portion of its assets in non-investment grade
debt securities, commonly known as "junk bonds." Such securities have ratings
from S&P and/or Moody's or another NRSRO which are BB/Ba or lower (or are
unrated but determined by AIM to be of comparable quality based on the rating
categories in Appendix A). Although these securities generally offer higher
yields than investment grade securities with similar maturities, non-investment
grade securities involve greater risks, including the possibility of default or
bankruptcy. In general, they are considered to be predominantly speculative with
respect to the issuer's capacity to pay interest and principal. Other potential
risks associated with investing in non-investment grade securities include:
- greater market price volatility resulting from changes in or
uncertainty about economic conditions, and changes in the actual or
perceived ability of the issuer to meet its obligations;
- greater sensitivity of highly leveraged issuers to adverse economic
changes and individual issuer developments; and
- liquidity may be affected by adverse publicity and changing investor
perceptions about these securities in general and/or a particular
issuer's credit quality.
As with any other asset held by the Fund, any reduction in market value of
such securities as a result of the above factors would be reflected in the
Fund's net asset value. In addition, because the Fund invests in non-investment
grade securities it may incur additional expenses to the extent it is required
to seek recovery upon a default in the payment of principal and interest on its
holdings. Due to such risks, successful investments in non-investment grade
securities will be more dependent on AIM's credit analysis than generally would
be the case for investments in securities which are investment grade.
It is uncertain how the market for non-investment grade securities will
perform during a prolonged period of rising interest rates. A prolonged economic
downturn or a prolonged period of rising interest rates could adversely affect
the market for these securities, increase their volatility, and reduce their
value and liquidity. Moreover, lower quality securities tend to be less liquid
than higher rated securities because the market for them is not as broad or
active. If market quotations are not available, these securities will be valued
in accordance with procedures established by the Company's Board of Directors.
Judgment may therefore play a greater role in valuing non-investment grade
securities.
In the event the Fund experiences an unexpected level of net redemptions,
it could be forced to sell its non-investment grade securities without regard to
their investment merits, thereby decreasing the asset base upon which the Fund's
expenses can be spread and possibly reducing the Fund's rate of return.
PORTFOLIO TURNOVER. Ordinarily, the Fund does not purchase securities with
the intention of engaging in short-term trading. However, any particular
security will be sold, and the proceeds reinvested, whenever such action is
deemed prudent in light of the Fund's investment objective, regardless of the
holding period of that security. A higher rate of portfolio turnover may result
in higher transaction costs. Also, to the extent that higher portfolio turnover
results in a higher rate of net realized capital gains to the Fund, the portion
of the Fund's distributions constituting taxable capital gain may increase. It
is expected that total portfolio turnover in any year will be less than 100%.
See "Dividends, Distributions and Tax Matters."
INVESTMENT POLICIES AND RESTRICTIONS. Unless otherwise noted, the
investment policies and standards stated above are not fundamental policies of
the Fund and may be changed by the Board of Directors without shareholder
approval. Shareholders will be notified before any material change in the
foregoing investment policies becomes effective. The Fund's investment program
is also subject to a number of investment restrictions which reflect
self-imposed standards as well as federal regulatory limitations. These
restrictions are described in the Statement of Additional Information.
8
<PAGE> 12
- --------------------------------------------------------------------------------
MANAGEMENT
The overall management of the business and affairs of the Fund is vested in
the Company's Board of Directors. The Board of Directors approves all
significant agreements between the Company, on behalf of the Fund, and persons
or companies furnishing services to the Fund, including the investment advisory
agreement and administrative services agreement with AIM, the agreement with AIM
Distributors regarding distribution of the Fund's shares, the agreement with The
Bank of New York as the custodian and the agreement with AFS as transfer agent.
The day-to-day operations of the Fund are delegated to the officers of the
Company and to AIM, subject always to the objective and policies of the Fund and
to the general supervision of the Board of Directors. Certain directors and
officers of the Company are affiliated with AIM and A I M Management Group Inc.
("AIM Management"), the parent corporation of AIM. AIM Management is a holding
company engaged in the financial services business and is an indirect wholly
owned subsidiary of AMVESCAP PLC. AMVESCAP 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. Information concerning the Board of Directors may be found
in the Statement of Additional Information.
INVESTMENT ADVISOR. A I M Advisors, Inc., 11 Greenway Plaza, Suite 100,
Houston, Texas 77046, serves as the investment advisor to the Fund pursuant to a
Master Investment Advisory Agreement, dated as of February 28, 1997 (the
"Advisory Agreement"). AIM was organized in 1976 and, together with its
subsidiaries, manages or advises 56 investment company portfolios. As of October
1, 1997, the total assets of such investment company portfolios were
approximately $83.2 billion.
Under the terms of the Advisory Agreement, AIM supervises all aspects of
the Fund's operations and provides investment advisory services to the Fund. AIM
obtains and evaluates economic, statistical and financial information to
formulate and implement the investment program for the Fund. The Advisory
Agreement also provides that, upon the request of the Board of Directors, AIM
may perform or arrange for certain accounting and other administrative services
for the Fund which are not required to be performed by AIM under the Advisory
Agreement. The Board of Directors has made such a request. As a result, AIM and
the Company have entered into a Master Administrative Services Agreement, dated
as of February 28, 1997 (the "Administrative Services Agreement"), pursuant to
which AIM is entitled to receive from the Fund reimbursement of its costs or
such reasonable compensation as may be approved by the Board of Directors.
Currently, AIM is reimbursed for the services of the Fund's principal financial
officer and his staff, and any expenses related to fund accounting services. In
addition, A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a
wholly owned subsidiary of AIM and a registered transfer agent, receives a fee
pursuant to a Transfer Agency and Service Agreement for its provision of
transfer agency, dividend distribution and disbursement, and shareholder
services to the Fund.
In accordance with policies established by the Board of Directors, AIM may
take into account sales of shares of the Fund and other funds advised by AIM in
selecting broker-dealers to effect portfolio transactions on behalf of the Fund.
See the Statement of Additional Information under the caption "Portfolio
Transactions" for further information.
PORTFOLIO MANAGEMENT. AIM uses a team approach and disciplined investment
strategy in providing investment advisory services to all its accounts,
including the Fund. AIM's investment staff consists of approximately 126
individuals. While individual members of AIM's investment staff are assigned
primary responsibility for the day-to-day management of each of AIM's accounts,
all accounts are reviewed on a regular basis by AIM's Investment Policy
Committee to ensure that they are being invested in accordance with the
accounts' and AIM's investment policies. The individuals on the investment team
primarily responsible for the day-to-day management of the Fund are Franklin
Ruben, Richard A. Berry and Sharon A. Copper. Mr. Ruben is of A I M
Capital Management, Inc. ("AIM Capital"), and has been responsible for the Fund
since its inception in 1997. Mr. Ruben has been associated with AIM and/or its
subsidiaries since 1997, and has a total of 12 years of experience as an
investment professional. Prior to joining AIM, he was Associate Portfolio
Manager with Van Kampen American Capital Asset Management, Inc. Mr. Berry is
Vice President of AIM Capital, and has been responsible for the Fund since its
inception in 1997. Mr. Berry has been associated with AIM and/or its
subsidiaries since 1987, and has a total of 29 years of experience as an
investment professional. Ms. Copper is Vice President of AIM Capital and has
been responsible for the Fund since its inception in 1997. Ms. Copper has been
associated with AIM and/or its subsidiaries since 1992 and has a total of 12
years of experience as an investment professional.
FEES AND EXPENSES. Pursuant to the Advisory Agreement, AIM is entitled to
receive a fee from the Fund calculated at the annual rates of 0.60% of the first
$500 million of net assets, plus 0.55% of the next $500 million of net assets,
plus 0.50% of the next $500 million of net assets, plus 0.45% of net assets over
$1.5 billion. AIM is also entitled to be reimbursed for administrative costs
incurred on behalf of the Fund.
FEE WAIVERS. In order to increase the yield to investors, AIM or its
affiliates may from time to time voluntarily waive or reduce advisory or
distribution fees, while retaining the ability to be reimbursed for such fees
prior to the end of each fiscal year. Fee waivers or reductions, other than
those which may be set forth in the Advisory Agreement, may be rescinded at any
time without notice to investors; provided, however, that the Board of Directors
of the Company will be notified of the discontinuance of each fee waiver or
reduction.
DISTRIBUTOR. The Company has entered into master distribution agreements
relating to the Fund (the "Distribution Agreements") with A I M Distributors,
Inc. ("AIM Distributors"), a registered broker-dealer and a wholly owned
subsidiary of AIM,
9
<PAGE> 13
to act as the distributor of Class A, Class B and Class C shares of the Fund.
The address of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739.
Certain directors and officers of the Company are affiliated with AIM
Distributors.
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Fund directly and through institutions with
whom AIM Distributors has entered into selected dealer agreements. Under the
Distribution Agreement for the Class B shares, AIM Distributors sells Class B
shares at net asset value subject to a contingent deferred sales charge
established by AIM Distributors. AIM Distributors is authorized to advance to
institutions through whom Class B shares are sold a sales commission under
schedules established by AIM Distributors. The Distribution Agreement for the
Class B shares provides that AIM Distributors (or its assignee or transfer) will
receive 0.75% (of the total 1.00% payable under the distribution plan applicable
to Class B shares) of the Fund's average daily net assets attributable to Class
B shares attributable to the sales efforts of AIM Distributors. In the event the
Class B shares Distribution Agreement is terminated, AIM Distributors would
continue to receive payments of asset based sales charges in respect of the
outstanding Class B shares attributable to the distribution efforts of AIM
Distributors; provided, however, that a complete termination of the Class B
shares master distribution plan (as defined in the plan) would terminate all
payments to AIM Distributors. Termination of the Class B shares distribution
plan or Distribution Agreement does not affect the obligation of Class B
shareholders to pay contingent deferred sales charges.
DISTRIBUTION PLANS. Class A and C Plan. The Company has adopted a Master
Distribution Plan applicable to Class A and Class C shares of the Fund (the
"Class A and C Plan") pursuant to Rule 12b-1 under the 1940 Act, to compensate
AIM Distributors for the purpose of financing any activity that is intended to
result in the sale of Class A and Class C shares of the Fund.
Under the Class A and C Plan, the Company may compensate AIM Distributors
an aggregate amount of 0.25% of the average daily net assets of Class A shares
of the Fund on an annualized basis and an aggregate amount of 1.00% of the
average daily net assets of Class C shares of the Fund on an annualized basis.
The Class A and C Plan is designed to compensate AIM Distributors, on a
quarterly basis, for certain promotional and other sales-related costs, and to
implement a dealer incentive program which provides for periodic payments to
selected dealers who furnish continuing personal shareholder services to their
customers who purchase and own Class A or Class C shares of the Fund. Payments
can also be directed by AIM Distributors to selected institutions who have
entered into service agreements with respect to Class A and Class C shares of
the Fund and who provide continuing personal shareholder services to their
customers who own Class A and Class C shares of the Fund. The service fees
payable to selected institutions are calculated at the annual rate of 0.25% of
the average daily net asset value of those Fund shares that are held in such
institution's customers' accounts which were purchased on or after a prescribed
date set forth in the Plan.
Of the aggregate amount payable under the Class A and C 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 are
characterized as a service fee, and 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 pursuant to the Class A and C Plan.
The Class A and C 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. The Class A and C Plan does not obligate the Fund to
reimburse AIM Distributors for the actual expenses AIM Distributors may incur in
fulfilling its obligations under the Class A and C Plan on behalf of the Fund.
Thus, under the Class A and C Plan, even if AIM Distributors' actual expenses
exceed the fee payable to AIM Distributors thereunder at any given time, the
Fund will not be obligated to pay more than that fee. If AIM Distributors'
expenses are less than the fee it receives, AIM Distributors will retain the
full amount of the fee.
Class B Plan. The Company has also adopted a Master Distribution Plan
applicable to Class B shares of the Fund (the "Class B Plan"). Under the Class B
Plan, the Fund pays distribution expenses at an annual rate of 1.00% of the
average daily net assets attributable to the Class B shares. Of such amount, the
Fund pays a service fee of 0.25% of the average daily net assets attributable to
the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee would
constitute an asset based sales charge. Amounts paid in accordance with the
Class B Plan may be used to finance any activity primarily intended to result in
the sale of Class B shares.
Both Plans. Activities that may be financed under the Class A and C Plan
and the Class B Plan (collectively, the "Plans") include, but are not limited
to: printing of prospectuses and statements of additional information and
reports for other than existing shareholders, overhead, preparation and
distribution of advertising material and sales literature, supplemental payments
to dealers and other institutions such as asset based sales charges or as
payments of service fees under shareholder service arrangements, and the cost of
administering the Plans. These amounts payable by the Fund under the Plans need
not be directly related to the expenses actually incurred by AIM Distributors on
behalf of the Fund. Thus, even if AIM Distributors' actual expenses exceed the
fee payable to AIM Distributors thereunder at any given time, the Company will
not be obligated to pay more than that fee, and if AIM Distributors' expenses
are less than the fee it receives, AIM Distributors will retain the full amount
of the fee. Payments pursuant to the Plans are subject to any applicable
limitations imposed by the rules of the National Association of Securities
Dealers, Inc.
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<PAGE> 14
Each of the Plans may be terminated at any time by a vote of the majority
of those directors who are not "interested persons" of the Company or by a vote
of the holders of the majority of the outstanding shares of the applicable
class.
Under the Plans, AIM Distributors may in its discretion from time to time
agree to waive voluntarily all or any portion of its fee that has not been
assigned or transferred, while retaining its ability to be reimbursed for such
fee prior to the end of each fiscal year.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Fund on an agency basis, may
receive payments from the Fund pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent for the Fund, in
making such payments. The Fund will obtain a representation from such financial
institutions that they will either be licensed as dealers as required under
applicable state law, or that they will not engage in activities which would
constitute acting as a "dealer" as defined under applicable state law. Financial
intermediaries and any other person entitled to receive compensation for selling
Fund shares may receive different compensation for selling shares of one
particular class over another.
For additional information concerning the operation of the Plans, see the
Statement of Additional Information.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE COMPANY
The Company was incorporated in Maryland on May 4, 1993. Shares of common
stock of the Company are currently divided into four portfolios, AIM TAX-EXEMPT
CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT (each of which currently offers only Class A shares) and AIM HIGH
INCOME MUNICIPAL FUND (which currently offers Class A, Class B and Class C
shares).
Class A shares, Class B shares and Class C shares of the Fund represent
interests in the Fund's assets and have identical voting, dividend, liquidation
and other rights on the same terms and conditions, except that each class of
shares bears differing class-specific expenses, is subject to differing sales
loads, conversion features and exchange privileges, and has exclusive voting
rights on matters pertaining to that class' distribution plan (although holders
of Class A and Class C shares and holders of Class B shares of the Fund must
approve any material increase in fees payable with respect to the Fund under the
Class A and C Plan).
Except as specifically noted above, shareholders of the Fund are entitled
to one vote per share (with proportionate voting for fractional shares),
irrespective of the relative net asset value of the Class A shares, Class B
shares and Class C shares of the Fund. However, on matters affecting one
portfolio of the Company or one class of shares, a separate vote of shareholders
of that portfolio or class is required. Shareholders of a portfolio or class are
not entitled to vote on any matter which does not affect that portfolio or class
but which requires a separate vote of another portfolio or class. An example of
a matter which would be voted on separately by shareholders of a portfolio is
the approval of an advisory agreement, and an example of a matter which would be
voted on separately by shareholders of each class of shares is approval of a
distribution plan. When issued, shares of the Fund are fully paid and
nonassessable, have no preemptive or subscription rights, and are fully
transferable. Other than the automatic conversion of Class B shares to Class A
shares, there are no conversion rights. Shares do not have cumulative voting
rights, which means that in situations in which shareholders elect directors,
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors of the Company, and the holders of less than 50% of
the shares voting for the election of directors will not be able to elect any
directors.
Under Maryland law and the Company's By-laws, the Company need not hold an
annual meeting of shareholders unless a meeting is otherwise required under the
1940 Act to elect directors. Shareholders may remove directors from office, and
a meeting of shareholders may be called at the request of the holders of 10% or
more of the Company's outstanding shares.
As of October , 1997, AIM owned more than 25% of the issued and
outstanding Class A shares, Class B shares and Class C shares of the Fund, and
therefore could be deemed to "control" the Fund as that term is defined in the
1940 Act. It is anticipated that upon commencement of the public offering of the
Fund's shares, AIM will cease to control the Fund for purposes of the 1940 Act.
11
<PAGE> 15
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND SHAREHOLDER
ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Registered Trademark--
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM ADVISOR CASH MANAGEMENT FUND(1),(2) AIM GLOBAL UTILITIES FUND
AIM ADVISOR FLEX FUND AIM GROWTH FUND
AIM ADVISOR INCOME FUND(2) AIM HIGH INCOME MUNICIPAL FUND
AIM ADVISOR INTERNATIONAL VALUE FUND AIM HIGH YIELD FUND
AIM ADVISOR LARGE CAP VALUE FUND AIM INCOME FUND
AIM ADVISOR MULTIFLEX FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM ADVISOR REAL ESTATE FUND AIM INTERNATIONAL EQUITY FUND
AIM AGGRESSIVE GROWTH FUND AIM LIMITED MATURITY TREASURY SHARES
AIM BALANCED FUND AIM MONEY MARKET FUND(1)
AIM BLUE CHIP FUND AIM MUNICIPAL BOND FUND
AIM CAPITAL DEVELOPMENT FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM CHARTER FUND AIM TAX-EXEMPT CASH FUND(1)
AIM CONSTELLATION FUND AIM TAX-FREE INTERMEDIATE FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM VALUE FUND
AIM GLOBAL GROWTH FUND AIM WEINGARTEN FUND
AIM GLOBAL INCOME FUND
</TABLE>
(1) Class A shares of AIM TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM
MONEY MARKET FUND, and Class A and Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND, are offered to investors at net asset value, without
payment of a sales charge, as described below. Other funds, including the
Class A, Class B and Class C shares of AIM MONEY MARKET FUND, are sold with
an initial sales charge or subject to a contingent deferred sales charge
upon redemption, as described below.
(2) Fund closed to new investments on August 4, 1997.
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds ("AIM Funds"), an investor must submit a fully completed new Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by A I M Distributors, Inc. ("AIM
Distributors") to sell shares of the AIM Funds.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed IRS Form W-8 (for non-resident aliens) or Form
W-9 (certifying exempt status) accompanying the registration information will be
subject to backup withholding. See the Account Application for applicable
Internal Revenue Service penalties. The minimum initial investment is $500,
except for accounts initially established through an Automatic Investment Plan,
which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for an Individual Retirement Arrangement ("IRA") is $250. There are
no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, IRA/Simplified Employee
Pension ("SEP") accounts, 403(b) plans or 457 (state deferred compensation)
plans (except that the minimum initial investment for salary deferrals for such
plans is $25), or for investment of dividends and distributions of any of the
AIM Funds into any existing AIM Funds account. A Salary Reduction SEP ("SARSEP")
may not be established after December 31, 1996; however existing SARSEP accounts
can remain in effect.
MCF 10/97
A-1
<PAGE> 16
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus are offered
pursuant to separate prospectuses. Copies of other prospectuses may be obtained
by calling (800) 347-4246.
HOW TO PURCHASE ADDITIONAL SHARES. The minimum investment for subsequent
purchases is $50. The minimum employee salary deferral investment for
participants in money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or
457 plans is $25. There are no such minimum investment requirements for
investment of dividends and distributions of any of the AIM Funds into any other
existing AIM Funds account.
Additional shares may be purchased directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors.
Direct investments may be made by mail or by wiring payment to AFS as follows:
SUBSEQUENT PURCHASES BY MAIL: Investors must indicate their account number and
the name of the Fund being purchased. The remittance slip from a confirmation
statement should be used for this purpose, and sent to AFS.
PURCHASES BY WIRE: To insure prompt credit to his account, an investor or his
dealer should call AFS' Client Services Department at (800) 959-4246 prior to
sending a wire to receive a reference number for the wire. The following wire
instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM ADVISOR CASH MANAGEMENT FUND, AIM ADVISOR FLEX FUND, AIM ADVISOR INCOME
FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND,
AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND, AIM AGGRESSIVE GROWTH
FUND, AIM BALANCED FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM
CHARTER FUND, AIM CONSTELLATION FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM
GROWTH FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME
FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM MONEY
MARKET FUND, AIM MUNICIPAL BOND FUND, AIM VALUE FUND and AIM WEINGARTEN FUND,
collectively (other than AIM AGGRESSIVE GROWTH FUND), the "Multiple Class
Funds," may be purchased at their respective net asset value plus a sales charge
as indicated below, except that Class A shares of AIM TAX-EXEMPT CASH FUND,
Class A shares of AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares
of AIM MONEY MARKET FUND are sold without a sales charge and Class B shares (the
"Class B shares") and Class C shares ("Class C shares") of the Multiple Class
Funds (except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND) are sold at
net asset value subject to a contingent deferred sales charge payable upon
certain redemptions. These contingent deferred sales charges are described under
the caption "How to Redeem Shares -- Multiple Distribution System." Securities
dealers and other persons entitled to receive compensation for selling or
servicing shares of a Multiple Class Fund may receive different compensation for
selling or servicing one particular class of shares over another class in the
same Multiple Class Fund. Factors an investor should consider prior to
purchasing Class A, Class B or Class C shares (or, if applicable, AIM Cash
Reserve Shares) of a Multiple Class Fund are described below under "Special
Information Relating to Multiple Class Funds." For information on purchasing any
of the AIM Funds and to receive a prospectus, please call (800) 347-4246. As
described below, the sales charge otherwise applicable to a purchase of shares
of a fund may be reduced if certain conditions are met. In order to take
advantage of a reduced sales charge, the prospective investor or his dealer must
advise AIM Distributors that the conditions for obtaining a reduced sales charge
have been met. Net asset value is determined in the manner described under the
caption "Determination of Net Asset Value." The following tables show the sales
charge and dealer concession at various investment levels for the AIM Funds.
MCF 10/97
A-2
<PAGE> 17
SALES CHARGES AND DEALER CONCESSIONS
GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds include Class A shares of each of AIM ADVISOR FLEX FUND, AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, AIM AGGRESSIVE GROWTH FUND, AIM BLUE CHIP FUND, AIM CAPITAL
DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM GLOBAL UTILITIES
FUND, AIM GROWTH FUND, AIM INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM
VALUE FUND and AIM WEINGARTEN FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
GROUP II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: the Class A shares of each of AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM ADVISOR INCOME FUND, AIM ADVISOR REAL ESTATE FUND, AIM BALANCED
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL
INCOME FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME
FUND, AIM INTERMEDIATE GOVERNMENT FUND and AIM MUNICIPAL BOND FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
MCF 10/97
A-3
<PAGE> 18
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are AIM LIMITED MATURITY TREASURY SHARES and the Class A shares
of AIM TAX-FREE INTERMEDIATE FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than AIM LIMITED MATURITY TREASURY SHARES and Class A shares of AIM
TAX-FREE INTERMEDIATE FUND as follows: 1% of the first $2 million of such
purchases, plus 0.80% of the next $1 million of such purchases, plus 0.50% of
the next $17 million of such purchases, plus 0.25% of amounts in excess of $20
million of such purchases. See "Contingent Deferred Sales Charge Program for
Large Purchases." AIM Distributors may make payments to dealers and institutions
who are dealers of record for purchases of $1 million or more of Class A shares
(or shares which normally involve payment of initial sales charges), and which
are sold at net asset value and are not subject to a contingent deferred sales
charge, in an amount up to 0.10% of such purchases of shares of AIM LIMITED
MATURITY TREASURY SHARES, and in an amount up to 0.25% of such purchases of
Class A shares of AIM TAX-FREE INTERMEDIATE FUND.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.00% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price (0.60% of the
purchase price of the AIM ADVISOR INCOME FUND) of the Class C shares sold by the
dealer or institution, and will consist of a sales commission of 0.75% of the
purchase price (0.35% of the purchase price of the AIM ADVISOR INCOME FUND) of
the Class C shares sold plus an advance of the first year service fee of 0.25%
with respect to such shares. AIM Distributors will retain all payments received
by it relating to Class C shares for the first year after they are purchased.
The portion of the payments to AIM Distributors under the Class A and C Plan
attributable to Class C shares which constitutes an asset-based sales charge
(0.75%) (0.35% for AIM ADVISOR INCOME FUND) is intended in part to permit AIM
Distributors to recoup a portion of on-going sales commissions to dealers plus
financing costs, if any. After the first full year, AIM Distributors will make
such payments quarterly to dealers and institutions based on the average net
asset value of Class C shares which are attributable to shareholders for whom
the dealers and institutions are designated as dealers of record.
MCF 10/97
A-4
<PAGE> 19
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of the New York Stock Exchange ("NYSE"), which is generally 4:00 p.m.
Eastern Time (and which is hereinafter referred to as "NYSE Close") on any
business day of an AIM Fund will be confirmed at the price next determined.
Orders received after NYSE Close will be confirmed at the price determined on
the next business day of the AIM Fund. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent.
Any loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. Please see "How to Purchase
Shares -- Purchases by Wire" for information on obtaining a reference number for
wire orders, which will facilitate the handling of such orders and ensure prompt
credit to an investor's account. A "business day" of an AIM Fund is any day on
which the NYSE is open for business. It is expected that the NYSE will be closed
during the next twelve months on Saturdays and Sundays and on the days on which
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class Funds
currently offer two or more classes of shares through separate distribution
systems (the "Multiple Distribution System"). Although each class of shares of a
particular Multiple Class Fund represents an interest in the same portfolio of
investments, each class is subject to a different distribution structure and, as
a result, differing expenses. This Multiple Distribution System allows investors
to select the class that is best suited to the investor's needs and objectives.
In considering the options afforded by the Multiple Distribution System,
investors should consider both the applicable initial sales charge or contingent
deferred sales charge, as well as the ongoing expenses borne by each class of
shares and other relevant factors, such as whether his or her investment goals
are long-term or short-term.
CLASS A SHARES (except Class A shares of AIM ADVISOR CASH MANAGEMENT FUND)
are sold subject to the initial sales charges described above and are
subject to the other fees and expenses described herein. Class A shares of
AIM MONEY MARKET FUND are designed to meet the needs of an investor who
wishes to establish a dollar cost averaging program, pursuant to which
Class A shares an investor owns may be exchanged at net asset value for
Class A shares of another Multiple Class Fund or shares of another AIM Fund
which is not a Multiple Class Fund, subject to the terms and conditions
described under the caption "Exchange Privilege -- Terms and Conditions of
Exchanges."
CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Rule 12b-1 Plan payments of 1.00%
per annum on the average daily net assets of a Multiple Class Fund
attributable to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the date such shares were purchased are subject to a
contingent deferred sales charge ranging from 5% for redemptions made
within the first year to 1% for redemptions made within the sixth year. No
contingent deferred sales charge will be imposed if Class B shares are
redeemed after six years from the date such shares were purchased.
Redemptions of Class B shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B
shares was made. Following such conversion of their Class B shares,
investors will be relieved of the higher Rule 12b-1 Plan payments
associated with Class B shares. See "Management -- Distribution Plans."
CLASS C SHARES are sold without an initial sales charge. Thus the entire
purchase price of Class C shares is immediately invested in Class C shares.
Class C shares (except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND)
are subject, however, to Rule 12b-1 Plan payments of 1.00% per annum on the
average daily net assets of a Multiple Class Fund attributable to Class C
shares. See the discussion under the caption "Management -- Distribution
Plans." In addition, Class C shares (except Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) redeemed within one year from the date such shares
were purchased are subject to a 1.00% contingent deferred sales charge. No
contingent deferred sales charge will be imposed if Class C shares are
redeemed after one year from the date such shares were purchased.
Redemptions of Class C shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class A and Class C shares of AIM ADVISOR CASH MANAGEMENT FUND and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND are sold without an initial sales
charge and are not subject to a contingent deferred sales charge. (A
contingent deferred sales charge may be imposed upon redemptions of Class A
and Class C shares of AIM ADVISOR CASH MANAGEMENT FUND when such shares
were purchased in an exchange. See "How to Redeem Shares -- Multiple
Distribution System -- Class C Shares" and "How to Redeem
Shares -- Contingent Deferred Sales Charge Program for Large Purchases").
AIM Cash Reserve Shares of AIM MONEY MARKET FUND are, however, subject to
the other fees and expenses described in the prospectus for AIM MONEY
MARKET FUND.
MCF 10/97
A-5
<PAGE> 20
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon Eastern Time or NYSE Close on any
business day of the Fund will be confirmed at the price next determined. Net
asset value is normally determined at 12:00 noon Eastern Time and NYSE Close on
each business day of AIM MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO AIM ADVISOR CASH MANAGEMENT FUND, AIM MONEY
MARKET FUND, AND AIM TAX-EXEMPT CASH FUND (THE "MONEY MARKET FUNDS"). Because
each Money Market Fund uses the amortized cost method of valuing the securities
it holds and rounds its per share net asset value to the nearest whole cent, it
is anticipated that the net asset value of the shares of such funds will remain
constant at $1.00 per share. However, there is no assurance that each Money
Market Fund can maintain a $1.00 net asset value per share. In order to earn
dividends with respect to AIM MONEY MARKET FUND on the same day that a purchase
is made, purchase payments in the form of federal funds must be received by the
Transfer Agent before 12:00 noon Eastern Time on that day. Purchases made by
payments in any other form, or payments in the form of federal funds received
after such time but prior to NYSE Close, will begin to earn dividends on the
next business day following the date of purchase. The Money Market Funds
generally will not issue share certificates but will record investor holdings in
noncertificate form and regularly advise the shareholder of his ownership
position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
TAX-EXEMPT CASH FUND, Class A and Class C shares of AIM ADVISOR CASH MANAGEMENT
FUND, AIM Cash Reserve Shares of AIM MONEY MARKET FUND and Class B and Class C
shares of the Multiple Class Funds will not be taken into account in determining
whether a purchase qualifies for a reduction in initial sales charges.
The term "purchaser" means:
- an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, a single-participant
money-purchase/profit-sharing plan or an individual participant in a 403(b)
Plan (unless such 403(b) plan qualifies as the purchaser as defined below);
- a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
- a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
- a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP") where the employer has
notified AIM Distributors in writing that all of its related employee SEP or
SARSEP accounts should be linked;
MCF 10/97
A-6
<PAGE> 21
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
- the discretionary advised accounts of A I M Advisors, Inc. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge as provided herein.
(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for
(i) Class A shares of AIM TAX-EXEMPT CASH FUND, Class A and Class C shares of
AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY
MARKET FUND and (ii) Class B and Class C shares of the Multiple Class Funds)
within the following 13 consecutive months. By marking the LOI section on the
account application and by signing the account application, the purchaser
indicates that he understands and agrees to the terms of the LOI and is bound by
the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM TAX-EXEMPT CASH FUND, Class A and Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY MARKET FUND and (ii)
Class B and Class C shares of the Multiple Class Funds) at the time of the
proposed purchase. Rights of Accumulation are also available to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992. To determine
whether or not a reduced initial sales charge applies to a proposed purchase,
AIM Distributors takes into account not only the money which is invested upon
such proposed purchase, but also the value of all shares of the AIM Funds
(except for (i) Class A shares of AIM TAX-EXEMPT CASH FUND, Class A and Class C
shares of AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and (ii) Class B and Class C shares of the Multiple Class
Funds) owned by such purchaser, calculated at their then current public offering
price. If a purchaser so qualifies for a reduced sales charge, the reduced sales
charge applies to the total amount of money then being invested by such
purchaser and not just to the portion that exceeds the breakpoint above which a
reduced sales charge applies. For example, if a purchaser already owns
qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest
an additional $20,000 in a fund with a maximum
MCF 10/97
A-7
<PAGE> 22
initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will
apply to the full $20,000 purchase and not just to the $15,000 in excess of the
$25,000 breakpoint. To qualify for obtaining the discount applicable to a
particular purchase, the purchaser or his dealer must furnish AFS with a list of
the account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a fund
(see "Dividends, Distributions and Tax Matters"); (b) exchanges of shares of
certain other funds (see "Exchange Privilege"); (c) use of the reinstatement
privilege (see "How to Redeem Shares"); or (d) a merger, consolidation or
acquisition of assets of a fund.
Shareholders of record of Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
shares of the particular AIM Fund(s) whose shares they owned on such date, at
net asset value (without payment of a sales charge) for as long as they
continuously own Class A shares of such AIM Fund(s) having a market value of at
least $500. In addition, discretionary advised clients of any investment
advisors whose clients held Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A shares of the applicable AIM
Fund(s) at the net asset value of such shares.
The following persons may purchase shares of the AIM Funds through AIM
Distributors without payment of an initial sales charge: (a) A I M Management
Group Inc. ("AIM Management") and its affiliated companies; (b) any current or
retired officer, director, trustee or employee, or any member of the immediate
family (including spouse, children, parents and parents of spouse) of any such
person, of AIM Management or its affiliates or of certain mutual funds which are
advised or managed by AIM, or any trust established exclusively for the benefit
of such persons; (c) any employee benefit plan established for employees of AIM
Management or its affiliates; (d) any current or retired officer, director,
trustee or employee, or any member of the immediate family (including spouse,
children, parents and parents of spouse) of any such person, or of CIGNA
Corporation or of any of its affiliated companies, or of First Data Investor
Services Group (formerly The Shareholders Services Group, Inc.); (e) any
investment company sponsored by CIGNA Investments, Inc. or any of its affiliated
companies for the benefit of its directors' deferred compensation plans; (f)
discretionary advised clients of AIM or AIM Capital; (g) registered
representatives and employees of dealers who have entered into agreements with
AIM Distributors (or financial institutions that have arrangements with such
dealers with respect to the sale of shares of the AIM Funds) and any member of
the immediate family (including spouse, children, parents and parents of spouse)
of any such person, provided that purchases at net asset value are permitted by
the policies of such person's employer; and (h) certain broker-dealers,
investment advisers or bank trust departments that provide asset allocation,
similar specialized investment services or investment company transaction
services for their customers, that charge a minimum annual fee for such
services, and that have entered into an agreement with AIM Distributors with
respect to their use of the AIM Funds in connection with such services.
In addition, shares of any AIM Fund may be purchased at net asset value,
without payment of a sales charge, by pension, profit-sharing or other employee
benefit plans created pursuant to a plan qualified under Section 401 of the Code
or plans under Section 457 of the Code, or employee benefit plans created
pursuant to Section 403(b) of the Code and sponsored by nonprofit organizations
defined under Section 501(c)(3) of the Code. Such plans will qualify for
purchases at net asset value provided that (1) the total amount invested in the
plan is at least $1,000,000, (2) the sponsor signs a $1,000,000 LOI, (3) such
shares are purchased by an employer-sponsored plan with at least 100 eligible
employees, or (4) all of the plan's transactions are executed through a single
financial institution or service organization who has entered into an agreement
with AIM Distributors with respect to their use of the AIM Funds in connection
with such accounts. Section 403(b) plans sponsored by public educational
institutions will not be eligible for net asset value purchases based on the
aggregate investment made by the plan or the number of eligible employees.
Participants in such plans will be eligible for reduced sales charges based
solely on the aggregate value of their individual investments in the applicable
AIM Fund. PLEASE NOTE THAT TAX-EXEMPT FUNDS ARE NOT APPROPRIATE INVESTMENTS FOR
SUCH PLANS. AIM Distributors may pay investment dealers or other financial
service firms for share purchases of the Load Funds (as defined on page A-10
herein) sold at net asset value to an employee benefit plan in accordance with
this paragraph as follows: 1% of the first $2 million of such purchases, plus
0.80% of the next $1 million of such purchases, plus 0.50% of the next $17
million of such purchases, plus 0.25% of amounts in excess of $20 million of
such purchases and up to 0.10% of the net asset value of any AIM LIMITED
MATURITY TREASURY SHARES sold at net asset value to an employee benefit plan in
accordance with this paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A shares of such funds may also be purchased at net asset
value by other unit investment trusts approved by the Board of Directors of AIM
Equity Funds, Inc. Unit holders of such trusts may elect to invest cash
distributions from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND at net asset value, including: (a) distributions of any
dividend income or other income received by such trusts; (b) distributions of
any net capital gains received in respect of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sale of Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such trusts;
and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided:
MCF 10/97
A-8
<PAGE> 23
(a) that the investment in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND is effected within 30 days of such redemption or repurchase;
and (b) that the unit holder or his dealer provides AIM Distributors with a
letter which: (i) identifies the name, address and telephone number of the
dealer who sold to the unit holder the units to be redeemed or repurchased; and
(ii) states that the investment in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND is being funded exclusively by the proceeds from the
redemption or repurchase of units of such trusts.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns shares which are not subject to a contingent deferred sales charge, can
arrange for monthly, quarterly or annual checks in any amount (but not less than
$50) to be drawn against the balance of his account in the designated AIM Fund.
Shareholders who own shares subject to a contingent deferred sales charge, can
only arrange for monthly or quarterly withdrawals under a Systematic Withdrawal
Plan. Payment of this amount can be made on any day of the month the shareholder
specifies, except the thirtieth or thirty-first day of each month in which a
payment is to be made. A minimum account balance of $5,000 is required to
establish a Systematic Withdrawal Plan, but there is no requirement thereafter
to maintain any minimum investment. With respect to shares subject to a
contingent deferred sales charge (all classes) no contingent deferred sales
charge will be imposed on withdrawals made under a Systematic Withdrawal Plan,
provided that the amounts withdrawn under such a plan do not exceed on an annual
basis 12% of the account value at the time the shareholder elects to participate
in the Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to
shares subject to a contingent deferred sales charge that exceed on an annual
basis 12% of such account will be subject to a contingent deferred sales charge
on the amounts exceeding 12% of the account value at the time the shareholder
elects to participate in the Systematic Withdrawal Plan.
Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested in shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic Withdrawal Plan, the Transfer Agent redeems sufficient full
and fractional shares at their net asset value in effect at the time of each
such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the Multiple Class Funds, AIM Cash
Reserve Shares of AIM MONEY MARKET FUND and Class A shares of AIM ADVISOR CASH
MANAGEMENT FUND), it is disadvantageous to effect such purchases while a
Systematic Withdrawal Plan is in effect.
The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make monthly or quarterly
investments may establish an Automatic Investment Plan. Under this plan, on or
about the tenth and/or twenty-fifth day of the applicable month, a draft is
drawn on the shareholder's bank account in the amount specified by the
shareholder (minimum $50 per investment, per account). The proceeds of the draft
are invested in shares of the designated AIM Fund at the applicable offering
price determined on the date of the draft. An Automatic Investment Plan may be
discontinued upon 10 days' prior notice to the Transfer Agent or AIM
Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
MCF 10/97
A-9
<PAGE> 24
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; dividends and distributions attributable to Class C
shares may be reinvested in Class C shares of the same fund or in Class C shares
of another Multiple Class Fund; and dividends and distributions attributable to
AIM Cash Reserve Shares of AIM MONEY MARKET FUND may be reinvested in additional
shares of such fund, in Class A shares of another Multiple Class Fund or in
shares of another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" for a description
of payment dates for these options. In order to qualify to have dividends and
distributions of one AIM Fund invested in shares of another AIM Fund, the
following conditions must be satisfied: (a) the shareholder must have an account
balance in the dividend paying fund of at least $5,000; (b) the account must be
held in the name of the shareholder (i.e., the account may not be held in
nominee name); and (c) the shareholder must have requested and completed an
authorization relating to the reinvestment of dividends into another AIM Fund.
An authorization may be given on the account application or on an authorization
form available from AIM Distributors. An AIM Fund will waive the $5,000 minimum
account value requirement if the shareholder has an account in the fund selected
to receive the dividends and distributions with a value of at least $500.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." The account from
which exchanges are to be made must have a value of at least $5,000 when a
shareholder elects to begin this program, and the exchange minimum is $50 per
transaction. All of the accounts that are part of this program must have
identical registrations. The net asset value of shares purchased under this
program may vary, and may be more or less advantageous than if shares were not
exchanged automatically. There is no charge for entering the Dollar Cost
Averaging program. Sales charges may apply, as described under the caption
"Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM TAX-FREE
INTERMEDIATE FUND, AIM TAX-EXEMPT CASH FUND, AIM MUNICIPAL BOND FUND, AIM HIGH
INCOME MUNICIPAL FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the
following prototype retirement plans available to corporations, individuals and
employees of non-profit organizations and public schools: combination
money-purchase/profit-sharing plans; 403(b) plans; IRA plans; SARSEP plans; and
SEP plans (collectively, "retirement accounts"). Information concerning these
plans, including the custodian's fees and the forms necessary to adopt such
plans, can be obtained by calling or writing the AIM Funds or AIM Distributors.
Shares of the AIM Funds are also available for investment through existing
401(k) plans (for both individuals and employers) adopted under the Code. The
plan custodian currently imposes an annual $10 maintenance fee with respect to
each retirement account for which it serves as the custodian. This fee is
generally charged in December. Each AIM Fund and/or the custodian reserve the
right to change this maintenance fee and to initiate an establishment fee (not
to exceed its cost).
MCF 10/97
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<PAGE> 25
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds,
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds (except AIM
ADVISOR CASH MANAGEMENT FUND), listed below and referred to herein as the "Load
Funds," are sold at a public offering price that includes a maximum sales charge
of 5.50% or 4.75% of the public offering price of such shares; Class A shares
(or shares which normally involve the payment of initial sales charges) of
certain of the AIM Funds, listed below and referred to herein as the "Lower Load
Funds," are sold at a public offering price that includes a maximum sales charge
of 1.00% of the public offering price of such shares; and Class A shares or
shares of certain other funds, listed below and referred to herein as the "No
Load Funds," are sold at net asset value, without payment of a sales charge.
<TABLE>
<S> <C> <C>
LOAD FUNDS: LOWER LOAD FUNDS:
----------- -----------------
AIM ADVISOR FLEX FUND -- AIM GLOBAL GROWTH AIM LIMITED MATURITY TREASURY SHARES
CLASS A FUND -- CLASS A AIM TAX-FREE INTERMEDIATE
AIM ADVISOR INCOME FUND -- AIM GLOBAL INCOME FUND -- CLASS A
CLASS A FUND -- CLASS A
AIM ADVISOR INTERNATIONAL AIM GLOBAL UTILITIES NO LOAD FUNDS:
VALUE FUND -- CLASS A FUND -- CLASS A --------------
AIM ADVISOR LARGE CAP AIM GROWTH FUND -- CLASS A
VALUE FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A AIM ADVISOR CASH MANAGEMENT FUND
AIM ADVISOR MULTIFLEX AIM HIGH INCOME MUNICIPAL -- CLASS A
FUND -- CLASS A FUND -- CLASS A AIM MONEY MARKET FUND
AIM ADVISOR REAL ESTATE AIM INCOME FUND -- CLASS A -- AIM CASH RESERVE SHARES
FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT AIM TAX-EXEMPT CASH FUND -- CLASS A
AIM AGGRESSIVE GROWTH FUND -- CLASS A
FUND -- CLASS A AIM INTERNATIONAL EQUITY
AIM BALANCED FUND -- CLASS A FUND -- CLASS A
AIM BLUE CHIP FUND -- CLASS A AIM MONEY MARKET
AIM CAPITAL DEVELOPMENT FUND -- CLASS A
FUND -- CLASS A AIM MUNICIPAL BOND
AIM CHARTER FUND -- CLASS A FUND -- CLASS A
AIM CONSTELLATION AIM TAX-EXEMPT BOND FUND
FUND -- CLASS A OF CONNECTICUT -- CLASS A
AIM GLOBAL AGGRESSIVE GROWTH AIM VALUE FUND -- CLASS A
FUND -- CLASS A AIM WEINGARTEN FUND -- CLASS A
</TABLE>
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund on
the terms described on the chart below, except that (i) effective August 4, 1997
(except with respect to shares of AIM ADVISOR CASH MANAGEMENT FUND, AIM ADVISOR
FLEX FUND, AIM ADVISOR INCOME FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM
ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND and AIM ADVISOR REAL
ESTATE FUND), no shares of any Load Fund, Class C of a Multiple Class Fund,
Lower Load Fund or No Load Fund may be exchanged for shares of AIM ADVISOR CASH
MANAGEMENT FUND or AIM ADVISOR INCOME FUND; (ii) effective October 3, 1997 no
share of any Load Fund, Class C of a Multiple Class Fund, Lower Load Fund or No
Load Fund may be exchanged for shares of AIM ADVISOR CASH MANAGEMENT FUND or AIM
ADVISOR INCOME FUND; (iii) Load Fund share purchases of $1,000,000 or more which
are subject to a contingent deferred sales charge may not be exchanged for Lower
Load Funds or for AIM TAX-EXEMPT CASH FUND; (iv) LOWER LOAD FUND SHARE PURCHASES
OF $1,000,000 OR MORE AND AIM Cash Reserve Shares of AIM MONEY MARKET FUND and
AIM TAX-EXEMPT CASH FUND PURCHASES MAY BE EXCHANGED FOR LOAD FUND SHARES IN
AMOUNTS OF $1,000,000 OR MORE WHICH WILL THEN BE SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE; HOWEVER, FOR PURPOSES OF CALCULATING THE CONTINGENT
DEFERRED SALES CHARGE ON THE LOAD FUND SHARES ACQUIRED, THE 18-MONTH PERIOD
SHALL BE COMPUTED FROM THE DATE OF SUCH EXCHANGE; (v) Class A shares and AIM
LIMITED MATURITY TREASURY SHARES may be exchanged for Class A shares or AIM
LIMITED MATURITY TREASURY SHARES, (vi) Class B shares may be exchanged only for
Class B shares; (vii) Class C shares may only be exchanged for Class C shares;
(viii) Class A shares of AIM ADVISOR CASH MANAGEMENT FUND may be exchanged for
Class A shares of any Load Fund, Lower Load Fund or No-Load Fund at net asset
value; (ix) Class C shares of AIM ADVISOR CASH MANAGEMENT FUND may be exchanged
for Class C shares of any Multiple Class Fund at net asset value; and (x) AIM
Cash Reserve Shares of AIM MONEY MARKET FUND may not be exchanged for Class A
shares of AIM MONEY MARKET FUND or for Class B or Class C shares.
MCF 10/97
A-11
<PAGE> 26
Broker-dealers and institutions of record for Class A or Class C shares
purchased pursuant to an exchange from Class A or Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND will be compensated according to the sales commission or
concession that would apply if these Class A or Class C share purchases had been
purchased in a manner other than pursuant to an exchange.
DEPENDING UPON THE FUND FROM WHICH AND INTO WHICH AN EXCHANGE IS BEING MADE,
SHARES BEING ACQUIRED IN AN EXCHANGE MAY BE ACQUIRED AT THEIR OFFERING PRICE OR
AT THEIR NET ASSET VALUE (WITHOUT PAYMENT OF A SALES CHARGE) AS SET FORTH IN THE
TABLE BELOW FOR SHARES INITIALLY PURCHASED PRIOR TO MAY 1, 1994:
<TABLE>
<CAPTION>
MULTIPLE CLASS FUNDS:
LOWER LOAD NO LOAD ------------------------------
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B CLASS C
----- -------------- ----------------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Funds..........
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund or any Fund or any Lower Load
Lower Load Fund. Fund; otherwise,
Offering Price.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable Not Applicable
Funds.......... acquired upon exchange of any
Load Fund. Otherwise, difference
in sales charge will apply.
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund. Fund or any Lower Load
Difference in sales charge will Fund; otherwise,
apply if No Load shares were Offering Price.
acquired upon exchange of Lower
Load Fund shares.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
Class C........ Not Applicable Not Applicable Not Applicable Not Applicable Net Asset Value
</TABLE>
An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A, Class B and Class C shares of a Multiple Class Fund
cannot be exchanged for each other), except that AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may be exchanged for Class A shares of another Multiple Class
Fund; (b) the dollar amount of the exchange must be at least equal to the
minimum investment applicable to the shares of the fund acquired through such
exchange; (c) the shares of the fund acquired through exchange must be qualified
for sale in the state in which the shareholder resides; (d) the exchange must be
made between accounts having identical registrations and addresses; (e) the full
amount of the purchase price for the shares being exchanged must have already
been received by the fund; (f) the account from which shares have been exchanged
must be coded as having a certified taxpayer identification number on file or,
in the alternative, an appropriate Internal Revenue Service ("IRS") Form W-8
(certificate of foreign status) or Form W-9 (certifying exempt status) must have
been received by the fund; (g) newly acquired shares (through either an initial
or subsequent investment) are held in an account for at least ten business days,
and all other shares are held in an account for at least one day, prior to the
exchange; and (h) certificates representing shares must be returned before
shares can be exchanged. There is no fee for exchanges among the AIM Funds.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
MCF 10/97
A-12
<PAGE> 27
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received after NYSE Close will result in the redemption of shares at their net
asset value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. Normally, shares of an AIM Fund to be acquired
by exchange are purchased at their net asset value or applicable offering price,
as the case may be, determined on the date that such request is received, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is determined that a fund would be materially disadvantaged
by an immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into a fund paying daily dividends (See "Dividends, Distributions and
Tax Matters -- Dividends and Distributions," below), and the release of the
exchange proceeds is delayed for the foregoing five-day period, such shareholder
will not begin to accrue dividends until the sixth business day after the
exchange. Shares purchased by check may not be exchanged until it is determined
that the check has cleared, which may take up to ten business days from the date
that the check is received. See "Terms and Conditions of Purchase of the AIM
Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AFS. The request should contain the account registration and
account number, the dollar amount or number of shares to be exchanged, and the
names of the funds from which and into which the exchange is to be made. The
request should comply with all of the requirements for redemption by mail,
except those required for redemption of IRAs. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AFS at (800) 959-4246. If a shareholder is unable to reach
AFS by telephone, he may also request exchanges by telegraph or use overnight
courier services to expedite exchanges by mail, which will be effective on the
business day received by the Transfer Agent as long as such request is received
prior to NYSE Close. The Transfer Agent and AIM Distributors will not be liable
for any loss, expense or cost arising out of any telephone exchange request that
they reasonably believe to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
Social Security Number and current address, and mailings of confirmations
promptly after the transaction.
EXCHANGES OF CLASS B AND CLASS C SHARES. A contingent deferred sales charge
will not be imposed in connection with exchanges among Class B shares or among
Class C shares. For purposes of determining a shareholder's holding period of
Class B or Class C shares in the calculation of the applicable contingent
deferred sales charge, the period of time during which Class B or Class C shares
were held prior to an exchange will be added to the holding period of the
applicable Class B or Class C shares (except for Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors. In
addition to the obligation of the fund(s) named on the cover page to redeem
shares, AIM Distributors also repurchases shares. Although a contingent deferred
sales charge may be applicable to certain redemptions, as described below, there
is no redemption fee imposed when shares are redeemed or repurchased; however,
dealers may charge service fees for handling repurchase transactions.
MULTIPLE DISTRIBUTION SYSTEM. Class B shares. Class B shares purchased under
the Multiple Distribution System may be redeemed on any business day of a
Multiple Class Fund at the net asset value per share next determined following
receipt of the redemption order, as described under the caption "Timing and
Pricing of Redemption Orders," less the applicable contingent deferred sales
charge shown in the table below. No deferred sales charge will be imposed (i) on
redemptions of Class B shares following six years from the date such shares were
purchased, (ii) on Class B shares acquired through reinvestments of dividends
and distributions attrib-
MCF 10/97
A-13
<PAGE> 28
utable to Class B shares or (iii) on amounts that represent capital appreciation
in the shareholder's account above the purchase price of the Class B shares.
<TABLE>
<CAPTION>
YEAR CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
-------- -------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
Class C Shares. Class C shares purchased under the Multiple Distribution
System may be redeemed on any business day of a Multiple Class Fund at the net
asset value per share next determined following receipt of the redemption order,
as described under the caption "Timing and Pricing of Redemption Orders," less a
1% contingent deferred sales charge. No deferred sales charge will be imposed
(i) on redemptions of Class C shares following one year from the date such
shares were purchased; (ii) on Class C shares acquired through reinvestment of
dividends and distributions attributable to Class C shares; (iii) on amounts
that represent capital appreciation in the shareholder's account above the
purchase price of the Class C shares; (iv) on redemptions of additional
purchases of shares of AIM ADVISOR FLEX FUND, AIM ADVISOR INCOME FUND, AIM
ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, and AIM ADVISOR REAL ESTATE FUND, by shareholders of record on
April 30, 1995 of these funds. Shareholders whose broker/dealers maintain a
single omnibus account with the Transfer Agent on behalf of those shareholders,
perform sub-accounting functions with respect to those shareholders, and are
unable to segregate shareholders of record prior to April 30, 1995 from
shareholders whose accounts were opened after that date will be subject to a
CDSC on all purchases made after March 1, 1996; or (v) on Class C shares of AIM
ADVISOR CASH MANAGEMENT FUND except in certain cases when the shares were
purchased in an exchange. Redemptions of shares of AIM ADVISOR CASH MANAGEMENT
FUND are generally not subject to a contingent deferred sales charge; however, a
contingent deferred sales charge may be applicable to redemptions of shares of
AIM ADVISOR CASH MANAGEMENT FUND if the redeemed shares were exchanged from
another Class C share fund and the one year holding period in such fund has not
been completed.
Contingent deferred sales charges on Class B and Class C shares will be waived
on redemptions (1) following the death or post-purchase disability, as defined
in Section 72(m)(7) of the Code, of a shareholder or a settlor of a living trust
(provided AIM Distributors is notified of such death or post-purchase disability
at the time of the redemption request and is provided with satisfactory evidence
of such death or post-purchase disability), (2) in connection with certain
distributions from individual retirement accounts, custodial accounts maintained
pursuant to Code Section 403(b), deferred compensation plans qualified under
Code Section 457 and plans qualified under Code Section 401 (collectively,
"Retirement Plans"), (3) pursuant to a Systematic Withdrawal Plan, provided that
amounts withdrawn under such plan do not exceed on an annual basis 12% of the
value of the shareholder's investment in Class B or Class C shares at the time
the shareholder elects to participate in the Systematic Withdrawal Plan, (4)
effected pursuant to the right of a Multiple Class Fund to liquidate a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the designated minimum account size described in the
prospectus of such Multiple Class Fund, (5) effected by AIM of its investment in
Class B or Class C shares and (6) of Class C shares where such investor's dealer
of record, due to the nature of the investor's account, notifies AIM
Distributors prior to the time of investment that the dealer waives the payment
otherwise payable to the dealer described in the fifth paragraph under the
caption "Terms and Conditions of Purchase of the AIM Funds -- All Groups of AIM
Funds."
Waiver category (1) above applies only to redemptions of Class B or Class C
shares held at the time of death or initial determination of post-purchase
disability.
Waiver category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or
beneficiaries who are age 70-1/2 or older, and only with respect to that
portion of such distributions which does not exceed 12% annually of the
participant's or beneficiary's account value;
(ii) in kind transfers of assets where the participant or beneficiary
notifies AIM Distributors of such transfer no later than the time such
transfer occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement
Plan invested in Class B or Class C shares of one or more Multiple Class
Funds;
MCF 10/97
A-14
<PAGE> 29
(iv) tax-free returns of excess contributions or returns of excess
deferral amounts; and
(v) distributions upon the death or disability (as defined in the
Code) of the participant or beneficiary.
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B and Class C shares of a Multiple Class Fund and purchases
of shares of the No Load Funds and Lower Load Funds, A CONTINGENT DEFERRED SALES
CHARGE OF 1% APPLIES TO PURCHASES OF $1,000,000 OR MORE THAT ARE REDEEMED WITHIN
18 MONTHS OF THE DATE OF PURCHASE. For a description of the AIM Funds
participating in this program, see "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions." This charge will be 1% of the
lesser of the value of the shares redeemed (excluding reinvested dividends and
capital gain distributions) or the total original cost of such shares. In
determining whether a contingent deferred sales charge is payable, and the
amount of any such charge, shares not subject to the contingent deferred sales
charge are redeemed first (including shares purchased by reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-MONTH PERIOD (i) shares of any Load
Fund, Class A shares of AIM ADVISOR CASH MANAGEMENT FUND or AIM Cash Reserve
Shares of AIM MONEY MARKET FUND which were acquired through an exchange of
shares which previously were subject to the 1% contingent deferred sales charge
will be credited with the period of time such exchanged shares were held, and
(ii) shares of any Load Fund which are subject to the 1% contingent deferred
sales charge and which were acquired through an exchange of shares of a Lower
Load Fund or a No Load Fund which previously were not subject to the 1%
contingent deferred sales charge will not be credited with the period of time
such exchanged shares were held. The charge will be waived in the following
circumstances: (1) redemptions of shares by employee benefit plans ("Plans")
qualified under Sections 401 or 457 of the Code, or Plans created under Section
403(b) of the Code and sponsored by nonprofit organizations as defined under
Section 501(c)(3) of the Code, where shares are being redeemed in connection
with employee terminations or withdrawals, and (a) the total amount invested in
a Plan is at least $1,000,000, (b) the sponsor of a Plan signs a letter of
intent to invest at least $1,000,000 in one or more of the AIM Funds, or (c) the
shares being redeemed were purchased by an employer-sponsored Plan with at least
100 eligible employees; provided, however, that Plans created under Section
403(b) of the Code which are sponsored by public educational institutions shall
qualify under (a), (b) or (c) above on the basis of the value of each Plan
participant's aggregate investment in the AIM Funds, and not on the aggregate
investment made by the Plan or on the number of eligible employees; (2)
redemptions of shares following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at least
$1,000,000; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of record, due to the nature of
the investor's account, notifies AIM Distributors prior to the time of
investment that the dealer waives the payments otherwise payable to the dealer
as described in the third paragraph under the caption "Terms and Conditions of
Purchase of the AIM Funds -- All Groups of AIM Funds"; and (5) pursuant to a
Systematic Withdrawal Plan, provided that amounts withdrawn under such plan do
not exceed on an annual basis 12% of the value of the shareholder's investment
in Class A shares at the time the shareholder elects to participate in the
Systematic Withdrawal Plan.
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnerships, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
In addition to these requirements, shareholders who have invested in a fund to
establish an IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares: (a) a statement
as to whether or not the shareholder has attained age 59- 1/2; and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or wired to the pre-authorized bank
account as indicated on the account application; (b) there has been no change of
address of record on the account within the preceding 30 days; (c) the shares to
be redeemed are not in certificate form; (d) the person requesting the
redemption can provide proper identification information; and (e) the proceeds
of the redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM
MCF 10/97
A-15
<PAGE> 30
Distributors has made arrangements with certain dealers and investment advisors
to accept telephone instructions for the redemption of shares. AIM Distributors
reserves the right to impose conditions on these dealers and investment
advisors, including the condition that they enter into agreements (which contain
additional conditions with respect to the redemption of shares) with AIM
Distributors. The Transfer Agent and AIM Distributors will not be liable for any
loss, expense or cost arising out of any telephone redemption request effected
in accordance with the authorization set forth at that item of the account
application if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions if they do not follow reasonable procedures for verification of
telephone transactions. Such reasonable procedures may include recordings of
telephone transactions (maintained for six months), requests for confirmation of
the shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transaction.
EXPEDITED REDEMPTIONS (AIM MONEY MARKET FUND ONLY). If a redemption order is
received prior to 11:30 a.m. Eastern Time, the redemption will be effective on
that day and AIM MONEY MARKET FUND will endeavor to transmit payment on that
same business day. If the redemption order is received after 11:30 a.m. and
prior to NYSE Close, the redemption will be made at the next determined net
asset value and payment will generally be transmitted on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND, AIM ADVISOR CASH MANAGEMENT
FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND). After completing the
appropriate authorization form, shareholders may use checks to effect
redemptions from AIM TAX-EXEMPT CASH FUND, AIM ADVISOR CASH MANAGEMENT FUND and
the AIM Cash Reserve Shares of AIM MONEY MARKET FUND. This privilege does not
apply to retirement accounts or qualified plans. Checks may be drawn in any
amount of $250 or more. Checks drawn against insufficient shares in the account,
against shares held less than ten business days, or in amounts of less than the
applicable minimum will be returned to the payee. The payee of the check may
cash or deposit it in the same way as an ordinary bank check. When a check is
presented to the Transfer Agent for payment, the Transfer Agent will cause a
sufficient number of shares of such fund to be redeemed to cover the amount of
the check. Shareholders are entitled to dividends on the shares redeemed through
the day on which the check is presented to the Transfer Agent for payment.
TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds
(other than AIM MONEY MARKET FUND) are redeemed at their net asset value next
computed after a request for redemption in proper form (including signature
guarantees and other required documentation for written redemptions) is received
by the Transfer Agent, except that shares that are subject to a contingent
deferred sales charge, may be subject to the imposition of deferred sales
charges that will be deducted from the redemption proceeds. See "Multiple
Distribution System" and "Contingent Deferred Sales Charge Program for Large
Purchases." Orders for the redemption of shares received in proper form prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer's failure to
submit a request for redemption within the prescribed time frame will be borne
by that dealer. Telephone redemption requests must be made by NYSE Close on any
business day of an AIM Fund and will be confirmed at the price determined as of
the close of that day. No AIM Fund will accept requests which specify a
particular date for redemption or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally mailed within seven
days following the redemption date. However, in the event of a redemption of
shares purchased by check, the investor may be required to wait up to ten
business days before the redemption proceeds are sent. See "Terms and Conditions
of Purchase of the AIM Funds -- Timing of Purchase Orders." A charge for special
handling (such as wiring of funds or expedited delivery services) may be made by
the Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent by wire to
other than the bank of record for the account; (4) redemptions requesting
proceeds to be sent to a new address or an address that has been changed within
the past 30 days; (5) requests to transfer the registration of shares to another
owner; (6) telephone exchange and telephone redemption authorization forms; (7)
changes in previously designated wiring instructions; and (8) written
redemptions or exchanges of shares previously reported as lost, whether or not
the redemption amount is under $50,000 or the proceeds are to be sent to the
address of record. These requirements may be waived or modified upon notice to
shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the Securities and
Exchange Commission ("SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as
MCF 10/97
A-16
<PAGE> 31
certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client
Services Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES AND AIM LIMITED MATURITY TREASURY
SHARES ONLY). Within 90 days of a redemption, a shareholder may invest all or
part of the redemption proceeds in Class A shares of any AIM Fund (except Class
A shares of AIM ADVISOR CASH MANAGEMENT FUND) and AIM LIMITED MATURITY TREASURY
SHARES at the net asset value next computed after receipt by the Transfer Agent
of the funds to be reinvested; provided, however, if the redemption was made
from AIM LIMITED MATURITY TREASURY SHARES or Class A shares of AIM TAX-FREE
INTERMEDIATE FUND, the reinvested proceeds will be subject to the difference in
sales charge between the shares redeemed and the shares the proceeds are
reinvested in. The shareholder must ask the Transfer Agent for such privilege at
the time of reinvestment. A realized gain on the redemption is taxable, and
reinvestment may alter any capital gains payable. If there has been a loss on
the redemption and shares of the same fund are repurchased, all of the loss may
not be tax deductible, depending on the timing and amount reinvested. Under the
Code, if the redemption proceeds of fund shares on which a sales charge was paid
are reinvested in (or exchanged for) shares of another AIM Fund at a reduced
sales charge within 90 days of the payment of the sales charge, the
shareholder's basis in the fund shares redeemed may not include the amount of
the sales charge paid, thereby reducing the loss or increasing the gain
recognized from the redemption; however, the shareholder's basis in the fund
shares purchased will include the sales charge. Each AIM Fund may amend, suspend
or cease offering this privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation. This privilege may only be
exercised once each year by a shareholder with respect to each AIM Fund.
Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares and who subsequently reinvest a portion or
all of the value of the redeemed shares in Class A shares of any AIM Fund within
90 days after such redemption may do so at net asset value if such privilege is
claimed at the time of reinvestment. Such reinvested proceeds will not be
subject to either a front-end sales charge at the time of reinvestment or an
additional contingent deferred sales charge upon subsequent redemption. In order
to exercise this reinvestment privilege, the shareholder must notify the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B or Class C shares.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon Eastern Time and NYSE Close with
respect to AIM MONEY MARKET FUND), on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an AIM Fund's share
will be determined as of the close of the NYSE on such day. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE.The net asset
value per share is calculated by subtracting a class' liabilities from its
assets and dividing the result by the total number of class shares outstanding.
The determination of net asset value per share is made in accordance with
generally accepted accounting principles. Among other items, liabilities include
accrued expenses and dividends payable, and total assets include portfolio
securities valued at their market value, as well as income accrued but not yet
received. 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 fund's officers and in accordance with methods which are specifically
authorized by its governing Board of Directors or Trustees. Short-term
obligations with maturities of 60 days or less, and the securities held by the
Money Market Funds, are valued at amortized cost as reflecting fair value. AIM
MUNICIPAL BOND FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT and AIM TAX-FREE INTERMEDIATE FUND value variable rate securities
that have an unconditional demand or put feature exercisable within seven days
or less at par, which reflects the market value of such securities.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund.
MCF 10/97
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<PAGE> 32
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund's policy regarding the payment of dividends and distributions is
set forth below.
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM ADVISOR CASH MANAGEMENT FUND.......... declared daily; paid monthly annually annually
AIM ADVISOR FLEX FUND..................... declared and paid quarterly quarterly annually
AIM ADVISOR INCOME FUND................... declared and paid monthly monthly annually
AIM ADVISOR INTERNATIONAL VALUE FUND...... declared and paid annually annually annually
AIM ADVISOR LARGE CAP VALUE FUND.......... declared and paid quarterly quarterly annually
AIM ADVISOR MULTIFLEX FUND................ declared and paid quarterly quarterly annually
AIM ADVISOR REAL ESTATE FUND.............. declared and paid quarterly quarterly annually
AIM AGGRESSIVE GROWTH FUND................ declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BLUE CHIP FUND........................ declared and paid annually annually annually
AIM CAPITAL DEVELOPMENT FUND.............. declared and paid annually annually annually
AIM CHARTER FUND.......................... declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................... declared and paid annually annually annually
AIM GLOBAL AGGRESSIVE GROWTH FUND......... declared and paid annually annually annually
AIM GLOBAL GROWTH FUND.................... declared and paid annually annually annually
AIM GLOBAL INCOME FUND.................... declared daily; paid monthly annually annually
AIM GLOBAL UTILITIES FUND................. declared daily; paid monthly annually annually
AIM GROWTH FUND........................... declared and paid annually annually annually
AIM HIGH INCOME MUNICIPAL FUND............ declared daily; paid monthly annually annually
AIM HIGH YIELD FUND....................... declared daily; paid monthly annually annually
AIM INCOME FUND........................... declared daily; paid monthly annually annually
AIM INTERMEDIATE GOVERNMENT FUND.......... declared daily; paid monthly annually annually
AIM INTERNATIONAL EQUITY FUND............. declared and paid annually annually annually
AIM LIMITED MATURITY TREASURY SHARES...... declared daily; paid monthly annually annually
AIM MONEY MARKET FUND..................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................... declared daily; paid monthly annually annually
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT... declared daily; paid monthly annually annually
AIM TAX-EXEMPT CASH FUND.................. declared daily; paid monthly at least annually annually
AIM TAX-FREE INTERMEDIATE FUND............ declared daily; paid monthly annually annually
AIM VALUE FUND............................ declared and paid annually annually annually
AIM WEINGARTEN FUND....................... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods.
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to a class are reinvested in additional
shares of such class, absent an election by a shareholder to receive cash or to
have such dividends and distributions reinvested in like shares of another
Multiple Class Fund, to the extent permitted. For funds that do not declare a
dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the ex-dividend date. For funds that declare
a dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or the
dividend portion thereof, in cash, or to invest such dividends and distributions
in shares of another fund in the AIM Funds; provided that (i) dividends and
distributions attributable to Class B shares may only be reinvested in Class B
shares, (ii) dividends and distributions attributable to Class C shares may only
be reinvested in Class C shares (except Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND) (iii) dividends and distributions attributable to Class A
shares or AIM LIMITED MATURITY TREASURY SHARES may not be reinvested in Class A
shares of AIM ADVISOR CASH MANAGEMENT FUND or Class B or Class C shares, and
(iv) dividends and distributions attributable to the AIM Cash Reserve Shares of
AIM MONEY MARKET FUND may not be reinvested in the Class A shares of that Fund
or in any Class B or Class C shares. Investors who have not previously selected
such a reinvestment option on the account application form may contact the
Transfer Agent at any time to obtain a form to authorize such reinvestments in
another AIM Fund. Such reinvestments into the AIM Funds are not subject to sales
charges, and shares so purchased are automatically credited to the account of
the shareholder.
Dividends on Class B and Class C shares (except Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) are expected to be lower than those for Class A shares or
AIM Cash Reserve Shares because of higher distribution fees paid by Class B and
Class C shares
MCF 10/97
A-18
<PAGE> 33
(except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND). Dividends on all
shares may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
TAX MATTERS
Each AIM Fund has qualified and intends to qualify for treatment as a
regulated investment company under Subchapter M of the Code. As long as a fund
qualifies for this tax treatment, it is not subject to federal income taxes on
net investment income and capital gains that are distributed to shareholders.
Each fund, for purposes of determining taxable income, distribution requirements
and other requirements of Subchapter M, is treated as a separate corporation.
Therefore, no fund may offset its gains against another fund's losses and each
fund must individually comply with all of the provisions of the Code which are
applicable to its operations.
TAX TREATMENT OF DISTRIBUTIONS -- GENERAL. Because each AIM Fund intends to
distribute substantially all of its net investment income and net realized
capital gains to its shareholders, it is not expected that any such fund will be
required to pay any federal income tax. Each AIM Fund also intends to meet the
distribution requirements of the Code to avoid the imposition of a
non-deductible 4% excise tax calculated as a percentage of certain undistributed
amounts of taxable ordinary income and capital gain net income. Nevertheless,
shareholders normally are subject to federal income taxes, and any applicable
state and local income taxes, on the dividends and distributions received by
them from a fund whether in the form of cash or additional shares of a fund,
except for tax-exempt dividends paid by AIM MUNICIPAL BOND FUND, AIM HIGH INCOME
MUNICIPAL FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH
FUND, and AIM TAX-FREE INTERMEDIATE FUND (the "Tax-Exempt Funds") which are
exempt from federal tax. Dividends paid by a fund (other than capital gain
distributions) may qualify for the federal 70% dividends received deduction for
corporate shareholders to the extent of the qualifying dividends received by the
fund on domestic common or preferred stock. It is not likely that dividends
received from AIM ADVISOR CASH MANAGEMENT FUND, AIM ADVISOR INCOME FUND, AIM
ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR REAL ESTATE FUND, AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
SHARES, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND
OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND or AIM TAX-FREE INTERMEDIATE FUND will
qualify for this dividends received deduction. Shortly after the end of each
year, shareholders will receive information regarding the amount and federal
income tax treatment of all distributions paid during the year. Certain
dividends declared in October, November or December of a calendar year are
taxable to shareholders as though received on December 31 of that year if paid
to shareholders during January of the following calendar year. No gain or loss
will be recognized by shareholders upon the automatic conversion of Class B
shares of a Multiple Class Fund into Class A shares of such Fund. With respect
to tax-exempt shareholders, distributions from the Funds will not be subject to
federal income taxation to the extent permitted under the applicable
tax-exemption.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, SHAREHOLDERS OF A FUND MUST
FURNISH THE FUND WITH THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER
PENALTIES OF PERJURY THAT THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT
SUBJECT TO BACKUP WITHHOLDING FOR ANY REASON.
Under existing provisions of the Code, nonresident alien individuals, foreign
partnerships and foreign corporations may be subject to federal income tax
withholding at a 30% rate on ordinary income dividends and distributions (other
than exempt-interest dividends and capital gain dividends) and return of capital
distributions. Under applicable treaty law, residents of treaty countries may
qualify for a reduced rate of withholding or a withholding exemption.
DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE OR LOCAL TAX
LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED HEREIN.
ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE STATEMENT OF ADDITIONAL
INFORMATION.
TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may give rise to a federal alternative minimum tax liability, may
affect the amount of social security benefits subject to federal income tax, may
affect the deductibility of inter-
MCF 10/97
A-19
<PAGE> 34
est on certain indebtedness of the shareholder, and may have other collateral
federal income tax consequences. The Tax-Exempt Funds may invest in Municipal
Securities the interest on which will constitute an item of tax preference and
which therefore could give rise to a federal alternative minimum tax liability
for shareholders, and may invest up to 20% of their net assets in such
securities and other taxable securities. For additional information concerning
the alternative minimum tax and certain collateral tax consequences of the
receipt of exempt-interest dividends, see the Statements of Additional
Information applicable to the Tax-Exempt Funds.
The Tax-Exempt Funds may pay dividends to shareholders which are taxable, but
will endeavor to avoid investments which would result in taxable dividends. The
percentage of dividends which constitute exempt-interest dividends, and the
percentage thereof (if any) which constitute an item of tax preference, will be
determined annually. This percentage may differ from the actual percentages for
any particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional shares.
Distributions of net long-term capital gains will be taxable as long-term
capital gains, whether received in cash or additional shares, and regardless of
the length of time a particular shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM INTERMEDIATE GOVERNMENT FUND and AIM LIMITED MATURITY TREASURY
SHARES -- SPECIAL TAX INFORMATION. Certain states exempt from state income taxes
dividends paid by mutual funds out of interest on U.S. Treasury and certain
other U.S. Government obligations, and investors should consult with their own
tax advisors concerning the availability of such exemption.
AIM ADVISOR INTERNATIONAL VALUE FUND, AIM INTERNATIONAL EQUITY FUND, AIM
GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND
AND AIM GLOBAL UTILITIES FUND -- SPECIAL TAX INFORMATION. For taxable years in
which it is eligible to do so, each of these funds may elect to pass through to
shareholders credits for foreign taxes paid. If the fund makes such an election,
a shareholder who receives a distribution (1) will be required to include in
gross income his proportionate share of foreign taxes allocable to the
distribution and (2) may claim a credit or deduction for such share for his
taxable year in which the distribution is received, subject to the general
limitations imposed on the allowance of foreign tax credits and deductions.
Shareholders should also note that certain gains or losses attributable to
fluctuations in exchange rates or foreign currency forward contracts may
increase or decrease the amount of income of the fund available for distribution
to shareholders, and should note that if such losses exceed other income during
a taxable year, the fund would not be able to pay ordinary income dividends.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM LIMITED MATURITY TREASURY SHARES,
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM
TAX-FREE INTERMEDIATE FUND, for which The Bank of New York, 90 Washington
Street, 11th Floor, New York, New York 10286, serves as custodian. Texas
Commerce Bank National Association, P.O. Box 2558, Houston, Texas 77252-8084,
serves as Sub-Custodian for retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each AIM Fund's transfer agent and dividend
payment agent.
LEGAL COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll,
Philadelphia, Pennsylvania, serves as counsel to the AIM Funds and passes upon
the legality of the shares offered pursuant to this Prospectus.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
MCF 10/97
A-20
<PAGE> 35
APPENDIX A
- --------------------------------------------------------------------------------
DESCRIPTIONS OF RATING CATEGORIES
The following are descriptions of ratings assigned by Moody's Investors
Service, Inc. ("Moody's") and Standard and Poor's Ratings Services ("S&P") to
certain debt securities in which AIM HIGH INCOME MUNICIPAL FUND may invest. See
the Statement of Additional Information for descriptions of other Moody's and
S&P rating categories and those of other rating agencies.
MOODY'S: Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. These are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements,
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
S&P: AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C -- Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the lowest degree of speculation and
C the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or large exposures
to adverse conditions.
A-21
<PAGE> 36
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for the Requester of Form W-9 (which can be obtained
from the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF 10/97
B-1
<PAGE> 37
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney-in-fact to surrender for redemption any and all unissued
shares held by the Transfer Agent in the designated account(s), or in any other
account with any of the AIM Funds, present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and
mailing address of the shares to be purchased are identical to the registration
of the shares being redeemed. An investor acknowledges by signing the form that
he understands and agrees that the Transfer Agent and AIM Distributors may not
be liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction. The Transfer Agent
reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone exchange privilege at any time without notice.
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by the Transfer Agent in the designated account(s), present
or future, with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption. An investor acknowledges by signing the
form that he understands and agrees that the Transfer Agent and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any exchanges must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "Exchange Privilege -- Exchanges
by Mail").
MCF 10/97
B-2
<PAGE> 38
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
Investment Advisor
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Custodian
The Bank of New York
90 Washington Street, 11th Floor
New York, NY 10286
Principal Underwriter
A I M Distributors, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Independent Accountants
KPMG Peat Marwick LLP
700 Louisiana
NationsBank Building
Houston, TX 77002
For more complete information about any other Fund in The AIM Family of Funds,
including charges and expenses, please call (800) 347-4246, or write to A I M
Distributors, Inc. and request a free prospectus. Please read the prospectus
carefully before you invest or send money.
<PAGE> 39
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor any
offers to buy be accepted prior to the time the registration statement becomes
effective. This Statement of Additional Information does not constitute a
prospectus.
Subject to Completion dated October 7, 1997
STATEMENT OF
ADDITIONAL INFORMATION
AIM TAX-EXEMPT FUNDS, INC.
AIM TAX-EXEMPT CASH FUND
AIM TAX-FREE INTERMEDIATE FUND
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM HIGH INCOME MUNICIPAL FUND
11 Greenway Plaza
Suite 100
Houston, Texas 77046
(713) 626-1919
---------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND IT
SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS FOR THE ABOVE-NAMED
FUNDS, A COPY OF WHICH MAY BE OBTAINED FROM AUTHORIZED DEALERS OR BY
WRITING A I M DISTRIBUTORS, INC., P.O. BOX 4739, HOUSTON, TEXAS 77210-4739,
OR BY CALLING (800) 347-4246
---------------
Statement of Additional Information Dated: December __, 1997
Relating to the Prospectuses Dated: August 1, 1997
for AIM Tax-Exempt Cash Fund, AIM Tax-Free Intermediate Fund and
AIM Tax-Exempt Bond Fund of Connecticut; and Dated: December __, 1997
for AIM High Income Municipal Fund
<PAGE> 40
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GENERAL INFORMATION ABOUT THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company and its Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Yield Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Total Return Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Historical Portfolio Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
INVESTMENT PROGRAM AND RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Municipal Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
When-Issued or Delayed Delivery Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Synthetic Municipal Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Variable or Floating Rate Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Investments in Securities Owned by Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . 10
Eligible Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Concentration of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investment in Non-Investment Grade Securities: AIM Tax-Exempt Bond Fund of Connecticut and AIM High Income
Municipal Fund Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Covered Call Options: AIM High Income Municipal Fund Only . . . . . . . . . . . . . . . . . . . . . . . . . 16
Put Options: AIM High Income Municipal Fund Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Combined Option Positions: AIM High Income Municipal Fund Only . . . . . . . . . . . . . . . . . . . . . . . 16
Futures Contracts: AIM Tax-Exempt Bond Fund of Connecticut and AIM High Income Municipal Fund Only . . . . . 16
Options on Futures Contracts: AIM Tax-Exempt Bond Fund of Connecticut and AIM High Income
Municipal Fund Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Risks as to Futures Contracts and Related Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
AIM High Income Municipal Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
The Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Shareholder Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Control Persons and Principal Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
HOW TO PURCHASE AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
i
<PAGE> 41
<TABLE>
<S> <C>
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
DESCRIPTION OF MONEY MARKET INSTRUMENTS (AIM Tax-Exempt Cash Fund Only) . . . . . . . . . . . . . . . . . . . . . . . 42
Money Market Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
RATINGS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS
</TABLE>
ii
<PAGE> 42
INTRODUCTION
AIM Tax-Exempt Funds, Inc. (formerly named AIM Tax-Free Funds, Inc.)
(the "Company") is a series mutual fund. The rules and regulations of the
United States Securities and Exchange Commission (the "SEC") require all mutual
funds to furnish prospective investors certain information concerning the
activities of the fund being considered for investment. This information is
included in two Prospectuses (the "Prospectuses"), one of which is dated August
1, 1997 and relates to the Class A shares of the Company's AIM TAX-EXEMPT CASH
FUND, AIM TAX-FREE INTERMEDIATE FUND, and AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, and one of which is dated December __, 1997 and relates to the
Class A, Class B and Class C shares of the Company's AIM HIGH INCOME MUNICIPAL
FUND (collectively, the "Funds" and each separately a "Fund"). Copies of the
Prospectuses and additional copies of this Statement of Additional Information
may be obtained without charge by writing the distributor of the Funds' shares,
A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739, Houston, Texas
77210-4739, or by calling (800) 347-4246. Investors must receive a Fund's
Prospectus before they invest in that Fund.
This Statement of Additional Information is intended to furnish
investors with additional information concerning the Funds. Some of the
information required to be in this Statement of Additional Information is also
included in the Funds' current Prospectuses. Additionally, the Prospectuses and
this Statement of Additional Information omit certain information contained in
the Company's Registration Statement filed with the SEC. Copies of the
Registration Statement, including items omitted from the Prospectuses and this
Statement of Additional Information, may be obtained from the SEC by paying the
charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE COMPANY
THE COMPANY AND ITS SHARES
The Company was incorporated under the laws of the State of Maryland
on May 4, 1993, and is registered with the SEC as an open-end series management
investment company.
On October 15, 1993, pursuant to an Agreement and Plan of
Reorganization between the Company and AIM Funds Group, a Massachusetts
business trust ("AFG"), the Company's AIM TAX-EXEMPT CASH FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT succeeded to the assets and assumed the
liabilities of AFG's AIM Tax-Exempt Cash Fund and AIM Tax-Exempt Bond Fund of
Connecticut (the "AFG Funds"), respectively. Similarly, on October 15, 1993,
pursuant to an Agreement and Plan of Reorganization between the Company and
Tax-Free Investments Co., a Maryland corporation ("TFIC"), the Company's AIM
TAX-FREE INTERMEDIATE FUND (named the Intermediate Portfolio prior to September
25, 1997) succeeded to the assets and assumed the liabilities of TFIC's
Intermediate Portfolio (together with the AFG Funds, the "Predecessor Funds").
All historical financial and other information contained in this Statement of
Additional Information for periods prior to October 15, 1993, relating to such
Funds is that of the Predecessor Funds.
Shares of common stock of the Company are redeemable at their net
asset value at the option of the shareholder or at the option of the Company in
certain circumstances. Class A shares of AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM TAX-FREE INTERMEDIATE FUND and AIM HIGH INCOME MUNICIPAL FUND
purchased in amounts of $1 million or more may be subject to a contingent
deferred sales charge under certain circumstances. For information concerning
the methods of redemption and the rights of share ownership, investors should
consult the Prospectuses under the captions "General Information" and "How to
Redeem Shares."
1
<PAGE> 43
As used in the Prospectuses, the term "majority of the outstanding
shares" of the Company or a Fund means, respectively, the vote of the lesser of
(i) 67% or more of the shares of the Company or the Fund present at a meeting
of shareholders, if the holders of more than 50% of the outstanding shares of
the Company or the Fund are present or represented by proxy or (ii) more than
50% of the outstanding shares of the Company or the Fund.
Each share of a Fund is entitled to one vote, to participate equally
in dividends and distributions declared by the Board of Directors with respect
to the Fund and, upon liquidation of a Fund, to participate proportionately in
the Fund's net assets remaining after satisfaction of the Fund's outstanding
liabilities. Fractional shares have proportionately the same rights, including
voting rights, as do full shares.
The assets received by the Company for the issue or sale of shares of
each Fund, and all income, earnings, profits, losses and proceeds thereof,
subject only to the rights of creditors, are specifically allocated to the
appropriate Fund. They constitute the underlying assets of each Fund, are
required to be segregated on the Company's books of account, and are to be
charged with the expenses of such Fund. Any general expenses of the Company not
readily identifiable as belonging to a particular Fund are allocated by or
under the direction of the Board of Directors, primarily on the basis of
relative net assets, or other relevant factors.
PERFORMANCE INFORMATION
YIELD CALCULATIONS
AIM TAX-FREE INTERMEDIATE FUND, AIM HIGH INCOME MUNICIPAL FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT
Calculations of yield will take into account the total income earned
by the AIM TAX-FREE INTERMEDIATE FUND, AIM HIGH INCOME MUNICIPAL FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, respectively, including taxable income, if
any; however, all three Funds intend to invest their respective assets so that
100% of annual interest income will be tax-exempt.
Yields for each Fund used in advertising are computed as follows: (a)
divide the Fund's income for a given 30- day or one-month period, net of
expenses, by the average number of shares entitled to receive dividends during
the period; (b) divide the figure arrived at in step (a) by the offering price
of the Fund's shares (including the maximum sales charge, if any) at the end of
the period; and (c) annualize the result (assuming compounding of income) in
order to arrive at an annual percentage rate. For purposes of such yield
quotation, income is calculated in accordance with standardized methods
applicable to all stock and bond mutual funds. In general, interest income is
reduced with respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and is
increased with respect to bonds trading at a discount by adding a portion of
the discount to daily income. Capital gains and losses are excluded from this
yield calculation.
A Fund's tax equivalent yield is the rate an investor would have to
earn from a fully taxable investment in order to equal the Fund's yield after
taxes. Tax equivalent yields are calculated by dividing the Fund's yield by one
minus a stated tax rate (if only a portion of the Fund's yield was tax-exempt,
only that portion would be adjusted in the calculation).
A Fund also may quote its distribution rate, which expresses the
historical amount of income the Fund paid as dividends to its shareholders as a
percentage of the Fund's offering price. The distribution rates for the Class A
shares of AIM TAX-FREE INTERMEDIATE FUND and AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT for the thirty days ended March 31, 1997, were 4.70% and 4.88%,
respectively. AIM HIGH INCOME MUNICIPAL FUND had not commenced operations as of
March 31, 1997.
2
<PAGE> 44
Income calculated for purposes of calculating a Fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding assumed in
yield calculations, the yield quoted for a Fund may differ from the rate of
distributions from the Fund paid over the same period or the rate of income
reported in the Fund's financial statements.
AIM TAX-EXEMPT CASH FUND
The standard formula for calculating annualized yield for AIM
TAX-EXEMPT CASH FUND is as follows:
Y = (V -- V ) x (V -- V ) 365
1 0 1 0
---------- --------------
V V 7
0 0
Where Y = annualized yield.
V = the value of a hypothetical pre-existing account
0 in the Fund having a balance of one share at the
beginning of a stated seven-day period.
V = the value of such an account at the end of the
1 stated period.
The standard formula for calculating effective annualized yield for
the Fund is as follows:
EY = (Y + 1(365/7) - 1
Where EY = effective annualized yield.
Y = annualized yield, as determined above.
For purposes of the annualized yield and effective annualized yield,
the net change in the value of the hypothetical AIM TAX-EXEMPT CASH FUND
account reflects the value of additional shares purchased with dividends from
the original shares and any such additional shares, and all fees charged, other
than non-recurring account or sales charges, to all shareholder accounts in
proportion to the length of the base period and the Fund's average account
size, but does not include realized gains or losses or unrealized appreciation
and depreciation.
Tax-equivalent yield for the Fund will be calculated by dividing that
portion of the yield of the Fund (as determined above) which is tax-exempt by
one minus a stated income tax rate and adding the product to that portion of
the yield that is not tax-exempt.
TOTAL RETURN CALCULATIONS (All Funds)
Total returns quoted in advertising reflect all aspects of a Fund's
return, including the effect of reinvesting dividends and capital gain
distributions, and any change in the Fund's net asset value per share over the
period. Average annual total returns are calculated by determining the growth
or decline in value of a hypothetical investment in a Fund over a stated period
of time, and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant over the period. While average annual total returns are a
convenient means of comparing investment alternatives, investors should realize
that a Fund's performance is not constant over time, but changes from year to
year, and that average annual total return does not represent the actual
year-to-year performance of a Fund.
In addition to average annual total return, a Fund may quote
unaveraged or cumulative total return reflecting the simple change in value of
an investment over a stated period. Average annual and cumulative total returns
may be quoted as a percentage or as a dollar amount, and may be calculated for
a single investment, a series of investments, and/or a series of redemptions,
over any time period. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share
3
<PAGE> 45
price) in order to illustrate the relationship of these factors and their
contributions to total return. Total returns, yields, and other performance
information may be quoted numerically or in tables, graphs or similar
illustrations. Total returns may be quoted with or without taking any
applicable maximum sales charge or contingent deferred sales charge into
account. The total returns included for the Funds do not include applicable
maximum sales charges and contingent deferred sales charges. Excluding a sales
charge from a total return calculation produces a higher total return figure.
HISTORICAL PORTFOLIO RESULTS
A Fund's performance may be compared in advertising to the performance
of other mutual funds in general, or of particular types of mutual funds,
especially those with similar objectives. Such performance data may be prepared
by Lipper Analytical Services, Inc. and other independent services which
monitor the performance of mutual funds. A Fund may also advertise mutual fund
performance rankings which have been assigned to it by such monitoring
services.
A Fund's performance may also be compared in advertising to the
performance of comparative benchmarks such as the Consumer Price Index, the
Standard & Poor's 500 Stock Index, and fixed-price investments such as bank
certificates of deposit and/or savings accounts. In addition, a Fund's
long-term performance may be described in advertising in relation to
historical, political and/or economic events. An investor should be aware that
an investment in a Fund is subject to risks not present in ownership of a
certificate of deposit, due to greater risk of loss of capital.
From time to time, sales literature and/or advertisements for any of
the Funds may disclose (i) the largest holdings in the Fund's portfolio, (ii)
certain selling group members and/or (iii) certain institutional shareholders.
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other mutual funds and other potential
investments, investors should note that the methods of computing performance of
other potential investments are not necessarily comparable to the methods
employed by a Fund.
From time to time, the Funds' sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. These topics
include, but are not limited to, literature addressing general information
about mutual funds, variable annuities, dollar-cost averaging, stocks, bonds,
money markets, certificates of deposit, asset allocation, tax-free investing,
college planning and inflation.
AIM TAX-EXEMPT CASH FUND
The annualized and effective annualized yields for the Class A shares
for the seven-day period ended March 31, 1997, were 2.85% and 2.89%,
respectively. Assuming a tax rate of 39.6%, these yields for the Class A shares
of the Fund on a tax-equivalent basis were 4.19% and 4.25%, respectively.
The annual average total returns of the Class A shares of the Fund for
the one, five and ten-year periods ended March 31, 1997, were 2.82%, 2.45% and
3.53%, respectively. The cumulative total returns of the Class A shares of the
Fund for the one, five and ten-year periods ended March 31, 1997, were 2.82%,
12.85% and 41.43%, respectively.
AIM TAX-FREE INTERMEDIATE FUND
The following chart shows the total returns of the Class A shares of
the Fund for the one and five-year periods ended March 31, 1997, and the period
from May 11, 1987 (date operations commenced) through March 31, 1997:
4
<PAGE> 46
<TABLE>
<CAPTION>
Average
Period Annual Return Cumulative Return
- ------ ------------- -----------------
<S> <C> <C>
One year ended 3/31/97 3.29% 3.29%
Five years ended 3/31/97 5.57% 31.14%
5/11/87 through 3/31/97 6.22% 81.53%
</TABLE>
The 30-day yield of the Fund's Class A shares as of March 31, 1997,
was 3.55%, with a corresponding tax-equivalent yield of 5.88%, assuming a tax
rate of 39.6%.
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
The following chart shows the total returns of the Class A shares of
the Fund for the one and five-year periods ended March 31, 1997, and the period
from October 3, 1989 (date operations commenced) through March 31, 1997:
<TABLE>
<CAPTION>
Average
Period Annual Return Cumulative Return
- ------ ------------- -----------------
<S> <C> <C>
One year ended 3/31/97 -0.14% -0.14%
Five years ended 3/31/97 5.54% 30.94%
10/03/89 through 3/31/97 6.46% 59.79%
</TABLE>
The 30-day yield of the Fund's Class A shares as of March 31, 1997,
was 4.33%, with a corresponding Connecticut individual's tax-equivalent yield
of 7.51%, assuming a federal tax rate of 39.6%, and a state tax rate of 4.5%.
AIM HIGH INCOME MUNICIPAL FUND
The Fund had not commenced operations as of March 31, 1997.
PORTFOLIO TRANSACTIONS
A I M Advisors, Inc. ("AIM") is responsible for decisions to buy and
sell securities for the Funds, selection of broker-dealers and negotiation of
commission rates. Since purchases and sales of portfolio securities by the
Funds are usually principal transactions, each Fund incurs little or no
brokerage commissions. Portfolio securities are normally purchased directly
from the issuer or from a market maker for the securities. The purchase price
paid to dealers serving as market makers may include a spread between the bid
and asked prices. The Funds also may purchase securities from underwriters at
prices which include a commission paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to
obtain the best net price and the most favorable execution of the order. To the
extent that the execution and prices offered by more than one dealer are
comparable, AIM may, in its discretion, effect transactions with dealers that
furnish statistical, research or other information or services which AIM deems
to be beneficial to the Funds' investment programs. Such research services
supplement AIM's own research. Research services may include the following:
statistical and background information on U.S. and foreign economies, industry
groups and individual companies; forecasts and interpretations with respect to
U.S. and foreign economies, money markets, fixed income markets, equity
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indices and investment
accounts; information concerning prices of securities; the providing of
equipment used to communicate research information; the arranging of meetings
with
5
<PAGE> 47
management of companies; and the providing of access to consultants who supply
research information. Certain research services furnished by dealers may be
useful to AIM with clients other than the Funds. Similarly, any research
services received by AIM through placement of portfolio transactions of other
clients may be of value to AIM in fulfilling their obligations to a Fund. AIM
is of the opinion that the material received is beneficial in supplementing
AIM's research and analysis; and therefore, it may benefit a Fund by improving
the quality of AIM's investment advice. The advisory fee paid by a Fund is not
reduced because AIM receives such services; however, because AIM must evaluate
information received as a result of such services, receipt of such services
does not reduce AIM's workload.
Under the Investment Company Act of 1940, as amended (the "1940 Act"),
certain persons affiliated with the Company are prohibited from dealing with
the Funds as principal in any purchase or sale of securities unless an
exemptive order allowing such transactions is obtained from the SEC. The 1940
Act also prohibits the Funds from purchasing a security being publicly
underwritten by a syndicate of which certain persons affiliated with the
Company are members except in accordance with certain conditions. These
conditions may restrict the ability of a Fund to purchase municipal securities
being publicly underwritten by such syndicate, and the Fund may be required to
wait until the syndicate has been terminated before buying such securities. At
such time, the market price of the securities may be higher or lower than the
original offering price. A person affiliated with the Company may, from time to
time, serve as placement agent or financial advisor to an issuer of municipal
securities and be paid a fee by such issuer. Each Fund may purchase such
municipal securities directly from the issuer, provided that the purchase is
reviewed by the Board of Directors and a determination is made that the
placement fee or other remuneration paid by the issuer to a person affiliated
with the Company is fair and reasonable in relation to the fees charged by
others performing similar services.
From time to time, an identical security may be sold by an investment
company managed by AIM (an "AIM Fund") or another investment account advised by
AIM or A I M Capital Management, Inc. ("AIM Capital") and simultaneously
purchased by another AIM Fund or another investment account advised by AIM or
AIM Capital, when such transactions comply with applicable rules and
regulations and are deemed consistent with the investment objective(s) and
policies of the investment accounts involved. Procedures pursuant to Rule 17a-7
under the 1940 Act regarding transactions between investment accounts advised
by AIM or AIM Capital have been adopted by the Boards of Directors/Trustees of
the various AIM Funds. Although such transactions may result in custodian, tax
or other related expenses, no brokerage commissions or other direct transaction
costs are generated by transactions among the investment accounts advised by
AIM or AIM Capital.
Provisions of the 1940 Act and rules and regulations thereunder have
also been construed to prohibit the Funds from purchasing securities or
instruments from, or selling securities or instruments to, any holder of 5% or
more of the voting securities of any investment company managed or advised by
AIM. The Company has obtained an order of exemption from the SEC which permits
the Funds to engage in certain transactions with certain 5% holders if the
Funds comply with conditions and procedures designed to ensure that such
transactions are executed at fair market value and present no conflicts of
interest.
Some of the AIM Funds may have objectives similar to those of the
Funds. It is possible that at times identical securities will be appropriate
for investment by a Fund and by one or more of the other AIM Funds. The
position of each account, however, in the securities of the same issue may vary
and the length of time that each account may choose to hold its investment in
the securities of the same issue may likewise vary. The timing and amount of
purchase by each account will also be determined by its cash position. If the
purchase or sale of securities consistent with the investment policies of a
Fund and one or more of the other AIM Funds is considered at or about the same
time, transactions in such securities will be allocated among the Fund and the
other AIM Funds in a manner deemed equitable by AIM. AIM may combine such
transactions, in accordance with applicable laws and regulations, in order to
obtain the best net price and most favorable execution. Simultaneous
transactions could, however, adversely affect the ability of a Fund to obtain
or dispose of the full amount of a security which it seeks to purchase or sell.
6
<PAGE> 48
In some cases the procedure for allocating portfolio transactions
among the Funds and the other AIM Funds could have an adverse effect on the
price or amount of securities available to a Fund. In making such allocations,
the main factors considered by AIM are the respective investment objectives and
policies of the Funds and the other AIM Funds, the relative size of portfolio
holdings by the same or comparable securities, the availability of cash for
investment, the size of investment commitments generally held and the judgments
of the persons responsible for recommending the investment.
The Funds paid no brokerage commissions to brokers affiliated with the
Funds during the past three fiscal years of each Fund.
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
Information concerning each Fund's investment objective and operating
policies is set forth in the applicable Prospectus. The principal features of
each Fund's investment program and the primary risks associated with that
investment program are also discussed in the applicable Prospectus. There can
be no assurance that a Fund will achieve its objective. The values of the
securities in which a Fund invests fluctuate based upon interest rates, the
financial stability of the issuer and other market factors. The following is a
more detailed description of the portfolio instruments eligible for purchase by
the Funds, which augments the discussion of the Funds' investment programs
which appears under the caption "Investment Program" in the Prospectuses.
Subsequent to its purchase by a Fund, an issue of Municipal Securities
may cease to be rated by Moody's Investors Service, Inc. ("Moody's") or
Standard and Poor's Ratings Services ("S&P"), or another nationally recognized
statistical rating organization ("NRSRO"), or the rating of such a security may
be reduced below the minimum rating required for purchase by a Fund. Neither
event would require a Fund to dispose of the security, but AIM will consider
such events to be relevant in determining whether the Fund should continue to
hold the security. To the extent that the ratings applied by Moody's, S&P or
another NRSRO to Municipal Securities may change as a result of changes in
these rating systems, a Fund will attempt to use comparable ratings as
standards for its investments in Municipal Securities in accordance with the
investment policies described herein.
The Funds may from time to time invest in taxable short-term
investments ("Taxable Investments") consisting of obligations of the U.S.
Government, its agencies or instrumentalities, and repurchase
agreements/reverse repurchase agreements (instruments under which the seller
agrees to repurchase the security at a specified time and price) relating
thereto; commercial paper rated within the highest rating category by a
recognized rating agency; and certificates of deposit of domestic banks with
assets of at least $1.5 billion or more as of the date of their most recently
published financial statements. A Fund may invest in Taxable Investments, for
example, due to market conditions or pending the investment of proceeds from
the sale of its shares or proceeds from the sale of portfolio securities or in
anticipation of redemptions. Although interest earned from Taxable Investments
will be taxable to shareholders as ordinary income, the Funds generally intend
to minimize taxable income through investment, when possible, in short-term
tax-exempt securities, which may include shares of other investment companies
whose dividends are tax-exempt.
MUNICIPAL SECURITIES
"Municipal Securities" include debt obligations issued to obtain funds
for various public purposes, including the construction of a wide range of
public facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works.
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Other public purposes for which Municipal Securities may be issued
include the refunding of outstanding obligations, obtaining funds for general
operating expenses and lending such funds to other public institutions and
facilities. In addition, certain types of industrial development bonds are
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated housing
facilities, airport, mass transit, industrial, port or parking facilities, air
or water pollution control facilities and certain local facilities for water
supply, gas, electricity or sewage or solid waste disposal. The interest paid
on such bonds may be exempt from federal income tax, although current federal
tax laws place substantial limitations on the purposes and size of such issues.
Such obligations are considered to be Municipal Securities provided that the
interest paid thereon, in the opinion of bond counsel, qualifies as exempt from
federal income tax. However, interest on Municipal Securities may give rise to
a federal alternative minimum tax liability and may have other collateral
federal income tax consequences. See "Dividends, Distributions and Tax Matters
- - Tax Matters."
The two major classifications of Municipal Securities are bonds and
notes. Bonds may be further classified as "general obligation" or "revenue"
issues. General obligation bonds are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue bonds are payable from the revenues derived from a particular facility
or class of facilities, and in some cases, from the proceeds of a special
excise or other specific revenue source, but not from the general taxing power.
Tax-exempt industrial development bonds are in most cases revenue bonds and do
not generally carry the pledge of the credit of the issuing municipality. Notes
are short-term instruments which usually mature in less than two years. Most
notes are general obligations of the issuing municipalities or agencies and are
sold in anticipation of a bond sale, collection of taxes or receipt of other
revenues. There are, of course, variations in the risks associated with
Municipal Securities, both within a particular classification and between
classifications. The Funds' assets may consist of any combination of general
obligation bonds, revenue bonds, industrial revenue bonds and notes. The
percentage of such Municipal Securities held by a Fund will vary from time to
time.
For purposes of the diversification requirements applicable to a Fund,
the identification of the issuer of Municipal Securities depends on the terms
and conditions of each individual security. When the assets and revenues of an
agency, authority, instrumentality or other political subdivision are separate
from those of the government creating the subdivision, and the security is
backed only by the assets and revenues of the subdivision, such subdivision
will be deemed to be the sole issuer. Similarly, in the case of an industrial
revenue bond, if that bond is backed only by the assets and revenues of the
non-governmental user, then such non-governmental user will be deemed to be the
sole issuer. If, however, in either case, the creating government or some
other entity guarantees a security, such guarantee would be considered a
separate security and will be treated as an issue of such government or other
entity unless the value of all securities issued or guaranteed by such
government or other entity and owned by a Fund does not exceed 10% of the total
assets of such Fund. Certain Municipal Securities may be secured by a guaranty
or irrevocable letter of credit of a major banking institution. Securities in
which the Funds invest may also be insured by financial insurance companies.
Since a limited number of entities provide such insurance, each of the Funds
may invest more than 25% of its total assets in securities insured by the same
insurance company.
The yields on Municipal Securities are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions of the Municipal Securities market, size of a particular
offering, and maturity and rating of the obligation. The yield realized by a
Fund's shareholders will be the yield realized by the Fund on its investments,
reduced by the general expenses of the Fund and the Company. The market values
of the Municipal Securities held by a Fund will be affected by changes in the
yields available on similar securities. If yields increase following the
purchase of a Municipal Security, the market value of such Municipal Security
will generally decrease. Conversely, if yields decrease, the market value of a
Municipal Security will generally increase.
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WHEN-ISSUED OR DELAYED DELIVERY SECURITIES
The Funds may purchase Municipal Securities on a "when-issued" basis,
that is, the date for delivery of and payment for the securities is not fixed
at the date of purchase, but is set after the securities are issued (normally
within forty-five days after the date of the transaction). The Funds also may
purchase or sell Municipal Securities on a delayed delivery basis. The payment
obligation and the interest rate that will be received on the when-issued
securities are fixed at the time the buyer enters into the commitment. The
Funds will only make commitments to purchase when-issued or delayed delivery
Municipal Securities with the intention of actually acquiring such securities,
but the Funds may sell these securities before the settlement date if it is
deemed advisable.
If a Fund purchases a when-issued or delayed delivery security, the
Fund will direct its custodian bank to segregate liquid assets (including
Temporary Investments and Municipal Securities) in an amount equal to the
when-issued or delayed delivery commitment. If Fund assets are so segregated,
the assets will be valued at market for the purpose of determining the adequacy
of the segregated securities. If the market value of such securities declines,
additional cash or securities will be segregated on a daily basis so that the
market value of the segregated assets will equal the amount of the Fund's
when-issued or delayed delivery commitments. To the extent assets are
segregated, they will not be available for new investment or to meet
redemptions.
Securities purchased on a when-issued or delayed delivery basis and
the other securities held by a Fund are subject to changes in market value
based on the public's perception of the creditworthiness of the issuer and
changes in the level of interest rates (which will generally result in all of
those securities changing in value in the same way (e.g., appreciating when
interest rates fall)). Therefore, if in order to achieve higher interest income
a Fund remains substantially fully invested at the same time that it has
purchased securities on a when-issued or delayed delivery basis, there is a
possibility that the Fund will experience greater fluctuation in the market
value of its assets.
Furthermore, when the time comes for a Fund to meet its obligations
under when-issued or delayed delivery commitments, the Fund will do so by use
of its then available cash, by the sale of the segregated assets, by the sale
of other securities or, although it would not normally expect to do so, by
directing the sale of the when-issued or delayed delivery securities themselves
(which may have a market value greater or less than the Fund's payment
obligation thereunder). The sale of securities to meet such obligations carries
with it a greater potential for the realization of net short-term capital
gains, which are not exempt from federal income taxes. The value of when-issued
or delayed delivery securities on the settlement date may be more or less than
the purchase price.
In a delayed delivery transaction, a Fund relies on the other party to
complete the transaction. If the transaction is not completed, the Fund may
miss a price or yield considered to be advantageous.
As a non-fundamental policy, AIM TAX-EXEMPT CASH FUND will not enter
into when-issued commitments if more than 25% of its net assets would be
subject to commitments for when-issued and delayed delivery securities.
SYNTHETIC MUNICIPAL INSTRUMENTS
AIM TAX-EXEMPT CASH FUND may invest in synthetic municipal instruments
the value of and return on which are derived from underlying securities. The
types of synthetic municipal instruments in which the Fund may invest include
tender option bonds and variable rate trust certificates. Both types of
instruments involve the deposit into a trust or custodial account of one or
more long-term tax-exempt bonds or notes ("Underlying Bonds"), and the sale of
certificates evidencing interests in the trust or custodial account to
investors such as the Fund. The trustee or custodian receives the long-term
fixed rate interest payments on the Underlying Bonds, and pays certificate
holders short-term floating or variable interest rates which are reset
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periodically. A "tender option bond" provides a certificate holder with the
conditional right to sell (put) its certificate to the Sponsor or some
designated third party at specified intervals and receive the par value of the
certificate plus accrued interest. A "variable rate trust certificate"
evidences an interest in a trust entitling the certificate holder to receive
variable rate interest based on prevailing short-term interest rates and also
typically providing the certificate holder with the conditional right to put
its certificate at par value plus accrued interest.
Because synthetic municipal instruments involve a trust or custodial
account and a third party conditional put feature, they involve complexities
and potential risks that may not be present where a municipal security is owned
directly. For further information regarding certain risks associated with
investing in synthetic municipal instruments see the applicable Prospectus
under the caption "Investment Program--AIM Tax-Exempt Cash Fund--Synthetic
Municipal Instruments."
VARIABLE OR FLOATING RATE INSTRUMENTS
The Funds may invest in Municipal Securities which have variable or
floating interest rates which are readjusted periodically. Variable or floating
interest rates generally reduce changes in the market price of Municipal
Securities from their original purchase price. Accordingly, as interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less for variable or floating rate Municipal Securities than for fixed rate
obligations. Many Municipal Securities with variable or floating interest rates
purchased by a Fund are subject to payment of principal and accrued interest
(usually within seven days) on the Fund's demand. The terms of such demand
instruments require payment of principal and accrued interest by the issuer, a
guarantor, and/or a liquidity provider. All variable or floating rate
instruments will meet the applicable quality standards of a Fund. AIM will
monitor the pricing, quality and liquidity of the variable or floating rate
Municipal Securities held by the Funds.
INVESTMENTS IN SECURITIES OWNED BY OFFICERS AND DIRECTORS
No Fund will purchase or retain the securities of any issuer if the
officers and directors of the Company or AIM who beneficially own more than 1/2
of 1% of the securities of such issuer together own more than 5% of the
securities of such issuer. This is a non-fundamental policy of each of the
Funds.
ELIGIBLE SECURITIES
AIM TAX-EXEMPT CASH FUND will limit its investments to those
securities which at the time of purchase are "Eligible Securities" as defined
in Rule 2a-7 under the 1940 Act, as amended from time to time, and which the
Company's Board of Directors has determined present minimal credit risk.
CONCENTRATION OF INVESTMENTS
As a non-fundamental policy, neither AIM TAX-EXEMPT CASH FUND nor AIM
TAX-FREE INTERMEDIATE FUND will purchase any securities which would cause more
than 25% of the value of its net assets at the time of such purchase to be
invested in: (i) securities of one or more issuers conducting their principal
activities in the same state, (ii) securities, the interest on which is paid
from revenues of projects with similar characteristics or (iii) industrial
development bonds; provided, that there is no limit with respect to investments
in U.S. Treasury bills, other obligations issued or guaranteed by the U.S.
Government and its agencies or instrumentalities, certificates of deposit and
guarantees of Municipal Securities by banks.
As a non-fundamental policy, AIM HIGH INCOME MUNICIPAL FUND may invest
more than 25% of the value of its total assets in Municipal Securities issued
by entities having similar characteristics, such as where issuers are located
in the same geographic area or where issuers' interest obligations are paid
from revenue of similar projects. The Fund may also invest more than 25% of the
value of its total assets in Municipal Securities with similar characteristics,
such as industrial development revenue bonds, including pollution
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<PAGE> 52
control revenue bonds, housing finance agency bonds or hospital bonds. The Fund
may not, however, invest more than 25% of the value of its total assets in
industrial development revenue bonds, including pollution control revenue
bonds, issued for companies in the same industry. The Fund may, but does not
currently intend to, invest more than 25% of the value of its total assets in
securities whose issuers are located in any of the following states: Arizona,
California, Colorado, Connecticut, Florida, Illinois, Michigan, Massachusetts,
New Hampshire, New Jersey, New York, Ohio, Pennsylvania and Texas.
INVESTMENT RESTRICTIONS
Each Fund is subject to the following restrictions which may not be
changed without the approval of the lesser of (i) 67% or more of the Fund's
shares present at a meeting if the holders of more than 50% of the outstanding
shares are present in person or represented by proxy, or (ii) more than 50% of
the Fund's outstanding shares. Any investment restriction that involves a
percentage limitation applies at the time of investment, without regard to
later increases or decreases in the values of securities or assets.
AIM TAX-EXEMPT CASH FUND may not:
1. 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 except as permitted by Rule 2a-7, as amended from time
to time, and except that such Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive order).
2. Borrow money or issue senior securities except for temporary or
emergency purposes, except that it may enter into reverse repurchase agreements
and may purchase when-issued securities (consistent with its investment
policies and objectives).
3. Purchase securities while borrowings in excess of 5% of its total
assets are outstanding and, in addition, will not borrow money if such
borrowing will exceed the borrowing limits established by the SEC for money
market funds, as amended from time to time.
4. Lend any portfolio securities if the value of the securities loaned
by it would exceed an amount equal to one-third of its total assets.
5. Concentrate 25% or more of its total assets in issuers in a
particular industry. Tax-exempt securities issued by governments or political
subdivisions of governments are not included within this restriction.
6. Make short sales of securities or purchase securities on margin or
invest in puts, calls, straddles, spreads or any combination thereof, except
that it may obtain such short-term credits as are necessary for the clearance
of purchases and sales of securities.
7. Make loans, other than by investing in obligations in which it may
invest consistent with its investment objective and policies, and other than by
engaging in repurchase agreements and loans of portfolio securities as
described above.
8. Pledge, mortgage or hypothecate more than 33-1/3% of its total
assets; provided that for purposes of this restriction, reverse repurchase
agreements and loans of portfolio securities are not deemed to involve the
pledge, mortgage or hypothecation of assets.
9. Purchase or sell real estate, but it may invest in marketable
securities secured by real estate or interests therein.
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10. Purchase or sell commodities or commodities futures contracts.
11. Underwrite any issue of securities, except that it may purchase
securities, either directly from an issuer or from an underwriter for an
issuer, and later dispose of such securities in accordance with its investment
program.
AIM TAX-FREE INTERMEDIATE FUND may not:
1. 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 except that the Fund may purchase securities of other
investment companies to the extent permitted by applicable law or exemptive
order).
2. Borrow money or issue senior securities except for temporary or
emergency purposes, except that it may enter into reverse repurchase agreements
and may purchase when-issued securities (consistent with its investment
policies and objectives).
3. Purchase securities while borrowings in excess of 5% of its total
assets are outstanding.
4. Lend money or lend any portfolio securities if the value of the
securities loaned by it would exceed an amount equal to one-third of its total
assets.
5. Concentrate 25% or more of its total assets in issuers in a
particular industry. Tax-exempt securities issued by governments or political
subdivisions of governments are not included within this restriction.
6. Make short sales of securities or purchase securities on margin or
invest in puts, calls, straddles, spreads or any combination thereof, except
that it may obtain such short-term credits as are necessary for the clearance
of purchases and sales of securities.
7. Make loans, other than by investing in obligations in which it may
invest consistent with its investment objective and policies, and other than by
engaging in repurchase agreements and loans of portfolio securities as
described above.
8. Pledge, mortgage or hypothecate more than 33-1/3% of its total
assets; provided that for purposes of this restriction, reverse repurchase
agreements and loans of portfolio securities are not deemed to involve the
pledge, mortgage or hypothecation of assets.
9. Purchase or sell real estate, but it may invest in marketable
securities secured by real estate or interests therein.
10. Purchase or sell commodities or commodities futures contracts.
11. Underwrite any issue of securities, except that it may purchase
securities, either directly from an issuer or from an underwriter for an
issuer, and later dispose of such securities in accordance with its investment
program.
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT may not:
1. Borrow money or issue senior securities except for temporary or
emergency purposes, except that it may enter into reverse repurchase agreements
and may purchase when-issued securities (consistent with
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<PAGE> 54
its investment policies and objectives), and except that it may enter into
financial futures contracts and it may borrow from banks provided that no
borrowing exceeds one-third of the value of its total assets.
2. Purchase securities while borrowings in excess of 5% of its total
assets are outstanding.
3. Lend any portfolio securities if the value of the securities loaned
by it would exceed an amount equal to one-third of its total assets.
4. Concentrate 25% or more of its total assets in issuers in a
particular industry. Tax-exempt securities issued by governments or political
subdivisions of governments are not included within this restriction.
5. Make short sales of securities or purchase securities on margin or
invest in puts, calls, straddles, spreads or any combination thereof, except
that it may obtain such short-term credits as are necessary for the clearance
of purchases and sales of securities, and it may make margin payments in
connection with transactions in financial futures contracts and options thereon
and municipal bond index futures contracts.
6. Make loans, other than by investing in obligations in which it may
invest consistent with its investment objective and policies, and other than by
engaging in repurchase agreements and loans of portfolio securities as
described above.
7. Pledge, mortgage or hypothecate more than 33-1/3% of its total
assets; provided that for purposes of this restriction, reverse repurchase
agreements and loans of portfolio securities are not deemed to involve the
pledge, mortgage or hypothecation of assets, and provided further that
collateral arrangements with respect to margin for financial or municipal bond
index futures contracts are not deemed to involve the pledge, mortgage or
hypothecation of assets.
8. Purchase or sell real estate, but it may invest in marketable
securities secured by real estate or interests therein.
9. Purchase or sell commodities or commodities futures contracts.
10. Underwrite any issue of securities, except that it may purchase
securities, either directly from an issuer or from an underwriter for an
issuer, and later dispose of such securities in accordance with its investment
program.
AIM HIGH INCOME MUNICIPAL FUND may not:
1. 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,
authorities and instrumentalities and except that the Fund may purchase
securities of other investment companies to the extent permitted by applicable
law or exemptive order). For purposes of this restriction, the Fund will regard
each state and each political subdivision, agency or instrumentality of such
state, and each multi-state agency of which such state is a member, as a
separate issuer.
2. Borrow money or issue senior securities, except (a) that it may
borrow from banks for temporary or emergency purposes provided that borrowings
may not exceed 33-1/3% of the value of its total assets (including the amount
of such borrowings), and (b) that it may enter into reverse repurchase
agreements and financial futures contracts, and (c) that it may purchase
when-issued securities (consistent with its investment policies and
objectives). For purposes of this restriction, collateral arrangements with
respect to margin for financial futures contracts are not deemed to be a pledge
of assets.
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3. Purchase securities while borrowings in excess of 5% of the value
of its total assets are outstanding.
4. Lend any of its portfolio securities if the value of the securities
loaned by it would exceed an amount equal to one-third of its total assets.
5. Lend money, other than by investing in debt instruments consistent
with its investment objective and policies, and other than by entering into
repurchase agreements and loans of portfolio securities as provided above.
6. Concentrate 25% or more of the value of its total assets in
industrial development revenue bonds, including pollution control bonds, issued
for companies in the same industry. Investments in municipal securities and
obligations issued, guaranteed or sponsored by the U.S. Government, its
agencies, authorities or instrumentalities do not involve investment in any
industry for purposes of this restriction.
7. Pledge, mortgage or hypothecate more than 33-1/3% of its total
assets; provided that for purposes of this restriction reverse repurchase
agreements and loans of portfolio securities are not deemed to involve the
pledge, mortgage or hypothecation of assets.
8. Purchase or sell real estate, but it may invest in marketable
securities secured by real estate or interests therein.
9. Purchase or sell physical commodities or physical commodities
futures contracts, except that it may purchase and sell financial futures
contracts and options thereon for hedging purposes.
10. Act as a securities underwriter except to the extent that it may
be deemed to be an underwriter under the Securities Act of 1933 when purchasing
or selling a portfolio security.
11. Make short sales of securities or purchase securities on margin,
except that it may obtain such short-term credits as are necessary for the
clearance of purchases and sales of securities and may make margin payments in
connection with transactions in financial futures contracts and options
thereon.
The following restrictions are non-fundamental and may be changed by
the Company's Board of Directors. Pursuant to such restrictions:
1. None of the Funds may invest in oil, gas or other mineral leases,
rights, royalty contracts or exploration or development programs.
2. None of the Funds may invest for the purpose of exercising control.
3. AIM TAX-FREE INTERMEDIATE FUND, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT and AIM HIGH INCOME MUNICIPAL FUND will not invest more than 15% of
the value of their respective net assets in illiquid securities, including
repurchase agreements with remaining maturities in excess of seven days. AIM
TAX-EXEMPT CASH FUND will not invest more than 10% of its net assets in such
securities.
In order to permit the sale of the Funds' shares in certain states,
the Funds may from time to time make commitments that are more restrictive than
the restrictions described above. For example, as of the date of this Statement
of Additional Information, (1) each of the Funds has undertaken that it will
not invest more than 15% of its average net assets at the time of purchase in
investments which are not readily marketable (Texas); (2) each of the Funds has
undertaken to comply with Texas Rule 123.2(6) and follow SEC guidelines which
provide that loans of portfolio securities will be fully collateralized
(Texas); (3) each of the Funds has undertaken to comply with Texas Rule
123.2(4) and not issue shares for any consideration
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<PAGE> 56
other than cash (Texas); (4) AIM TAX-EXEMPT BOND FUND OF CONNECTICUT has
undertaken to not hedge over 5% of the value of its assets without first
amending its prospectus to inform investors of the relevant risks (Maryland);
(5) each of the Funds has undertaken that it will not invest more than 15% of
its respective total assets in securities of issuers which together with any
predecessors have a record of less than three years of continuous operation or
securities of issuers which are restricted as to disposition (Ohio); and (6)
each of the AIM TAX-FREE INTERMEDIATE FUND and AIM TAX-EXEMPT CASH FUND has
undertaken that it will not invest more than 5% of its total assets in
securities of issuers which together with any predecessors have a record of
less than three years of continuous operation (Arkansas). Should any of the
Funds determine that any such commitment is no longer in the best interests of
the Fund and its shareholders, that Fund will revoke the commitment by
terminating sales of its shares in the state(s) involved.
Any loan of portfolio securities by a Fund (as permitted by the above
restrictions) would involve risks of delay in receiving additional collateral
in the event the value of the collateral decreased below the value of the
securities loaned, or of delay in recovering the securities loaned, or even
loss of rights in the collateral should the borrower of the securities fail
financially. However, loans of securities will only be made to borrowers
determined by AIM to be of good standing and only when, in AIM's judgment, the
income to be earned from such loans justifies the attendant risks.
INVESTMENT IN NON-INVESTMENT GRADE SECURITIES: AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT AND AIM HIGH INCOME MUNICIPAL FUND ONLY
As noted in its Prospectus, in pursuit of its investment objective AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT will maintain less than 35% of its net
assets in debt securities rated below Baa/BBB. As noted in its Prospectus, in
pursuit of its investment objective AIM HIGH INCOME MUNICIPAL FUND will usually
maintain at least 80% of its net assets in Municipal Securities which are rated
below Baa/BBB. Such non-investment grade debt securities are typically
considered high risk securities and are commonly referred to as "junk bonds."
During the latest fiscal year, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT did not
invest in any securities which were rated below investment grade, and the Fund
expects to invest less than 5% of its net assets in such securities during the
next fiscal year. AIM HIGH INCOME MUNICIPAL FUND expects to invest at least 80%
of its net assets in Municipal Securities which are non-investment grade during
its initial fiscal year. See "Ratings of Securities" in this Statement of
Additional Information.
Issuers of non-investment grade debt securities are substantially
leveraged, which may impair their ability to meet their obligations. In some
cases, such securities are subordinated to the prior payment of indebtedness
senior to the securities purchased by the Funds, thus potentially limiting a
Fund's ability to recover full principal or to receive payments when senior
securities are in default. When the secondary market for non-investment grade
debt securities becomes increasingly illiquid, including the absence of readily
available market quotations, the relative lack of reliable, objective data
makes the responsibility of the Board of Directors to value a Fund's securities
more difficult, and judgment plays a greater role in the valuation of portfolio
securities, which may have a negative impact on the ability to accurately value
the Fund's assets. Also, increased illiquidity in the non-investment grade debt
market may affect a Fund's ability to dispose of portfolio securities at a
desirable price.
The credit rating of a security does not necessarily address its
market value risk. Also, ratings may from time to time be changed to reflect
developments in the issuer's financial condition. Non-investment grade debt
securities have speculative characteristics which generally increase in number
and significance with each successive lower rating category. Also, prices of
non-investment grade debt securities have been found to be less sensitive to
interest rate changes and more sensitive to adverse economic changes and
individual issuer developments than more highly rated debt securities.
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COVERED CALL OPTIONS: AIM HIGH INCOME MUNICIPAL FUND ONLY
The Fund may write call options, but only on a covered basis; that is,
the Fund will own the underlying security. The exercise price of a call option
may be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered call
option, an amount equal to the premium received by the Fund is recorded as an
asset and an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option written.
The current market value of a written option is the last sale price, or in the
absence of a sale, the last offering price. If a written call option expires on
the stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or a loss if the closing purchase
transaction exceeds the premium received when the option was written) without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a written option is
exercised, the Fund realizes a gain or a loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received.
A call option gives the purchaser of such option the right to buy, and
the writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call option
owns or has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has given
up the opportunity for capital appreciation above the exercise price should the
market price of the underlying security increase, but has retained the risk of
loss should the price of the underlying security decline. During the option
period, the Fund may be required at any time to deliver the underlying security
against payment of the exercise price. This obligation is terminated upon the
expiration of the option period or at such earlier time at which the Fund
effects a closing purchase transaction by purchasing (at a price which may be
higher than was received when the call option was written) a call option
identical to the one originally written. The Fund as non-fundamental policies
(a) will not write covered call options which exceed 25% of the value of its
net assets and (b) will only write covered call options for hedging purposes
and will not use leverage in doing so.
PUT OPTIONS: AIM HIGH INCOME MUNICIPAL FUND ONLY
The Fund may write put options on securities, but only on a covered
basis; that is, the Fund will segregate liquid assets to satisfy any obligation
of the Fund to purchase the underlying securities. A put option may be sold at
a profit or loss depending upon changes in the price of the underlying
security. The Fund as non-fundamental policies (a) will not write covered put
options which exceed 25% of the value of its net assets and (b) will only write
covered put options for hedging purposes and will not use leverage in doing so.
COMBINED OPTION POSITIONS: AIM HIGH INCOME MUNICIPAL FUND ONLY
The Fund, for hedging purposes, may write combinations of put and call
options on the same underlying security to adjust the risk and return
characteristics of the Fund's overall position. A possible combined position
would involve writing a covered call option at one strike price and buying a
call option at a lower price, in order to reduce the risk of the written
covered call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.
FUTURES CONTRACTS: AIM TAX-EXEMPT BOND FUND OF CONNECTICUT AND AIM HIGH INCOME
MUNICIPAL FUND ONLY
In cases of purchases of futures contracts, an amount of liquid
assets, equal to the cost of the futures contracts (less any related margin
deposits), will be segregated with a Fund's custodian to collateralize the
position and ensure that the use of such futures contracts is unleveraged.
Unlike when a Fund purchases
16
<PAGE> 58
or sells a security, no price is paid or received by a Fund upon the purchase
or sale of a futures contract. Initially, a Fund will be required to deposit
liquid assets with its custodian for the account of the broker a stated amount,
as called for by the particular contract. This amount is known as "initial
margin." The nature of initial margin in futures transactions is different from
that of margin in securities transactions in that futures contract margin does
not involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract assuming all contractual obligations have
been satisfied. Subsequent payments, called "variation margin," to and from the
broker will be made on a daily basis as the price of the futures contract
fluctuates, making the long and short positions in the futures contract more or
less valuable. This process is known as "marking-to-market." For example, when
a Fund has purchased an indexed futures contract and the price of the
underlying index has risen, that position will have increased in value and the
Fund will receive from the broker a variation margin payment with respect to
that increase in value. Conversely, where a Fund has purchased an indexed
futures contract and the price of the underlying index has declined, that
position would be less valuable and the Fund would be required to make a
variation margin payment to the broker. Variation margin payments would be made
in a similar fashion when a Fund has purchased an interest rate futures
contract. At any time prior to expiration of the futures contract, a Fund may
elect to close the position by taking an opposite position which will operate
to terminate the Fund's position in the futures contract. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or a gain.
An interest rate futures contract is an agreement between two parties
to buy and sell a debt security for a set price on a future date. Currently,
there are futures contracts based on long-term U.S. Treasury bonds, U.S.
Treasury notes, U.S. Treasury bills, Eurodollars and the Bond Buyer Municipal
Bond Index.
OPTIONS ON FUTURES CONTRACTS: AIM TAX-EXEMPT BOND FUND OF CONNECTICUT AND AIM
HIGH INCOME MUNICIPAL FUND ONLY
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the option exercise period.
The writer of the option is required upon exercise to assume an offsetting
futures position (a short position if the option is a call and a long position
if the option is a put) at a specified exercise price at any time during the
period of the option. Upon exercise of the option, the assumption of offsetting
futures positions by the writer and holder of the option will be accompanied by
delivery of the accumulated cash balance in the writer's futures margin account
which represents the amount by which the market price of the futures contract,
at exercise, exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures contract. If an option on
a futures contract is exercised on the last trading date prior to the
expiration date of the option, the settlement will be made entirely in cash
equal to the difference between the exercise price of the option and the
closing price of the futures contract on the expiration date.
A Fund may purchase and sell put and call options on futures contracts
in order to hedge the value of its portfolio against changes in market
conditions. Depending on the pricing of the option compared to either the price
of the futures contract upon which it is based or the price of the underlying
securities or currency, it may or may not be less risky than ownership of the
futures contract or underlying securities or currency.
RISKS AS TO FUTURES CONTRACTS AND RELATED OPTIONS
The use of futures contracts and related options as hedging devices
presents several risks. One risk arises because of the imperfect correlation
between movements in the price of hedging instruments and movements in the
price of the debt securities which are the subject of the hedge. Such imperfect
correlation is exacerbated in the case of AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT by the fact that futures contracts
17
<PAGE> 59
are not based on a portfolio of bonds issued by the State of Connecticut and
its political subdivisions. If the price of a hedging instrument moves less
than the price of the Fund's investments which are the subject of the hedge,
the hedge will not be fully effective. If the price of a hedging instrument
moves more than the price of the Fund's investments, a Fund will experience
either a loss or a gain on the hedging instrument which will not be completely
offset by movements in the price of the investments which are the subject of
the hedge. The use of options on futures contracts involves the additional risk
that changes in the value of the underlying futures contract will not be fully
reflected in the value of the option.
Successful use of hedging instruments by a Fund is also subject to
AIM's ability to predict correctly movements in the direction of interest
rates. Because of possible price distortions in the futures and options
markets, and because of the imperfect correlation between movements in the
prices of hedging instruments and the investments being hedged, even a correct
forecast by AIM of general market trends may not result in a completely
successful hedging transaction.
It is also possible that where a Fund has sold futures contracts to
hedge its portfolio against a decline in the market, the market may advance and
the value of debt securities held in a Fund's portfolio may decline. If this
occurred, a Fund would lose money on the futures contracts and also experience
a decline in the value of its portfolio securities.
Positions in futures contracts or options may be closed out only on an
exchange on which such contracts are traded. Although the Funds intend to
purchase or sell futures contracts or purchase options only on exchanges or
boards of trade where there appears to be an active market, there is no
assurance that a liquid market on an exchange or board of trade will exist for
any particular contract or at any particular time. If there is not a liquid
market at a particular time, it may not be possible to close a futures position
or purchase an option at such time. In the event of adverse price movements
under those circumstances, the Fund would continue to be required to make daily
cash payments of maintenance margin on its futures positions. The extent to
which the Fund may engage in futures contracts or related options will be
limited by Internal Revenue Code requirements for qualification as a regulated
investment company and the Funds' intent to continue to qualify as such. The
result of a hedging program cannot be foreseen and may cause a Fund to suffer
losses which it would not otherwise sustain.
AIM HIGH INCOME MUNICIPAL FUND
The Fund may purchase insurance for non-insured Municipal Securities
in which it invests. The purchase of such insurance is expected to enhance the
value of the security for which insurance is purchased. The cost of purchasing
such insurance would be an expense of the Fund.
The Fund may purchase municipal forward contracts. A municipal forward
contract is a Municipal Security which is purchased on a when-issued basis with
delivery taking place up to five years from the date of purchase. AIM will
monitor the liquidity, value, credit quality and delivery of the security under
the supervision of the Board of Directors. The Fund will not invest more than
5% of the value of its total assets in municipal forward contracts.
As discussed in the applicable Prospectus, the Fund may invest in
municipal lease obligations. The Company's Board of Directors will establish
guidelines for the determination of whether municipal lease obligations held by
the Fund will be deemed liquid or illiquid, based on factors including but not
limited to: the frequency of trades and quotes for the obligation, the number
of dealers willing to purchase or sell the obligation and the number of
potential buyers, the willingness of dealers to undertake to make a market in
the obligation, and the nature of the marketplace trades.
The Fund may from time to time invest more than 25% of the value of
its total assets in securities whose issuers are located in one or more of the
following states: Arizona, California, Colorado, Connecticut,
18
<PAGE> 60
Florida, Illinois, Michigan, Massachusetts, New Hampshire, New Jersey, New York,
Ohio, Pennsylvania and Texas.
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company and their principal
occupations during at least the last five years are set forth below.
<TABLE>
<CAPTION>
============================================================================================================================
Positions Held Principal Occupation During At
Name, Address and Age with Registrant Least The Past 5 Years
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (78) Director and Chairman of the Board of
11 Greenway Plaza, Suite 100 Chairman Directors, A I M Management Group
Houston, TX 77046 Inc., A I M Advisors, Inc.,
A I M Capital Management, Inc.,
A I M Distributors, Inc.,
A I M Fund Services, Inc.,
A I M Institutional Fund
Services, Inc. and Fund
Management Company; and Vice
Chairman and Director, AMVESCAP
PLC.
- ----------------------------------------------------------------------------------------------------------------------------
BRUCE L. CROCKETT (53) Director Director, ACE Limited (insurance
906 Frome Lane company). Formerly, Director,
McLean, VA 22102 President and Chief Executive
Officer, COMSAT Corporation and
Chairman, Board of Governors
of INTELSAT (international
communications company).
- ----------------------------------------------------------------------------------------------------------------------------
OWEN DALY II (72) Director Director, Cortland Trust Inc.
Six Blythewood Road (investment company). Formerly,
Baltimore, MD 21210 Director, CF & I Steel Corp.,
Monumental Life Insurance Company
and Monumental General Insurance
Company; and Chairman of the
Board of Equitable
Bancorporation.
- ----------------------------------------------------------------------------------------------------------------------------
JACK FIELDS (45) Director Formerly, Member of the U.S.
2607 Old Humble Road House of Representatives.
Humble, TX 77338
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
* A director who is an "interested person" of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
19
<PAGE> 61
<TABLE>
<CAPTION>
============================================================================================================================
Positions Held Principal Occupation During At
Name, Address and Age with Registrant Least The Past 5 Years
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
**CARL FRISCHLING (60) Director Partner, Kramer, Levin, Naftalis
919 Third Avenue & Frankel (law firm); and
New York, NY 10022 Director, ERD Waste, Inc. (waste
management company), Aegis Consumer
Finance (auto leasing company) and Lazard
Funds, Inc. (investment companies). Formerly,
Partner, Reid & Priest (law firm);
and, prior thereto, Partner, Spengler
Carlson Gubar Brodsky & Frischling (law firm).
- ----------------------------------------------------------------------------------------------------------------------------
*ROBERT H. GRAHAM (50) Director and Director, President and Chief
11 Greenway Plaza, President Executive Officer,
Suite 100 A I M Management Group Inc.;
Houston, TX 77046 Director and President,
A I M Advisors, Inc.; Director
and Senior Vice President,
A I M Capital Management, Inc.,
A I M Distributors, Inc.,
A I M Fund Services, Inc.,
A I M Institutional Fund
Services, Inc. and Fund
Management Company; Director,
AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------------------------------
JOHN F. KROEGER (72) Director Director, Flag Investors
37 Pippins Way International Fund, Inc., Flag
Morristown, NJ 07960 Investors Emerging Growth Fund,
Inc., Flag Investors Telephone
Income Fund, Inc., Flag Investors
Equity Partners Fund, Inc.,
Total Return U.S. Treasury Fund,
Inc., Flag Investors Intermediate
Term Income Fund, Inc., Managed
Municipal Fund, Inc., Flag
Investors Value Builder Fund,
Inc., Flag Investors Maryland
Intermediate Tax-Free Income
Fund, Inc., Flag Investors Real
Estate Securities Fund, Inc.,
Alex. Brown Cash Reserve Fund,
Inc. and North American
Government Bond Fund, Inc.
(investment companies).
Formerly, Consultant, Wendell &
Stockel Associates, Inc.
(consulting firm).
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
** A director who is an "interested person" of the Company as defined in the
1940 Act.
* A director who is an "interested person" of A I M Advisors, Inc. and the
Company as defined in the 1940 Act.
20
<PAGE> 62
<TABLE>
<CAPTION>
============================================================================================================================
Positions Held Principal Occupation During At
Name, Address and Age with Registrant Least The Past 5 Years
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LEWIS F. PENNOCK (54) Director Attorney in private practice in
6363 Woodway, Suite 825 Houston, Texas.
Houston, TX 77057
- ----------------------------------------------------------------------------------------------------------------------------
IAN W. ROBINSON (74) Director Formerly, Executive Vice
183 River Drive President and Chief Financial
Tequesta, FL 33469 Officer, Bell Atlantic Management
Services, Inc. (provider of centralized
management services to telephone
companies); Executive Vice President,
Bell Atlantic Corporation (parent of
seven telephone companies); and Vice
President and Chief Financial Officer,
Bell Telephone Company of Pennsylvania
and Diamond State Telephone Company.
- ----------------------------------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (57) Director Executive Vice President,
Transco Tower, 50th Floor Development and Operations, Hines
2800 Post Oak Blvd. Interests Limited Partnership
Houston, TX 77056 (real estate development).
- ----------------------------------------------------------------------------------------------------------------------------
***JOHN J. ARTHUR (52) Senior Vice Senior Vice President and
11 Greenway Plaza, President and Treasurer, A I M Advisors, Inc.;
Suite 100 Treasurer and Vice President and Treasurer,
Houston, TX 77046 A I M Management Group Inc.,
A I M Capital Management, Inc.,
A I M Distributors, Inc.,
A I M Fund Services, Inc.,
A I M Institutional Fund
Services, Inc. and Fund
Management Company.
- ----------------------------------------------------------------------------------------------------------------------------
GARY T. CRUM (49) Senior Vice Director and President,
11 Greenway Plaza, President A I M Capital Management, Inc.;
Suite 100 Director and Senior Vice
Houston, TX 77046 President, A I M Management Group
Inc. and A I M Advisors, Inc.;
and Director, A I M Distributors,
Inc. and AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
*** Mr. Arthur and Ms. Relihan are married to each other.
21
<PAGE> 63
<TABLE>
<CAPTION>
============================================================================================================================
Positions Held Principal Occupation During At
Name, Address and Age with Registrant Least The Past 5 Years
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
***CAROL F. RELIHAN (42) Senior Vice Senior Vice President, General
11 Greenway Plaza,Suite 100 President and Counsel and Secretary,
Houston, TX 77046 Secretary A I M Advisors, Inc.; Vice
President, General Counsel and
Secretary, A I M Management Group
Inc.; Vice President and General
Counsel, Fund Management Company;
and Vice President, A I M Capital
Management, Inc.,
A I M Distributors, Inc.,
A I M Fund Services, Inc. and
A I M Institutional Fund
Services, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (38) Vice Vice President and Fund
11 Greenway Plaza, President and Controller, A I M Advisors, Inc.;
Suite 100 Assistant and Assistant Vice President and
Houston, TX 77046 Treasurer Assistant Treasurer, Fund
Management Company.
- ----------------------------------------------------------------------------------------------------------------------------
STUART W. COCO (42) Vice President Senior Vice President, A I M Capital
11 Greenway Plaza, Management, Inc. and Vice President,
Suite 100 A I M Advisors, Inc.
Houston, TX 77046
- ----------------------------------------------------------------------------------------------------------------------------
MELVILLE B. COX (53) Vice President Vice President and Chief Compliance Officer,
11 Greenway Plaza, Suite 100 A I M Advisors, Inc., A I M Capital
Houston, TX 77046 Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management
Company.
- ----------------------------------------------------------------------------------------------------------------------------
KAREN DUNN KELLEY (37) Vice President Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 Management, Inc. and Vice President,
Houston, TX 77046 A I M Advisors, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
All of the directors of the Company serve as directors or trustees of
some or all of the other AIM Funds. All of the Company's executive officers
hold similar offices with some or all of the other AIM Funds.
The standing committees of the Board of Directors are the Audit
Committee, the Investments Committee, and the Nominating and Compensation
Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Fields,
Frischling, Kroeger (Chairman), Pennock, Robinson and Sklar. The Audit
Committee is responsible for meeting with the Funds' auditors to review audit
procedures and results and to consider any matters arising from an audit to be
brought to the attention of the directors as a whole with respect to the Funds'
portfolio accounting or their internal accounting controls, and for considering
such matters as may from time to time be set forth in a charter adopted by the
Board of Directors and such committee.
- --------
*** Mr. Arthur and Ms. Relihan are married to each other.
22
<PAGE> 64
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly (Chairman), Fields, Frischling, Kroeger, Pennock, Robinson and Sklar. The
Investments Committee is responsible for reviewing portfolio compliance,
brokerage allocation, portfolio investment pricing issues, interim dividend and
distribution issues, and considering such matters as may from time to time be
set forth in a charter adopted by the Board of Directors and such committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Fields, Kroeger, Pennock (Chairman), Robinson and Sklar. The
Nominating and Compensation Committee is responsible for considering and
nominating individuals to stand for election as directors who are not
interested persons as long as any of the Funds maintains a distribution plan
pursuant to Rule 12b-1 under the 1940 Act, reviewing from time to time the
compensation payable to the disinterested directors, and considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such committee.
REMUNERATION OF DIRECTORS
Each director is reimbursed for expenses incurred in connection with
each meeting of the Board of Directors or any committee thereof. Each director
who is not also an officer of the Company is compensated for his services
according to a fee schedule which recognizes the fact that such director also
serves as a director or trustee of other AIM Funds. Each such director receives
a fee, allocated among the AIM Funds for which he or she serves as a director
or trustee, which consists of an annual retainer component and a meeting fee
component.
Set forth below is information regarding compensation paid or accrued
for each director of the Company:
23
<PAGE> 65
<TABLE>
<CAPTION>
==================================================================================================
RETIREMENT
AGGREGATE BENEFITS TOTAL
COMPENSATION ACCRUED COMPENSATION
FROM THE BY ALL AIM FROM ALL AIM
DIRECTOR COMPANY(1) FUNDS(2) FUNDS(3)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------------------
Bruce L. Crockett 2,744 38,621 68,000
- --------------------------------------------------------------------------------------------------
Owen Daly II 2,755 82,607 68,000
- --------------------------------------------------------------------------------------------------
Jack Fields(4) 184 0 0
- --------------------------------------------------------------------------------------------------
Carl Frischling 2,774 56,683 68,000 (5)
- --------------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- --------------------------------------------------------------------------------------------------
John F. Kroeger 2,671 83,654 66,000
- --------------------------------------------------------------------------------------------------
Lewis F. Pennock 2,712 33,702 67,000
- --------------------------------------------------------------------------------------------------
Ian Robinson 2,774 64,973 68,000
- --------------------------------------------------------------------------------------------------
Louis S. Sklar 2,712 47,593 66,500
==================================================================================================
</TABLE>
(1) The total amount of compensation deferred by all Directors of the
Company during the fiscal year ended March 31, 1997, including interest earned
thereon, was $11,985.
(2) During the fiscal year ended March 31, 1997, the total amount of
expenses allocated to the Company in respect of such retirement benefits was
$1,187. Data reflects compensation for the calendar year ended December 31,
1996.
(3) Each Director serves as director or trustee of a total of 11
registered investment companies advised by AIM. Data reflect total compensation
for the calendar year ended December 31, 1996.
(4) Mr. Fields did not serve as a Director during the calendar year ended
December 31, 1996.
(5) See also page 26 regarding fees earned by Mr. Frischling's former
law firm.
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not an employee of any
of the AIM Funds, A I M Management Group Inc. or any of their affiliates) may
be entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "Applicable
AIM Funds"). Each eligible director is entitled to receive an annual benefit
from the Applicable AIM Funds commencing on the first day of the calendar
quarter coincident with or following his date of retirement equal to 75% of the
retainer paid or accrued by the Applicable AIM Funds for such director during
the twelve-month period immediately preceding
24
<PAGE> 66
the director's retirement (including amounts deferred under a separate
agreement between the Applicable AIM Funds and the director) for the number of
such Director's years of service (not in excess of 10 years of service)
completed with respect to any of the AIM Funds. Such benefit is payable to each
eligible director in quarterly installments. If an eligible director dies after
attaining the normal retirement date but before receipt of any benefits under
the Plan commences, the director's surviving spouse (if any) shall receive a
quarterly survivor's benefit equal to 50% of the amount payable to the deceased
director for no more than ten years beginning the first day of the calendar
quarter following the date of the director's death. Payments under the Plan are
not secured or funded by any AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming the retainer amount
reflected below and various years of service. The estimated credited years of
service as of March 31, 1997, for Messrs. Crockett, Daly, Fields, Frischling,
Kroeger, Pennock, Robinson and Sklar are 10, 10, 0, 19, 19, 15, 10 and 7 years,
respectively.
ESTIMATED BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
==================================================================
Number of Annual Retainer Paid By All AIM Funds
Years of
Service With the $80,000
AIM Funds
==================================================================
<S> <C>
10 $60,000
------------------------------------------------------------------
9 $54,000
------------------------------------------------------------------
8 $48,000
------------------------------------------------------------------
7 $42,000
------------------------------------------------------------------
6 $36,000
------------------------------------------------------------------
5 $30,000
==================================================================
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of
this paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors may elect to defer receipt of up to 100% of
their compensation payable by the Company, and such amounts are placed into a
deferral account. Currently, the deferring directors may select various AIM
Funds in which all or part of their deferral accounts shall be deemed to be
invested. Distributions from the deferring directors' deferral accounts will be
paid in cash, in generally equal quarterly installments over a period of five
(5) or ten (10) years (depending on the Agreement) beginning on the date the
deferring director's retirement benefits commence under the Plan. The Company's
Board of Directors, in its sole discretion, may accelerate or extend the
distribution of such deferral accounts after the deferring director's
termination of service as a director of the Company. If a deferring director
dies prior to the distribution of amounts in his deferral account, the balance
of the deferral account will be distributed to his designated beneficiary in a
single lump sum payment as soon as practicable after such deferring director's
death. The Agreements are not funded and, with respect to the payments of
amounts held in the deferral accounts, the deferring directors have the status
of unsecured creditors of the Company and of each other AIM Fund from which
they are deferring compensation.
25
<PAGE> 67
Effective September 1994, the firm of Kramer, Levin, Naftalis &
Frankel ("Kramer Levin") was appointed counsel to the Board of Directors.
During the year ended March 31, 1997, AIM TAX-EXEMPT CASH FUND paid $3,973 in
legal fees to Kramer Levin. During the year ended March 31, 1997, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT paid $3,997 in legal fees to Kramer Levin.
During the year ended March 31, 1997, AIM TAX-FREE INTERMEDIATE FUND paid
$4,122 in legal fees to Kramer Levin. Mr. Frischling, a director of the
Company, is a partner in Kramer Levin.
INVESTMENT ADVISORY AND OTHER SERVICES
AIM is a wholly owned subsidiary of A I M Management Group Inc. ("AIM
Management"), 11 Greenway Plaza, Suite 100, Houston, Texas 77046. AIM
Management, an indirect subsidiary of AMVESCAP PLC, has been engaged in the
financial services business since 1976. AMVESCAP PLC and its subsidiaries are
an independent investment management group engaged in institutional investment
management and retail fund business in the United States, Europe and the
Pacific Region. Certain of the directors and officers of AIM are also executive
officers of the Company and their affiliations are shown under "Directors and
Officers". AIM Capital, a wholly owned subsidiary of AIM, is engaged in the
business of providing investment advisory services to investment companies,
corporations, institutions and other accounts.
AIM was organized in 1976 and, together with its subsidiaries, advises
or manages 56 investment company portfolios. As of October 1, 1997, the total
assets of the investment company portfolios advised or managed by AIM and its
subsidiaries were approximately $83.2 billion.
AIM and the Company have adopted a Code of Ethics which requires
investment personnel and certain other employees (a) to pre-clear all personal
securities transactions subject to the Code of Ethics, (b) to file reports or
duplicate confirmations regarding such transactions, (c) to refrain from
personally engaging in (i) short-term trading of a security, (ii) transactions
involving a security within seven days of an AIM Fund transaction involving the
same security, and (iii) transactions involving securities being considered for
investment by an AIM Fund, and (d) to abide by certain other provisions under
the Code of Ethics. The Code of Ethics also prohibits investment personnel and
all other AIM employees from purchasing securities in an initial public
offering. Personal trading reports are reviewed periodically by AIM, and the
Board of Directors reviews quarterly and annual reports (including information
on any substantial violations of the Code of Ethics). Violations of the Code of
Ethics may include censure, monetary penalties, suspension or termination of
employment.
The Company, on behalf of each Fund, has entered into a Master
Investment Advisory Agreement (the "Advisory Agreement") and a Master
Administrative Services Agreement (the "Administrative Agreement") with AIM,
each dated February 28, 1997.
The Advisory Agreement provides that each Fund will pay or cause to be
paid all expenses of the Fund not assumed by AIM, including, without
limitation: brokerage commissions; taxes, legal, accounting, auditing or
governmental fees; the cost of preparing share certificates; custodian,
transfer and shareholder service agent costs; expenses of issue, sale,
redemption and repurchase of shares; expenses of registering and qualifying
shares for sale; expenses relating to director and shareholder meetings; the
cost of preparing and distributing reports and notices to shareholders; the
fees and other expenses incurred by the Company on behalf of each Fund in
connection with membership in investment company organizations; the cost of
printing copies of prospectuses and statements of additional information
distributed to the Fund's shareholders; and all other charges and costs of the
Fund's operations unless otherwise explicitly provided. The Advisory Agreement
will continue in effect from year to year only if such continuance is
specifically approved at least annually by the Company's Board of Directors and
by the affirmative vote of a majority of the directors who are not parties to
the Advisory Agreement or "interested persons" of any such party (the
"Non-Interested Directors") by votes cast in person at a meeting called for
such purpose. The Advisory Agreement was initially approved by the Company's
Board of Directors (including the affirmative vote of all
26
<PAGE> 68
the Non-Interested Directors on December 11, 1996, and was approved by the
Funds' shareholders on February 7, 1997. The Advisory Agreement became
effective as of February 28, 1997. Under the Advisory Agreement, AIM is
entitled to receive a fee from AIM TAX-EXEMPT CASH FUND and AIM TAX-EXEMPT BOND
FUND OF CONNECTICUT at the annual rates of 0.35% and 0.50% of those Funds'
average daily net assets, respectively. The Advisory Agreement provides that
AIM is entitled to receive a fee from AIM TAX-FREE INTERMEDIATE FUND at the
following annual rates based on the Fund's average daily net assets:
AIM TAX-FREE INTERMEDIATE FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $500 million 0.30%
Next $500 million 0.25%
Amount over $1 billion 0.20%
</TABLE>
The Advisory Agreement provides that AIM is entitled to receive a fee
from AIM HIGH INCOME MUNICIPAL FUND at the following annual rates based on the
Fund's average daily net assets:
AIM HIGH INCOME MUNICIPAL FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $500 million 0.60%
Next $500 million 0.55%
Next $500 million 0.50%
Amount over $1.5 billion 0.45%
</TABLE>
Each Fund or AIM may terminate the Advisory Agreement on sixty (60)
days' written notice without penalty. The Advisory Agreement terminates
automatically in the event of its assignment.
The Advisory Agreement provides that if, for any fiscal year, the
total of all ordinary business expenses of a Fund, including all investment
advisory fees, but excluding brokerage commissions and fees, taxes, interest
and extraordinary expenses, such as litigation costs, exceed the applicable
expense limitations imposed by state securities regulations in any state in
which that Fund's shares are qualified for sale, as such limitations may be
raised or lowered from time to time, the aggregate of all such investment
advisory fees paid by such Fund shall be reduced by the amount of such excess.
The amount of any such reduction to be borne by AIM shall be deducted from the
monthly investment advisory fee otherwise payable to AIM during such fiscal
year. If required pursuant to such state securities regulations, AIM will
reimburse a Fund no later than the last day of the first month of the next
succeeding fiscal year for any such annual operating expenses (after reduction
of all investment advisory fees in excess of such limitation).
For the years ended March 31, 1997, 1996 and 1995, AIM received
advisory fees from AIM TAX-EXEMPT CASH FUND of $125,537, $101,649 and $119,085,
respectively.
For the years ended March 31, 1997, 1996 and 1995, AIM received
advisory fees from AIM TAX-FREE INTERMEDIATE FUND of $276,828, $232,893 and
$283,990, respectively.
For the year ended March 31, 1997, AIM received advisory fees from AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT of $194,372. For the years ended March 31,
1996 and 1995, AIM received no advisory fees from AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, and for the years ended March 31, 1997, 1996 and 1995, AIM waived
fees from the Fund in the amount of $144,775, $198,182 and $195,413,
respectively.
27
<PAGE> 69
The Administrative Agreement for the Funds provides that AIM may
perform, or arrange for the performance of, certain accounting and other
administrative services to the Funds which are not required to be performed by
AIM under the Advisory Agreement. For such services, AIM would be entitled to
receive from each Fund reimbursement of AIM's costs or such reasonable
compensation as may be approved by the Company's Board of Directors. The
Administrative Agreement provides that such agreement will continue in effect
until June 30, 1998, and shall continue in effect from year to year thereafter
only if such continuance is specifically approved at least annually by the
Company's Board of Directors, including the Non-Interested Directors, by votes
cast in person at a meeting called for such purpose. The Administrative
Agreement was initially approved by the Company's Board of Directors (including
the Non-Interested Directors) on December 11, 1996, and became effective as of
February 28, 1997.
In addition, the Amended and Restated Transfer Agency and Service
Agreement (the "Transfer Agency and Service Agreement") between the Company and
A I M Fund Services, Inc. ("AFS"), a registered transfer agent and wholly owned
subsidiary of AIM, will perform certain shareholder services for the Funds for
a fee per account serviced. The Transfer Agency and Service Agreement provides
that AFS will receive a per account fee plus out-of-pocket expenses to process
orders for purchases, redemptions and exchanges of shares, prepare and transmit
payments for dividends and distributions declared by the Funds, maintain
shareholder accounts and provide shareholders with information regarding the
Funds and their accounts. The original transfer agency and service agreement
became effective on November 1, 1994 and the Transfer Agency and Service
Agreement became effective September 20, 1997.
For the years ended March 31, 1997, 1996 and 1995, AIM TAX-EXEMPT CASH
FUND reimbursed AIM in the amounts of $34,329, $34,220 and $43,481,
respectively, for administrative services.
For the years ended March 31, 1997, 1996 and 1995, the AIM TAX-FREE
INTERMEDIATE FUND reimbursed AIM in the amounts of $52,666, $44,054 and
$43,890, respectively, for administrative services.
For the years ended March 31, 1997, 1996 and 1995, AIM TAX-EXEMPT BOND
FUND OF CONNECTICUT reimbursed AIM in the amounts of $49,467, $45,950 and
$46,754, respectively, for administrative services.
DISTRIBUTION PLANS
THE CLASS A AND C PLAN. The Company has adopted a Third Amended and
Restated Master Distribution Plan pursuant to Rule 12b-1 under the 1940 Act
relating to the Class A shares of AIM TAX-EXEMPT CASH FUND, AIM TAX-EXEMPT BOND
FUND OF CONNECTICUT and AIM HIGH INCOME MUNICIPAL FUND, and the Class C shares
of AIM HIGH INCOME MUNICIPAL FUND (the "Class A and C Plan"). The Class A and C
Plan provides that Class A shares pay 0.25% per annum of their average daily
net assets as compensation to AIM Distributors for the purpose of financing any
activity which is primarily intended to result in the sale of Class A shares.
The Class A and C Plan also provides that Class C shares pay 1.00% per annum of
their average daily net assets as compensation to AIM Distributors. Of such
amount, the Class C shares pay a service fee of 0.25% of their average daily
net assets to selected dealers and other institutions which furnish continuing
personal shareholder services to their customers who purchase and own Class C
shares. Activities appropriate for financing under the Class A and C Plan
include, but are not limited to, the following: printing of prospectuses and
statements of additional information and reports for other than existing
shareholders; overhead; preparation and distribution of advertising material
and sales literature; expenses of organizing and conducting sales seminars;
supplemental payments to dealers and other institutions such as asset-based
sales charges or as payments of service fees under shareholder service
arrangements; and costs of administering the Class A and C Plan.
THE CLASS B PLAN. The Company has also adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to the Class B shares
of AIM HIGH INCOME MUNICIPAL FUND (the "Class B Plan", and collectively with
the Class A and C Plan, the "Plans"). Under the Class B Plan, the Class B
shares pay compensation to AIM Distributors at an annual rate of 1.00% of their
average daily net assets.
28
<PAGE> 70
Of such amount, the Class B shares pay a service fee of 0.25% of their average
daily net assets to selected dealers and other institutions which furnish
continuing personal shareholder services to their customers who purchase and
own Class B shares. Amounts paid in accordance with the Class B Plan may be
used to finance any activity primarily intended to result in the sale of Class
B shares, including, but not limited to, printing of prospectuses and
statements of additional information and reports for other than existing
shareholders; overhead; preparation and distribution of advertising material
and sales literature; expenses of organizing and conducting sales seminars;
supplemental payments to dealers and other institutions such as asset-based
sales charges or as payments of service fees under shareholder service
arrangements; and costs of administering the Class B Plan. AIM Distributors may
transfer and sell its rights under the Class B Plan in order to finance
distribution expenditures in respect of Class B shares.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may
enter into agreements ("Shareholder Service Agreements") with investment
dealers selected from time to time by AIM Distributors for the provision of
distribution assistance in connection with the sale of the Funds' shares to
such dealers' customers, and for the provision of continuing personal
shareholder services to customers who may from time to time directly or
beneficially own shares of the Funds. The distribution assistance and
continuing personal shareholder services to be rendered by dealers under the
Shareholder Service Agreements may include, but shall not be limited to, the
following: distributing sales literature; answering routine customer inquiries
concerning the Funds; assisting customers in changing dividend options, account
designations and addresses, and in enrolling in any of several special
investment plans offered in connection with the purchase of the Funds' shares;
assisting in the establishment and maintenance of customer accounts and records
and in the processing of purchase and redemption transactions; investing
dividends and any capital gains distributions automatically in the Funds'
shares; and providing such other information and services as the Funds or the
customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding the Funds
and the Company; performing sub-accounting; establishing and maintaining
shareholder accounts and records; processing customer purchase and redemption
transactions; providing periodic statements showing a shareholder's account
balance and the integration of such statements with those of other transactions
and balances in the shareholder's other accounts serviced by the bank;
forwarding applicable prospectuses, proxy statements, reports and notices to
bank clients who hold shares of the Funds; and such other administrative
services as the Funds reasonably may request, to the extent permitted by
applicable statute, rule or regulation. Similar agreements may be permitted
under the Plans for institutions which provide recordkeeping for and
administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive
compensation for selling shares of the Funds may receive different compensation
for selling shares of one particular class over another.
Under a Shareholder Service Agreement, the Funds agree to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement generally will be calculated at the end of each payment
period for each business day of the Funds during such period at the annual rate
of 0.25% of the average daily net asset value of the Funds' shares purchased or
acquired through exchange. Fees calculated in this manner shall be paid only to
those selected dealers or other institutions who are dealers or institutions of
record at the close of business on the last business day of the applicable
payment period for the account in which the Funds' shares are held. Due to AIM
Distributors' waiver of fees payable by AIM TAX-EXEMPT CASH FUND under the
Plan, fees payable under Shareholder Service Agreements currently are limited
to 0.10% of the average daily net asset value of that Fund's shares purchased
or acquired through exchange.
29
<PAGE> 71
The Plans are subject to any applicable limitations imposed from time
to time by rules of the National Association of Securities Dealers, Inc.
AIM Distributors does not act as principal, but rather as agent for
the Funds, in making dealer incentive and shareholder servicing payments under
the Plans. These payments are an obligation of the Funds and not of AIM
Distributors.
For the years ended March 31, 1997, 1996 and 1995, the Class A shares
of AIM TAX-EXEMPT CASH FUND paid a total of $35,864, $29,043 and $34,024,
respectively, under the Class A and C Plan, which constituted 0.10%, 0.10% and
0.10%, respectively, of such Class A shares' average daily net assets. For the
years ended March 31, 1997, 1996 and 1995, the Class A shares of AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT paid a total of $97,186, $99,095 and $97,706,
respectively, under the Class A and C Plan, which constituted 0.25%, 0.25% and
0.25%, respectively, of such Class A shares' average daily net assets.
An estimate by category of actual fees paid by the Class A shares under the
Class A and C Plan during the year ended March 31, 1997, were allocated as
follows:
<TABLE>
<CAPTION>
AIM TAX-EXEMPT
AIM TAX-EXEMPT BOND FUND OF
CASH FUND CONNECTICUT
-------------- -------------
<S> <C> <C>
CLASS A
Advertising $ 4,192 $ 1,897
Printing and mailing prospectuses, 1,048 -0-
semi-annual reports and annual
reports (other than to current
shareholders)
Seminars 1,048 -0-
Compensation to Underwriters to -0- -0-
partially offset other marketing
expenses
Compensation to Dealers 29,573 95,291
including finder's fees
Compensation to Sales Personnel -0- -0-
Annual Report Total 35,861 97,188
</TABLE>
The Plans require AIM Distributors to provide the Board of Directors
at least quarterly with a written report of the amounts expended pursuant to
the Plans and the purposes for which such expenditures were made. The Board of
Directors reviews these reports in connection with their decisions with respect
to the Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Directors, including a
majority of the directors who are not "interested persons" (as
30
<PAGE> 72
defined in the 1940 Act) of the Company and who have no direct or indirect
financial interest in the operation of the Plans or in any agreements related
to the Plans ("Qualified Directors"). In approving the Plans in accordance with
the requirements of Rule 12b-1, the directors considered various factors and
determined that there is a reasonable likelihood that the Plans would benefit
each class of each applicable Fund, and its respective shareholders.
The Plans do not obligate the Funds to reimburse AIM Distributors for
the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Funds will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less
than the fee it receives, AIM Distributors will retain the full amount of the
fee.
Unless the Plans are terminated earlier in accordance with their
terms, the Plans continue in effect until June 30, 1998, and thereafter, both
Plans continue as long as such continuance is specifically approved at least
annually by the Board of Directors, including a majority of the Qualified
Directors.
The Plans may be terminated by the vote of a majority of the Qualified
Directors, or, with respect to a particular class, by the vote of a majority of
the outstanding voting securities of that class.
Any change in the Plans that would increase materially the
distribution expenses paid by the applicable class requires shareholder
approval; otherwise, it may be amended by the directors, including a majority
of the Qualified Directors, by votes cast in person at a meeting called for the
purpose of voting upon such amendment. As long as the Plans are in effect, the
selection or nomination of the Qualified Directors is committed to the
discretion of the Qualified Directors. In the event the Class A and C Plan is
amended in a manner which the Board of Directors determines would materially
increase the charges paid under the Class A and C Plan, the Class B shares of
the Company will no longer convert into Class A shares of the Company unless
the Class B shares, voting separately, approve such amendment. If the Class B
shareholders do not approve such amendment, the Board of Directors will (i)
create a new class of shares of the Company which is identical in all material
respects to the Class A shares as they existed prior to the implementation of
the amendment, and (ii) ensure that the existing Class B shares of the Company
will be exchanged or converted into such new class of shares no later than the
date the Class B shares were scheduled to convert into Class A shares.
The principal differences between the Class A and C Plan and the Class
B Plan are: (i) the Class A and C Plan allows payment to AIM Distributors or to
dealers or financial institutions of up to 0.25% of average daily net assets of
the Class A shares of AIM Tax-Exempt Cash Fund, AIM Tax-Exempt Bond Fund of
Connecticut and AIM High Income Municipal Fund, as compared to 1.00% of such
assets of the Class B shares of AIM High Income Municipal Fund; (ii) the Class
B Plan obligates the Class B shares to continue to make payments to AIM
Distributors following termination of the Class B shares Distribution Agreement
with respect to Class B shares sold by or attributable to the distribution
efforts of AIM Distributors unless there has been a complete termination of the
Class B Plan (as defined in such Plan); and (iii) the Class B Plan expressly
authorizes AIM Distributors to assign, transfer or pledge its rights to
payments pursuant to the Class B Plan.
THE DISTRIBUTOR
Information concerning AIM Distributors and the continuous offering of
the Funds' shares is set forth in the Prospectuses under the headings "How to
Purchase Shares" and "Terms and Conditions of Purchase of the AIM Funds." An
Amended and Restated Master Distribution Agreement with AIM Distributors
relating to the Class A shares of the Funds and Class C shares of AIM High
Income Municipal Fund was approved by the Board of Directors of the Company on
September 20, 1997. A Master Distribution Agreement with AIM Distributors
relating to the Class B shares of AIM High Income Municipal Fund was also
approved by the Board of Directors of the Company on September 20, 1997. Both
such Master Distribution agreements are hereinafter collectively referred to as
the "Distribution Agreements".
31
<PAGE> 73
The Distribution Agreements provide that AIM Distributors will bear
the expenses of printing from the final proof and distributing the Funds'
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Funds), and any promotional or
sales literature used by AIM Distributors or furnished by AIM Distributors to
dealers in connection with the public offering of the Funds' shares, including
expenses of advertising in connection with such public offerings. AIM
Distributors has not undertaken to sell any specified number of shares of any
classes of the Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B shares and Class C
shares of AIM High Income Municipal Fund at the time of such sales. Payments
with respect to Class B shares will equal 4.0% of the purchase price of the
Class B shares sold by the dealer or institution, and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
The portion of the payments to AIM Distributors under the Class B Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of such sales commissions plus financing
costs. AIM Distributors anticipates that it will require a number of years to
recoup from Class B Plan payments the sales commissions paid to dealers and
institutions in connection with sales of Class B shares.
In the future, if multiple distributors serve AIM High Income
Municipal Fund, each such distributor (or its assignee or transferee) would
receive a share of the payments under the Class B Plan based on the portion of
such Fund's Class B shares sold by or attributable to the distribution efforts
of that distributor.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of AIM High Income Municipal Fund at the time of such
sales. Payments with respect to Class C shares will equal 1.00% of the purchase
price of the Class C shares sold by the dealer or institution, and will consist
of a sales commission of 0.75% of the purchase price of the Class C shares sold
plus an advance of the first year service fee of 0.25% with respect to such
shares. AIM Distributors will retain all payments received by it relating to
Class C shares for the first year after they are purchased. The portion of the
payments to AIM Distributors under the Class A and C Plan attributable to Class
C shares which constitutes an asset-based sales charge (0.75%) is intended in
part to permit AIM Distributors to recoup a portion of on-going sales
commissions to dealers plus financing costs, if any. After the first full year,
AIM Distributors will make such payments quarterly to dealers and institutions
based on the average net asset value of Class C shares which are attributable
to shareholders for whom the dealers and institutions are designated as dealers
of record.
The Company (on behalf of any class of the Funds) or AIM Distributors
may terminate the Distribution Agreements on sixty (60) days' written notice
without penalty. The Distribution Agreements will terminate in the event of
their assignment. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset-based
distribution fees in respect of the outstanding Class B shares attributable to
the distribution efforts of AIM Distributors; provided, however, that a
complete termination of the Class B Plan (as defined in such Plan) would
terminate all payments to AIM Distributors. Termination of the Class B Plan or
Distribution Agreement does not affect the obligations of Class B shareholders
to pay contingent deferred sales charges.
For the years ended March 31, 1997, 1996 and 1995, the total sales
charges paid in connection with the sale of Class A shares of AIM TAX-FREE
INTERMEDIATE FUND were $82,414, $69,848 and $71,141, respectively, of which AIM
Distributors retained $21,018, $18,234 and $18,075, respectively.
For the years ended March 31, 1997, 1996 and 1995, the total sales
charges paid in connection with the sale of Class A shares of AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT were $152,493, $183,364 and $132,560, respectively, of
which AIM Distributors retained $27,428, $33,891 and $21,690, respectively.
32
<PAGE> 74
MISCELLANEOUS INFORMATION
SHAREHOLDER INQUIRIES
The Transfer Agent may impose certain copying charges for requests for
copies of shareholder account statements and other historical account
information older than the current year and the immediately preceding year.
AUDIT REPORTS
The Board of Directors will issue to shareholders at least
semi-annually the Funds' financial statements. Financial statements, audited by
independent auditors, will be issued annually. The firm of Price Waterhouse LLP
served as the auditors to AIM TAX-EXEMPT CASH FUND and AIM TAX-EXEMPT BOND FUND
OF CONNECTICUT for the year ended December 31, 1992. The firm of KPMG Peat
Marwick LLP, 700 Louisiana, NationsBank Building, Houston, Texas 77002,
currently serves as the auditors of the Funds.
LEGAL MATTERS
Legal matters for the Company have been passed upon by Ballard Spahr
Andrews & Ingersoll, Philadelphia, Pennsylvania.
CUSTODIAN AND TRANSFER AGENT
The Bank of New York (the "Custodian"), 90 Washington Street, 11th
Floor, New York, New York 10286 is custodian of all securities and cash of the
Funds. Under its contract with the Company, the Custodian maintains the
portfolio securities of the Funds, administers the purchases and sales of
portfolio securities, collects interest and dividends and other distributions
made on the securities held in the portfolios of the Funds and performs other
ministerial duties. A I M Fund Services, Inc., a wholly owned subsidiary of AIM
(the "Transfer Agent"), P.O. Box 4739, Houston, Texas 77210-4739, acts as
transfer and dividend disbursing agent for the Funds. These services do not
include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Funds pay the Custodian and
the Transfer Agent such compensation as may be agreed upon from time to time.
Texas Commerce Bank National Association, 712 Main, Houston, Texas
77002, serves as Sub-Custodian for retail purchases of the AIM Funds.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of October 1, 1997, the directors and officers of the Company as a
group owned less than 1% of the outstanding Class A shares of AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT and AIM HIGH INCOME MUNICIPAL FUND. Also as of October
1, 1997, the directors and officers of the Company as a group owned 3.89% of
the outstanding Class A shares of AIM TAX-EXEMPT CASH FUND. Also as of October
1, 1997, the directors and officers of the Company as a group owned 37.73% of
the outstanding Class A shares of AIM TAX-FREE INTERMEDIATE FUND.
To the best knowledge of the Company, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of each Fund as
of October 1, 1997, and the amount of outstanding shares held of record or
beneficially by such holders are set forth below:
33
<PAGE> 75
<TABLE>
<CAPTION>
Percent Owned
Name and Address of Percent Owned of Record
Fund Record or Beneficial Owner of Record* and Beneficially
- ---- -------------------------- ------------- ----------------
<S> <C> <C> <C>
AIM Tax-Free Gary T. Crum 26.57%** -0-
Intermediate Fund - 11 Greenway Plaza Suite 100
Class A Shares Houston, TX 77046
CFP Holdings Ltd (Partnership) -0- 8.57%
ATTN: Gary Crum
11 Greenway Plaze Suite 100
Houston, TX 77046
Jonathan C. Schoolar 6.16% -0-
3722 Tartan Lane
Houston, TX 77025
J. Abbott Sprague and -0- 5.39%
Leslie M. Sprague JT-Ten
3451 Piping Rock
Houston, TX 77027-0000
AIM Tax-Exempt Gary T. Crum TTEE -0- 10.65%
Cash Fund - Charles Douglas Bauer
Class A Shares Management Trust
11 Greenway Plaza Suite 100
Houston, TX 77046
ATTN: Gary Crum
P. Andrews McLane 8.34% -0-
77 Dean Road
Weston, MA 02193-0000
Gary T. Crum 7.41% -0-
11 Greenway Plaza Suite 100
Houston, TX 77046
</TABLE>
AIM High Income
Municipal Fund
AIM provided the initial capitalization of AIM High Income Municipal
Fund and, accordingly, as of the date of this Statement of Additional
Information, owned more than 25% of the issued and outstanding Class A shares,
Class B shares and Class C shares of the Fund and therefore could be deemed to
"control" the Fund as that term is defined in the 1940 Act. It is anticipated
that upon commencement of the public offering of the Fund's shares, AIM will
cease to control the Fund for purposes of the 1940 Act.
- ---------------
* The Company has no knowledge as to whether all or any of the shares owned
of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a class
may be presumed to be in "control" of such class of shares, as defined in
the 1940 Act.
34
<PAGE> 76
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which the shares of the Funds
may be purchased appears in the Prospectuses under the headings "How to
Purchase Shares," "Terms and Conditions of Purchase of the AIM Funds" and
"Special Plans."
The sales charge normally deducted on purchases of Class A shares of
AIM TAX-FREE INTERMEDIATE FUND, AIM HIGH INCOME MUNICIPAL FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT is used to compensate AIM Distributors and
participating dealers for their expenses incurred in connection with the
distribution of such Funds' shares. Since there is little expense associated
with unsolicited orders placed directly with AIM Distributors by persons who,
because of their relationship with the Funds or with AIM and its affiliates,
are familiar with the Funds (e.g., due to the size of the transaction and
shareholder records required), AIM Distributors believes that it is appropriate
and in a Fund's best interest that such persons, and certain other persons
whose purchases result in relatively low expenses of distribution, be permitted
to purchase Class A shares of AIM TAX-FREE INTERMEDIATE FUND and AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT through AIM Distributors without payment of a sales
charge. The persons who may purchase Class A shares of those Funds without a
sales charge are set forth in the Prospectuses.
Complete information concerning the method of exchanging shares of the
Funds for shares of the other AIM Funds is set forth in the Prospectuses under
the heading "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in
the Prospectuses under the heading "How to Redeem Shares." In addition to the
Funds' obligation to redeem shares, AIM Distributors may also repurchase shares
as an accommodation to shareholders. To effect a repurchase, those dealers who
have executed Selected Dealer Agreements with AIM Distributors must phone
orders to the order desk of the Funds (telephone: (800) 959-4246) and guarantee
delivery of all required documents in good order. A repurchase is effected at
the net asset value per share of the applicable Fund next determined after the
repurchase order is received. Such arrangement is subject to timely receipt by
the Transfer Agent of all required documents in good order. If such documents
are not received within a reasonable time after the order is placed, the order
is subject to cancellation. While there is no charge imposed by a Fund or by
AIM Distributors when shares are redeemed or repurchased, dealers may charge a
fair service fee for handling the transaction.
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange (the "NYSE") is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the NYSE is closed for other than customary weekend and holiday closings, (c)
the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of a Fund not reasonably practicable.
A Fund's net asset value is calculated by dividing the number of
outstanding shares into the net assets of the Fund. Net assets are the excess
of a Fund's assets over its liabilities.
For AIM TAX-EXEMPT CASH FUND: The Fund may use the amortized cost
method to determine its net asset value so long as the Fund does not (a)
purchase any instrument with a remaining maturity greater than 397 days (for
these purposes, repurchase agreements shall not be deemed to involve the
purchase by the Fund of the securities pledged as collateral in connection with
such agreements) or (b) maintain a dollar-weighted average portfolio maturity
in excess of 90 days, and otherwise complies with the terms of rules adopted by
the SEC.
Under the amortized cost method, each investment is valued at its cost
and thereafter any discount or premium is amortized on a constant basis to
maturity. While this method provides certainty of valuation,
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<PAGE> 77
it may result in periods in which the amortized cost value of the Fund's
investments is higher or lower than the price that would be received if the
investments were sold. During periods of declining interest rates, use by the
Fund of the amortized cost method of valuing its portfolio may result in a
lower value than the market value of the portfolio, which could be an advantage
to new investors relative to existing shareholders. The converse would apply in
a period of rising interest rates.
The Board of Directors has established procedures designed to
stabilize at $1.00, to the extent reasonably possible, the Fund's net asset
value per share. Such procedures include review of portfolio holdings by the
directors at such intervals as they may deem appropriate to determine whether
net asset value, calculated by using available market quotations, deviates from
$1.00 per share and, if so, whether such deviation may result in material
dilution or is otherwise unfair to investors or existing shareholders. In the
event the directors determine that a deviation having such a result exists,
they intend to take such corrective action as they deem necessary and
appropriate, including the sale of portfolio securities prior to maturity in
order to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends; redemption of shares in kind; or establishing
a net asset value per share by using available market quotations, in which
case, the net asset value could possibly be more or less than $1.00 per share.
For AIM TAX-FREE INTERMEDIATE FUND, AIM HIGH INCOME MUNICIPAL FUND and
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT: Securities held by AIM TAX-FREE
INTERMEDIATE FUND, AIM HIGH INCOME MUNICIPAL FUND and AIM TAX-EXEMPT BOND FUND
OF CONNECTICUT are valued using market quotations or at fair value determined
by a pricing service approved by the Board of Directors. Debt securities with
remaining maturities of sixty (60) days or less are valued on the basis of
amortized cost. All variable rate securities held by such Funds, with an
unconditional demand or put feature exercisable within seven (7) days or less
are valued at par, which reflects the market value of such securities.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Directors.
The following formula may be used to determine the public offering
price per share of an investment in AIM TAX-FREE INTERMEDIATE FUND, AIM HIGH
INCOME MUNICIPAL FUND or AIM TAX-EXEMPT BOND FUND OF CONNECTICUT:
Net Asset Value / (1 - Sales Charge as % of Offering Price) = Offering Price.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund is normally determined
daily as of the close of trading of the NYSE (generally 4:00 p.m. Eastern time)
on each business day of the Fund. In the event the NYSE closes early (i.e.,
before 4:00 p.m. Eastern time) on a particular day, the net asset value of a
Fund share is determined as of the close of the NYSE on such day. For purposes
of determining net asset value per share, futures and options contract closing
prices which are available fifteen (15) minutes after the close of trading on
the NYSE will generally be used. The net asset values per share of the various
classes of a Fund will differ because different expenses are attributable to
each class. The income or loss and the expenses common to all classes of a Fund
are allocated to each class on the basis of the net assets of the Fund
allocable to each such class, calculated as of the close of business on the
previous business day, as adjusted for the current day's shareholder activity
of each class. In addition to certain common expenses which are allocated to
all classes of a Fund, certain expenses, such as those related to the
distribution of shares of a class, are allocated only to the class to which
such expenses relate. The net asset value per share of a class is determined by
subtracting the liabilities (e.g., the expenses) of the Fund allocated to the
class from the assets of the Fund allocated to the class and dividing the
result by the total number of shares outstanding of such class. Determination
of each Fund's net asset value per share is made in accordance with generally
accepted accounting principles.
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Option contracts are valued at the mean between the closing bid and
asked prices on the exchange where the contracts are principally traded.
Securities for which market quotations are not readily available or are
questionable are valued at fair value as determined in good faith by or under
the supervision of the Company's officers in a manner specifically authorized
by the Board of Directors of the Company. Short-term obligations having sixty
(60) days or less to maturity are valued at amortized cost, which approximates
market value.
Generally, trading in foreign securities, corporate bonds, municipal
bonds, U.S. Government securities and money market instruments is substantially
completed each day at various times prior to the close of the NYSE. The values
of such securities used in computing the net asset value of each Fund's shares
are determined at such times. Foreign currency exchange rates are also
generally determined prior the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which such values are determined and the close of the NYSE
which will not be reflected in the computation of a Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as determined
in good faith by or under the supervision of the Board of Directors.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Net investment income for each Fund is declared as a dividend to the
shareholders of record of such Fund on each business day of the Fund. Dividends
will be paid monthly. Net realized capital gains, if any, are normally
distributed annually, although AIM TAX-EXEMPT CASH FUND may distribute
short-term capital gains more frequently. Dividends and distributions are
reinvested in additional full and fractional shares of the same class of each
Fund at the net asset value thereof, unless the shareholder has elected to have
dividends and distributions paid in cash. Dividends and distributions may also
be reinvested in shares of another AIM Fund. See the caption "Dividends,
Distributions and Tax Matters" in the Prospectuses.
Dividends with respect to the shares of AIM TAX-FREE INTERMEDIATE
FUND, AIM HIGH INCOME MUNICIPAL FUND and AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT begin accruing on the day on which payment is received for the
purchase of shares, and accrue through the day preceding the date of payment of
redemption proceeds. Dividends with respect to the shares of AIM TAX-EXEMPT
CASH FUND begin accruing on the day after which payment is received, and accrue
through the date of payment of redemption proceeds.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are
not described in the Funds' Prospectuses. No attempt is made to present a
detailed explanation of the tax treatment of the Funds or their shareholders,
and the discussion here and in the Funds' Prospectuses is not intended as a
substitute for careful tax planning. Investors are urged to consult their tax
advisors with specific reference to their own tax situation.
Qualification as a Regulated Investment Company. Each Fund intends to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). As a regulated investment
company, a Fund is not subject to federal income tax on the portion of its net
investment income (i.e., taxable interest, dividends and other taxable ordinary
income, net of expenses) and capital gain net income (i.e., the excess of
capital gains over capital losses) that it distributes to shareholders,
provided that it distributes an amount at least equal to the sum of (a) 90% of
its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) and (b)
90% of its tax-exempt income (net of allocable expenses and amortized bond
premium) for the taxable year (the "Distribution Requirement"), and satisfies
certain other requirements of the Code that are
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described below. Distributions by each Fund made during the taxable year or,
under specified circumstances, within twelve months after the close of the
taxable year, will be considered distributions of income and gains of the
taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities)
and other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
securities or currencies (the "Income Requirement"); and (2) derive less than
30% of its gross income from the sale or other disposition of securities or
foreign currencies that are not directly related to its principal business of
investing in securities (or options, futures or forward contracts thereon) held
for less than three months (the "Short-Short Gain Test"). Because of the
Short-Short Gain Test, a Fund may have to limit the sale of appreciated
securities that it has held for less than three months. However, the
Short-Short Gain Test will not prevent a Fund from disposing of investments at
a loss, since the recognition of a loss before the expiration of the
three-month holding period is disregarded. Interest (including original issue
discount) received by a Fund at maturity or upon the disposition of a security
held for less than three months will not be treated as gross income derived
from the sale or other disposition of such security within the meaning of the
Short-Short Gain Test. However, income that is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose. The Funds will not be subject to the
Short-Short Gain Test after March 31, 1998.
At the close of each quarter of a Fund's taxable year, at least 50% of
the value of the Fund's assets must consist of cash and cash items, U.S.
Government securities, securities of other regulated investment companies, and
securities of other issuers (as to which the Fund has not invested more than 5%
of the value of the Fund's total assets in securities of such issuer and as to
which the Fund does not hold more than 10% of the outstanding voting securities
of such issuer), and no more than 25% of the value of its total assets may be
invested in the securities of any one issuer (other than U.S. Government
securities and securities of other regulated investment companies), or in two
or more issuers which the Fund controls and which are engaged in the same or
similar trades or businesses.
If for any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to shareholders, and
such distributions will be taxable as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits. Such distributions will be
eligible for the dividends-received deduction in the case of corporate
shareholders.
Excise Tax on Regulated Investment Companies. A 4% non-deductible
excise tax is imposed on a regulated investment company that fails to
distribute in each calendar year an amount equal to 98% of its ordinary taxable
income for the calendar year plus 98% of its capital gain net income (excess of
capital gains over capital losses) for the one-year period ended on October 31
of such calendar year. The balance of such income must be distributed during
the next calendar year. Undistributed tax-exempt interest on Municipal
Securities (as defined under "Investment Program and Restrictions -- Municipal
Securities") is not subject to the excise tax. For the foregoing purposes, a
regulated investment company is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.
Each Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that a Fund may in certain circumstances be
required to liquidate portfolio investments if it intends to make sufficient
distributions to avoid excise tax liability.
Tax Treatment of Interest Rate Futures Contracts and Related Options.
Section 1092 of the Code affects the taxation of certain transactions involving
futures or options contracts. If a futures or options
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contract is part of a "straddle" (which could include another futures contract
or underlying stock or securities), as defined in Section 1092 of the Code,
then, generally, losses are deferred first to the extent that the modified
"wash sale" rules of the Section 1092 regulations apply, and second to the
extent of unrecognized gains on offsetting positions. Further, a Fund may be
required to capitalize, rather than deduct currently, any interest expense on
indebtedness incurred or continued to purchase or carry any positions that are
part of a straddle. Sections 1092 of the Code and the Treasury Regulations
thereunder also suspend the holding periods for straddle positions with
possible adverse effects regarding long-term capital gain treatment.
Section 1256 of the Code generally requires that futures contracts and
options on futures contracts be "marked-to-market" at the end of each year for
federal income tax purposes. Code Section 1256 further characterizes 60% of any
capital gain or loss with respect to such futures and options contracts as
long-term capital gain or loss and 40% as short-term capital gain or loss. If
such a future or option is held as an offsetting position and can be considered
a straddle under Section 1092 of the Code, such a straddle will constitute a
mixed straddle. A mixed straddle will be subject to both Section 1256 and
Section 1092 unless certain elections are made by a Fund.
Fund Distributions. Each Fund intends to qualify to pay
exempt-interest dividends by satisfying the requirement that at the close of
each quarter of a Fund's taxable year at least 50% of the Fund's total assets
consist of tax-exempt Municipal Securities. Distributions from a Fund will
constitute exempt-interest dividends to the extent of the Fund's tax-exempt
interest income (net of allocable expenses and amortized bond premium).
Exempt-interest dividends distributed to shareholders of a Fund are excluded
from gross income for federal income tax purposes. However, shareholders who
file federal income tax returns will be required to report the receipt of
exempt-interest dividends on such returns. Moreover, while exempt-interest
dividends are excluded from gross income for federal income tax purposes, they
may be subject to alternative minimum tax ("AMT") in certain circumstances and
may have other collateral tax consequences as discussed below. Distributions by
a Fund of any investment company taxable income or of any net capital gain will
be taxable to shareholders as discussed below.
AMT is imposed in addition to, but only to the extent it exceeds, the
regular tax and is computed at a maximum rate of 28% for non-corporate
taxpayers and 20% for corporate taxpayers on the excess of the taxpayer's
alternative minimum taxable income ("AMTI") over an exemption amount.
Exempt-interest dividends derived from certain "private activity" Municipal
Securities issued after August 7, 1986, will generally constitute an item of
tax preference includable in AMTI for both corporate and non-corporate
taxpayers. In addition, exempt-interest dividends derived from all Municipal
Securities, regardless of the date of issue, must be included in adjusted
current earnings, which are used in computing an additional corporate
preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted
current earnings over its AMTI (determined without regard to this item and the
AMT net operating loss deduction)) includable in AMTI. For taxable years
beginning after 1997, however, certain small corporations are wholly exempt
from AMT.
Exempt-interest dividends must be taken into account in computing the
portion, if any, of social security or railroad retirement benefits that must
be included in an individual shareholder's gross income subject to federal
income tax. Further, a shareholder of a Fund is denied a deduction for interest
on indebtedness incurred or continued to purchase or carry such shares.
Moreover, a shareholder who is (or is related to) a "substantial user" of a
facility financed by industrial development bonds held by a Fund will likely be
subject to tax on dividends paid by the Fund which are derived from interest on
such bonds. Receipt of exempt-interest dividends may result in other collateral
federal income tax consequences to certain taxpayers, including financial
institutions, property and casualty insurance companies and foreign
corporations engaged in a trade or business in the United States. Prospective
investors should consult their own tax advisors as to such consequences.
Each Fund anticipates distributing substantially all of its investment
company taxable income, if any, for each taxable year. Such distributions will
be taxable to shareholders as ordinary income and treated as
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dividends for federal income tax purposes, but they will not qualify for the
70% dividends-received deduction for corporations.
Each Fund may either retain or distribute to shareholders its net
capital gain, if any, for each taxable year. Each Fund currently intends to
distribute any such amounts. If net capital gain is distributed and designated
as a capital gain distribution, it will be taxable to shareholders as long-term
capital gain, regardless of the length of time the shareholder has held his
shares or whether such gain was recognized by a Fund prior to the date on which
the shareholder acquired his shares. Under the Taxpayer Relief Act of 1997, the
Internal Revenue Service ("IRS") is authorized to issue regulations that will
enable shareholders to determine the tax rates applicable to such capital gain
distributions. If a Fund does not distribute its net capital gain in any
taxable year, such Fund will be subject to taxes on such net capital gain at
the highest corporate rate. If a Fund elects to retain its net capital gain, it
is expected that the Fund also will elect to have shareholders treated as if
each received a distribution of its pro rata share of such gain, with the
result that each shareholder will be required to report its pro rata share of
such gain on its tax return as long-term capital gain, will receive a
refundable tax credit for its share of tax paid by the Fund on the gain, and
will increase the tax basis for its shares by an amount equal to the deemed
distribution less the tax credit. Realized market discount on Municipal
Securities purchased after April 30, 1993, will be treated as ordinary income
and not as capital gain.
Distributions by a Fund that do not constitute ordinary income
dividends, exempt-interest dividends or capital gain distributions will be
treated as a return of capital to the extent of (and in reduction of) the
shareholder's tax basis in his shares; any excess will be treated as gain from
the sale of his shares, as discussed below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another AIM Fund). Shareholders electing
to reinvest a distribution in additional shares will be treated as receiving a
distribution in an amount equal to the net asset value of the shares acquired,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of a Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically would constitute a return of capital
to the shareholder.
Ordinarily, shareholders are required to take distributions by a Fund
into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year
to the extent that guidance has been provided by the IRS.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain
distributions, and the proceeds of redemptions of shares, paid to any
shareholder who (1) has provided either an incorrect tax identification number
or no number at all, (2) is subject to backup withholding by the IRS for
failure to properly report the receipt of interest or dividend income, or (3)
has failed to certify to the Fund that it is not subject to backup withholding
or that it is a corporation or other "exempt recipient."
Sale or Redemption of Shares. A shareholder will recognize gain or
loss on the sale or redemption of shares of a Fund in an amount equal to the
difference between the proceeds of the sale or redemption and the shareholder's
adjusted tax basis in the shares. All or a portion of any loss so recognized
may be disallowed if the shareholder purchases other shares of the same Fund
within 30 days before or after the sale or redemption. Investors should note
that this rule applies to shares purchased through the reinvestment of
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dividends within 30 days before or after a sale or redemption of shares. In
general, any gain or loss arising from (or treated as arising from) the sale or
redemption of shares of a Fund will be considered capital gain or loss and will
be long-term capital gain or loss if the shares were held for longer than one
year. Under the Taxpayer Relief Act of 1997, the IRS is authorized to issue
regulations that will enable shareholders to determine the tax rates applicable
to such recognized long-term capital gain. However, any capital loss arising
from the sale or redemption of shares held for six months or less will be
disallowed to the extent of the amount of exempt-interest dividends received on
such shares and (to the extent not disallowed) will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) generally will apply in determining the holding period of
shares. Long-term capital gains of non-corporate taxpayers are currently taxed
at a maximum rate that in some cases may be at least 19.6% lower than the
maximum rate applicable to ordinary income. Capital losses in any year are
deductible only to the extent of capital gains plus, in the case of
non-corporate taxpayers, $3,000 of ordinary income.
If a shareholder (i) incurs a sales load in acquiring shares of a
Fund, (ii) disposes of such shares less than 91 days after they are acquired
and (iii) subsequently acquires such shares or shares of another fund at a
reduced sales load pursuant to a right to reinvest at such reduced sales load
acquired in connection with the acquisition of the shares disposed of, then the
sales load on the shares disposed of (to the extent of the reduction in the
sales load on the shares subsequently acquired) shall not be taken into account
in determining gain or loss on the shares disposed of but shall be treated as
incurred on the acquisition of the shares subsequently acquired (unless such
shares also are disposed of less than 91 days after they are acquired).
Foreign Shareholders. Taxation of a shareholder who, as to the United
States, is a nonresident alien individual, foreign trust or estate, foreign
corporation, or foreign partnership ("foreign shareholder"), depends on whether
the income from a Fund is "effectively connected" with a U.S. trade or business
carried on by such shareholder.
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, dividends and
distributions (other than long-term capital gain distributions and
exempt-interest dividends) will be subject to U.S. withholding tax at the rate
of 30% (or lower applicable treaty rate) upon the gross amount of the dividend
or distribution. Such a foreign shareholder would generally be exempt from U.S.
federal income tax on gains realized on the sale of shares of a Fund, capital
gain distributions and exempt-interest dividends.
If the income from a Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain distributions and any gains realized upon the sale of
shares of the Fund will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or domestic corporations.
In the case of foreign non-corporate shareholders, a Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
(other than exempt-interest dividends) that are otherwise exempt from
withholding tax (or taxable at a reduced treaty rate) unless such shareholders
furnish the Fund with proper notification of their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Recently proposed regulations may change the information provided here.
Foreign shareholders are urged to consult their own tax advisors with respect
to the particular tax consequences to them of an investment in a Fund.
Effect of Future Legislation; Local Tax Considerations. The foregoing
general discussion of federal income tax consequences is based on the Code and
the regulations issued thereunder as in effect on October 3, 1997. Future
legislative or administrative changes or court decisions may significantly
change the
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conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions discussed herein.
Connecticut Tax Considerations. The Connecticut income tax ("CIT") is
imposed on individuals resident in Connecticut and certain non-residents and
partial-year residents with income derived from or connected with sources
located within Connecticut. The CIT is imposed on the federal adjusted gross
income of taxpayers (including married couples who file a joint federal income
tax return) with certain adjustments. The applicable CIT law provides that
distributions by a regulated investment company that qualify as exempt-interest
dividends for federal income tax purposes are not added to federal adjusted
gross income and thus are not subject to CIT to the extent such distributions
are derived from obligations issued by or on behalf of the State of
Connecticut, any political subdivision thereof, or public instrumentality,
state or local authority, district or similar public entity created under the
laws thereof, and certain other U.S. Government obligations and obligations of
certain U.S. Territories. Distributions of the net income of AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT from other sources, including distributions from
Municipal Securities issued by other states or authorities and short-term
capital gains that are treated as ordinary income dividends for federal income
tax purposes are taxable as dividends for CIT purposes.
In addition, the Connecticut corporation business tax ("CCBT") is
imposed on any corporation or association carrying on, or having the right to
carry on, business in Connecticut. Distributions from any source that are
treated as exempt-interest dividends for federal income tax purposes are
includable in gross income for purposes of the CCBT. Moreover, while the CCBT
generally allows a 70% deduction for amounts includable in taxable income for
CCBT purposes that are treated as "dividends" for federal income tax purposes,
such as distributions of taxable net investment income and net short-term
capital gains, the Connecticut Department of Revenue Services has ruled that
the CCBT does not allow this deduction for exempt-interest dividends and
capital gain distributions whose character as "dividends" has been altered for
federal income tax purposes.
Rules of state and local taxation of ordinary income dividends,
exempt-interest dividends and capital gain distributions from regulated
investment companies often differ from the rules for U.S. federal income
taxation described above. Shareholders are urged to consult their tax advisors
as to the consequences of these and other federal, state and local tax rules
affecting investments in the Funds.
DESCRIPTION OF MONEY MARKET INSTRUMENTS (AIM TAX-EXEMPT CASH FUND ONLY)
U.S. Government Obligations consist of marketable securities and
instruments issued or guaranteed by the United States Government or by certain
of its agencies or instrumentalities. Direct obligations are issued by the
United States Treasury and include bills, certificates of indebtedness, notes
and bonds. Obligations of United States Government agencies and
instrumentalities ("Agencies") are issued by government-sponsored agencies and
enterprises acting under authority of Congress. Certain Agencies are backed by
the full faith and credit of the United States Government, and others are not.
MONEY MARKET OBLIGATIONS
The Fund will limit its investments to those securities which at the
time of purchase are "First Tier" securities as defined in Rule 2a-7 under the
1940 Act, as such Rule may be amended from time to time. Rule 2a-7 defines a
"First Tier" security as any "Eligible Security" that:
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(i) has received a short-term rating (or that has been issued
by an issuer that has received a short-term rating with respect to a
class of debt obligations, or any debt obligation within that class,
that is comparable in priority and security with the security) by the
Requisite NRSROs* in the highest short-term rating category for debt
obligations (within which there may be sub-categories or gradations
indicating relative standing); or
(ii) is a security described in paragraph (a)(9)(ii) of Rule
2a-7 (i.e. a security that at the time of issuance was a long-term
security but has a remaining maturity of 397 days or less) whose
issuer has received from the Requisite NRSROs a short-term rating,
with respect to a class of debt obligations (or any debt obligation
within that class) that now is comparable in priority and security
with the security, in the highest short-term rating category for debt
obligations (within which there may be sub-categories or gradations
indicating relative standing); or
(iii) is an Unrated Security** that is of comparable quality
to a security meeting the requirements of clauses (i) and (ii) above,
as determined by the Board of Directors; or
(iv) is a security issued by a registered investment company
that is a money market fund; or
(v) is a Government Security (as defined in Section 2(a)(16)
of the 1940 Act).
Subsequent to its purchase by the Fund, a security may cease to be a
First Tier security. Subject to certain exceptions set forth in Rule 2a-7, such
an event will not require the disposition of the security by the Fund, but AIM
will consider such an event to be relevant in its determination of whether the
Fund should continue to hold the security. To the extent that the ratings
applied by an NRSRO to a security may change as a result of changes in these
rating systems, the Fund will attempt to use comparable ratings as standards
for its investments in accordance with the investment policies described
herein.
Rule 2a-7 defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 calendar days or
less that has received a short-term rating (or that has been
issued by an issuer that has received a short-term rating
with respect to a class of debt obligations, or any debt
obligation within that class, that is comparable in priority
and security with the security) by the Requisite NRSROs in
one of the
- --------
* "Requisite NRSROs" shall mean (a) any two nationally recognized
statistical rating organizations ("NRSROs") that have issued a rating
with respect to a security or class of debt obligations of an issuer,
or (b) if only one NRSRO has issued a rating with respect to such
security or class of debt obligations of an issuer at the time the
Fund purchases or rolls over the security, that NRSRO. At present the
NRSROs are: S&P, Moody's, Duff and Phelps, Inc. ("Duff & Phelps"),
Fitch Investors Services, Inc. ("Fitch") and, with respect to certain
types of securities, IBCA Limited and its affiliate, IBCA Inc.
Subcategories or gradations in ratings (such as a "+" or "-") do not
count as rating categories.
** An "Unrated Security" is generally a security (i) with a remaining
maturity of 397 calendar days or less issued by an issuer that did
not, at the time the security was acquired or rolled over by the
Fund, have a current short-term rating assigned by any NRSRO, either
as to the particular security or as to any other class of debt
obligations of comparable priority and security; (ii) that was a
long-term security at the time of issuance and whose issuer has not
received from any NRSRO a short-term rating with respect to a class
of debt obligations now comparable in priority and security; and
(iii) that is rated but which is the subject of an external credit
support agreement not in effect when the security (or the issuer) was
assigned its rating unless the security has a rating from an NRSRO
reflecting the existence of the credit support agreement.
43
<PAGE> 85
two highest short-term rating categories (within which
there may be sub-categories or gradations indicating
relative standing); or
(ii) a security:
(A) that at the time of issuance had a remaining
maturity of more than 397 calendar days but that has
a remaining maturity of 397 calendar days or less;
and
(B) whose issuer has received from the Requisite NRSROs
a rating with respect to a class of debt obligations
(or any debt obligation within that class) that is
now comparable in priority and security with the
security, in one of the two highest short-term
rating categories (within which there may be
sub-categories or gradations indicating relative
standing); or
(iii) an unrated security that is of comparable quality to a
security meeting the requirements of (i) or (ii) above, as
determined by the Company's Board of Directors; provided,
however, that:
(A) the Board of Directors may base its determination
that a standby commitment that is not a demand
feature is an Eligible Security upon a finding that
the issuer of the commitment presents a minimal risk
of default;
(B) a security that at the time of issuance had a
remaining maturity of more than 397 calendar days
but that has a remaining maturity of 397 calendar
days or less and that is an unrated security is not
an Eligible Security if the security has received a
long-term rating from any NRSRO that is not within
the NRSRO's three highest long-term ratings
categories (within which there may be sub-categories
or gradations indicating relative standing);
(C) an asset backed security shall not be an Eligible
Security unless it has a debt rating from an NRSRO;
and
(D) a security that is subject to a demand feature shall
not be an Eligible Security unless:
(1) the demand feature has received a
short-term rating from an NRSRO (or the
issuer of the demand feature has received
from an NRSRO a short-term rating with
respect to a class of debt obligations or
any debt obligation within that class that
is comparable in priority and security to
the demand feature); and
(2) the issuer of the demand feature, or
another institution, undertakes to notify
promptly the holder of the security in the
event that the demand feature is
substituted with a demand feature provided
by another issuer.
44
<PAGE> 86
RATINGS OF SECURITIES
The following is a description of the factors underlying the
commercial paper and debt ratings of Moody's, S&P and Fitch:
MOODY'S BOND RATINGS
Moody's describes its ratings for corporate bonds as follows:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa to B. The modifier 1 indicates that the company
ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the company
ranks in the low end of its generic rating category.
45
<PAGE> 87
MOODY'S MUNICIPAL BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa to B. The modifier 1 indicates that the company
ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the company
ranks in the lower end of its generic rating category.
46
<PAGE> 88
MOODY'S SHORT-TERM LOAN RATINGS
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in bond
risk, long-term secular trends for example, may be less important over the
short run.
A short-term rating may also be assigned on an issue having a demand
feature variable rate demand obligation (VRDO). Such ratings will be designated
as VMIG or, if the demand feature is not rated, as NR. Short-term ratings on
issues with demand features are differentiated by the use of the VMIG symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in
the event the demand is not met.
A VMIG rating may also be assigned to commercial paper programs. Such
programs are characterized as having variable short-term maturities but having
neither a variable rate nor demand feature.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4.
Gradations of investment quality are indicated by rating symbols, with
each symbol representing a group in which the quality characteristics are
broadly the same.
MIG 1/VMIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3: This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG 4/VMIG 4: This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
MOODY'S COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are opinions of the ability of issues
to repay punctually promissory obligations not having an original maturity in
excess of nine months.
PRIME-1: Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return
on funds employed; conservative capitalization structures with moderate
reliance on debt and ample asset protection; broad margins in earning coverage
of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternate liquidity.
47
<PAGE> 89
PRIME-2: Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
PRIME-3: Issuers rated Prime-3 (or related supported institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
S&P BOND RATINGS
S&P describes its ratings for corporate bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation and
C the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or large exposure
to adverse conditions.
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option
or demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal
and interest as due, and the second rating addresses only the demand feature.
The long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, AAA/A-1+). With short-term demand debt, the note rating symbols are
used with the commercial paper rating symbols (for example, SP-1+/A-1+).
48
<PAGE> 90
S&P MUNICIPAL NOTE RATINGS
A S&P note rating reflects the liquidity factors and market-access
risks unique to notes. Notes maturing in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment: amortization schedule (the larger the final maturity relative
to other maturities, the more likely the issue will be treated as a note); and
source of payment (the more the issue depends on the market for its
refinancing, the more likely it is to be treated as a note).
Note rating symbols and definitions are as follows.
SP-1: Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics are given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
S&P COMMERCIAL PAPER RATINGS
A S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
Rating categories are as follows:
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes
in circumstances than obligations carrying the higher designations.
B: Issues with this rating are regarded as having only speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D: Debt with this rating is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless it is believed that such
payments will be made during such grace period.
FITCH INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue in a timely manner.
49
<PAGE> 91
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be
provided by insurance policies or financial guaranties unless otherwise
indicated.
Bonds carrying the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any
security. Ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt nature
or taxability of payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA." Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
"F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds
and, therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
SUSPENDED: A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or
refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
50
<PAGE> 92
FITCHALERT: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive," indicating a potential
upgrade, "Negative," for potential downgrade, or "Evolving," where ratings may
be raised or lowered. FitchAlert is relatively short-term and should be
resolved within 12 months.
RATINGS OUTLOOK
An outlook is used to describe the most likely direction of any rating
change over the intermediate term. It is described as "Positive" or "Negative."
The absence of a designation indicates a stable outlook.
FITCH SPECULATIVE GRADE BOND RATINGS
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or
liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer or possible recovery value in
bankruptcy, the current and prospective financial condition and operating
performance of the issuer and any guarantor, as well as the economic and
political environment that might affect the issuer's future financial strength.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since rating categories cannot fully reflect the
differences in degrees of credit risk.
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified, which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC: Bonds have certain identifiable characteristics that, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D"
represents the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "DDD", "DD", or "D" categories.
51
<PAGE> 93
FITCH SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating
on the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as for issues assigned "F-1+" and "F-1" ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse changes could cause these securities to be rated
below investment grade.
F-S: Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are vulnerable
to near-term adverse changes in financial and economic conditions.
D: Default. Issues assigned this rating are in actual or imminent payment
default.
LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
52
<PAGE> 94
FINANCIAL STATEMENTS
FS
<PAGE> 95
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Tax-Exempt Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Tax-Exempt Cash Fund (a portfolio of
AIM Tax-Exempt Funds, Inc.), including the schedule of
investments, as of March 31, 1997, and the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended and the financial
highlights for each of the years in the three-year period
then ended, the three-month period ended March 31, 1994,
and the year ended December 31, 1993. These financial
statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express
an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of March 31, 1997, 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 financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM
Tax-Exempt Cash Fund as of March 31, 1997, the results of
its operations for the year then ended, changes in its net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years
in the three-year period then ended, the three-month
period ended March 31, 1994, and the year ended December
31, 1993, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
May 2, 1997
FS-1
<PAGE> 96
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MUNICIPAL SECURITIES-81.70%
ALABAMA-2.28%
Alabama Industrial
Development Board
(Industrial Partners
Project); Variable/Fixed
Rate Refunding Series 1989
RB
3.60%, 01/01/07(b)(c) -- VMIG-1 $1,295 $ 1,295,000
- --------------------------------------------------------------------
ALASKA-0.80%
Fairbanks North Star
(Borough of) Alaska; GO
8.00%, 11/01/97(d) AAA Aaa 445 455,065
- --------------------------------------------------------------------
ARIZONA-1.06%
Maricopa (County of) Union
High School District No.
210; Series 1989 B GO
6.55%, 07/01/97 AA Aa 600 604,114
- --------------------------------------------------------------------
COLORADO-7.12%
Colorado Housing Finance
Authority (Grant Plaza
Project); Multifamily
Mortgage Series 1991 A RB
3.525%, 11/01/09(b)(c) -- VMIG-1 800 800,000
- --------------------------------------------------------------------
Denver (City of) (Helen
Bonfils Theatre Complex
Project); Adjustable Rate
Series 1997 A RB
3.61%, 01/01/17(b)(c)(e) -- -- 1,000 1,000,000
- --------------------------------------------------------------------
Eagle (County of) Smith
Creek Metropolitan
District; Variable Rate
Series 1997 RB
3.15%, 10/01/35(b)(c) A-1+ -- 2,250 2,250,000
- --------------------------------------------------------------------
4,050,000
- --------------------------------------------------------------------
DISTRICT OF COLUMBIA-1.93%
District of Columbia;
Georgetown University
Issue Series 1988 B RB
3.40%, 04/01/17(b)(c) A-1+ VMIG-1 1,100 1,100,000
- --------------------------------------------------------------------
FLORIDA-2.49%
Dade (County of) Health
Facilities Authority
Hospital (Baptist Hospital
Miami Project); RB
7.375%, 05/01/97(f)(g) AAA -- 400 409,051
- --------------------------------------------------------------------
Okalusa (County of) School
Board; Sales Tax RB
5.00%, 09/01/97(d) AAA Aaa 1,000 1,005,754
- --------------------------------------------------------------------
1,414,805
- --------------------------------------------------------------------
GEORGIA-9.15%
Dekalb (County of) Private
Hospital Authority
(Egleston Children's
Hospital at Emory
University); Variable Rate
Demand Series 1994 A RAN
3.45%, 03/01/24(b)(c) A-1+ VMIG-1 2,200 2,200,000
- --------------------------------------------------------------------
Elbert & Bowman (Counties
of) (Seaboard Farms of
Elberton); Series 1985 IDR
3.55%, 07/01/05(b)(c) A-1 -- 1,000 1,000,000
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GEORGIA-(CONTINUED)
Monroe (County of) Georgia
Development Authority
(Oglethorpe Power Corp.);
Pollution Control Series A
RB
5.35%, 01/01/98(d) AAA Aaa $ 500 $ 505,076
- --------------------------------------------------------------------
Roswell (City of) Georgia
Housing Development
Authority (Azalea
Project); Multifamily
Housing Series 1996 RB
3.45%, 06/15/25(b)(c) A-1+ -- 1,500 1,500,000
- --------------------------------------------------------------------
5,205,076
- --------------------------------------------------------------------
ILLINOIS-9.44%
Illinois Development Finance
Authority (Chicago
Symphony Orchestra
Project); Variable/Fixed
Rate Demand Series 1996 RB
3.50%, 06/01/31(b)(c) A-1+ VMIG-1 2,000 2,000,000
- --------------------------------------------------------------------
Illinois Health Facilities
Authority (Children's
Memorial Hospital
Project); RB
3.50%, 11/01/15(b)(c)(e) -- -- 1,950 1,950,000
- --------------------------------------------------------------------
Illinois Health Facilities
Authority (Franciscan
Eldercare Project);
Adjustable Rate Refunding
Series 1996 C RB
3.50%, 05/15/26(b)(c) A-1+ -- 1,420 1,420,000
- --------------------------------------------------------------------
5,370,000
- --------------------------------------------------------------------
INDIANA-3.69%
Indianapolis (City of)
(Children's Museum
Project); Economic
Development Floating Rate
Series 1995 RB
3.45%, 10/01/25(b)(c) A-1+ -- 1,400 1,400,000
- --------------------------------------------------------------------
Indianapolis (City of)
(Local Public Improvement
Bond Bank Notes); Series
1996 F RB
4.125%, 07/10/97(c) SP-1+ -- 700 701,117
- --------------------------------------------------------------------
2,101,117
- --------------------------------------------------------------------
MARYLAND-1.23%
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-1 700 700,000
- --------------------------------------------------------------------
MICHIGAN-2.73%
Michigan State Hospital
Finance Authority
(Hospital Equipment Loan
Program); Adjustable
Series 1995 A RB
3.55%, 12/01/23(b)(c) -- VMIG-1 800 800,000
- --------------------------------------------------------------------
Michigan (State of) Housing
Development Authority
Rental Housing; Series
1994 C RB
3.45%, 04/01/19(b)(c) A-1+ -- 550 550,000
- --------------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 97
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MICHIGAN-(CONTINUED)
Plymouth (Township of)
Economic Development Corp.
(Key International
Project); Variable Rate
Demand Series 1984 RB
3.60%, 07/01/04(b)(c)(e) -- -- $ 200 $ 200,000
- --------------------------------------------------------------------
1,550,000
- --------------------------------------------------------------------
MINNESOTA-0.88%
Mankato (City of) (Northern
States Power Co. Project);
Floating Collateralized
Series 1985 PCR
3.55%, 03/01/11(c) AA- A1 500 500,000
- --------------------------------------------------------------------
MISSOURI-2.46%
Missouri (State of) Health
and Education Facilities
Authority Washington
University; Series 1996 A
RB
3.80%, 09/01/30(c) A-1+ VMIG-1 1,400 1,400,000
- --------------------------------------------------------------------
MONTANA-1.76%
Missoula (County of)
(Washington Corp.
Project); Floating Rate
Monthly Demand Series 1984
IDR
3.50%, 11/01/04(b)(c)(e) -- -- 1,000 1,000,000
- --------------------------------------------------------------------
NEVADA-4.75%
Clark (County of) (Nevada
Power Co. Project);
Refunding Series 1995 C
IDR
3.45%, 10/01/30(b)(c) A-1+ -- 1,000 1,000,000
- --------------------------------------------------------------------
Clark (County of) Airport
System; Series 1993 A RB
3.45%, 07/01/12(c)(d) A-1+ VMIG-1 1,700 1,700,000
- --------------------------------------------------------------------
2,700,000
- --------------------------------------------------------------------
NEW HAMPSHIRE-2.46%
New Hampshire Higher
Education and Health
Facilities Authority;
Variable Rate Hospital
Series 1985 C RB
3.45%, 12/01/25(c)(d) A-1 -- 1,400 1,400,000
- --------------------------------------------------------------------
NEW YORK-1.76%
New York (City of); General
Obligation Fiscal Series
1997 B RAN
4.50%, 06/30/97(b) SP-1+ MIG-1 1,000 1,002,672
- --------------------------------------------------------------------
NORTH CAROLINA-6.07%
Alamance (County of)
Industrial Facilities and
Pollution Control
Financing Authority
(Science Manufacturing,
Inc. Project); Series 1985
IDR
3.90%, 04/01/15(b)(c) -- P-1 1,400 1,400,000
- --------------------------------------------------------------------
New Hanover (County of)
Industrial Facilities and
Pollution Control
Financing Authority
(Gang-Nail Systems, Inc.
Project); Series 1984 IDR
3.50%, 12/01/99(b)(c) -- P-1 1,300 1,300,000
- --------------------------------------------------------------------
Raleigh Durham Airport
Authority (American
Airlines Project); Series
1995 Refunding RB
3.80%, 11/01/15(b)(c) A-1 -- 750 750,000
- --------------------------------------------------------------------
3,450,000
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
OHIO-4.92%
Delaware (County of)
(Radiation Sterilizers,
Inc.); Series 1984 IDR
3.60%, 12/01/04(b)(c) A-1 -- $ 300 $ 300,000
- --------------------------------------------------------------------
Lucus (County of) (Lutheran
Homes Society Project);
Adjustable Rate Demand
Health Care Facilities
1996 RB
3.45%, 11/01/19(b)(c) A-1+ -- 2,500 2,500,000
- --------------------------------------------------------------------
2,800,000
- --------------------------------------------------------------------
PENNSYLVANIA-2.20%
Allentown (City of) School
District; Series 1991 GO
6.00%, 08/01/07(d) AAA Aaa 250 251,638
- --------------------------------------------------------------------
Delaware (County of)
Industrial Development
Authority (Scotfoam Corp.
Project); Variable Rate
Demand Series 1985 IDR
3.60%, 10/01/05(b)(c)(e) -- -- 1,000 1,000,000
- --------------------------------------------------------------------
1,251,638
- --------------------------------------------------------------------
RHODE ISLAND-1.76%
Rhode Island (State of)
Industrial Facilities
Authority (Blackstone
Valley Electric Company);
Variable Rate Series 1984
RB
3.50%, 12/01/14(b)(c) A-1 -- 1,000 1,000,000
- --------------------------------------------------------------------
TENNESSEE-2.23%
Industrial Development Board
of the Metropolitan
Government of Nashville &
Davidson County
(Amberwood, Ltd. Project);
Multifamily Housing Series
1993 A RB
3.76%, 07/01/13(b)(c) -- VMIG-1 1,270 1,270,000
- --------------------------------------------------------------------
TEXAS-4.66%
Harris (County of) Sub Lien
Toll Road Series D RB
3.30%, 08/01/15(b)(c) A-1+ VMIG-1 1,000 1,000,000
- --------------------------------------------------------------------
Richardson (City of)
Independent School
District; Series 1993
Refunding GO
4.10%, 08/15/97 AA Aa1 250 250,410
- --------------------------------------------------------------------
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
- --------------------------------------------------------------------
2,650,410
- --------------------------------------------------------------------
UTAH-2.29%
Salt Lake (County of);
Series 1992 GO
5.00%, 06/15/97 AA+ Aaa 500 501,474
- --------------------------------------------------------------------
Salt Lake (County of)
(Service Station Holdings
Inc. Project-The British
Petroleum Co. plc); Series
1994 Refunding RB
3.80%, 02/01/08(c) A-1+ P-1 800 800,000
- --------------------------------------------------------------------
1,301,474
- --------------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 98
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WASHINGTON-0.88%
Industrial Development Corp.
of Port Townsend (Port
Townsend Paper Corp.
Project); Series 1988 A
Refunding RB
3.55%, 03/01/09(b)(c) VMIG-1 $ 500 $ 500,000
- --------------------------------------------------------------------
WISCONSIN-0.70%
Wisconsin (State of); GO
4.50%, 06/16/97 SP-1+ MIG-1 400 400,519
- --------------------------------------------------------------------
Total Municipal
Securities 46,471,890
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) MARKET
S&P Moody's PAR VALUE
<S> <C> <C> <C> <C>
TAXABLE COMMERCIAL PAPER(H)(I)-9.17%
Cargill Financial Services
Corp.-(Food Processing),
5.35%, 08/26/97 A-1+ P-1 $2,000 $ 1,956,308
- --------------------------------------------------------------------
Merrill Lynch & Co.
Inc.-(Broker-Dealer),
5.32%, 08/12/97 A-1+ P-1 1,800 1,764,622
- --------------------------------------------------------------------
Receivables Capital
Corp.-(Receivable Pools),
5.37%, 05/28/97 A-1+ P-1 1,507 1,494,187
- --------------------------------------------------------------------
Total Taxable Commercial Paper 5,215,117
- --------------------------------------------------------------------
REPURCHASE AGREEMENT(i)(j)-6.33%
Goldman, Sachs & Co., Inc.
6.50% 04/01/97(k) 3,598,070
- --------------------------------------------------------------------
TOTAL INVESTMENTS- 97.20% 55,285,077(l)
- --------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.80% 1,595,115
- --------------------------------------------------------------------
NET ASSETS-100.00% $ 56,880,192
- --------------------------------------------------------------------
</TABLE>
ABBREVIATIONS:
<TABLE>
<S> <C>
GO -- General Obligation Bonds
IDR -- Industrial Development Revenue Bonds
PCR -- Pollution Control Revenue Bonds
RAN -- Revenue Anticipation Notes
RB -- Revenue Bonds
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Ratings assigned by Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("MOODY'S"). Ratings are not covered by Independent
Auditor's Report.
(b) Secured by a letter of credit.
(c) Demand security; payable upon demand by the Fund at specified time intervals
no greater than thirteen months. Interest rate is redetermined periodically.
Rate shown is the rate in effect on 03/31/97.
(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) Secured by an escrow fund of U.S. Treasury obligations.
(g) Subject to an irrevocable call or mandatory put by the issuer. Maturity date
and value reflect such call or put.
(h) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(i) Interest does not qualify as exempt interest for federal tax purposes.
(j) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(k) Joint repurchase agreement entered into 03/31/97 with a maturing value of
$575,103,819. Collateralized by U.S. Treasury obligations, 0% to 9.25% due
07/24/97 to 02/15/16 with an aggregate market value at March 31, 1997 of
$587,066,889.
(l) Also represents costs for federal income tax purposes.
See Notes to Financial Statements
FS-4
<PAGE> 99
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (amortized cost) $ 55,285,077
- ------------------------------------------------------------
Receivables for:
Fund shares sold 1,573,139
- ------------------------------------------------------------
Interest 216,636
- ------------------------------------------------------------
Investment for deferred compensation plan 17,708
- ------------------------------------------------------------
Other assets 15,190
- ------------------------------------------------------------
Total assets 57,107,750
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 2,450
- ------------------------------------------------------------
Deferred compensation 17,708
- ------------------------------------------------------------
Fund shares reacquired 133,479
- ------------------------------------------------------------
Accrued advisory fees 16,004
- ------------------------------------------------------------
Accrued distribution fees 11,162
- ------------------------------------------------------------
Accrued administrative service fees 5,768
- ------------------------------------------------------------
Accrued transfer agent fees 11,718
- ------------------------------------------------------------
Accrued operating expenses 29,269
- ------------------------------------------------------------
Total liabilities 227,558
- ------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 56,880,192
============================================================
Capital stock, $.001 par value per share:
Authorized 1,000,000,000
- ------------------------------------------------------------
Outstanding 56,877,041
============================================================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 1.00
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended March 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $1,370,128
- -----------------------------------------------------------
EXPENSES:
Advisory fees 125,537
- -----------------------------------------------------------
Custodian fees 9,962
- -----------------------------------------------------------
Administrative service fees 34,329
- -----------------------------------------------------------
Directors' fees and expenses 6,846
- -----------------------------------------------------------
Transfer agent fees 71,297
- -----------------------------------------------------------
Distribution fees 89,659
- -----------------------------------------------------------
Registration and filing fees 29,153
- -----------------------------------------------------------
Other 58,376
- -----------------------------------------------------------
Total expenses 425,159
- -----------------------------------------------------------
Less: Fees waived by advisor (53,795)
- -----------------------------------------------------------
Net expenses 371,364
- -----------------------------------------------------------
Net investment income 998,764
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Net realized gain on sales of investment
securities 7,711
- -----------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities (741)
- -----------------------------------------------------------
Net gain on investment securities 6,970
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $1,005,734
============================================================
</TABLE>
See Notes to Financial Statements.
FS-5
<PAGE> 100
STATEMENT OF CHANGES IN NET ASSETS
For the years ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income $ 998,764 $ 861,666
- ---------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 7,711 12,256
- ---------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (741) (1,694)
- ---------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,005,734 872,228
- ---------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (996,476) (838,861)
- ---------------------------------------------------------------------------------------
Net increase (decrease) from capital stock transactions 26,856,591 (383,580)
- ---------------------------------------------------------------------------------------
Net increase (decrease) in net assets 26,865,849 (350,213)
- ---------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 30,014,343 30,364,556
- ---------------------------------------------------------------------------------------
End of period $56,880,192 $30,014,343
=======================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $56,877,041 $30,020,450
=======================================================================================
Undistributed net investment income 34,005 31,717
=======================================================================================
Undistributed realized gain (loss) on sales of investment
securities (30,854) (38,565)
=======================================================================================
Unrealized appreciation of investment securities -- 741
=======================================================================================
$56,880,192 $30,014,343
=======================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Tax-Exempt Cash Fund (the "Fund") is a series portfolio of AIM Tax-Exempt
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of three separate
portfolios: AIM Tax-Exempt Cash Fund, AIM Tax-Exempt Bond Fund of Connecticut
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 Fund. The Fund's investment
objective is to earn the highest level of current income free from federal
income taxes that is consistent with safety of principal and liquidity.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--The Fund invests only in securities which have
maturities of 397 days or less from the date of purchase. The securities are
valued on the basis of amortized cost which approximates market value. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of premiums or original issue
discounts.
B. Securities Transactions, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date,
adjusted for amortization of premiums and discounts on investments, and is
recorded on the accrual basis. Discounts, other than original issue, are
amortized to unrealized appreciation for financial reporting purposes. It is
the policy of the Fund to declare daily dividends from net investment income.
Such dividends are paid monthly.
C. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements. The Fund has a capital loss carryforward of $33,594
(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.
FS-6
<PAGE> 101
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.35% of the Fund's
average daily net assets.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended March 31, 1997, the Fund
reimbursed AIM $34,329 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the year ended March 31, 1997, the Fund paid AFS
$39,534 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") pursuant to which AIM Distributors
serves as the distributor for the Fund. The Company has also adopted a plan
pursuant to Rule 12b-1 under the 1940 Act (the "Plan") with respect to the Fund
whereby the Fund will pay AIM Distributors up to a maximum annual rate of 0.25%
of the Fund's average daily net assets as compensation for services related to
the sale and distribution of the Fund's shares. Currently, AIM Distributors has
voluntarily elected to waive a portion of its compensation payable by the Fund
such that the compensation paid pursuant to the Plan equals 0.10% per annum of
the Fund's average daily net assets. During the year ended March 31, 1997, AIM
Distributors waived $53,795. This waiver may be rescinded by AIM Distributors at
any time without further notice to investors. The Plan provides that of the
aggregate amount payable under the Plan, payments to dealers and other financial
institutions that provide continuing personal shareholder services to their
customers who purchase and own shares of the Fund in amounts of up to 0.25% of
the average daily net assets of the Fund attributable to the customers of such
dealers or financial institutions may be characterized as a service fee, and
that payments to dealers and other financial institutions in excess of such
amount and payments to AIM Distributors would be characterized as an asset-based
sales charge. The Plan also imposes a cap on the total amount of sales charges,
including asset-based sales charges, that may be paid by the Company with
respect to the Fund. As a result of AIM Distributors' waiver of compensation due
from the Fund, payments to dealers and other financial institutions by that Fund
will be limited to 0.10% of the Fund's average daily net assets. During the year
ended March 31, 1997, the Fund paid AIM Distributors $35,864 as compensation
pursuant to the Plan.
Certain officers and directors of the Company are officers and directors of
AIM, AFS and AIM Distributors. The Fund paid legal fees of $3,973 for services
rendered by Kramer, Levin, Naftalis & Frankel as counsel to the Fund's Board of
Directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company invests directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-CAPITAL STOCK
Changes in capital stock outstanding during the years ended March 31, 1997 and
1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold 96,643,811 $ 96,643,811 42,892,892 $ 42,892,892
- ------------------------------------------------------------------------------
Issued as
reinvestment of
dividends 948,679 948,679 808,372 808,372
- ------------------------------------------------------------------------------
Reacquired (70,735,899) (70,735,899) (44,084,844) (44,084,844)
- ------------------------------------------------------------------------------
26,856,591 $ 26,856,591 (383,580) $ (383,580)
==============================================================================
</TABLE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during each of the years in the three-year period ended March 31,
1997, the three months ended March 31, 1994 and each of the years in the
six-year period ended December 31, 1993.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------------------------------------------- --------------------------------
1997 1996 1995 1994 1993 1992(A) 1991
-------- -------- -------- -------- -------- -------- --------
<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 0.03 0.03 0.03 0.004 0.02 0.02 0.04
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.03) (0.03) (0.03) (0.004) (0.02) (0.02) (0.04)
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
Total return 2.82% 2.92% 2.54% 1.73%(b) 1.78% 2.42% 3.91%
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $ 56,880 $ 30,014 $ 30,365 $ 33,658 $ 35,230 $ 41,291 $ 43,366
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
Ratio of expenses to average net assets 1.04%(c)(d) 1.05%(d) 1.01%(d) 1.00%(b)(d) 1.00%(d) 0.98%(d) 0.98%
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
Ratio of net investment income to average
net assets 2.78%(c)(e) 2.97%(e) 2.53%(e) 1.75%(b)(e) 1.76%(e) 2.42%(e) 3.87%
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
<CAPTION>
DECEMBER 31,
------------------------------
1990 1989 1988
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------ -------- -------- --------
Income from investment operations:
Net investment income 0.05 0.05 0.05
- ------------------------------------------ -------- -------- --------
Less distributions:
Dividends from net investment income (0.05) (0.05) (0.05)
- ------------------------------------------ -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------ -------- -------- --------
Total return 5.17% 5.62% 4.65%
- ------------------------------------------ -------- -------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $ 43,302 $ 45,995 $ 51,597
- ------------------------------------------ -------- -------- --------
Ratio of expenses to average net assets 0.99% 0.93% 0.83%
- ------------------------------------------ -------- -------- --------
Ratio of net investment income to average
net assets 5.05% 5.48% 4.54%
- ------------------------------------------ -------- -------- --------
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Annualized.
(c) Ratios are based on average daily net assets of $35,863,626.
(d) After waiver of fees and/or expense reimbursements. Ratios of expenses to
average net assets prior to waiver of fees and/or expense reimbursements
were 1.19%, 1.20%, 1.16%, 1.14% (annualized), 1.36% and 1.00% for the
periods 1997 - 1992, respectively.
(e) After waiver of fees and/or expense reimbursements. Ratios of income to
average net assets prior to waiver of fees and/or expense reimbursements
were 2.63%, 2.82%, 2.38, 1.61% (annualized), 1.40% and 2.40% for the periods
1997-1992, respectively.
FS-7
<PAGE> 102
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Tax-Exempt Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Tax-Free Intermediate Shares (a
portfolio of AIM Tax-Exempt Funds, Inc.), including the
schedule of investments, as of March 31, 1997, and the
related statement of operations for the year then ended,
the statement of changes in net assets for each of the
years in the two-year period then ended and the financial
highlights for each of the years in the eight-year period
then ended, the eleven-month period ended March 31, 1989,
and the period May 11, 1987 (date operations commenced)
through April 30, 1988. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on
these financial statements and the financial highlights
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of March 31, 1997, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Tax-Free
Intermediate Shares as of March 31, 1997, the results of
its operations for the year then ended, changes in its net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years
in the eight-year period then ended, the eleven-month
period ended March 31, 1989, and the period May 11, 1987
(date operations commenced) through April 30, 1988, in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
May 2, 1997
FS-8
<PAGE> 103
SCHEDULE OF INVESTMENTS
March 31, 1997
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ALABAMA-0.24%
Alabama State Municipal Electric
Authority; Power Supply
Series A RB
6.30%, 09/01/01(b) AAA Aaa $ 400 $ 422,600
- -------------------------------------------------------------------------
ALASKA-5.77%
Alaska Housing Finance Corp.;
General Mortgage Series A RB
3.45%, 06/01/26(c)(d) AAA VMIG1 8,000 8,000,000
- -------------------------------------------------------------------------
Anchorage (City of); School
Series 1994 GO
5.50%, 07/01/06(b) AAA Aaa 1,950 1,998,087
- -------------------------------------------------------------------------
9,998,087
- -------------------------------------------------------------------------
ARIZONA-2.63%
Arizona (State of); Educational
Loan Marketing Corp.
Series A Refunding RB
6.55%, 03/01/99 -- A 1,000 1,030,980
- -------------------------------------------------------------------------
Cochise (County of);
Series 1990 Certificates of
Participation
4.15%, 08/01/98(b) AAA Aaa 180 179,968
- -------------------------------------------------------------------------
Maricopa County Gilbert Unified
School District #41 (Project of
1988); School Improvement
Series 1992 E GO
6.20%, 07/01/02(e) AAA Aaa 1,250 1,339,137
- -------------------------------------------------------------------------
Mesa Industrial Development
Authority (Western Health
Network-Mesa Lutheran Project);
Health Care Facilities
Refunding
Series 1988 B1 RB
7.50%, 01/01/04(b) AAA Aaa 700 740,922
- -------------------------------------------------------------------------
Mohave County Unified School
District #1; Lake Havasu Series
A GO
5.40%, 07/01/06(b) AAA Aaa 200 202,596
- -------------------------------------------------------------------------
Phoenix (City of); Senior Lien
Street and Highway User
Refunding
Series 1992 RB
6.20%, 07/01/02 AA A1 1,000 1,067,000
- -------------------------------------------------------------------------
4,560,603
- -------------------------------------------------------------------------
ARKANSAS-1.17%
Little Rock (City of) (Baptist
Medical Center); Health
Facility Hospital RB
6.70%, 11/01/04(b) AAA Aaa 1,400 1,509,172
- -------------------------------------------------------------------------
North Little Rock (City of);
Electric System Refunding
Series 1992 A RB
6.00%, 07/01/01(b) AAA Aaa 500 527,260
- -------------------------------------------------------------------------
2,036,432
- -------------------------------------------------------------------------
CALIFORNIA-2.48%
Folsom (City of) (School
Facilities Project);
Series 1994 B GO
6.00%, 08/01/02(b) AAA Aaa 500 527,870
- -------------------------------------------------------------------------
Inglewood (City of) (Daniel
Freeman Hospital Inc.); Insured
Hospital
Series 1991 RB
6.50%, 05/01/01 A -- 400 418,716
- -------------------------------------------------------------------------
Oakland (City of); Housing
Finance
Issue D-1 RB
6.70%, 01/01/98 A+ -- 165 166,983
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
CALIFORNIA-(CONTINUED)
Orange (County of); Refunding
Recovery
Series A RB
5.50%, 06/01/06(b) AAA Aaa $1,000 $ 1,028,910
- -------------------------------------------------------------------------
Parking Authority of the City and
County of San Francisco;
Parking Meter
Series 1994 RB
6.75%, 06/01/05(b) AAA Aaa 500 556,230
- -------------------------------------------------------------------------
Rancho Mirage Joint Powers
Authority (Eisenhower Medical
Center);
Series A Certificate of
Participation
5.10%, 07/01/07(b) AAA Aaa 1,000 984,260
- -------------------------------------------------------------------------
Regents (The) of the University
of California (Multiple Purpose
Projects); Refunding
Series A RB
5.75%, 09/01/97 A A2 250 251,573
- -------------------------------------------------------------------------
State Public Works Board of the
State of California (Department
of Corrections) (State
Prison-Madera County); Lease
Series 1990 A RB
7.00%, 09/01/00 A A 100 107,230
- -------------------------------------------------------------------------
West End Water Development,
Treatment, and Conservation
Joint Powers Authority; 1990
Water Facilities
Certificate of Participation
7.00%, 10/01/00 BBB+ A 250 264,045
- -------------------------------------------------------------------------
4,305,817
- -------------------------------------------------------------------------
COLORADO-0.05%
Colorado Student Obligation Bond
Authority; Student Loan
Series 1985 B RB
6.125%, 12/01/98 -- A 80 81,169
- -------------------------------------------------------------------------
CONNECTICUT-0.07%
Connecticut (State of) Special
Tax Obligation; Second Lien
Transportation and
Infrastructure Purpose S-1 RB
3.40%, 12/01/10(c)(d) AA- VMIG1 130 130,000
- -------------------------------------------------------------------------
DELAWARE-0.45%
Delaware Transportation
Authority; Senior Lien
Transportation System
Series 1991 RB
6.00%, 07/01/01(e)(f) AAA Aaa 750 786,173
- -------------------------------------------------------------------------
DISTRICT OF COLUMBIA-3.35%
District of Columbia; Refunding
Series B GO
6.75%, 06/01/99(b) AAA Aaa 750 778,897
- -------------------------------------------------------------------------
District of Columbia;
Series B GO
6.125%, 06/01/03(b) AAA Aaa 3,020 3,186,523
- -------------------------------------------------------------------------
District of Columbia (Medlantic
Healthcare Group);
Series 1996 A RB
6.00%, 08/15/06(b) AAA Aaa 1,550 1,632,677
- -------------------------------------------------------------------------
District of Columbia (The Howard
University Issue); University
Series 1990 A RB
6.90%, 10/01/00 A+ A3 200 213,098
- -------------------------------------------------------------------------
5,811,195
- -------------------------------------------------------------------------
</TABLE>
FS-9
<PAGE> 104
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
FLORIDA-3.71%
Dade (County of) School District;
Refunding
Series 1996 GO
6.00%, 07/15/06(b) AAA Aaa $1,900 $ 2,035,185
- -------------------------------------------------------------------------
Dade (County of); Water and Sewer
RB
5.00%, 10/01/99(b) AAA Aaa 225 228,049
- -------------------------------------------------------------------------
Palm Beach County Solid Waste
Authority; RB
7.90%, 07/01/97 A A2 100 100,939
- -------------------------------------------------------------------------
Palm Beach County Solid Waste
Authority; Refunding Series
1997 A RB
5.50%, 10/01/06(b) AAA Aaa 4,000 4,068,000
- -------------------------------------------------------------------------
6,432,173
- -------------------------------------------------------------------------
GEORGIA-3.89%
Albany (City of); Sewer System
Series 1992 RB
6.30%, 07/01/02(e) AAA Aaa 500 533,645
- -------------------------------------------------------------------------
Chatham (County of) Hospital
Authority (Memorial Medical
Center); Refunding Series 1996
A RB
5.10%, 01/01/07(b) AAA Aaa 1,000 989,330
- -------------------------------------------------------------------------
Dekalb Private Hospital Authority
(Egleston Children's Hospital
at Emory University, Inc.
Project); Series 1994 A RB
3.45%, 03/01/24(c)(d) AA- VMIG1 800 800,000
- -------------------------------------------------------------------------
Fulton (County of); Water and
Sewer Refunding Series 1992 RB
5.75%, 01/01/02(b) AAA Aaa 715 744,680
- -------------------------------------------------------------------------
Georgia (State of);
Series 1988 D GO
7.10%, 06/01/99 AA- Aaa 2,000 2,105,120
- -------------------------------------------------------------------------
Georgia State Municipal Electric
Authority; Series V RB
6.00%, 01/01/01(b) AAA Aaa 1,000 1,040,240
- -------------------------------------------------------------------------
Metropolitan Atlanta Rapid
Transit Authority; Sales Tax
Refunding
Series M RB
6.15%, 07/01/02 AA- A1 500 532,115
- -------------------------------------------------------------------------
6,745,130
- -------------------------------------------------------------------------
HAWAII-3.05%
Hawaii (State of); Refunding
Series 1997 GO
6.00%, 03/01/07(b) AAA Aaa 5,000 5,281,250
- -------------------------------------------------------------------------
ILLINOIS-5.83%
Chicago (City of) (Central Public
Library Project); Adjustable
Rate
Series 1988 C GO
6.10%, 01/01/99(b) AAA Aaa 500 513,150
- -------------------------------------------------------------------------
Chicago (City of);
Series 1997 GO
6.00%, 01/01/06(b) AAA Aaa 500 525,620
- -------------------------------------------------------------------------
Chicago Park District; Capital
Improvement
Series 1991 GO
5.80%, 01/01/98(e) AA- A1 750 759,585
- -------------------------------------------------------------------------
Illinois Development Finance
Authority Chicago Symphony
Project; RB
3.50%, 06/01/31(c)(d) AA- VMIG1 756 756,000
- -------------------------------------------------------------------------
Illinois Educational Facilities
Authority (Augustana College);
Series 1997 RB
4.80%, 10/01/99(b) AAA -- 375 376,920
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ILLINOIS-(CONTINUED)
Illinois Health Facilities
Authority (Mercy Hospital and
Medical Center); Refunding
Series 1992 RB
6.20%, 01/01/00 A- Baa1 $ 250 $ 255,013
- -------------------------------------------------------------------------
Illinois Health Facilities
Authority;
Series D RB
3.50%, 08/01/15(c)(d) AA- VMIG1 1,150 1,150,000
- -------------------------------------------------------------------------
Illinois Health Facilities
Authority (Children's Memorial
Hospital Project); Series 1985
B RB
3.50%, 11/01/15(c)(d) AA- VMIG1 2,050 2,050,000
- -------------------------------------------------------------------------
Illinois Regional Transit
Authority; Series B RB
6.30%, 6/01/04(e)(f) AAA Aaa 1,000 1,092,670
- -------------------------------------------------------------------------
Joliet (City of); Waterworks and
Sewer Series 1991 RB
6.95%, 01/01/01(b) AAA Aaa 250 266,785
- -------------------------------------------------------------------------
Kane (County of) Public Building
Commission; Unlimited Tax
Public Building Series B GO
6.20%, 12/01/01 -- Aa 700 725,746
- -------------------------------------------------------------------------
Kankakee County School District
#111; GO
5.40%, 01/01/07(b) -- Aaa 625 628,837
- -------------------------------------------------------------------------
Village of Hoffman Estates (Park
Place Apartment Project);
Series 1996 RB
5.75%, 06/01/06(f) AAA Aaa 1,000 1,000,550
- -------------------------------------------------------------------------
10,100,876
- -------------------------------------------------------------------------
INDIANA-5.65%
Frankfort Middle School Building
Corp.; Refunding Series 1996 RB
5.20%, 01/10/07(b) AAA Aaa 295 295,870
- -------------------------------------------------------------------------
Indiana Transportation Finance
Authority; Airport Facilities
Lease Series A RB
6.00%, 11/01/01 A A2 500 521,660
- -------------------------------------------------------------------------
Indiana Transportation Finance
Authority; Highway Series A RB
5.50%, 06/01/07(b) AAA Aaa 1,000 1,024,160
- -------------------------------------------------------------------------
South Bend Redevelopment
Authority (College Football
Hall of Fame Project); Series
1994 RB
3.45%, 02/01/19(c)(d) AAA VMIG1 7,950 7,950,000
- -------------------------------------------------------------------------
9,791,690
- -------------------------------------------------------------------------
IOWA-4.91%
Iowa Higher Education Loan
Authority; Private College
Facilities Series 1985 RB
3.45%, 12/01/15(c)(d) AAA VMIG1 8,000 8,000,000
- -------------------------------------------------------------------------
Iowa Student Loan Liquidity
Corp.; Student Loan Series 1992
A RB
6.25%, 03/01/00 -- Aa1 500 517,390
- -------------------------------------------------------------------------
8,517,390
- -------------------------------------------------------------------------
KENTUCKY-0.39%
Kentucky State Turnpike Authority
(Economic Development Road
Revitalization Project); RB
7.125%, 05/15/00(e)(f) AAA Aaa 260 281,593
- -------------------------------------------------------------------------
</TABLE>
FS-10
<PAGE> 105
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
KENTUCKY-(CONTINUED)
Western Kentucky University;
Consolidated Educational
Buildings Refunding Series M RB
4.70%, 05/01/99(b) AAA Aaa $ 390 $ 393,510
- -------------------------------------------------------------------------
675,103
- -------------------------------------------------------------------------
LOUISIANA-5.97%
Jefferson Parish School Board;
Sales and Use Tax RB
6.00%, 02/01/04(b) AAA Aaa 1,720 1,803,110
- -------------------------------------------------------------------------
Louisiana (State of); Series A GO
6.00%, 04/15/07(b) AAA Aaa 5,000 5,309,500
- -------------------------------------------------------------------------
Louisiana Offshore Terminal
Authority (Loop, Inc.);
Deepwater Port Refunding Series
1992 RB
6.00%, 09/01/01 A Baa1 1,000 1,042,300
- -------------------------------------------------------------------------
Louisiana Offshore Terminal
Authority (Loop, Inc.);
Deepwater Port Refunding RB
6.20%, 09/01/03 A Baa1 1,000 1,058,330
- -------------------------------------------------------------------------
Louisiana Public Facilities
Authority (Tulane University of
Louisiana); Series 1987 C RB
7.30%, 08/15/99 A A1 270 277,825
- -------------------------------------------------------------------------
Ouachita (Parish of) Hospital
Service District #1 (Glenwood
Regional Medical Center);
Hospital Refunding Series 1996
RB
5.00%, 05/15/99 A -- 850 853,162
- -------------------------------------------------------------------------
10,344,227
- -------------------------------------------------------------------------
MASSACHUSETTS-4.57%
Massachusetts Health &
Educational Facilities
Authority (Harvard University
Issue); Series I RB
3.30%, 08/01/17(c) AAA VMIG1 7,500 7,500,000
- -------------------------------------------------------------------------
New England Education Loan
Marketing Corp.; Student Loan
Refunding Senior Issue 1992 D
RB
6.20%, 09/01/00 -- Aaa 400 417,531
- -------------------------------------------------------------------------
7,917,531
- -------------------------------------------------------------------------
MICHIGAN-8.35%
Dearborn (City of) Economic
Development Corp. (Oakwood
Obligated Group); Hospital
Series 1991 A RB
6.95%, 08/15/01(e)(f) AAA Aaa 1,000 1,102,890
- -------------------------------------------------------------------------
Detroit (City of) School
District; GO
5.60%, 05/01/01 AA Aa2 765 784,821
- -------------------------------------------------------------------------
Grand Rapids Water Supply;
Refunding RB
3.30%, 01/01/20(c)(d) AAA VMIG1 5,400 5,400,000
- -------------------------------------------------------------------------
Michigan State Building
Authority; Refunding Series I
RB
6.40%, 10/01/04 AA- A1 2,000 2,141,820
- -------------------------------------------------------------------------
Michigan State Hospital Finance
Authority; Series A RB
3.55%, 12/01/23(c)(d) -- VMIG1 4,000 4,000,000
- -------------------------------------------------------------------------
Michigan State Strategic Fund;
Refunding Series 1988 PCR
3.65%, 04/15/18(c) -- Aaa 742 741,500
- -------------------------------------------------------------------------
North Muskegon School District;
GO
7.00%, 05/01/98(b) AAA Aaa 200 205,980
- -------------------------------------------------------------------------
Novi Community School District;
GO
5.875%, 05/01/97(b) AAA Aaa 100 100,159
- -------------------------------------------------------------------------
14,477,170
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MINNESOTA-0.44%
Southern Minnesota Municipal
Power Agency; Power Supply
System Series A RB
5.60%, 01/01/04 A+ A2 $ 745 $ 757,889
- -------------------------------------------------------------------------
MISSOURI-0.51%
Cass County School District
#R-02; Missouri Direct Deposit
Program GO
4.30%, 03/01/98 AA -- 375 376,718
- -------------------------------------------------------------------------
State Environmental Improvement
and Energy Resource Authority
(City of Branson Project)
(State Revolving Fund Program);
Water Series 1995 A PCR
5.00%, 07/01/99(b) AAA Aaa 500 503,120
- -------------------------------------------------------------------------
879,838
- -------------------------------------------------------------------------
MONTANA-0.26%
Montana Higher Education
Assistance Corp.; Student Loan
Series 1992 A RB
6.60%, 12/01/00 -- A 425 447,746
- -------------------------------------------------------------------------
NEVADA-0.28%
Clark County Improvement District
No. 65 (Lamb Boulevard III);
Series 1992 GO
6.20%, 12/01/02 AA- A1 120 123,812
- -------------------------------------------------------------------------
Nevada (State of) (Nevada
Municipal Bond Bank Project
Nos. 38-39); Limited Tax Series
1992 A GO
6.00%, 07/01/01(e) AA -- 350 365,512
- -------------------------------------------------------------------------
489,324
- -------------------------------------------------------------------------
NEW JERSEY-1.64%
Gloucester County Utilities
Authority; Sewer Refunding
Series 1991 RB
6.10%, 01/01/00 AA- A-1 225 235,420
- -------------------------------------------------------------------------
Jersey City (City of) (Qualified
School Bond); GO
6.40%, 02/15/00 AA A3 1,000 1,048,580
- -------------------------------------------------------------------------
New Jersey Transportation Trust
Fund Authority; Transportation
System Series 1992 A RB
5.90%, 06/15/99(e) NRR Aaa 1,000 1,030,410
- -------------------------------------------------------------------------
Trenton (City of); Fiscal Year
Adjustment GO
6.10%, 08/15/02(b) AAA Aaa 500 527,015
- -------------------------------------------------------------------------
2,841,425
- -------------------------------------------------------------------------
NEW MEXICO-1.05%
Albuquerque (City of);
Joint Water and Sewer
Series 1990 A RB
6.00%, 07/01/00(e)(f) AAA -- 1,000 1,039,220
- -------------------------------------------------------------------------
Las Cruces (City of) South
Central Solid Waste Authority;
Environmental RB
6.00%, 06/01/97 -- A 260 260,673
- -------------------------------------------------------------------------
Santa Fe (City of); Series 1994 A
RB
5.50%, 06/01/03(e) AAA Aaa 500 514,945
- -------------------------------------------------------------------------
1,814,838
- -------------------------------------------------------------------------
NEW YORK-12.26%
Nassau (County of); GO
5.15%, 03/01/07(b) AAA Aaa 5,000 4,992,050
- -------------------------------------------------------------------------
New York (City of); Refunding
Series D GO
5.60%, 11/01/05 BBB+ Baa1 5,000 4,982,900
- -------------------------------------------------------------------------
New York (City of); Series G GO
5.90%, 02/01/05 BBB+ Baa1 1,150 1,170,056
- -------------------------------------------------------------------------
</TABLE>
FS-11
<PAGE> 106
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW YORK-(CONTINUED)
New York (City of) Municipal
Assistance Corp.; Series I RB
5.25%, 07/01/03 AA- Aa2 $5,500 $ 5,590,200
- -------------------------------------------------------------------------
New York (State of) Dormitory
Authority; Mental Health
Facilities Series A RB
6.00%, 02/15/05 BBB+ Baa1 1,000 1,023,170
- -------------------------------------------------------------------------
6.00%, 08/15/07 BBB+ Baa1 1,775 1,798,075
- -------------------------------------------------------------------------
New York (State of) Medical Care
Facilities Financing Agency;
Hospital & Nursing Home Series
1995 A RB
5.60%, 02/15/05(b) AAA -- 1,665 1,703,112
- -------------------------------------------------------------------------
21,259,563
- -------------------------------------------------------------------------
OHIO-4.42%
Franklin (County of); 1991 Issue
GO
6.30%, 12/01/01(e)(f) NRR -- 1,500 1,621,485
- -------------------------------------------------------------------------
Greene (County of); Water System
Series A RB
5.45%, 12/01/06(b) AAA Aaa 585 597,735
- -------------------------------------------------------------------------
Hilliard City School District;
School Improvement Refunding
Series 1992 GO
6.05%, 12/01/00(b) AAA Aaa 500 526,025
- -------------------------------------------------------------------------
6.15%, 12/01/01(b) AAA Aaa 250 265,103
- -------------------------------------------------------------------------
Lucas County (St. Vincent's
Medical Center); Hospital
Series A RB
6.75%, 08/15/00(b)(f) AAA Aaa 2,000 2,147,380
- -------------------------------------------------------------------------
Lucas County Health Facilities
(Lutheran Homes Society
Project); RB
3.45%, 11/01/19(c)(d) AA -- 390 390,000
- -------------------------------------------------------------------------
Miami County (Upper Valley
Medical Center); Refunding
Hospital Facility Series 1996 B
RB
5.00%, 05/15/98(b) AAA Aaa 585 588,691
- -------------------------------------------------------------------------
Ohio State Public Facilities
Commission; Mental Health
Series A RB
7.00%, 12/01/97 AA- Aa3 1,500 1,526,385
- -------------------------------------------------------------------------
7,662,804
- -------------------------------------------------------------------------
OKLAHOMA-5.17%
Grand River Dam Authority;
Refunding Series 1987 RB
6.45%, 06/01/97(e)(f) AAA Aaa 500 512,010
- -------------------------------------------------------------------------
Norman (City of) Hospital
Authority; Refunding Series A
RB
5.20%, 09/01/06(b) AAA Aaa 310 308,388
- -------------------------------------------------------------------------
5.30%, 09/01/07(b) AAA Aaa 1,090 1,088,212
- -------------------------------------------------------------------------
Norman (City of) Utilities
Authority; RB
5.10%, 11/01/06 AAA Aaa 500 493,645
- -------------------------------------------------------------------------
Oklahoma Housing Finance Agency;
Single Family Mortgage Series A
RB
6.55%, 03/01/00(b) AAA Aaa 130 134,961
- -------------------------------------------------------------------------
Oklahoma State Turnpike
Authority; RB
7.875%, 01/01/99(e)(f) AAA -- 4,780 5,145,766
- -------------------------------------------------------------------------
Southern Oklahoma Memorial
Hospital Authority; Hospital
Series 1993 A RB
5.60%, 02/01/00 A A 1,250 1,280,037
- -------------------------------------------------------------------------
8,963,019
- -------------------------------------------------------------------------
OREGON-1.51%
Oregon (State of) Department of
Transportation (Westside Light
Rail Project); Series 1994 RB
5.00%, 06/01/97(b) AAA Aaa 1,000 1,001,940
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
OREGON-(CONTINUED)
Portland (City of); Sewer System
Series 1994 A RB
5.45%, 06/01/03 A+ A1 $1,065 $ 1,100,315
- -------------------------------------------------------------------------
5.55%, 06/01/04 A+ A1 500 519,390
- -------------------------------------------------------------------------
2,621,645
- -------------------------------------------------------------------------
PENNSYLVANIA-3.09%
Pennsylvania Industrial
Development Authority; Economic
Development Series 1991 A RB
6.50%, 01/01/98(e) NRR NRR 100 101,623
- -------------------------------------------------------------------------
6.50%, 07/01/98(e) NRR NRR 150 153,852
- -------------------------------------------------------------------------
York (City of); Pooled Financing
RB
3.50%, 09/01/26(c)(d) A+ -- 5,100 5,100,000
- -------------------------------------------------------------------------
5,355,475
- -------------------------------------------------------------------------
RHODE ISLAND-0.62%
Rhode Island (State of);
Refunding Series 1992 A GO
6.10%, 06/15/03(b) AAA Aaa 1,000 1,063,950
- -------------------------------------------------------------------------
SOUTH DAKOTA-1.14%
Rapid City (City of); Sales Tax
Series 1995 A RB
5.60%, 06/01/05(b) AAA Aaa 255 264,093
- -------------------------------------------------------------------------
South Dakota Health and Education
Facility McKennan Hospital;
Refunding Series 1996 RB
5.40%, 07/01/06(b) AAA Aaa 1,680 1,703,033
- -------------------------------------------------------------------------
1,967,126
- -------------------------------------------------------------------------
TENNESSEE-1.42%
Knoxville (City of); Refunding
Series B GO
4.85%, 05/01/99 AA- A1 700 710,885
- -------------------------------------------------------------------------
Nashville and Davidson (County
of) Health and Education
Facilities Board (Meharry
Medical College); RB
7.875%, 12/01/04(e) NRR Aaa 1,100 1,205,963
- -------------------------------------------------------------------------
Tennessee School Board Authority
(College and University
Improvement); RB
5.75%, 05/01/06 AA A1 550 551,545
- -------------------------------------------------------------------------
2,468,393
- -------------------------------------------------------------------------
TEXAS-9.48%
Alamo Community College District;
Series 1990 GO
6.90%, 02/15/00(e)(f) AA Aaa 500 529,415
- -------------------------------------------------------------------------
Austin (City of); Combined
Utility System Refunding Series
1986 RB
7.20%, 05/15/98(e) NRR NRR 25 25,828
- -------------------------------------------------------------------------
Series 1986 RB
7.20%, 05/15/98 A A 175 177,361
- -------------------------------------------------------------------------
Clint Independent School
District; Unlimited Tax
Refunding Series 1991 GO
6.30%, 03/01/00(b) -- Aaa 185 191,434
- -------------------------------------------------------------------------
Comal County Industrial
Development Authority (The
Coleman Company, Inc. Project);
Series 1980 IDR
9.25%, 08/01/00(e) NRR NRR 665 719,038
- -------------------------------------------------------------------------
Conroe (City of) Independent
School District; Unlimited
School Tax GO
7.375%, 02/01/01(b) AAA Aaa 115 125,525
- -------------------------------------------------------------------------
</TABLE>
FS-12
<PAGE> 107
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS-(CONTINUED)
Dallas (City of); Waterwork &
Sewer System Series A RB
5.50%, 10/01/05 AA Aa $1,000 $ 1,004,970
- -------------------------------------------------------------------------
Gatesville Independent School
District; Unlimited Tax School
Building and Refunding Series
1995 RB
5.80%, 02/01/03(b) -- Aaa 485 508,610
- -------------------------------------------------------------------------
Harris (County of); Port of
Houston Authority RB
5.75%, 05/01/02 A A 1,565 1,596,926
- -------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Memorial
Hospital System Project);
Hospital Series 1992 RB
6.70%, 06/01/00(e) A- A2 1,000 1,057,130
- -------------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (School
Health Care System Project);
Series B RB
4.00%, 07/01/98 AA Aa3 840 838,942
- -------------------------------------------------------------------------
5.10%, 07/01/06 AA Aa3 1,000 985,440
- -------------------------------------------------------------------------
Hays (County of); Series 1995 GO
7.75%, 08/15/97(b) AAA Aaa 175 177,396
- -------------------------------------------------------------------------
Keller (City of) Independent
School District; Series 1994
Certificates of Participation
5.75%, 08/15/01(b) AAA Aaa 915 953,201
- -------------------------------------------------------------------------
Kerrville (City of); Electric
System Refunding Series 1991 RB
6.375%, 11/01/01(b) AAA Aaa 185 196,137
- -------------------------------------------------------------------------
La Marque Independent School
District; Unlimited Schoolhouse
Tax Series 1992 GO
7.50%, 08/15/99(b) AAA Aaa 575 616,204
- -------------------------------------------------------------------------
7.50%, 08/15/02(b) AAA Aaa 750 845,497
- -------------------------------------------------------------------------
Plano Independent School
District; GO
5.80%, 02/15/05(b) AAA Aaa 2,025 2,109,665
- -------------------------------------------------------------------------
San Antonio (City of); Electric
and Gas System Refunding Series
1989 A RB
7.00%, 02/01/01 AA Aa1 400 421,696
- -------------------------------------------------------------------------
Temple (City of) (Bell County);
Refunding Series 1992 GO
5.80%, 02/01/01(b) AAA Aaa 250 259,690
- -------------------------------------------------------------------------
Texarkana (City of); Water and
Sewer Utility Improvement
Series 1996 GO
6.75%, 02/15/98(b) AAA Aaa 280 286,740
- -------------------------------------------------------------------------
Texas (State of); Refunding
Series A GO
6.00%, 10/01/06 AA Aa 1,000 1,070,170
- -------------------------------------------------------------------------
Texas Municipal Power Agency; RB
5.75%, 09/01/02(e)(f) AAA Aaa 1,000 1,040,880
- -------------------------------------------------------------------------
Texas Turnpike Authority (Addison
Airport Toll Tunnel Project);
Dallas North Tollway Series
1994 RB
6.30%, 01/01/05(b) AAA Aaa 500 538,605
- -------------------------------------------------------------------------
Texas Water Resources Finance
Authority; Series 1989 A RB
7.25%, 08/15/97 A A 140 141,372
- -------------------------------------------------------------------------
University of Texas System;
General Tuition Series 1986
Refunding RB
7.75%, 08/15/98(e) AA+ Aa1 10 10,482
- -------------------------------------------------------------------------
16,428,354
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
UTAH-1.22%
Salt Lake (City of) Municipal
Building Authority; Series A RB
6.50%, 10/15/00 A+ A1 $ 570 $ 593,142
- -------------------------------------------------------------------------
Utah (State of) (Board of Water
Resources Program); Revolving
Fund Recapitalization Series
1992 B RB
6.10%, 04/01/02 AA -- 500 529,470
- -------------------------------------------------------------------------
Utah Municipal Finance
Cooperative (Pooled Capital
Improvement Financing Program)
(University Hospital Project);
Local Government Series August
1, 1991 RB
6.50%, 05/15/99 AA -- 475 496,090
- -------------------------------------------------------------------------
Utah Water Financing Agency;
Series A RB
4.40%, 10/01/99(b) AAA Aaa 500 497,665
- -------------------------------------------------------------------------
2,116,367
- -------------------------------------------------------------------------
VIRGINIA-1.44%
Henrico (County of) Industrial
Development Authority
(Hermitage Project); Health
Facilities RB
3.80%, 05/01/24(c)(d) -- VMIG1 30 29,500
- -------------------------------------------------------------------------
Medical College of Hampton Roads;
General Refunding Series 1991 A
RB
6.00%, 11/15/99 A- -- 605 623,065
- -------------------------------------------------------------------------
Norfolk (City of) Redevelopment
and Housing Authority (State
Board for Community
Colleges-Tidewater);
Educational Facility Series
1995 RB
5.30%, 11/01/04 AA Aa 535 545,331
- -------------------------------------------------------------------------
5.40%, 11/01/05 AA Aa 500 513,085
- -------------------------------------------------------------------------
Portsmouth (City of); Port
Improvement Unlimited Tax
Refunding GO
6.40%, 11/01/03 AA- A 300 323,046
- -------------------------------------------------------------------------
Portsmouth (City of); Public
Utility Refunding Series 1992
GO
5.90%, 11/01/01 AA- A 450 470,669
- -------------------------------------------------------------------------
2,504,696
- -------------------------------------------------------------------------
WASHINGTON-3.90%
King (County of); Series A RB
5.80%, 01/01/05 AA+ Aa1 1,000 1,050,100
- -------------------------------------------------------------------------
Seattle (City of) (West Seattle
Bridge); Limited Tax Refunding
Series 1991 GO
6.40%, 10/01/01 AA+ Aa1 250 266,830
- -------------------------------------------------------------------------
Seattle (Port of); Series 1992 A
RB
6.00%, 11/01/01 AA- A-1 500 522,910
- -------------------------------------------------------------------------
Snohomish (County of) Public
Utilities District # 1; RB
5.70%, 01/01/06(b) AAA Aaa 4,000 4,148,240
- -------------------------------------------------------------------------
Washington Health Care Facility
Authority (Our Lady of Lourdes
Health Center); Refunding RB
7.35%, 12/01/97(d) A -- 500 508,575
- -------------------------------------------------------------------------
Washington Public Power Supply
System (Nuclear Project #3);
Refunding Series B RB
6.80%, 07/01/97 AA- Aa1 250 251,725
- -------------------------------------------------------------------------
6,748,380
- -------------------------------------------------------------------------
</TABLE>
FS-13
<PAGE> 108
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WISCONSIN-3.62%
Middleton (City of); GO
4.00%, 03/01/99 -- Aa2 $1,000 $ 995,420
- -------------------------------------------------------------------------
Sturgeon Bay (City of); Series
1996 A Bond Anticipation Notes
4.30%, 10/01/97 -- MIG-1 1,000 1,000,390
- -------------------------------------------------------------------------
Wisconsin (State of); Series A GO
5.75%, 05/01/99 AA Aa 1,000 1,027,480
- -------------------------------------------------------------------------
Wisconsin Health and Educational
Facilities Authority
(Marshfield Clinic); RB
5.20%, 02/15/07(b) AAA Aaa 3,310 3,247,242
- -------------------------------------------------------------------------
6,270,532
- -------------------------------------------------------------------------
TOTAL INVESTMENTS-116.00% 201,075,980
- -------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(16.00%) (27,734,200)
- -------------------------------------------------------------------------
NET ASSETS-100.00% $173,341,780
=========================================================================
</TABLE>
Investment Abbreviations:
<TABLE>
<S> <C>
GO - General Obligation Bonds
IDR - Industrial Development Revenue Bonds
NRR - Not re-rated
PCR - Pollution Control Revenue Bonds
RB - Revenue Bonds
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Ratings assigned by Moody's Investors Service, Inc. ("MOODY'S") and Standard
& Poor's Corporation ("S&P"). NRR indicates a security that is not re-rated
subsequent to funding of an escrow fund (consisting of U.S. Treasury
obligations); this funding is pursuant to an advance refunding of the
security. Ratings are not covered by Independent Auditors' Report.
(b) Secured by bond insurance.
(c) Payable on demand by the Fund at specified frequencies no greater than
thirteen months. Interest rate is redetermined periodically. Rate shown is
the rate in effect on March 31, 1997.
(d) Secured by a letter of credit.
(e) Secured by an escrow fund of U.S. Treasury obligations.
(f) Security has an outstanding irrevocable call or mandatory put by the
issuer. Market value and maturity date reflect such call or put.
See Notes to Financial Statements.
FS-14
<PAGE> 109
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$199,440,470) $ 201,075,980
- ---------------------------------------------------------
Receivables for:
Capital stock sold 220,266
- ---------------------------------------------------------
Interest 2,171,711
- ---------------------------------------------------------
Investment for deferred compensation plan 12,379
- ---------------------------------------------------------
Other assets 44,562
- ---------------------------------------------------------
Total assets 203,524,898
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 29,476,663
- ---------------------------------------------------------
Capital stock reacquired 242,356
- ---------------------------------------------------------
Dividends 349,164
- ---------------------------------------------------------
Deferred compensation plan 12,379
- ---------------------------------------------------------
Accrued advisory fees 43,785
- ---------------------------------------------------------
Accrued administrative service fees 11,154
- ---------------------------------------------------------
Accrued directors' fees 2,400
- ---------------------------------------------------------
Accrued transfer agent fees 10,750
- ---------------------------------------------------------
Accrued operating expenses 34,467
- ---------------------------------------------------------
Total liabilities 30,183,118
- ---------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $ 173,341,780
=========================================================
Capital stock, $.001 par value per share:
Authorized 1,000,000,000
- ---------------------------------------------------------
Outstanding 16,154,571
=========================================================
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE $ 10.73
- ---------------------------------------------------------
OFFERING PRICE PER SHARE:
(Net asset value of $10.73 divided by
99.00%) $ 10.84
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended March 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $ 4,790,956
- --------------------------------------------------------
EXPENSES:
Advisory fees 276,828
- --------------------------------------------------------
Custodian fees 7,156
- --------------------------------------------------------
Transfer agent fees 61,732
- --------------------------------------------------------
Registration and filing fees 35,266
- --------------------------------------------------------
Administrative service fees 52,666
- --------------------------------------------------------
Directors' fees 7,508
- --------------------------------------------------------
Other 77,082
- --------------------------------------------------------
Total expenses 518,238
- --------------------------------------------------------
Net investment income 4,272,718
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Net realized gain on sales of investment
securities 7,036
- --------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities (1,085,090)
- --------------------------------------------------------
Net gain (loss) on investment
securities (1,078,054)
- --------------------------------------------------------
Net increase in net assets resulting from
operations $ 3,194,664
========================================================
</TABLE>
See Notes to Financial Statements.
FS-15
<PAGE> 110
STATEMENT OF CHANGES IN NET ASSETS
For the years ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,272,718 $ 3,731,756
- -----------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities 7,036 (5,848)
- -----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (1,085,090) 836,452
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,194,664 4,562,360
- -----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (4,406,557) (3,712,690)
- -----------------------------------------------------------------------------------------
Distributions from capital (21,485) --
- -----------------------------------------------------------------------------------------
Net increase (decrease) from capital stock transactions 91,508,711 (137,887)
- -----------------------------------------------------------------------------------------
Net increase in net assets 90,275,333 711,783
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 83,066,447 82,354,664
- -----------------------------------------------------------------------------------------
End of period $173,341,780 $83,066,447
- -----------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $172,821,545 $81,353,865
- -----------------------------------------------------------------------------------------
Undistributed net investment income (10,946) 103,347
- -----------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of investment
securities (1,104,329) (1,111,365)
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 1,635,510 2,720,600
- -----------------------------------------------------------------------------------------
$173,341,780 $83,066,447
=========================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Tax Exempt Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Company is organized as a Maryland corporation
consisting of three separate portfolios; the Intermediate Portfolio, AIM
Tax-Exempt Cash Fund and AIM Tax-Exempt Bond Fund of Connecticut. Matters
affecting each portfolio are voted on exclusively by the shareholders of such
portfolio. The assets, liabilities, and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Intermediate Portfolio (the "Fund"). The Fund currently
offers one class of shares, AIM Tax-Free Intermediate Shares (the "Shares"). The
investment objective of the Fund is to generate as high a level of tax-exempt
income as is consistent with preservation of capital by investing in high
quality, intermediate-term municipal securities having a maturity of ten and
one-half years or less.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- Portfolio securities are valued based on market
quotations or at fair value determined by a pricing service approved by the
Company's Board of Directors, provided that securities with a demand feature
exercisable within one to seven days are valued at par. Prices provided by
the pricing service represent valuations of the mean between current bid and
asked market prices which may be determined without exclusive reliance on
quoted prices and may reflect appropriate factors such as institution-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, individual trading characteristics and other market
data. Portfolio securities for which prices are not provided by the pricing
service are valued at the mean between the last available bid and asked
prices, unless the Board of Directors or its designees determines that the
mean between the last available bid and asked prices does not accurately
reflect the current market value of the security. Securities for which market
quotations either are not readily available or are questionable are valued at
fair value as determined in good faith by or under the supervision of the
Company's officers in accordance with methods which are specifically
authorized by the Board of Directors. Notwithstanding the above, short-term
obligations with maturities of sixty days or less are valued at amortized
cost.
FS-16
<PAGE> 111
B. Securities Transactions and Investment Income -- Securities transactions are
recorded on a trade date basis. Realized gains and losses are computed on the
basis of specific identification of the securities sold. Interest income,
adjusted for amortization of premiums and original issue discounts, is earned
from settlement date and is recorded on the accrual basis. On March 31, 1997
$21,485, was reclassified from undistributed net investment income to
paid-in-capital due to distributions in excess of net investment income. In
addition, $19,546 was reclassified from net investment income to paid in
capital due to permanent book/tax differences. Net assets of the Fund were
unaffected by the reclassifications discussed above.
C. Dividends and Distributions to Shareholders -- It is the policy of the Fund
to declare daily dividends from net investment income. Such dividends are
paid monthly. Net realized capital gains (including net short-term capital
gains and market discounts), if any, are distributed annually.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward (which may be carried forward to offset future taxable capital
gains, if any) of $1,118,055, which expires, if not previously utilized, in
the year 2004. The Fund cannot distribute capital gains to shareholders until
the tax loss carryforwards have been utilized. In addition, the Fund intends
to invest in such municipal securities to allow it to qualify to pay "exempt
interest dividends," as defined in the Internal Revenue Code.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.30% of
the first $500 million of the Fund's average daily net assets, plus 0.25% of the
Fund's average daily net assets in excess of $500 million, but not in excess of
$1 billion, plus 0.20% of the Fund's average daily net assets in excess of $1
billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain costs incurred in providing accounting
services to the Fund. During the year ended March 31, 1997, the Fund reimbursed
AIM $52,666 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agent and
shareholder services to the Fund. During the year ended March 31, 1997, the Fund
paid AFS $38,819 for such services.
Under the terms of a master distribution agreement between the Company and the
Fund, A I M Distributors, Inc. ("AIM Distributors") acts as the exclusive
distributor of the Shares. AIM Distributors received commissions of $21,018 from
sales of capital stock during the year ended March 31, 1997. Such commissions
are not an expense of the Company. They are deducted from, and are not included
in, the proceeds from sales of capital stock. Certain officers and directors of
the Company are officers of AIM, AFS and AIM Distributors.
During the year ended March 31, 1997, the Fund paid legal fees of $4,122 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the Board
of Directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the year ended March 31, 1997, the Fund did not borrow under the line of
credit agreement. The funds which are parties to the line of credit are charged
a commitment fee of 0.08% on the unused balance of the committed line. The
commitment fee is allocated among such funds based on their respective average
net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the year ended March 31, 1997 was $94,982,995 and
$22,629,475, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of March 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $2,095,498
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (459,988)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $1,635,510
=========================================================
Investments have the same cost for tax and financial
statement purposes.
</TABLE>
NOTE 6-CAPITAL STOCK
Changes in capital stock outstanding for the years ended March 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 11,037,256 $119,260,028 2,173,832 $ 23,604,635
- --------------------- ---------- ------------ ---------- ------------
Issued as
reinvestment of
dividends 277,497 2,985,870 232,136 2,517,616
- --------------------- ---------- ------------ ---------- ------------
Reacquired (2,855,695) (30,737,187) (2,428,661) (26,260,138)
- --------------------- ---------- ------------ ---------- ------------
8,459,058 $ 91,508,711 (22,693) $ (137,887)
========== ============ ========== ============
</TABLE>
FS-17
<PAGE> 112
NOTE 7- FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during each of the years in the eight-year period ended March 31,
1997, the eleven months ended March 31, 1989 and the period May 11, 1987 (date
operations commenced) through April 30, 1988.
<TABLE>
<CAPTION>
MARCH 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $10.79 $10.67 $10.62 $10.74 $10.27
- ---------------------------- -------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.50 0.52 0.49 0.48 0.53
- ---------------------------- -------- ------- ------- ------- -------
Net gains (losses) on
securities (both
realized and
unrealized) (0.04) 0.12 0.04 (0.10) 0.47
============================ ======== ======= ======= ======= =======
Total from
investment
operations 0.46 0.64 0.53 0.38 1.00
============================ ======== ======= ======= ======= =======
Less distributions:
Dividends from net
investment income (0.52) (0.52) (0.48) (0.48) (0.53)
- ---------------------------- -------- ------- ------- ------- -------
Distributions from net
realized capital gains -- -- -- (0.02) --
- ---------------------------- -------- ------- ------- ------- -------
Total distributions (0.52) (0.52) (0.48) (0.50) (0.53)
- ---------------------------- -------- ------- ------- ------- -------
Net asset value, end of
period $10.73 $10.79 $10.67 $10.62 $10.74
============================ ======== ======= ======= ======= =======
Total return(a) 4.33% 6.06% 5.17% 3.47% 10.01%
============================ ======== ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $173,342 $83,066 $82,355 $99,757 $70,120
============================ ======== ======= ======= ======= =======
Ratio of expenses to average
net assets 0.56%(b) 0.65% 0.59% 0.61%(c) 0.38%(c)
============================ ======== ======= ======= ======= =======
Ratio of net investment
income to average net
assets 4.63%(b) 4.81% 4.65% 4.37%(c) 5.00%(c)
============================ ======== ======= ======= ======= =======
Portfolio turnover rate 26% 32% 75% 26% 29%
============================ ======== ======= ======= ======= =======
<CAPTION>
----------------------------------------- APRIL 30,
1992 1991 1990 1989 1988
------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $10.07 $9.89 $9.69 $9.88 $10.00
- ---------------------------- ------- ------ ------ ------ ---------
Income from investment
operations:
Net investment income 0.62 0.63 0.62 0.56 0.55
- ---------------------------- ------- ------ ------ ------ ---------
Net gains (losses) on
securities (both
realized and
unrealized) 0.20 0.18 0.20 (0.19) (0.12)
============================ ======= ====== ====== ====== =========
Total from
investment
operations 0.82 0.81 0.82 0.37 0.43
============================ ======= ====== ====== ====== =========
Less distributions:
Dividends from net
investment income (0.62) (0.63) (0.62) (0.56) (0.55)
- ---------------------------- ------- ------ ------ ------ ---------
Distributions from net
realized capital gains -- -- -- -- --
- ---------------------------- ------- ------ ------ ------ ---------
Total distributions (0.62) (0.63) (0.62) (0.56) (0.55)
- ---------------------------- ------- ------ ------ ------ ---------
Net asset value, end of
period $10.27 $10.07 $9.89 $9.69 $9.88
============================ ======= ====== ====== ====== =========
Total return(a) 8.39% 8.39% 8.66% 3.85% 4.46%
============================ ======= ====== ====== ====== =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $38,773 $6,184 $5,231 $4,413 $5,594
============================ ======= ====== ====== ====== =========
Ratio of expenses to average
net assets 0.02%(c) 0.50%(c) 0.50%(c) 0.53%(c)(d) 0.50%(c)(d)
============================ ======= ====== ====== ====== =========
Ratio of net investment
income to average net
assets 5.78%(c) 6.29%(c) 6.27%(c) 6.74%(c)(d) 5.86%(c)(d)
============================ ======= ====== ====== ====== =========
Portfolio turnover rate 15% 0% 12% 31% 80%
============================ ======= ====== ====== ====== =========
</TABLE>
(a) Does not deduct sales charges and for periods less than one year, total
return is not annualized.
(b) Ratios are based on average net assets of $92,275,955.
(c) After waiver of advisory fees and/or expense reimbursements. The ratios of
expenses and net investment income prior to waivers and/or expense
reimbursements were as follows:
<TABLE>
<CAPTION>
Net Investment
Period ended Expenses Income
------------ -------- --------------
<S> <C> <C>
1994 0.64% 4.35%
1993 0.66% 4.71%
1992 0.98% 4.81%
1991 1.79% 5.00%
1990 1.91% 4.86%
1989 2.09% 5.18%
1988 1.57% 4.79%
</TABLE>
(d) Annualized.
FS-18
<PAGE> 113
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, 1997, and the
related statement of operations for the year then ended,
the statement of changes in net assets for each of the
years in the two-year period then ended and the financial
highlights for each of the years in the three-year period
then ended, the three-month period ended March 31, 1994,
and the year ended December 31, 1993. These financial
statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express
an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of March 31, 1997, 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 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, 1997,
the results of its operations for the year then ended,
changes in its net assets for each of the years in the
two-year period then ended and the financial highlights
for each of the years in the three-year period then ended,
the three-month period ended March 31, 1994, and for the
year ended December 31, 1993, in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
May 2, 1997
FS-19
<PAGE> 114
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS-97.91%
EDUCATION-11.44%
Connecticut Health and
Education Facilities
Authority (Fairfield
University); Series F RB
6.875%, 07/01/09 BBB+ Baa1 $1,475 $ 1,548,013
- -------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Quinnipiac College); RB
4.90%, Series D, 07/01/98 BBB- - 150 149,292
- -------------------------------------------------------------------
7.25%, Series 1989 B,
07/01/99(b)(c) AAA NRR 450 484,942
- -------------------------------------------------------------------
Connecticut Regional School
District No. 5;
Series 1992 GO
6.00%, 03/01/12(d) AAA Aaa 335 346,893
- -------------------------------------------------------------------
Connecticut Regional School
District No. 5
(Towns of Bethany, Orange
and Woodbridge); 1993
Issue GO
5.50%, 02/15/07(d) AAA Aaa 500 513,760
- -------------------------------------------------------------------
Connecticut State Higher
Education Supplemental
Loan Authority (Family
Education Loan Program);
Series 1990 A RB
7.50%, 11/15/10(e) - A1 1,265 1,317,080
- -------------------------------------------------------------------
4,359,980
- -------------------------------------------------------------------
ELECTRIC-4.47%
Connecticut Development
Authority (New England
Power Co.); Series 1985
Fixed Rate PCR
7.25%, 10/15/15 A+ A2 1,600 1,702,608
- -------------------------------------------------------------------
GENERAL OBLIGATION-12.08%
Bridgeport (Town of),
Connecticut; Series A
Unlimited GO
6.00%, 09/01/06(d) AAA Aaa 875 929,871
- -------------------------------------------------------------------
Brooklyn (City of),
Connecticut; Unlimited
Tax GO
5.50%, 05/01/06(d) AAA Aaa 250 255,905
- -------------------------------------------------------------------
5.70%, 05/01/08(d) AAA Aaa 250 258,310
- -------------------------------------------------------------------
Chester (Town of),
Connecticut; Series 1989
GO
7.00%, 10/01/05 - A 190 201,292
- -------------------------------------------------------------------
Connecticut (State of);
Series 1991 A GO
6.75%, 03/01/01(b)(c) NRR NRR 480 521,323
- -------------------------------------------------------------------
Connecticut (State of)
(General Purpose Public
Improvement); GO
6.75%, Series 1991 A,
03/01/01(b)(c) NRR NRR 200 217,218
- -------------------------------------------------------------------
6.50%, Series 1992 A,
03/15/02(b)(c) NRR NRR 300 325,860
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GENERAL OBLIGATION-(CONTINUED)
Mansfield (City of),
Connecticut; Series 1990
GO
6.00%, 06/15/07 - A1 $ 100 $ 105,855
- ------------------------------------------------------------------
6.00%, 06/15/08 - A1 100 104,983
- ------------------------------------------------------------------
6.00%, 06/15/09 - A1 100 105,760
- ------------------------------------------------------------------
New Britain (City of),
Connecticut; Series 1992
Various Purpose GO
6.00%, 02/01/11(d) AAA Aaa 400 418,364
- ------------------------------------------------------------------
North Canaan (City of),
Connecticut;
Series 1991 GO
6.50%, 01/15/08 - A 125 137,080
- ------------------------------------------------------------------
6.50%, 01/15/09 - A 125 136,744
- ------------------------------------------------------------------
6.50%, 01/15/10 - A 125 136,234
- ------------------------------------------------------------------
6.50%, 01/15/11 - A 125 135,566
- ------------------------------------------------------------------
Somers (City of),
Connecticut; Series 1990
Various Purpose GO
6.00%, 12/01/10 - A1 190 200,146
- ------------------------------------------------------------------
Westbrook (City of),
Connecticut; Series 1992
GO
6.40%, 03/15/10(d) AAA Aaa 380 416,176
- ------------------------------------------------------------------
4,606,687
- ------------------------------------------------------------------
HEALTH CARE-13.22%
Connecticut Health and
Education Facilities
Authority
(Bridgeport Hospital);
1992 Series A RB
6.625%, 07/01/18(d) AAA Aaa 500 528,595
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Capital Asset); Series
1989 B RB
7.00%, 01/01/00(f) A A1 200 209,856
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Danbury Hospital); 1991
Series E RB
6.50%, 07/01/14(d) AAA Aaa 750 786,278
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Middlesex Hospital);
1992 Series G RB
6.25%, 07/01/12(d) AAA Aaa 1,100 1,142,647
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(New Britain Memorial
Hospital); Series 1991 A
RB
7.75%, 07/01/22 BBB- - 500 533,325
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (Stamford
Hospital); Series F RB
5.40%, 07/01/09(d) AAA Aaa 1,000 993,720
- ------------------------------------------------------------------
</TABLE>
FS-20
<PAGE> 115
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
HEALTH CARE-(CONTINUED)
Connecticut Health and
Education Facilities
Authority (Yale-New Haven
Hospital); Series 1990 F
RB
7.10%, 07/01/00(b)(c) AAA Aaa $ 775 $ 845,339
- ------------------------------------------------------------------
5,039,760
- ------------------------------------------------------------------
HOUSING-13.45%
Connecticut Housing
Development Authority
(Housing Mortgage Finance
Program); RB
7.55%, Series 1990 B-1,
11/15/08 AA Aa 345 358,010
- ------------------------------------------------------------------
7.00%, Series 1991 A-1,
11/15/09 AA Aa 450 471,240
- ------------------------------------------------------------------
6.55%, Series 1991 C,
Sub-Series C-3,
11/15/13 AA Aa 310 322,576
- ------------------------------------------------------------------
7.00%, Series C,
11/15/99(e) AA Aa 320 331,363
- ------------------------------------------------------------------
Connecticut (State of)
(Housing Mortgage Finance
Program); RB
6.00%, Series 1993 E-1,
05/15/17 AA Aa 675 676,289
- ------------------------------------------------------------------
5.95%, Series E-1,
05/15/17 AA Aa 500 498,795
- ------------------------------------------------------------------
6.30%, Series C-1,
11/15/17 AA Aa 1,270 1,289,152
- ------------------------------------------------------------------
6.25%, Series C-2,
11/15/18 AA Aa 750 756,510
- ------------------------------------------------------------------
6.70%, Series C-2,
11/15/22(e) AA Aa 415 424,125
- ------------------------------------------------------------------
5,128,060
- ------------------------------------------------------------------
LEASE RENTAL-1.11%
Connecticut (State of)
(Middletown Courthouse
Facilities Project); 1991
Issue Lease-Rental
Revenue Certificates of
Participation
6.25%, 12/15/10(d) AAA Aaa 400 422,772
- ------------------------------------------------------------------
RESOURCE RECOVERY-5.93%
Connecticut State Resource
Recovery Authority
(American Ref-Fuel Co.-
Southeastern Connecticut
Project); Series 1988 A
RB
8.00%, 11/15/15(e) AA- Baa1 500 536,335
- ------------------------------------------------------------------
Connecticut State Resource
Recovery Authority
(Bridgeport Resco
Corp.-Ltd. Partners);
1985 Issue RB
8.625%, Project B,
01/01/04 A A 670 687,052
- ------------------------------------------------------------------
7.625%, Project A,
01/01/09 A A 1,000 1,035,610
- ------------------------------------------------------------------
2,258,997
- ------------------------------------------------------------------
TRANSPORTATION-19.05%
Connecticut State Special
Tax Obligation
(Transportation
Infrastructure); RB
5.10%, Series 1992 B,
09/01/99 AA- A1 1,000 1,010,330
- ------------------------------------------------------------------
6.25%, Series 1991 B,
10/01/01(b)(c) NRR Aaa 1,000 1,077,100
- ------------------------------------------------------------------
6.80%, Series A,
06/01/03(b)(c) NRR NRR 1,250 1,372,788
- ------------------------------------------------------------------
6.50%, Series 1991 B,
10/01/10 AA- A1 530 586,969
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TRANSPORTATION-(CONTINUED)
Connecticut State Special
Tax Obligation
(Transportation
Infrastructure Sales and
Excise Tax); RB
5.90%, Series 1991 B,
10/01/99 AA- A1 $1,000 $ 1,030,060
- ------------------------------------------------------------------
6.80%, Series 1989 C,
12/01/99(b)(c) AAA NRR 500 537,640
- ------------------------------------------------------------------
6.50%, Series 1991 B,
10/01/12 AA- A1 1,500 1,645,155
- ------------------------------------------------------------------
7,260,042
- ------------------------------------------------------------------
WATER & SEWER-9.47%
Connecticut Development
Authority (Pfizer Inc.);
Series 1982 Refunding PCR
6.55%, 02/15/13 AAA Aaa 250 269,158
- ------------------------------------------------------------------
Connecticut Development
Authority Water Facility
(Bridgeport Hydraulic Co.
Project); Refunding RB
7.25%, Series 1990,
06/01/20 A+ - 800 858,336
- ------------------------------------------------------------------
6.15%, 04/01/35(e) A+ - 250 247,495
- ------------------------------------------------------------------
Connecticut State Clean
Water Fund; Series 1991
Clean Water RB
7.00%, 01/01/11 AA+ Aa2 1,100 1,203,125
- ------------------------------------------------------------------
Manchester (City of)
Connecticut Eighth
Utilities Fire District;
Series 1991 GO
6.75%, 08/15/06 - A1 180 199,760
- ------------------------------------------------------------------
South Central Connecticut
Regional Water Authority;
Eighth Series 1990 A
Water System RB
6.60%, 08/01/00(b)(c) NRR NRR 250 268,898
- ------------------------------------------------------------------
South Central Connecticut
Regional Water Authority;
Series 1988 Water System
RB
6.80%, 08/01/98(b)(c) NRR NRR 535 563,718
- ------------------------------------------------------------------
3,610,490
- ------------------------------------------------------------------
MISCELLANEOUS-7.69%
Connecticut Development
Authority (Economic
Development Projects);
1992 Series Refunding
Bonds
6.00%, 11/15/08 AA- Aa 500 520,500
- ------------------------------------------------------------------
Guam (Government of);
Series 1995 A GO
4.90%, 09/01/97 BBB - 500 500,930
- ------------------------------------------------------------------
5.25%, 09/01/99 BBB - 250 250,345
- ------------------------------------------------------------------
5.375%, 09/01/00 BBB - 250 250,458
- ------------------------------------------------------------------
</TABLE>
FS-21
<PAGE> 116
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MISCELLANEOUS-(CONTINUED)
Guam (Government of);
Series 1994 A GO
5.50%, 08/15/97 BBB - $ 500 $ 501,885
- ------------------------------------------------------------------
Puerto Rico Commonwealth
(Highway and
Transportation
Authority); Series X RB
5.20%, 07/01/03 A Baa1 500 505,800
- ------------------------------------------------------------------
Puerto Rico Electric Power
Authority; Series W RB
5.00%, 07/01/98 BBB+ Baa1 400 402,944
- ------------------------------------------------------------------
2,932,862
- ------------------------------------------------------------------
TOTAL INVESTMENTS-97.91% 37,322,258
- ------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.09% 796,217
- ------------------------------------------------------------------
NET ASSETS-100.00% $38,118,475
==================================================================
</TABLE>
ABBREVIATIONS:
GO General Obligation Bonds
NRR Not re-rated
PCR Pollution Control Revenue Bonds
RB Revenue Bonds
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.
See Notes to Financial Statements.
FS-22
<PAGE> 117
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$35,730,336) $ 37,322,258
- ---------------------------------------------------------
Receivables for:
Investments sold 1,023,000
- ---------------------------------------------------------
Capital stock sold 41,043
- ---------------------------------------------------------
Interest 692,735
- ---------------------------------------------------------
Investment for deferred compensation plan 12,601
- ---------------------------------------------------------
Other assets 3,258
- ---------------------------------------------------------
Total assets 39,094,895
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Amount due to custodian bank 836,124
- ---------------------------------------------------------
Dividends 64,157
- ---------------------------------------------------------
Deferred compensation 12,601
- ---------------------------------------------------------
Accrued advisory fees 4,968
- ---------------------------------------------------------
Accrued administrative service fees 8,538
- ---------------------------------------------------------
Accrued distribution fees 24,260
- ---------------------------------------------------------
Accrued transfer agent fees 1,076
- ---------------------------------------------------------
Accrued operating expenses 24,696
- ---------------------------------------------------------
Total liabilities 976,420
- ---------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $ 38,118,475
=========================================================
Capital stock, $.001 par value per share:
Authorized 1,000,000,000
- ---------------------------------------------------------
Outstanding 3,539,857
=========================================================
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE $ 10.77
=========================================================
OFFERING PRICE PER SHARE:
(Net asset value of $10.77 divided
by 95.25%) $ 11.31
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $2,295,751
- --------------------------------------------------------
EXPENSES:
Advisory fees 194,372
- --------------------------------------------------------
Custodian fees 3,545
- --------------------------------------------------------
Transfer agent fees 25,300
- --------------------------------------------------------
Directors' fees 6,401
- --------------------------------------------------------
Distribution fees 97,186
- --------------------------------------------------------
Administrative services fees 49,467
- --------------------------------------------------------
Other 48,860
- --------------------------------------------------------
Total expenses 425,131
- --------------------------------------------------------
Less fees waived by advisor (144,775)
- --------------------------------------------------------
Net expenses 280,356
- --------------------------------------------------------
Net investment income 2,015,395
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Net realized gain (loss) on sales of
investment securities (111,639)
- --------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities (75,618)
- --------------------------------------------------------
Net gain (loss) on investment securities (187,257)
- --------------------------------------------------------
Net increase in net assets resulting from
operations $1,828,138
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-23
<PAGE> 118
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,015,395 $ 2,046,631
- -----------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities (111,639) (39,012)
- -----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (75,618) 362,769
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,828,138 2,370,388
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (1,983,768) (2,032,807)
- -----------------------------------------------------------------------------------------
Net increase (decrease) from capital stock transactions (1,081,336) 729,185
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets (1,236,966) 1,066,766
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 39,355,441 38,288,675
- -----------------------------------------------------------------------------------------
End of period $38,118,475 $39,355,441
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $36,742,486 $37,823,822
- -----------------------------------------------------------------------------------------
Undistributed net investment income 36,704 5,077
- -----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (252,637) (140,998)
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 1,591,922 1,667,540
- -----------------------------------------------------------------------------------------
$38,118,475 $39,355,441
=========================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Tax-Exempt Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (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
investment objective of the Fund is to earn a high level of income free from
federal taxes and Connecticut taxes by investing at least 80% of its net assets
in municipal bonds and other municipal securities.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations--Portfolio securities are valued based on market
quotations or at fair value determined by a pricing service approved by the
Board of Directors, provided that securities with a demand feature
exercisable within one to seven days are valued at par. Prices provided by
the pricing service represent valuations of the mean between current bid and
asked market prices which may be determined without exclusive reliance on
quoted prices and may reflect appropriate factors such as institution-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, individual trading characteristics and other market
data. Portfolio securities for which prices are not provided by the pricing
service are valued at the mean between the last available bid and asked
prices, unless the Board of Directors or its designees determines that the
mean between the last available bid and asked prices does not accurately
reflect the current market value of the security. Securities for which market
quotations either are not readily available or are questionable are valued at
fair value as determined in good faith by or under the supervision of the
Company's officers in accordance with methods which are specifically
authorized by the Board of Directors. Notwithstanding the above, short-term
obligations with maturities of sixty days or less are valued at amortized
cost.
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
FS-24
<PAGE> 119
income. Such dividends are paid monthly. Net realized capital gains
(including net short-term capital gains and market discounts), if any, are
distributed annually.
D. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements. The Fund has a capital loss carryforward (which may
be carried forward to offset future taxable gains, if any) of $229,538, which
expires, if not previously utilized, through the year 2005. The Fund cannot
distribute capital gains to shareholders until the tax loss carryforwards
have been utilized. In addition, the Fund intends to invest in such municipal
securities to allow it to qualify to pay to shareholders "exempt interest
dividends," as defined in the Internal Revenue Code.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.50% of
the Fund's average daily net assets. During the year ended March 31, 1997, AIM
voluntarily waived advisory fees of $144,775.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain costs incurred in providing accounting
services to the Fund. During the year ended March 31, 1997, the Fund reimbursed
AIM $49,467 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agent and
shareholder services to the Fund. During the year ended March 31, 1997, the Fund
paid AFS $16,224 for such services.
Under the terms of a master distribution agreement between the Company and the
Fund, A I M Distributors, Inc. ("AIM Distributors") acts as the exclusive
distributor of the Fund's shares. 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 provides
for 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, 1997, the Fund paid AIM Distributors
$97,186 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 $27,428 from sales of shares of the
Fund's capital stock during the year ended March 31, 1997. 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.
During the year ended March 31, 1997, the Fund paid legal fees of $3,997 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the Board
of Directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the year ended March 31, 1997, the Fund did not borrow under the line of
credit agreement. The funds which are parties to the line of credit are charged
a commitment fee of 0.08% on the unused balance of the committed line. The
commitment fee is allocated among such funds based on their respective average
net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the year ended March 31, 1997 were $6,435,125 and
$6,950,383, respectively. The amount of unrealized appreciation (depreciation)
of investment securities as of March 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $1,599,717
- --------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (7,795)
- --------------------------------------------------------
Net unrealized appreciation of investment
securities $1,591,922
========================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 6-CAPITAL STOCK
Changes in capital stock outstanding for the years ended March 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sold 522,830 $ 5,656,859 555,351 $ 6,036,362
- --------------------------------------------- ------------------------
Issued as
reinvestment of
dividends 115,643 1,250,693 116,353 1,264,613
- --------------------------------------------- ------------------------
Reacquired (739,882) (7,988,888) (603,962) (6,571,790)
- --------------------------------------------- ------------------------
(101,409) $(1,081,336) 67,742 $ 729,185
============================================= ========================
</TABLE>
FS-25
<PAGE> 120
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during each of the years in the three-year period ended March 31,
1997, 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,
-------------------------------------------- --------------------
1997 1996 1995 1994 1993 1992(a)
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.81 $ 10.71 $ 10.69 $ 11.29 $ 10.65 $ 10.52
- ----------------------------------------------------- ------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.56 0.56 0.56 0.15 0.60 0.66
- ----------------------------------------------------- ------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized
and unrealized) (0.05) 0.10 0.04 (0.61) 0.65 0.17
- ----------------------------------------------------- ------- -------- -------- -------- -------- --------
Total from investment operations 0.51 0.66 0.60 (0.46) 1.25 0.83
- ----------------------------------------------------- ------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.55) (0.56) (0.57) (0.14) (0.60) (0.66)
- ----------------------------------------------------- ------- -------- -------- -------- -------- --------
Distributions from net realized capital gains -- -- -- -- (0.01) (0.04)
- ----------------------------------------------------- ------- -------- -------- -------- -------- --------
Returns of capital -- -- (0.01) -- --
- ----------------------------------------------------- ------- -------- -------- -------- -------- --------
Total distributions (0.55) (0.56) (0.58) (0.14) (0.61) (0.70)
- ----------------------------------------------------- ------- -------- -------- -------- -------- --------
Net asset value, end of period $ 10.77 $ 10.81 $ 10.71 $ 10.69 $ 11.29 $ 10.65
- ----------------------------------------------------- ------- -------- -------- -------- -------- --------
Total return(b) 4.84% 6.24% 5.78% (4.06)% 11.99% 8.22%
===================================================== ======= ======== ======== ======== ======== ========
Ratio/supplemental data:
Net assets, end of period (000s omitted) $38,118 $ 39,355 $ 38,289 $ 42,361 $ 46,224 $ 33,110
===================================================== ======= ======== ======== ======== ======== ========
Ratio of expenses to average net assets(c) 0.72%(d) 0.66% 0.55% 0.50%(e) 0.34% 0.25%
===================================================== ======= ======== ======== ======== ======== ========
Ratio of net investment income to average net
assets(c) 5.18%(d) 5.16% 5.37% 5.32%(e) 5.42% 6.25%
===================================================== ======= ======== ======== ======== ======== ========
Portfolio turnover rate 17% 17% 7% 2% 5% 43%
===================================================== ======= ======== ======== ======== ======== ========
<CAPTION>
DECEMBER 31,
--------------------------------
1991 1990 1989
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.07 $ 10.19 $ 10.00
- ----------------------------------------------------- -------- -------- -------
Income from investment operations:
Net investment income 0.69 0.67 0.14
- ----------------------------------------------------- -------- -------- -------
Net gains (losses) on securities (both realized
and unrealized) 0.50 (0.10) 0.16
- ----------------------------------------------------- -------- -------- -------
Total from investment operations 1.19 0.57 0.30
- ----------------------------------------------------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.69) (0.69) (0.11)
- ----------------------------------------------------- -------- -------- -------
Distributions from net realized capital gains (0.05) -- --
- ----------------------------------------------------- -------- -------- -------
Returns of capital -- -- --
- ----------------------------------------------------- -------- -------- -------
Total distributions (0.74) (0.69) (0.11)
- ----------------------------------------------------- -------- -------- -------
Net asset value, end of period $ 10.52 $ 10.07 $ 10.19
- ----------------------------------------------------- -------- -------- -------
Total return(b) 12.23% 5.88% 3.06%
===================================================== ======== ======== =======
Ratio/supplemental data:
Net assets, end of period (000s omitted) $ 27,298 $ 16,685 $ 6,556
===================================================== ======== ======== =======
Ratio of expenses to average net assets(c) 0.25% 0.25% 0.25%(e)
===================================================== ======== ======== =======
Ratio of net investment income to average net
assets(c) 6.73% 6.82% 6.21%(e)
===================================================== ======== ======== =======
Portfolio turnover rate 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 1.09%, 1.16%, 1.13%, 1.23% (annualized), 1.30%, 1.12%,
1.26%, 1.33%, and 1.99% (annualized) for the period 1997-89, respectively.
Ratios of net investment income to average net assets prior to waiver of
advisory fees and expense reimbursements are 4.81%, 4.66%, 4.79%, 4.59%
(annualized), 4.45%, 5.38%, 5.72%, 5.74%, and 4.48% (annualized) for the
period 1997-89, respectively.
(d) Ratios are based on average daily net assets of $38,874,455.
(e) Annualized.
FS-26
<PAGE> 121
PART C
OTHER INFORMATION
Item 24. (a) Financial Statements:
(1) AIM High Income Municipal Fund
In Part A: None
In Part B: None
(2) AIM Tax-Exempt Cash Fund
In Part A: None
<TABLE>
<S> <C>
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of March 31, 1997
(3) Statement of Assets and Liabilities as of March 31, 1997
(4) Statement of Operations for the year ended March 31, 1997
(5) Statement of Changes in Net Assets for the years ended March 31, 1997
and 1996
</TABLE>
(3) AIM Tax-Free Intermediate Fund
In Part A: None
<TABLE>
<S> <C>
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of March 31, 1997
(3) Statement of Assets and Liabilities as of March 31, 1997
(4) Statement of Operations for the year ended March 31, 1997
(5) Statement of Changes in Net Assets for the years ended
March 31, 1997 and 1996
</TABLE>
(4) AIM Tax-Exempt Bond Fund of Connecticut
In Part A: None
<TABLE>
<S> <C>
In Part B: (1) Independent Auditors' Report
(2) Schedule of Investments as of March 31,
1997
(3) Statement of Assets and Liabilities as of
March 31, 1997
(4) Statement of Operations for the year ended March 31, 1997
(5) Statement of Changes in Net Assets for the years ended March 31, 1997
and 1996
</TABLE>
(b) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <S> <C>
(1) (a) - Articles of Incorporation of Registrant, dated April 30,
1993, were filed as an Exhibit to Registrant's Registration
Statement on July 19, 1993, and were filed electronically
as an
</TABLE>
C-1
<PAGE> 122
<TABLE>
<S> <C> <C>
Exhibit to Post-Effective Amendment No. 4 on July 26, 1996,
and are hereby incorporated by reference.
(b) - Articles of Amendment, dated July 27, 1993, were filed as
an Exhibit to Registrant's Pre- Effective Amendment No. 1
on October 12, 1993, and were filed electronically as an
Exhibit to Post-Effective Amendment No. 4 on July 26, 1996,
and are hereby incorporated by reference.
(c) - Articles of Amendment, dated September 10, 1993, were
filed as an Exhibit to Registrant's Pre-Effective Amendment
No. 1 on October 12, 1993, and were filed electronically as
an Exhibit to Post-Effective Amendment No. 4 on July 26,
1996, and are hereby incorporated by reference.
(d) - Articles of Amendment, dated June 18, 1997, were filed as
an Exhibit to Registrant's Post- Effective Amendment No. 5
on July 29, 1997, and are hereby incorporated by reference.
(e) - Articles of Amendment, dated September 23, 1997, are filed
herewith electronically.
(f) - Articles Supplementary, dated September 29, 1997, are
filed herewith electronically.
(2) (a) - By-Laws of Registrant were filed as an Exhibit to
Registrant's Registration Statement on July 19, 1993, and
were electronically filed as an Exhibit to Post-Effective
Amendment No. 3 on July 27, 1995.
(b) - First Amendment, dated March 14, 1995, to the By-Laws of
Registrant was electronically filed as an Exhibit to
Post-Effective Amendment No. 3 on July 27, 1995.
(c) - Amended and Restated By-Laws of Registrant, dated
December 11, 1996, were filed as an Exhibit to Registrant's
Post-Effective Amendment No. 5 on July 29, 1997, and are
hereby incorporated by reference.
(3) - Voting Trust Agreements - None.
(4) (a) - Specimen share certificate for AIM Tax-Exempt Cash Fund of
Registrant (transfer agent change) was electronically filed
as an Exhibit to Post-Effective Amendment No. 3 on July
27, 1995.
(b) - Specimen share certificate for Intermediate Portfolio -
AIM Tax-Free Intermediate Shares of Registrant (transfer
agent change) was electronically filed as an Exhibit to
Post-Effective Amendment No. 3 on July 27, 1995.
(c) - Specimen share certificate for AIM Tax-Exempt Bond Fund
of Connecticut of Registrant (transfer agent change) was
electronically filed as an Exhibit to Post-Effective
Amendment No. 3 on July 27, 1995.
(5) (a) - Master Investment Advisory Agreement, dated as of August 6,
1993, between Registrant and A I M Advisors, Inc. was
filed as an Exhibit to Registrant's Pre-Effective Amendment
No. 1 on October 12, 1993.
(b) - Master Investment Advisory Agreement, dated October 18,
1993, between Registrant and A I M Advisors, Inc. was filed
as an Exhibit to Registrant's Post-Effective Amendment No.
1 on April 28, 1994 and was filed electronically as an
Exhibit to Post-Effective Amendment No. 4 on July 26, 1996.
</TABLE>
C-2
<PAGE> 123
<TABLE>
<S> <C> <C>
(c) - Master Investment Advisory Agreement, dated February 28,
1997, between Registrant and A I M Advisors, Inc. was filed
as an Exhibit to Post-Effective Amendment No. 5 on July 29,
1997, and is hereby incorporated by reference.
(d) - Form of Amendment No. 1, dated _________, 1997, to the
Master Investment Advisory Agreement, dated February 28,
1997, between Registrant and A I M Advisors, Inc., is filed
herewith electronically.
(6) (a) - (1) Master Distribution Agreement, dated as of August 6,
1993, between Registrant and A I M Distributors, Inc. was
filed as an Exhibit to Registrant's Pre-Effective Amendment
No. 1 on October 12, 1993.
(2) Master Distribution Agreement, dated October 18, 1993,
between Registrant and A I M Distributors, Inc. was filed
as an Exhibit to Registrant's Post-Effective Amendment No.
1 on April 28, 1994, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 4 on July 26, 1996.
(3) Master Distribution Agreement, dated February 28, 1997,
between Registrant and A I M Distributors, Inc. was filed
as an Exhibit to Post-Effective Amendment No. 5 on July 29,
1997, and is hereby incorporated by reference.
(4) Amendment No. 1, dated August 4, 1997, to Master
Distribution Agreement, dated February 28, 1997, between
Registrant and A I M Distributors, Inc., is filed herewith
electronically.
(5) Form of Amended and Restated Master Distribution
Agreement, dated ___________, 1997 between Registrant (on
behalf of its Class A and Class C Shares) and A I M
Distributors, Inc., is filed herewith electronically.
(6) Form of Master Distribution Agreement, dated
___________, 1997 between Registrant (on behalf of its
Class B Shares) and A I M Distributors, Inc. is filed
herewith electronically.
(b) - Form of Selected Dealer Agreement between A I M
Distributors, Inc. and selected dealers is filed herewith
electronically.
(c) - Form of Bank Agreement between A I M Distributors, Inc.
and selected banks is filed herewith electronically.
(7) (a) - Retirement Plan for Registrant's Non-Affiliated Directors
was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 2 on July 26, 1994.
(b) - AIM Funds Retirement Plan for Eligible Directors/Trustees
dated effective March 8, 1994, as restated September 18,
1995, was filed electronically as an Exhibit to
Post-Effective Amendment No. 4 on July 26, 1996, and is
hereby incorporated by reference.
(c) - Form of Deferred Compensation Agreement for Registrant's
Non-Affiliated Directors was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 2 on July 26,
1994.
(d) - Form of Deferred Compensation Plan for Eligible
Directors/Trustees was filed electronically as an Exhibit
to Post-Effective Amendment No.4 on July 26, 1996, and is
hereby incorporated by reference.
</TABLE>
C-3
<PAGE> 124
<TABLE>
<S> <C> <C>
(8) (a) - Custodian Agreement, dated October 15, 1993, between
Registrant and State Street Bank and Trust Company was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 1 on April 28, 1994.
(b) - Custody Agreement, dated October 19, 1995, between
Registrant and The Bank of New York was filed
electronically as an Exhibit to Post-Effective Amendment
No. 4 on July 26, 1996, and is hereby incorporated by
reference.
(c) - Subcustodian Agreement, dated September 9, 1994, between
Registrant and Texas Commerce Bank National Association was
electronically filed as an Exhibit to Post- Effective
Amendment No. 3 on July 27, 1995, and is hereby
incorporated by reference.
(9) (a) - (1) Assignment and Acceptance of Assignment of Transfer
Agency and Registrar Agreement, dated as of October 15,
1993, among Registrant (on behalf of its Intermediate
Portfolio - AIM Tax-Free Intermediate Shares), Tax-Free
Investments Co. (on behalf of its Intermediate Portfolio -
AIM Tax-Free Intermediate Shares) and First Data Investor
Services Group (formerly The Shareholder Services Group,
Inc.) was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 2 on July 26, 1994.
(2) Amendment No. 1, dated October 15, 1993, to the
Transfer Agency and Registrar Agreement between Registrant
and First Data Investor Services Group (formerly The
Shareholder Services Group, Inc.) was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 2 on July 26,
1994.
(3) Transfer Agency and Service Agreement, dated November 1,
1994, between Registrant and A I M Fund Services, Inc. was
electronically filed as an Exhibit to Post-Effective
Amendment No. 3 on July 27, 1995.
(4) Form of Amended and Restated Transfer Agency and
Service Agreement, dated _________, 1997, between
Registrant and A I M Fund Services, Inc. is filed herewith
electronically.
(5) Remote Access and Related Services Agreement, dated as
December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly The Shareholder
Services Group, Inc.) was electronically filed as an
Exhibit to Post-Effective Amendment No. 3 on July 27, 1995,
and is hereby incorporated by reference.
(6) Amendment No. 1, dated October 4, 1995, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. (formerly, The Shareholder Services Group,
Inc.) was filed electronically as an Exhibit to
Post-Effective Amendment No. 4 on July 26, 1996, and is
hereby incorporated by reference.
(7) Addendum No. 2, dated October 12, 1995, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. (formerly The Shareholder Services Group, Inc.)
was filed electronically as an Exhibit to Post-Effective
Amendment No. 4 on July 26, 1996, and is hereby
incorporated by reference.
(8) Amendment No. 3, dated February 1, 1997, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. (formerly The Shareholder Services Group, Inc.)
was filed
</TABLE>
C-4
<PAGE> 125
<TABLE>
<S> <C> <C>
electronically as an Exhibit to Post-Effective Amendment
No. 5 on July 29, 1997, and is hereby incorporated by
reference.
(b) - (1) Master Administrative Services Agreement, dated as of
August 6, 1993, between Registrant and A I M Advisors, Inc.
was filed as an Exhibit to Registrant's Pre-Effective
Amendment No. 1 on October 12, 1993.
(2) Master Administrative Services Agreement, dated October
18, 1993, between Registrant and A I M Advisors, Inc. was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 1 on April 28, 1994, and was filed
electronically as an Exhibit to Post- Effective Amendment
No. 4 on July 26, 1996.
(3)(i) Administrative Services Agreement, dated October 18,
1993, between A I M Advisors, Inc., on behalf of
Registrant's portfolios, and A I M Fund Services, Inc. was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 1 on April 28, 1994.
(3)(ii) Amendment No. 1 to the Administrative Services
Agreement, dated October 18, 1993, between A I M Advisors,
Inc., on behalf of Registrant's portfolios and classes, and
A I M Fund Services, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 2 on July 26,
1994.
(3)(iii) Amendment No. 2, dated July 1, 1994, to the
Administrative Services Agreement dated October 18, 1993,
between A I M Advisors, Inc. on behalf of Registrant's
portfolios and classes, and A I M Fund Services, Inc. was
filed as an Exhibit to Post-Effective Amendment No. 5 on
July 29, 1997.
(3)(iv) Amendment No. 3, dated September 16, 1994, to the
Administrative Services Agreement dated October 18, 1993,
between A I M Advisors, Inc. on behalf of Registrant's
portfolios and classes, and A I M Fund Services, Inc. was
filed as an Exhibit to Post- Effective Amendment No. 5 on
July 29, 1997.
(3)(v) Amendment No. 4, dated November 1, 1994, to the
Administrative Services Agreement dated October 18, 1993,
between A I M Advisors, Inc. on behalf of Registrant's
portfolios and classes, and A I M Fund Services, Inc. was
filed as an Exhibit to Post- Effective Amendment No. 5 on
July 29, 1997.
(4) Master Administrative Services Agreement, dated
February 28, 1997, between Registrant and A I M Advisors,
Inc. was filed as an Exhibit to Post-Effective Amendment
No. 5 on July 29, 1997, and is hereby incorporated by
reference.
(5) Form of Amendment No. 1, dated ______________, 1997,
to the Master Administrative Services Agreement, dated
February 28, 1997, between Registrant and A I M Advisors,
Inc. is filed herewith electronically.
(10) - Opinion of Ballard Spahr Andrews & Ingersoll is filed
herewith electronically.
(11) (a) - Consent of Ballard Spahr Andrews & Ingersoll is filed
herewith electronically.
(b) - Consent of KPMG Peat Marwick LLP is filed herewith
electronically.
(c) - Consent of Price Waterhouse LLP is filed herewith
electronically.
</TABLE>
C-5
<PAGE> 126
<TABLE>
<S> <C> <C>
(12) - Financial Statements - None.
(13) - Form of Initial Capitalization Agreement, dated _________,
1997, for Registrant's AIM High Income Municipal Fund is
filed herewith electronically.
(14) - Retirement Plan Documents - None.
(15) (a) - (1) Distribution Plan for Registrant's AIM Tax-Exempt Cash
Fund and AIM Tax-Exempt Bond Fund of Connecticut, and
related forms of agreements were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on April 28,
1994.
(2) Amended Distribution Plan, dated as of September 10,
1994, for Registrant's AIM Tax- Exempt Cash Fund and AIM
Tax-Exempt Bond Fund of Connecticut, and related forms of
agreement were electronically filed as an Exhibit to
Post-Effective Amendment No. 3 on July 27, 1995.
(3) Amended and Restated Master Distribution Plan, dated as
of June 30, 1997, for Registrant's AIM Tax-Exempt Cash Fund
and AIM Tax-Exempt Bond Fund of Connecticut was filed as an
Exhibit to Post-Effective Amendment No. 5 on July 29, 1997.
(4) Second Amended and Restated Master Distribution Plan,
dated as of August 4, 1997, for Registrant's AIM Tax-Exempt
Cash Fund and AIM Tax-Exempt Bond Fund of Connecticut is
filed herewith electronically.
(5) Form of Third Amended and Restated Master Distribution
Plan, dated as of _________, 1997, for Registrant's Class A
and Class C Shares is filed herewith electronically.
(6) Form of Master Distribution Plan, dated as of ________,
1997, for Registrant's Class B Shares is filed herewith
electronically.
(b) - Form of Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan is
filed herewith electronically.
(c) - Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan is
filed herewith electronically.
(d) - Forms of Service Agreement for Bank Trust Department and
for Brokers for Bank Trust Departments to be used in
connection with Registrant's Master Distribution Plan are
filed herewith electronically.
(16) - Schedule of Sample Performance Quotation Calculations was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 2 on July 26, 1994 and was filed
electronically as an Exhibit to Post-Effective Amendment
No. 4 on July 26, 1996 and is hereby incorporated by
reference.
(18) (a) - Rule 18f-3 Amended and Restated Multiple Class Plan was
filed as an Exhibit to Post- Effective Amendment No. 5 on
July 29, 1997.
(b) - Rule 18f-3 Second Amended and Restated Multiple Class Plan
is filed herewith electronically.
(27) - Financial Data Schedule was filed as an Exhibit to
Post-Effective Amendment No. 5 on July 29, 1997, and is
hereby incorporated by reference.
</TABLE>
C-6
<PAGE> 127
Item 25. Persons Controlled by or Under Common Control with Registrant
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each such
person indicate (1) if a company, the state or other sovereign power under the
laws of which it is organized, and (2) the percentage of voting securities
owned or other basis of control by the person, if any, immediately controlling
it.
Not Applicable.
Item 26. Number of Holders of Securities
State in substantially the tabular form indicated, as of a specified
date within 90 days prior to the date of filing, the number of record holders
of each class of securities of the Registrant.
<TABLE>
<CAPTION>
Number of Record Holders as
Title of Class of October 1, 1997
-------------- ------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
AIM High Income Municipal Fund 0 0 0
AIM Tax-Exempt Cash Fund 1,941 N/A N/A
AIM Tax-Free Intermediate Fund 1,953 N/A N/A
AIM Tax-Exempt Bond Fund of Connecticut 895 N/A N/A
</TABLE>
Item 27. Indemnification
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any director,
officer, affiliated person or underwriter for their own protection.
Pursuant to the Maryland General Corporation Law and the Registrant's
Charter and By-Laws, the Registrant may indemnify any person who was or
is a director, officer, employee or agent of the Registrant to the
maximum extent permitted by the Maryland General Corporation Law. The
specific terms of such indemnification are reflected in the Registrant's
Charter and By-Laws, which are incorporated herein as part of this
Registration Statement. No indemnification will be provided by the
Registrant to any director or officer of the Registrant for any
liability to the Registrant or shareholders to which such director or
officer would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of duty.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in such Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered hereby, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against
C-7
<PAGE> 128
public policy and will be governed by the final adjudication of such
issue. Insurance coverage is provided under a joint Mutual Fund and
Investment Advisory Professional Directors & Officers Liability Policy,
issued by ICI Mutual Insurance Company, with a $25,000,000 limit of
liability.
Item 28. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment advisor of the Registrant, and each
director, officer or partner of any such investment advisor, is or has been, at
any time during the past two fiscal years, engaged for his own account or in
the capacity of director, officer, employee, partner, or trustee.
The only employment of a substantial nature of the Advisor's directors
and officers is with the Advisor and its affiliated companies. Reference
is also made to the discussion under the captions "Management" of the
Prospectus which comprises Part A of this Registration Statement, and to
the discussion under the caption "Investment Advisory and Other
Services" of the Statement of Additional Information which comprises
Part B of this Registration Statement, and to Item 29(b) of Part C of
this Registration Statement.
Item 29. Principal Underwriters
(a) A I M Distributors, Inc., the Registrant's principal underwriter,
also acts as principal underwriter to the following investment
companies:
AIM Advisor Funds, Inc.
AIM Equity Funds, Inc. (Retail Classes)
AIM Funds Group
AIM International Funds, Inc.
AIM Investment Securities Funds (AIM Limited Maturity Treasury
Shares)
AIM Summit Fund, Inc.
AIM Variable Insurance Funds, Inc.
(b) The following table sets forth information with respect to each
director, officer or partner of A I M Distributors, Inc.
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors Chairman
Michael J. Cemo President & Director None
Gary T. Crum Director Senior Vice President
Robert H. Graham Senior Vice President & Director President & Director
James L. Salners Senior Vice President & Director None
William G. Littlepage Senior Vice President & Director None
- --------
</TABLE>
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-8
<PAGE> 129
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ---------------- -------------------------- ---------------
<S> <C> <C>
John Caldwell Senior Vice President None
Gordan J. Sprague Senior Vice President None
Michael C. Vessels Senior Vice President None
Marilyn M. Miller First Vice President None
John J. Arthur Vice President & Treasurer Senior Vice President
& Treasurer
Mary Kay Coleman Vice President None
Melville B. Cox Vice President & Chief Compliance Vice President
Officer
Charles R. Dewey Vice President None
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
William H. Kleh Vice President None
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
Carol F. Relihan Vice President Senior Vice President
& Secretary
Kamala C. Sachidanandan Vice President None
Frank V. Serebrin Vice President None
B.J. Thompson Vice President None
Robert D. Van Sant, Jr. Vice President None
Kathleen J. Pflueger Secretary Assistant Secretary
Luke P. Beausoleil Assistant Vice President None
Tisha B. Christopher Assistant Vice President None
Glenda A. Dayton Assistant Vice President None
</TABLE>
- --------------------------
*11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-9
<PAGE> 130
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
<S> <C> <C>
Kathleen M. Douglas Assistant Vice President None
Terri L. Fiedler Assistant Vice President None
Mary E. Gentempo Assistant Vice President None
David E. Hessel Assistant Vice President, None
Assistant Treasurer &
Controller
Jeffrey L. Horne Assistant Vice President None
Melissa E. Hudson Assistant Vice President None
Jodie L. Johnson Assistant Vice President None
Kim T. Lankford Assistant Vice President None
Wayne W. LaPlante Assistant Vice President None
Ivy B. McLemore Assistant Vice President None
David B. O'Neil Assistant Vice President None
Terri L. Ransdell Assistant Vice President None
Patricia M. Shyman Assistant Vice President None
Christopher T. Simutis Assistant Vice President None
Gary K. Wendler Assistant Vice President None
Nicholas D. White Assistant Vice President None
Norman W. Woodson Assistant Vice President None
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
Samuel D. Sirko Assistant General Counsel & Assistant Secretary
Assistant Secretary
Stephen I. Winer Assistant Secretary Assistant Secretary
</TABLE>
(c) Not Applicable.
- ----------------------------
*11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-10
<PAGE> 131
Item 30. Location of Accounts and Records
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to
31a-3) promulgated thereunder, furnish the name and address of each person
maintaining physical possession of each such account, book or other document.
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173, maintains physical possession of each such account, book or
other document of the Registrant at its principal executive offices,
except for those maintained by the Registrant's Custodian, The Bank of
New York, 90 Washington Street, 11th Floor, New York, New York 10286,
and the Registrant's Transfer Agent and Dividend Paying Agent, A I M
Fund Services, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173.
Item 31. Management Services
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or Part B of this
Form (because the contract was not believed to be of interest to a purchaser of
securities of the Registrant) under which services are provided to the
Registrant, indicating the parties to the contract, the total dollars paid and
by whom, for the last three fiscal years.
Not Applicable.
Item 32. Undertakings
The Registrant undertakes to furnish each person to whom a prospectus is
delivered a copy of the applicable Fund's latest annual report to
shareholders, upon request and without charge.
The Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the effective date of this Registration Statement.
C-11
<PAGE> 132
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 7th day
of October, 1997.
Registrant: AIM TAX-EXEMPT FUNDS, INC.
By: /s/ ROBERT H. GRAHAM
-------------------------------------
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ CHARLES T. BAUER Chairman & Director October 7, 1997
- -----------------------------------
(Charles T. Bauer)
/s/ ROBERT H. GRAHAM
- ----------------------------------- Director & President
(Robert H. Graham) (Principal Executive Officer) October 7, 1997
/s/ BRUCE L. CROCKETT
- ----------------------------------- Director October 7, 1997
(Bruce L. Crockett)
/s/ OWEN DALY II
- ----------------------------------- Director October 7, 1997
(Owen Daly II)
/s/ JACK FIELDS
- ----------------------------------- Director October 7, 1997
(Jack Fields)
/s/ CARL FRISCHLING
- ----------------------------------- Director October 7, 1997
(Carl Frischling)
/s/ JOHN F. KROEGER
- ----------------------------------- Director October 7, 1997
(John F. Kroeger)
/s/ LEWIS F. PENNOCK
- ----------------------------------- Director October 7, 1997
(Lewis F. Pennock)
/s/ IAN W. ROBINSON
- ----------------------------------- Director October 7, 1997
(Ian W. Robinson)
/s/ LOUIS S. SKLAR
- ----------------------------------- Director October 7, 1997
(Louis S. Sklar)
/s/ JOHN J. ARTHUR Senior Vice President &
- ----------------------------------- Treasurer (Principal Financial October 7, 1997
(John J. Arthur) and Accounting Officer)
</TABLE>
<PAGE> 133
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
1(e) Articles of Amendment, dated September 23, 1997
1(f) Articles Supplementary, dated September 29, 1997
5(d) Form of Amendment No. 1, dated _________, 1997, to the Master
Investment Advisory Agreement, dated February 28, 1997 between
Registrant and A I M Advisors, Inc.
6(a)(4) Amendment No. 1, dated August 4, 1997, to the Master Distribution
Agreement, dated February 28, 1997, between Registrant and A I M
Distributors, Inc.
6(a)(5) Form of Amended and Restated Master Distribution Agreement, dated
____________, 1997, between Registrant (on behalf of its Class A
and Class C Shares) and A I M Distributors, Inc.
6(a)(6) Form of Master Distribution Agreement, dated ___________, 1997,
between Registrant (on behalf of its Class B Shares) and A I M
Distributors, Inc.
6(b) Form of Selected Dealer Agreement between A I M Distributors, Inc.
and selected dealers
6(c) Form of Bank Agreement between A I M Distributors, Inc. and
selected banks
9(a)(4) Form of Amended and Restated Transfer Agency and Service
Agreement, dated __________, 1997, between Registrant and A I M
Fund Services, Inc.
9(b)(5) Form of Amendment No. 1, dated ____________, 1997, to the Master
Administrative Services Agreement, dated February 28, 1997,
between Registrant and A I M Advisors,Inc.
10 Opinion of Ballard Spahr Andrews & Ingersoll
11(a) Consent of Ballard Spahr Andrews & Ingersoll
11(b) Consent of KPMG Peat Marwick LLP
11(c) Consent of Price Waterhouse LLP
13 Form of Initial Capitalization Agreement, dated ___________,
1997, for Registrant's AIM High Income Municipal Fund
15(a)(4) Second Amended and Restated Master Distribution Plan, dated
August 4, 1997, for Registrant's AIM Tax-Exempt Cash Fund and AIM
Tax-Exempt Bond Fund of Connecticut
15(a)(5) Form of Third Amended and Restated Master Distribution Plan,
dated as of _________, 1997, for Registrant's Class A and Class C
Shares
</TABLE>
<PAGE> 134
<TABLE>
<S> <C>
15(a)(6) Form of Master Distribution Plan, dated as of _________, 1997,
for Registrant's Class B Shares
15(b) Form of Shareholder Service Agreement to be used in connection
with Registrant's Master Distribution Plan
15(c) Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan
15(d) Forms of Service Agreement for Bank Trust Department and for
Brokers for Bank Trust Departments to be used in connection with
Registrant's Master Distribution Plan
18(b) Rule 18f-3 Second Amended and Restated Multiple Class Plan
</TABLE>
<PAGE> 1
EXHIBIT 1(e)
AIM TAX-EXEMPT FUNDS, INC.
ARTICLES OF AMENDMENT
AIM Tax-Exempt Funds, Inc., a Maryland corporation having its
principal office in the State of Maryland in Baltimore City (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Article Fifth (a) is hereby amended in its entirety to read as
follows:
"The total number of shares of common stock which the Corporation
shall have the authority to issue is 5,000,000,000 shares, of which
1,000,000,000 shares are classified as AIM Tax-Exempt Cash Fund -
Class A Shares, 1,000,000,000 shares are classified AIM Tax-Exempt
Bond Fund of Connecticut - Class A Shares, 1,000,000,000 shares are
classified as AIM Tax-Free Intermediate Fund - Class A Shares and the
balance of which are unclassified. The par value of common stock is
$.001, and the aggregate par value of all authorized shares of common
stock is $5,000,000. Unissued shares of common stock may be classified
and reclassified by the Board of Directors in the manner permitted by
the Maryland General Corporation Law."
SECOND: The Corporation is registered as an open-end company under the
Investment Company Act of 1940. The foregoing amendment to the charter was
approved by a majority of the board of directors. The amendment is limited to a
change expressly permitted by Section 2-605(a)(4) of the Maryland General
Corporation Law to be made without action by the stockholders.
The undersigned President acknowledges these Articles of Amendment to
be the corporate act of the Corporation and states to the best of his
knowledge, information and belief that the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
<PAGE> 2
IN WITNESS WHEREOF, AIM Tax-Exempt Funds, Inc. has caused these
Articles of Amendment to be signed in its name and on its behalf by its
President and witnessed by its Assistant Secretary on September 23rd, 1997.
AIM Tax-Exempt Funds, Inc.
By /s/ ROBERT H. GRAHAM
-------------------------------
Robert H. Graham, President
WITNESS:
/s/ P. MICHELLE GRACE
- ----------------------------
Assistant Secretary
<PAGE> 1
EXHIBIT 1(f)
AIM TAX-EXEMPT FUNDS, INC.
ARTICLES SUPPLEMENTARY
AIM TAX-EXEMPT FUNDS, INC., a Maryland corporation registered as an
open-end investment company under the Investment Company Act of 1940, having
its principal office in the State of Maryland in Baltimore City (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to Section 2-105(c) of the Maryland General
Corporation Law, the Board of Directors of the Corporation hereby increases the
aggregate number of shares of common stock which the Corporation shall have the
authority to issue from 5,000,000,000 to 7,000,000,000 shares with a par value
of $.001 each.
SECOND: Immediately prior to the filing of these Articles
Supplementary, the Corporation had authority to issue 5,000,000,000 shares with
a par value of $.001 each. Of these shares:
(a) one billion (1,000,000,000) shares have been
classified as AIM Tax-Exempt Cash Fund-Class A Shares; one billion
(1,000,000,000) shares have been classified as AIM Tax-Exempt Bond
Fund of Connecticut Class A Shares; and one billion (1,000,000,000)
shares have been classified as AIM Tax-Free Intermediate Fund-Class A
Shares); and
(b) 2,000,000,000 shares were unclassified.
THIRD: All the shares of common stock of the Corporation, both
classified and unclassified, collectively had an aggregate par value of
$5,000,000.
<PAGE> 2
FOURTH: As of the filing of these Article Supplementary, the
Corporation shall have authority to issue 7,000,000,000 shares with a par value
of $.001 each. Of the 7,000,000,000 shares:
(a) one billion (1,000,000,000) shares are classified as
AIM Tax-Exempt Cash Fund - Class A Shares; one billion (1,000,000,000)
shares are classified as AIM Tax-Exempt Bond Fund of Connecticut -
Class A Shares; one billion (1,000,000,000) shares are classified as
AIM Tax-Free Intermediate Fund - Class A Shares; and one billion
(1,000,000,000) shares are classified as AIM High Income Municipal
Fund - Class A Shares (which classified shares shall be referred to
herein collectively as "Class A Shares," and holders of such Class A
Shares shall be referred to herein as "Class A Shareholders");
(b) one billion (1,000,000,000) shares are classified as
AIM High Income Municipal Fund - Class B Shares (which classified
shares shall be referred to herein as the "Class B Shares," and
holders of such Class B Shares shall be referred to herein as "Class B
Shareholders");
(c) one billion (1,000,000,000) shares are classified as
AIM High Income Municipal Fund - Class C Shares (which classified
shares shall be referred to herein as the "Class C Shares," and
holders of such Class C Shares shall be referred to herein as "Class C
Shareholders"); and
(d) 1,000,000,000 shares are unclassified.
2
<PAGE> 3
FIFTH: Unissued shares of common stock (both classified and
unclassified) may be classified and reclassified by the Board of Directors.
SIXTH: All the shares of common stock of the Corporation, both
classified and unclassified, collectively have an aggregate par value of
$7,000,000.
SEVENTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Class A Shares as set forth in ARTICLE FIFTH,
paragraph (b) of the Corporation's Charter, and in the provisions of the
Charter relating to stock of the Corporation generally, remain unchanged.
EIGHTH: Except as set forth below, the Class B Shares shall have the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as set forth in ARTICLE FIFTH, paragraph (b) of the Corporation's
Charter and shall be subject to all provisions of the Charter relating to stock
of the Corporation generally. In addition, the Class B Shares shall have the
following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption:
(a) Subject to the provisions of paragraph (c) below, all
Class B Shares other than those purchased through the reinvestment of
dividends and distributions shall automatically convert to Class A
Shares eight (8) years after the end of the calendar month in which a
shareholder's order to purchase such Class B Shares was accepted.
3
<PAGE> 4
(b) Subject to the provisions of paragraph (c) below,
Class B Shares purchased through the reinvestment of dividends and
distributions paid in respect of Class B Shares will be considered held
in a separate sub-account, and will automatically convert to Class A
Shares in the same proportion as any Class B Shares (other than those
in the sub-account) convert to Class A Shares. Other than this
conversion feature, the Class B Shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B
Shares shall have all the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of Class B
Shares generally.
(c) If an investment portfolio of the Corporation
implements any amendment to a Rule 12b-1 Plan (or, if presented to
shareholders, adopts or implements a non-Rule 12b-1 shareholder
services plan) which the Board of Directors determines would
materially increase the charges that may be borne by the Class A
Shareholders under such plan, the Class B Shares will stop converting
to the Class A Shares unless the Class B Shares, voting separately,
approve the amendment or adoption. The Board of Directors shall have
sole discretion in determining whether such amendment or adoption is
submitted to a vote of the Class B Shareholders. Should such amendment
or adoption not be submitted to a vote of the Class B Shareholders or,
if submitted, should the Class B Shareholders fail to approve such
amendment or adoption, the Board of Directors shall take such action
as is necessary to: (1) create a new class ("New Class A Shares")
which shall be identical in all material respects to the Class A
Shares as they existed prior to the implementation of the amendment or
adoption; and (2) ensure that the existing Class B Shares will be
exchanged or converted into New Class A Shares no later than the date
such Class B Shares were scheduled to convert to Class A Shares. If
deemed advisable by the Board of Directors to
4
<PAGE> 5
implement the foregoing, and at the sole discretion of the Board of
Directors, such action may include the conversion of all Class B Shares
for a new class ("New Class B Shares"), identical in all respects to
the Class B Shares except that the New Class B Shares will
automatically convert into the New Class A Shares. Such exchanges or
conversions shall be effected in a manner that the Board of Directors
reasonably believes will not be subject to federal taxation.
NINTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Class C Shares are set forth in ARTICLE FIFTH,
paragraph (b) of the Corporation's Charter and shall be subject to all
provisions of the Charter relating to stock of the Corporation generally.
TENTH: The Board of Directors of the Corporation has authorized the
additional shares and classified the Class A Shares, Class B Shares and Class C
Shares of AIM High Income Municipal Fund under authority contained in the
Charter of the Corporation.
The undersigned President acknowledges these Articles Supplementary to
be the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
5
<PAGE> 6
IN WITNESS WHEREOF, AIM TAX-EXEMPT FUNDS, INC. has caused these
Articles Supplementary to be executed in its name and on its behalf by its
President and witnessed by its Assistant Secretary on September 29, 1997.
AIM TAX-EXEMPT FUNDS, INC.
Witness:
/s/ SAMUEL D. SIRKO By: /s/ ROBERT H. GRAHAM
- ---------------------------- ----------------------------
Assistant Secretary President
6
<PAGE> 1
EXHIBIT 5(d)
AMENDMENT NO. 1
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This Amendment dated as of September ______, 1997, amends the Master
Investment Advisory Agreement (the "Agreement"), dated February 28, 1997,
between AIM Tax-Exempt Funds, Inc., a Maryland corporation (the "Company"),
and A I M Advisors, Inc., a Delaware corporation (the "Advisor").
W I T N E S S E T H:
WHEREAS, the parties desire to amend the Agreement to add one new
portfolio, the AIM High Income Municipal Fund;
NOW, THEREFORE, the parties agree as follows;
1. Appendix A to the Agreement is hereby deleted in its entirety
and replaced with the following:
"APPENDIX A
TO
MASTER INVESTMENT ADVISORY AGREEMENT
OF
AIM TAX-EXEMPT FUNDS, INC.
The Company shall pay the Advisor, out of the assets of a Fund, as
full compensation for all services rendered and all facilities furnished
hereunder, a management fee for such Fund set forth below. Such fee shall be
calculated by applying the following annual rates to the average daily net
assets of such Fund for the calendar year computed in the manner used for the
determination of the net asset value of shares of such Fund.
AIM TAX-FREE INTERMEDIATE FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $500 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.30%
Over $500 million to and including $1 billion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Over $1 billion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.20%
</TABLE>
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
All Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
</TABLE>
1
<PAGE> 2
AIM TAX-EXEMPT CASH FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
All Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.35%
</TABLE>
AIM HIGH INCOME MUNICIPAL FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $500 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.60%
Over $500 million to and including $1 billion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.55%
Over $1 billion to and including $1.5 billion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Over $1.5 billion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.45%"
</TABLE>
2. In all other respects, the Agreement is hereby confirmed and
remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers on the date first written above.
Dated: September , 1997
-------
AIM TAX-EXEMPT FUNDS, INC.
Attest: By:
-------------------------------- -------------------------------
Assistant Secretary President
(SEAL)
A I M ADVISORS, INC.
Attest: By:
-------------------------------- -------------------------------
Assistant Secretary President
(SEAL)
2
<PAGE> 1
EXHIBIT 6(a)(4)
AMENDMENT NO. 1
MASTER DISTRIBUTION AGREEMENT
The Master Distribution Agreement (the "Agreement"), dated February
28, 1997, by and between AIM Tax-Exempt Funds, Inc., a Maryland corporation and
AIM Distributors, Inc., a Delaware Corporation shall hereby be amended as
follows:
Appendix A of the Agreement is hereby deleted in its entirety and
replaced with the following:
"APPENDIX A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM TAX-EXEMPT FUNDS, INC.
Class A Shares
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
Intermediate Portfolio
AIM Tax-Free Intermediate Shares"
All other terms and provisions of the Agreement not amended herein
shall remain in full force and effect.
Dated: August 4, 1997
AIM TAX-EXEMPT FUNDS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------------ -------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ STEPHEN I. WINER By: /s/ MICHAEL J. CEMO
------------------------------------ -------------------------
Assistant Secretary Michael J. Cemo
President
(SEAL)
<PAGE> 1
EXHIBIT 6(a)(5)
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
BETWEEN
AIM TAX-EXEMPT FUNDS, INC.
(CLASS A AND C SHARES)
AND
A I M DISTRIBUTORS, INC.
THIS AGREEMENT made as of the ________ day of September, 1997, by and
between AIM TAX-EXEMPT FUNDS, INC., a Maryland corporation (the "Company"),
with respect to the series of shares of its common stock set forth on Appendix
A to this agreement (the "Portfolios") and the shares, other than the Class B
shares, representing the Portfolios (hereinafter referred to as the "Class A
and Class C Shares") and A I M DISTRIBUTORS, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto agree as follows:
FIRST: The Company on behalf of the Class A and Class C Shares hereby
appoints the Distributor as its exclusive agent for the sale of the Class A and
Class C Shares to the public directly and through investment dealers and
financial institutions in the United States and throughout the world.
SECOND: The Company shall not sell any Class A and Class C Shares
except through the Distributor and under the terms and conditions set forth in
paragraph FOURTH below. Notwithstanding the provisions of the foregoing
sentence, however:
(A) the Company may issue Class A and Class C Shares to any other
investment company or personal holding company, or to the shareholders thereof,
in exchange for all or a majority of the shares or assets of any such company;
and
(B) the Company may issue Class A and Class C Shares at their net asset
value in connection with certain classes of transactions or to certain
categories of persons, in accordance with Rule 22d-1 under the Investment
Company Act of 1940, as amended (the "1940 Act"), provided that any such
category is specified in the then current prospectus of the applicable Class A
and Class C Shares.
THIRD: The Distributor hereby accepts appointment as exclusive agent
for the sale of the Class A and Class C Shares and agrees that it will use its
best efforts to sell such shares; provided, however, that:
(A) the Distributor may, and when requested by the Company on behalf of
the Class A and Class C Shares shall, suspend its efforts to effectuate such
sales at any time when, in the
1
<PAGE> 2
opinion of the Distributor or of the Company, no sales should be made because
of market or other economic considerations or abnormal circumstances of any
kind; and
(B) the Company may withdraw the offering of the Class A and Class C
Shares (i) at any time with the consent of the Distributor, or (ii) without
such consent when so required by the provisions of any statute or of any order,
rule or regulation of any governmental body having jurisdiction. It is
mutually understood and agreed that the Distributor does not undertake to sell
any specific amount of the Class A and Class C Shares. The Company shall have
the right to specify minimum amounts for initial and subsequent orders for the
purchase of Class A and Class C Shares.
FOURTH:
(A) The public offering price of Class A Shares (the "offering price")
shall be the net asset value per share plus a sales charge, if any. Net asset
value per share shall be determined in accordance with the provisions of the
then current prospectus and statement of additional information of the
Portfolios. The sales charge shall be established by the Distributor, may
reflect scheduled variations in, or the elimination of, sales charges on sales
of Class A Shares either generally to the public, or to any specified class of
investors or in connection with any specified class of transactions, in
accordance with Rule 22d-1 and as set forth in the then current prospectus and
statement of additional information of the Portfolios. The Distributor shall
apply any scheduled variation in, or elimination of, the selling commission
uniformly to all offerees in the class specified.
The public offering price of the Class C shares shall be the net asset
value per share of the applicable Class C shares. Net asset value per share
shall be determined in accordance with the provisions of the then current
prospectus and statement of additional information of the applicable Portfolio.
The Distributor may establish a schedule of contingent deferred sales charges
to be imposed at the time of redemption of the Shares, and such schedule shall
be disclosed in the current prospectus of each Portfolio. Such schedule of
contingent deferred sales charges may reflect variations in or waivers of such
charges on redemptions of Class C shares, either generally to the public or to
any specified class of shareholders and/or in connection with any specified
class of transactions, in accordance with applicable rules and regulations and
exemptive relief granted by the Securities and Exchange Commission, and as set
forth in the Portfolios' current prospectus(es). The Distributor and the
Company shall apply any then applicable scheduled variation in or waiver of
contingent deferred sales charges uniformly to all shareholders and/or all
transactions belonging to a specified class.
(B) The Portfolios shall allow directly to investment dealers and other
financial institutions through whom Class A Shares are sold such portion of the
sales charge as may be payable to them and specified by the Distributor up to
but not exceeding the amount of the total sales charge. The difference between
any commissions so payable and the total sales charges included in the offering
price shall be paid to the Distributor.
The Distributor may pay to investment dealers and other financial
institutions through whom Class C shares are sold, such sales commission as the
Distributor may specify from time to time. Payment of any such sales
commissions shall be the sole obligation of the Distributor.
(C) No provision of this Agreement shall be deemed to prohibit any
payments by a Portfolio to the Distributor or by a Portfolio or the Distributor
to investment dealers, financial institutions and 401(k) plan service providers
where such payments are made under a distribution plan adopted by the Company
on behalf of each Portfolio pursuant to Rule 12b-1 under the 1940 Act.
2
<PAGE> 3
FIFTH: The Distributor shall act as agent of the Company on behalf of
each Portfolio in connection with the sale and repurchase of Class A and Class
C Shares. Except with respect to such sales and repurchases, the Distributor
shall act as principal in all matters relating to the promotion of the sale of
Class A and Class C Shares and shall enter into all of its own engagements,
agreements and contracts as principal on its own account. The Distributor
shall enter into agreements with investment dealers and financial institutions
selected by the Distributor, authorizing such investment dealers and financial
institutions to offer and sell Class A and Class C Shares to the public upon
the terms and conditions set forth therein, which shall not be inconsistent
with the provisions of this Agreement. Each agreement shall provide that the
investment dealer and financial institution shall act as a principal, and not
as an agent, of the Company on behalf of the Portfolios.
SIXTH: The Portfolios shall bear:
(A) the expenses of qualification of Class A and Class C Shares for sale
in connection with such public offerings in such states as shall be selected by
the Distributor, and of continuing the qualification therein until the
Distributor notifies the Company that it does not wish such qualification
continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH:
(A) The Distributor shall bear the expenses of printing from the final
proof and distributing the Portfolios' prospectuses and statements of
additional information (including supplements thereto) relating to public
offerings made by the Distributor pursuant to this Agreement (which shall not
include those prospectuses and statements of additional information, and
supplements thereto, to be distributed to shareholders of each Portfolio), and
any other promotional or sales literature used by the Distributor or furnished
by the Distributor to dealers in connection with such public offerings, and
expenses of advertising in connection with such public offerings.
(B) The Distributor may be reimbursed for all or a portion of such
expenses, or may receive reasonable compensation for distribution related
services, to the extent permitted by a distribution plan adopted by the Company
on behalf of the Portfolios pursuant to Rule 12b-1 under the 1940 Act.
EIGHTH: The Distributor will accept orders for the purchase of Class A
and Class C Shares only to the extent of purchase orders actually received and
not in excess of such orders, and it will not avail itself of any opportunity
of making a profit by expediting or withholding orders. It is mutually
understood and agreed that the Company may reject purchase orders where, in the
judgment of the Company, such rejection is in the best interest of the Company.
NINTH: The Company, on behalf of the Portfolios, and the Distributor
shall each comply with all applicable provisions of the 1940 Act, the
Securities Act of 1933 and of all other federal and state laws, rules and
regulations governing the issuance and sale of Class A and Class C Shares.
TENTH:
(A) In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company on behalf of the Portfolios agrees to indemnify the
Distributor against any and all claims, demands, liabilities and expenses which
the Distributor may incur under the Securities Act of 1933, or common law or
3
<PAGE> 4
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of the
Portfolios, or any omission to state a material fact therein, the omission of
which makes any statement contained therein misleading, unless such statement
or omission was made in reliance upon, and in conformity with, information
furnished to the Company or Portfolio in connection therewith by or on behalf
of the Distributor. The Distributor agrees to indemnify the Company and the
Portfolios against any and all claims, demands, liabilities and expenses which
the Company or the Portfolios may incur arising out of or based upon any act or
deed of the Distributor or its sales representatives which has not been
authorized by the Company or the Portfolios in its prospectus or in this
Agreement.
(B) The Distributor agrees to indemnify the Company and the Portfolios
against any and all claims, demands, liabilities and expenses which the Company
or the Portfolios may incur under the Securities Act of 1933, or common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of the
Portfolios, or any omission to state a material fact therein if such statement
or omission was made in reliance upon, and in conformity with, information
furnished to the Company or the Portfolios in connection therewith by or on
behalf of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the Portfolios' transfer
agent(s), or for any failure of any such transfer agent to perform its duties.
ELEVENTH: Nothing herein contained shall require the Company to take
any action contrary to any provision of its Articles of Incorporation, or to
any applicable statute or regulation.
TWELFTH: This Agreement shall become effective as of the date hereof,
shall continue in force and effect until February 28, 1999, and shall continue
in force and effect from year to year thereafter, provided, that such
continuance is specifically approved at least annually (a)(i) by the Board of
Directors of the Company or (ii) by the vote of a majority of the Portfolios'
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act),
and (b) by vote of a majority of the Company's directors who are not parties to
this Agreement or "interested persons" (as defined in Section 2(a)(19) of the
1940 Act) of any party to this Agreement cast in person at a meeting called for
such purpose.
4
<PAGE> 5
THIRTEENTH:
(A) This Agreement may be terminated at any time, without the payment
of any penalty, by vote of the Board of Directors of the Company or by vote of
a majority of the outstanding voting securities of each Portfolio, or by the
Distributor, on sixty (60) days' written notice to the other party.
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act.
FOURTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, it is agreed that the addresses of both the
Company and the Distributor shall be 11 Greenway Plaza, Suite 100, Houston,
Texas 77046.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
AIM TAX-EXEMPT FUNDS, INC.
By:
--------------------------
Name: Robert H. Graham
Title: President
Attest:
- -------------------------------
Name:
Title:
A I M DISTRIBUTORS, INC.
By:
--------------------------
Name: Michael J. Cemo
Title: President
Attest:
- -------------------------------
Name:
Title:
5
<PAGE> 6
APPENDIX A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM TAX-EXEMPT FUNDS, INC.
CLASS A SHARES
- --------------
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Fund
AIM High Income Municipal Fund
CLASS C SHARES
- --------------
AIM High Income Municipal Fund
6
<PAGE> 1
EXHIBIT 6(a)(6)
MASTER DISTRIBUTION AGREEMENT
BETWEEN
AIM TAX-EXEMPT FUNDS, INC.
(CLASS B SHARES)
AND
A I M DISTRIBUTORS, INC.
THIS AGREEMENT made as of the ______ day of September, 1997, by and
between AIM TAX-EXEMPT FUNDS, INC., a Maryland corporation (the "Company"),
with respect to each of the Class B shares (the "Shares") of each series of
shares of common stock set forth on Schedule A to this agreement (the
"Portfolios"), and A I M DISTRIBUTORS, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto agree as follows:
FIRST: The Company hereby appoints the Distributor as its exclusive
agent for the sale of the Shares to the public directly and through investment
dealers in the United States and throughout the world. If subsequent to the
termination of the Distributor's services to the Company pursuant to this
Agreement, the Company retains the services of another distributor, the
distribution agreement with such distributor shall contain provisions
comparable to Clauses FOURTH and SEVENTH hereof and Exhibit A hereto, and
without limiting the generality of the foregoing, will require such distributor
to maintain and make available to the Distributor records regarding sales,
redemptions and reinvestments of Shares necessary to implement the terms of
Clauses FOURTH, SEVENTH and EIGHTH hereof.
SECOND: The Company shall not sell any Shares except through the
Distributor and under the terms and conditions set forth in paragraph FOURTH
below. Notwithstanding the provisions of the foregoing sentence, however:
(A) the Company may issue Shares to any other investment company or
personal holding company, or to the shareholders thereof, in exchange for all
or a majority of the shares or assets of any such company;
(B) the Company may issue Shares at their net asset value in
connection with certain classes of transactions or to certain classes of
persons, in accordance with Rule 22d-1 under the Investment Company Act of
1940, as amended (the "1940 Act"), provided that any such class is specified in
the then current prospectus of the applicable Shares; and
(C) the Company shall have the right to specify minimum amounts for
initial and subsequent orders for the purchase of Shares.
1
<PAGE> 2
THIRD: The Distributor hereby accepts appointment as exclusive agent
for the sale of the Shares and agrees that it will use its best efforts to sell
such Shares; provided, however, that:
(A) the Distributor may, and when requested by the Company on behalf
of the Shares shall, suspend its efforts to effectuate such sales at any time
when, in the opinion of the Distributor or of the Company, no sales should be
made because of market or other economic considerations or abnormal
circumstances of any kind;
(B) the Company may withdraw the offering of the Shares (i) at any
time with the consent of the Distributor, or (ii) without such consent when so
required by the provisions of any statute or of any order, rule or regulation
of any governmental body having jurisdiction; and
(C) the Distributor, as agent, does not undertake to sell any
specific amount of the Shares.
FOURTH:
(A) The public offering price of the Shares shall be the net asset
value per share of the applicable Shares. Net asset value per share shall be
determined in accordance with the provisions of the then current prospectus and
statement of additional information of the applicable Portfolio. The
Distributor may establish a schedule of contingent deferred sales charges to be
imposed at the time of redemption of the Shares, and such schedule shall be
disclosed in the current prospectus of each Portfolio. Such schedule of
contingent deferred sales charges may reflect variations in or waivers of such
charges on redemptions of Shares, either generally to the public or to any
specified class of shareholders and/or in connection with any specified class
of transactions, in accordance with applicable rules and regulations and
exemptive relief granted by the Securities and Exchange Commission, and as set
forth in the Portfolios' current prospectus(es). The Distributor and the
Company shall apply any then applicable scheduled variation in or waiver of
contingent deferred sales charges uniformly to all shareholders and/or all
transactions belonging to a specified class.
(B) The Distributor may pay to investment dealers and other financial
institutions through whom Shares are sold, such sales commission as the
Distributor may specify from time to time. Payment of any such sales
commissions shall be the sole obligation of the Distributor.
(C) No provision of this Agreement shall be deemed to prohibit any
payments by the Company to the Distributor or by the Company or the Distributor
to investment dealers, financial institutions and 401(k) plan service providers
where such payments are made under a distribution plan adopted by the Company
pursuant to Rule 12b-1 under the 1940 Act.
(D) The Company shall redeem the Shares from shareholders in
accordance with the terms set forth from time to time in the current prospectus
and statement of additional information of each Portfolio. The price to be
paid to a shareholder to redeem the Shares shall be equal to the net asset
value of the Shares being redeemed ("gross redemption proceeds"), less any
applicable contingent deferred sales charge, calculated pursuant to the then
applicable schedule of contingent deferred sales charges ("net redemption
proceeds"). The Distributor shall be entitled to receive the amount of the
contingent deferred sales charge that has been subtracted from gross redemption
proceeds (the "CDSC"), provided that the Shares being redeemed were (i) issued
by a Portfolio during the term of this Agreement and any predecessor Agreement
between the Company and the Distributor or (ii) issued by a Portfolio during or
after the term of this Agreement or any predecessor Agreement between the
Company and the Distributor in one or a series of free exchanges of Shares for
Class B shares of another
2
<PAGE> 3
portfolio, which can be traced to Shares or Class B shares of another portfolio
initially issued by a Portfolio or such other portfolio during the term of this
Agreement, any predecessor Agreement or any other distribution agreement with
the Distributor with respect to such other portfolio (the "Distributor's Earned
CDSC"). The Company shall pay or cause the Company's transfer agent to pay the
Distributor's Earned CDSC to the Distributor on the date net redemption
proceeds are payable to the redeeming shareholder.
(E) The Distributor shall maintain adequate books and records to
identify Shares (i) issued by a Portfolio during the term of this Agreement and
any predecessor Agreement between the Company and the Distributor or (ii)
issued by a Portfolio during or after the term of this Agreement or any
predecessor Agreement between the Company and the Distributor in one or a
series of free exchanges of Shares for Class B shares of another portfolio,
which can be traced to Shares or Class B shares of another portfolio initially
issued by a Portfolio or such other portfolio during the term of this
Agreement, any predecessor Agreement or any other distribution agreement with
the Distributor with respect to such other portfolio and shall calculate the
Distributor's Earned CDSC, if any, with respect to such Shares, upon their
redemption. The Company shall be entitled to rely on Distributor's books,
records and calculations with respect to Distributor's Earned CDSC.
FIFTH: The Distributor shall act as an agent of the Company in
connection with the sale and redemption of Shares. Except with respect to such
sales and redemptions, the Distributor shall act as principal in all matters
relating to the promotion of the sale of Shares and shall enter into all of its
own engagements, agreements and contracts as principal on its own account. The
Distributor shall enter into agreements with investment dealers and financial
institutions selected by the Distributor, authorizing such investment dealers
and financial institutions to offer and sell the Shares to the public upon the
terms and conditions set forth therein, which shall not be inconsistent with
the provisions of this Agreement. Each agreement shall provide that the
investment dealer or financial institution shall act as a principal, and not as
an agent, of the Company.
SIXTH: The Shares shall bear:
(A) the expenses of qualification of Shares for sale in connection
with such public offerings in such states as shall be selected by the
Distributor, and of continuing the qualification therein until the Distributor
notifies the Company that it does not wish such qualification continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH:
(A) The Distributor shall bear the expenses of printing from the
final proof and distributing the prospectuses and statements of additional
information for the Shares (including supplements thereto) relating to public
offerings made by the Company pursuant to such prospectuses (which shall not
include those prospectuses and statements of additional information, and
supplements thereto, to be distributed to existing shareholders of the Shares),
and any other promotional or sales literature used by the Distributor or
furnished by the Distributor to dealers in connection with such public
offerings, and expenses of advertising in connection with such public
offerings.
(B) Subject to the limitations, if any, of applicable law including
the NASD Conduct Rules (formerly, the NASD Rules of Fair Practice) regarding
asset-based sales charges, the Company shall pay to the Distributor as a
reimbursement for all or a portion of such expenses, or as reasonable
compensation for distribution of the Shares, an asset-based sales charge in an
amount equal to 0.75% per annum of the average daily net asset value of the
Shares of each Portfolio from time to
3
<PAGE> 4
time (the "Distributor's 12b-1 Share"), such sales charge to be payable
pursuant to the distribution plan adopted pursuant to Rule 12b-1 under the 1940
Act (the "Plan"). The Distributor's 12b-1 Share shall be a percentage, which
shall be recomputed periodically (but not less than monthly) in accordance with
Exhibit A to this Agreement. The Distributor's 12b-1 Share shall accrue daily
and be paid to the Distributor as soon as practicable after the end of each
calendar month within which it accrues but in any event within 10 business days
after the end of each such calendar month (unless the Distributor shall specify
a later date in written instructions to the Company) provided, however, that
any notices and calculation required by Section EIGHTH: (B) and (C) have been
received by the Company.
(C) The Distributor shall maintain adequate books and records to
permit calculations periodically (but not less than monthly) of, and shall
calculate on a monthly basis, the Distributor's 12b-1 Share to be paid to the
Distributor. The Company shall be entitled to rely on Distributor's books,
records and calculations relating to Distributor's 12b-1 Share.
EIGHTH:
(A) The Distributor may, from time to time, assign, transfer or pledge
("Transfer") to one or more designees (each an "Assignee"), its rights to all
or a designated portion of (i) the Distributor's 12b-1 Share (but not the
Distributor's duties and obligations pursuant hereto or pursuant to the Plan),
and (ii) the Distributor's Earned CDSC, free and clear of any offsets or claims
the Company may have against the Distributor. Each such Assignee's ownership
interest in a Transfer of a designated portion of a Distributor's 12b-1 Share
and a Distributor's Earned CDSC is hereinafter referred to as an "Assignee's
12b-1 Portion" and an "Assignee's CDSC Portion," respectively. A Transfer
pursuant to this Section EIGHTH: (A) shall not reduce or extinguish any claim
of the Company against the Distributor.
(B) The Distributor shall promptly notify the Company in writing of
each Transfer pursuant to Section EIGHTH: (A) by providing the Company with the
name and address of each such Assignee.
(C) The Distributor may direct the Company to pay directly to an
Assignee such Assignee's 12b-1 Portion and Assignee's CDSC Portion. In such
event, Distributor shall provide the Company with a monthly calculation of (i)
the Distributor's Earned CDSC and Distributor's 12b-1 Share and (ii) each
Assignee's 12b-1 Portion and Assignee's CDSC Portion, if any, for such month
(the "Monthly Calculation"). The Monthly Calculation shall be provided to the
Company by the Distributor promptly after the close of each month or such other
time as agreed to by the Company and the Distributor which allows timely
payment of the Distributor's 12b-1 Share and Distributor's Earned CDSC and/or
the Assignee's 12b-1 Portion and Assignee's CDSC Portion. The Company shall
not be liable for any interest on such payments occasioned by delayed delivery
of the Monthly Calculation by the Distributor. In such event following receipt
from the Distributor of (i) notice of Transfer referred to in Section EIGHTH:
(B) and (ii) each Monthly Calculation, the Company shall make all payments
directly to the Assignee or Assignees in accordance with the information
provided in such notice and Monthly Calculation, on the same terms and
conditions as if such payments were to be paid directly to the Distributor.
The Company shall be entitled to rely on Distributor's notices, and Monthly
Calculations in respect of amounts to be paid pursuant to this Section
EIGHTH: (B).
(D) Alternatively, in connection with a Transfer the Distributor may
direct the Company to pay all of such Distributor's 12b-1 Share and
Distributor's Earned CDSC from time to time to a depository or collection agent
designated by any Assignee, which depository or collection agent may be
delegated the duty of dividing such Distributor's 12b-1 Share and Distributor's
Earned CDSC
4
<PAGE> 5
between the Assignee's 12b-1 Portion and Assignee's CDSC Portion and the
balance of the Distributor's 12b-1 Share (such balance, when distributed to the
Distributor by the depository or collection agent, the "Distributor's 12b-1
Portion") and of the Distributor's Earned CDSC (such balance, when distributed
to the Distributor by the depository or collection agent, the "Distributor's
Earned CDSC Portion"), in which case only the Distributor's 12b-1 Portion and
Distributor's Earned CDSC Portion may be subject to offsets or claims the
Company may have against the Distributor.
(E) The Company shall not amend the Plan to reduce the amount payable
to the Distributor or any Assignee under Section SEVENTH: (B) hereof with
respect to the Shares for any Shares which have been issued prior to the date
of such amendment.
NINTH: The Distributor will accept orders for the purchase of Shares
only to the extent of purchase orders actually received and not in excess of
such orders, and it will not avail itself of any opportunity of making a profit
by expediting or withholding orders.
TENTH:
(A) Pursuant to the Plan and this Agreement, the Distributor shall
enter into Shareholder Service Agreements with investment dealers, financial
institutions and certain 401(K) plan service providers (collectively "Service
Providers") selected by the Distributor for the provision of certain continuing
personal services to customers of such Service Providers who have purchased
Shares. Such agreements shall authorize Service Providers to provide
continuing personal shareholder services to their customers upon the terms and
conditions set forth therein, which shall not be inconsistent with the
provisions of this Agreement. Each Shareholder Service Agreement shall provide
that the Service Provider shall act as principal, and not as an agent of the
Company.
(B) Shareholder Service Agreements may provide that the Service
Providers may receive a service fee in the amount of .25% of the average daily
net assets of the Shares held by customers of such Service Providers provided
that such Service Providers furnish continuing personal shareholder services to
their customers in respect of such Shares. The continuing personal services to
be rendered by Service Providers under the Shareholder Service Agreements may
include, but shall not be limited to, some or all of the following:
distributing sales literature; answering routine customer inquiries concerning
the Company; assisting customers in changing dividend elections, options,
account designations and addresses, and in enrolling in any of several special
investment plans offered in connection with the purchase of Shares; assisting
in the establishment and maintenance of or establishing and maintaining
customer accounts and records and the processing of purchase and redemption
transactions; performing subaccounting; investing dividends and any capital
gains distributions automatically in the Company's shares; providing periodic
statements showing a customer's account balance and the integration of such
statements with those of other transactions and balances in the customer's
account serviced by the Service Provider; forwarding applicable prospectus,
proxy statements, reports and notices to customers who hold Shares and
providing such other information and services as the Company or the customers
may reasonably request.
(C) The Distributor may advance service fees payable to Service
Providers pursuant to the Plan or any other distribution plan adopted by the
Company with respect to Shares of one or more of the Portfolios pursuant to
Rule 12b-1 under the 1940 Act; and thereafter the Distributor may be reimbursed
for such advances through retention of service fee payments during the period
for which the service fees were advanced.
5
<PAGE> 6
ELEVENTH: The Company and the Distributor shall each comply with all
applicable provisions of the 1940 Act, the Securities Act of 1933, as amended,
and of all other federal and state laws, rules and regulations governing the
issuance and sale of the Shares.
TWELFTH:
(A) In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Distributor, the Company shall indemnify the Distributor against any and
all claims, demands, liabilities and expenses which the Distributor may incur
under the Securities Act of 1933, or common law or otherwise, arising out of or
based upon any alleged untrue statement of a material fact contained in any
registration statement or prospectus of the Shares, or any omission to state a
material fact therein, the omission of which makes any statement contained
therein misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Company in
connection therewith by or on behalf of the Distributor. The Distributor shall
indemnify the Company and the Shares against any and all claims, demands,
liabilities and expenses which the Company or the Shares may incur arising out
of or based upon (i) any act or deed of the Distributor or its sales
representatives which has not been authorized by the Company in its prospectus
or in this Agreement and (ii) the Company's reliance on the Distributor's
books, records, calculations and notices in Sections FOURTH: (E), SEVENTH: (C),
EIGHTH: (B), EIGHTH: (C) and EIGHTH: (D).
(B) The Distributor shall indemnify the Company and the Shares
against any and all claims, demands, liabilities and expenses which the Company
or the Shares may incur under the Securities Act of 1933, as amended, or common
law or otherwise, arising out of or based upon any alleged untrue statement of
a material fact contained in any registration statement or prospectus of the
Shares, or any omission to state a material fact therein if such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Company in connection therewith by or on behalf of the
Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the transfer agent(s) of the
Shares, or for any failure of any such transfer agent to perform its duties.
THIRTEENTH: Nothing herein contained shall require the Company to take
any action contrary to any provision of its Articles of Incorporation or to any
applicable statute or regulation.
FOURTEENTH: This Agreement shall become effective with respect to the
Shares of each Portfolio upon its approval by the Board of Directors of the
Company and by vote of a majority of the Company's directors who are not
interested parties to this Agreement or "interested persons" (as defined in
Section 2(a)(19) of the 1940 Act) of any party to this Agreement cast in person
at a meeting called for such purpose, shall continue in force and effect until
February 28, 1999, and from year to year thereafter, provided, that such
continuance is specifically approved with respect to the Shares of each
Portfolio at least annually (a)(i) by the Board of Directors of the Company or
(ii) by the vote of a majority of the outstanding Shares of such class of such
Portfolio, and (b) by vote of a majority of the Company's directors who are not
parties to this Agreement or "interested persons" (as defined in Section
2(a)(19) of the 1940 Act) of any party to this Agreement cast in person at a
meeting called for such purpose.
6
<PAGE> 7
FIFTEENTH:
(A) This Agreement may be terminated with respect to the Shares of
any Portfolio, at any time, without the payment of any penalty, by vote of the
Board of Directors of the Company or by vote of a majority of the outstanding
Shares of such Portfolio, or by the Distributor, on sixty (60) days' written
notice to the other party; and
(B) This Agreement shall also automatically terminate in the event of
its assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act; provided, that, subject to the provisions of the
following sentence, if this Agreement is terminated for any reason, the
obligations of the Company and the Distributor pursuant to Sections FOURTH:
(D), FOURTH: (E), SEVENTH: (B), SEVENTH: (C), EIGHTH: (A) through (E) and
TWELFTH: (A) of this Agreement will continue and survive any such termination.
Notwithstanding the foregoing, upon Complete Termination of the Plan (as such
term is defined in Section 8 of the Plan in effect at the date of this
Agreement), the obligations of the Company pursuant to the terms of Sections
SEVENTH: (B), EIGHTH: (A), EIGHTH: (C), EIGHTH: (D) and EIGHTH: (E) (with
respect to payments of Distributor's 12b-1 Share and Assignee's 12b-1 Portion)
of this Agreement shall terminate. A termination of the Plan with respect to
any or all Shares of any or all Portfolios shall not affect the obligations of
the Company pursuant to Sections FOURTH: (D), EIGHTH: (A), EIGHTH: (C), EIGHTH:
(D) and EIGHTH: (E) (with respect to payments of Distributor's Earned CDSC or
Assignee's CDSC Portion) hereof or of the obligations of the Distributor
pursuant to Section FOURTH: (E) or EIGHTH: (B) hereof.
(C) The Transfer of the Distributor's rights to Distributor's 12b-1
Share or Distributor's Earned CDSC shall not cause a termination of this
Agreement or be deemed to be an assignment for purposes of Section FIFTEENTH:
(B) above.
SIXTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, the addresses of both the Company and the
Distributor shall be 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
AIM TAX-EXEMPT FUNDS, INC.
By:
------------------------
Name: Robert H. Graham
Title: President
Attest:
- -----------------------------
Name:
Title:
A I M DISTRIBUTORS, INC.
By:
------------------------
Name: Michael J. Cemo
Title: President
Attest:
- -----------------------------
Name:
Title:
8
<PAGE> 9
SCHEDULE A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM TAX-EXEMPT FUNDS, INC.
CLASS B SHARES
- --------------
AIM High Income Municipal Fund
9
<PAGE> 10
EXHIBIT A
The Distributor's 12b-1 Share in respect of each Portfolio shall
be 100 percent until such time as the Distributor shall cease to serve as
exclusive distributor of the Shares of such Portfolio and thereafter shall be a
percentage, recomputed first on the date of any termination of the
Distributor's services as exclusive distributor of Shares of any Portfolio and
thereafter periodically (but not less than monthly), representing the
percentage of Shares of such Portfolio outstanding on each such computation
date allocated to the Distributor in accordance with the following rules:
1. DEFINITIONS. For purposes of this Exhibit A defined terms
used herein shall have the meaning assigned to such terms in the Distribution
Agreement and the following terms shall have the following meanings:
"Commission Shares" shall mean shares of the Portfolio or
another portfolio the redemption of which would, in the absence of the
application of some standard waiver provision, give rise to the payment of a
CDSC and shall include Commission Shares which due to the expiration of the
CDSC period no longer bear a CDSC.
"Distributor" shall mean the Distributor.
"Other Distributor" shall mean each person appointed as
the exclusive distributor for the Shares of the Portfolio after the Distributor
ceases to serve in that capacity.
2. ALLOCATION RULES. In determining the Distributor's 12b-1
Share in respect of a particular Portfolio:
(a) There shall be allocated to the Distributor and
each Other Distributor all Commission Shares of such Portfolio which were sold
while such Distributor or such Other Distributor, as the case may be, was the
exclusive distributor for the Shares of the Portfolio, determined in accordance
with the transfer records maintained for such Portfolio.
(b) Reinvested Shares: On the date that any Shares are
issued by a Portfolio as a result of the reinvestment of dividends or other
distributions, whether ordinary income, capital gains or exempt-interest
dividend or distributions ("Reinvested Shares"), Reinvested Shares shall be
allocated to the Distributor and each Other Distributor in a number obtained by
multiplying the total number of Reinvested Shares issued on such date by a
fraction, the numerator of which is the total number of all Shares outstanding
in such Fund as of the opening of business on such date and allocated to the
Distributor or Other Distributor as of such date of determination pursuant to
these allocation procedures and the denominator is the total number of Shares
outstanding as of the opening of business on such date.
A-1
<PAGE> 11
(c) Exchange Shares: There shall be allocated to the
Distributor and each Other Distributor, as the case may be, all Commission
Shares of such Portfolio which were issued during or after the period referred
to in (a) as a consequence of one or more free exchanges of Commission Shares
of the Portfolio or of another portfolio (other than Free Appreciation Shares)
(the "Exchange Shares"), which in accordance with the transfer records
maintained for such Portfolio can be traced to Commission Shares of the
Portfolio or another portfolio initially issued by the Company or such other
portfolio during the time the Distributor or such Other Distributor, as the
case may be, was the exclusive distributor for the Shares of the Portfolio or
such other portfolio.
(d) Free Appreciation Shares: Shares (other than
Exchange Shares) that were acquired by the holders of such Shares in a free
exchange of Shares of any other Portfolio, which represent the appreciated
value of the Shares of the exiting portfolio over the initial purchase price
paid for the Shares being redeemed and exchanged and for which the original
purchase date and the original purchase price are not identified on an on-going
basis, shall be allocated to the Distributor and each Other Distributor ("Free
Appreciation Shares") daily in a number obtained by multiplying the total
number of Free Appreciation Shares issued by the exiting portfolio on such date
by a fraction, the numerator of which is the total number of all Shares
outstanding as of the opening of business on such date allocated to the
Distributor or such Other Distributor as of such date of determination pursuant
to these allocation procedures and the denominator is the total number of
Shares outstanding as of the opening of business on such date.
(e) Redeemed Shares: Shares (other than Reinvested
Shares and Free Appreciation Shares) that are redeemed will be allocated to the
Distributor and each Other Distributor to the extent such Share was previously
allocated to the Distributor or such Other Distributor in accordance with the
rules set forth in 2(a) or (c) above. Reinvested Shares and Free Appreciation
Shares that are redeemed will be allocated to the Distributor and each Other
Distributor daily in an amount equal to the number of Free Appreciation Shares
and Reinvested Shares of such Portfolio being redeemed on such date, which
amount is obtained by multiplying the total number of Free Appreciation Shares
and Reinvested Shares being redeemed by such Portfolio on such date by a
fraction, the numerator of which is the total number of all Free Appreciation
Shares and Reinvested Shares of such Portfolio outstanding as of the opening of
business on such date and the denominator is the total number of Free
Appreciation Shares and Reinvested Shares of such Portfolio outstanding as of
the opening of business on such date.
The Fund shall use its best efforts to assure that the transfer agents
and sub-transfer agents for each Portfolio maintain the data necessary to
implement the foregoing rules. If, notwithstanding the foregoing, the transfer
agents or sub-transfer agents for such Portfolio are unable to maintain the
data necessary to implement the foregoing rules as written, and if the
Distributor shall cease to serve as exclusive distributor of the Shares of the
Portfolio, the Distributor and the Portfolio agree to negotiate in good faith
with each other, with the transfer agents and sub-transfer agents for such
Portfolio and with any third party that has obtained an interest in the
Distributor's 12b-1 Share in
A-2
<PAGE> 12
respect of such Portfolio with a view to arriving at mutually satisfactory
modifications to the foregoing rules designed to accomplish substantially
identical results on the basis of data which can be made available.
A-3
<PAGE> 1
EXHIBIT 6(b)
[AIM LOGO APPEARS HERE]
A I M DISTRIBUTORS, INC.
SELECTED DEALER AGREEMENT
FOR INVESTMENT COMPANIES MANAGED
BY A I M ADVISORS, INC.
TO THE UNDERSIGNED SELECTED DEALER:
Gentlemen:
A I M Distributors, Inc., as the exclusive national distributor of shares of
the common stock (the "Shares") of the registered investment companies listed
on Schedule A attached hereto which may be amended from time to time by us (the
"Funds"), understands that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"), or, if a foreign dealer, that
you agree to abide by all of the rules and regulations of the NASD for purposes
of this Agreement (which you confirm by your signature below). In consideration
of the mutual covenants stated below, you and we hereby agree as follows:
1 Sales of Shares through you will be at the public offering price of such
Shares (the net asset value of the Shares plus any sales charge applicable
to such Shares), as determined in accordance with the then effective
prospectus used in connection with the offer and sale of Shares
(the "Prospectus"), which public offering price may reflect scheduled
variations in, or the elimination of, the Sales Charge on sales of the
Funds' Shares either generally to the public or in connection with special
purchase plans, as described in the Prospectus. You agree that you will
apply any scheduled variation in, or elimination of, the Sales Charge
uniformly to all offerees in the class specified in the Prospectus.
2 You agree to purchase Shares solely through us and only for the purpose of
covering purchase orders already received from customers or for your own
bona fide investment. You agree not to purchase for any other securities
dealer unless you have an agreement with such other dealer or broker to
handle clearing arrangements and then only in the ordinary course of
business for such purpose and only if such other dealer has executed a
Selected Dealer Agreement with us. You also agree not to withhold any
customer order so as to profit therefrom.
3 The procedures relating to the handling of orders shall be subject to
instructions which we will forward from time to time to all selected
dealers with whom we have entered into a Selected Dealer Agreement. The
minimum initial order shall be specified in the Funds' then current
prospectuses. All purchase orders are subject to receipt of Shares by us
from the Funds concerned and to acceptance of such orders by us. We reserve
the right in our sole discretion to reject any order.
4 With respect to the Funds the Shares of which are indicated on the attached
Schedule as being sold with a Sales Charge (the "Load Funds"), you will be
allowed the concessions from the public offering price provided in the
Load Funds' prospectus. With respect to the Funds, the Shares of which are
indicated on the attached Schedule A as being sold with a contingent
deferred sales charge (the "CDSC Funds"), you will be paid a commission or
consession as disclosed in the CDSC Fund's then current prospectus. With
respect to the Funds whose Shares are indicated on the attached Schedule as
being sold without a Sales Charge or a contingent deferred sales charge
(the "No-Load Funds"), you may charge a reasonable administrative fee. For
the purpose of this Agreement the terms "Sales Charge" and "Dealer
Commission" apply only to the Load Funds and the CDSC Funds. All commissions
and concessions are subject to change without notice by us and will comply
with any changes in regulatory requirements. You agree that you will not
combine customer orders to reach breakpoints in commissions for any purpose
whatsoever unless authorized by the Prospectus or by us in writing.
5 You agree that your transactions in shares of the Funds will be limited to
(a) the purchase of Shares from us for resale to your customers at the
public offering price then in effect or for your own bona fide investment,
(b) exchanges of Shares between Funds, as permitted by the Funds' then
current registration statement (which includes the Prospectus) and in
accordance with procedures as they may be modified by us from time to time,
and (c) transactions involving the redemption of Shares by a Fund or the
repurchase of Shares by us as an accommodation to shareholders. Redemptions
by a Fund and repurchases by us will be effected in the manner and upon the
terms described in the Prospectus. We will, upon your request, assist you
in processing such orders for redemptions or repurchases. To facilitate
prompt payment following a redemption or repurchase of Shares, the owner's
signature shall appear as registered on the Funds' records and, as
described in the Prospectus, it may be required to be guaranteed by a
commercial bank, trust company or a member of a national securities
exchange.
7/97
<PAGE> 2
6 Sales and exchanges of Shares may only be made in those states and
jurisdictions where the Shares are registered or qualified for sale to the
public. We agree to advise you currently of the identity of those states
and jurisdictions in which the Shares are registered or qualified for sale,
and you agree to indemnify us and/or the Funds for any claim, liability,
expense or loss in any way arising out of a sale of Shares in any state or
jurisdiction in which such Shares are not so registered or qualified.
7 We shall accept orders only on the basis of the then current offering
price. You agree to place orders in respect of Shares immediately upon the
receipt of orders from your customers for the same number of shares. Orders
which you receive from your customers shall be deemed to be placed with us
when received by us. Orders which you receive prior to the close of
business, as defined in the Prospectus, and placed with us within the time
frame set forth in the Prospectus shall be priced at the offering price
next computed after they are received by you. We will not accept from you
a conditional order on any basis. All orders shall be subject to
confirmation by us.
8 Your customer will be entitled to a reduction in the Sales Charge on
purchases made under a Letter of Intent or Right of Accumulation described
in the Prospectus. In such case, your Dealer's Concession will be based
upon such reduced Sales Charge; however, in the case of a Letter of Intent
signed by your customer, an adjustment to a higher Dealer's Concesssion
will thereafter be made to reflect actual purchases by your customer if he
should fail to fulfil his Letter of Intent. When placing wire trades, you
agree to advise us of any Letter of Intent signed by your customer or of
any Right of Accumulation available to him of which he has made you aware.
If you fail to so advise us, you will be liable to us for the return of
any commissions plus interest thereon.
9 You and we agree to abide by the Rules of Fair Practice of the NASD and all
other federal and state rules and regulations that are now or may become
applicable to transactions hereunder. Your expulsion from the NASD will
automatically terminate this Agreement without notice. Your suspension from
the NASD or a violation by you of applicable state and federal laws and
rules and regulations of authorized regulatory agencies will terminate this
Agreement effective upon notice received by you from us. You agree that it
is your responsibility to determine the suitability of any Shares as
investments for your customers, and that AIM Distributors has no
responsibility for such determination.
10 With respect to the Load Funds and the CDSC Funds, and unless otherwise
agreed, settlement shall be made at the offices of the Funds' transfer
agent within three (3) business days after our acceptance of the order. With
respect to the No-Load Funds, settlement will be made only upon receipt by
the Fund of payment in the form of federal funds. If payment is not so
received or made within ten (10) business days of our acceptance of the
order, we reserve the right to cancel the sale or, at our option, to sell
the Shares to the Funds at the then prevailing net asset value. In this
event, or in the event that you cancel the trade for any reason, you agree
to be responsible for any loss resulting to the Funds or to us from your
failure to make payments as aforesaid. You shall not be entitled to any
gains generated thereby.
11 If any Shares of any of the Load Funds sold to you under the terms of this
Agreement are redeemed by the Fund or repurchased for the account of the
Funds or are tendered to the Funds for redemption or repurchase within
seven (7) business days after the date of our confirmation to you of your
original purchase order therefore, you agree to pay forthwith to us the
full amount of the concession allowed to you on the original sale and we
agree to pay such amount to the Fund when received by us. We also agree to
pay to the Fund the amount of our share of the Sales Charge on the original
sale of such Shares.
12 Any order placed by you for the repurchase of Shares of a Fund is subject
to the timely receipt by the Fund's transfer agent of all required
documents in good order. If such documents are not received within a
reasonable time after the order is placed, the order is subject to
cancellation, in which case you agree to be responsible for any loss
resulting to the Fund or to us from such cancellation.
13 We reserve the right in our discretion without notice to you to suspend
sales or withdraw any offering of Shares entirely, to change the offering
prices as provided in the Prospectus or, upon notice to you, to amend or
cancel this Agreement. You agree that any order to purchase Shares of the
Funds placed by you after notice of any amendment to this Agreement has
been sent to you shall constitute your agreement to any such amendment.
14 In every transaction, we will act as agent for the Fund and you will act as
principal for your own account. You have no authority whatsoever to act as
our agent or as agent for the Funds, any other Selected Dealer or the
Funds' transfer agent and nothing in this Agreement shall serve to appoint
you as an agent of any of the foregoing in connection with transactions
with your customers or otherwise.
15 No person is authorized to make any representations concerning the Funds or
their Shares except those contained in the Prospectus and any such
information as may be released by us as information supplemental to the
Prospectus. If you should make such unauthorized representation, you agree
to indemnify the Funds and us from and against any and all claims,
liability, expense or loss in any way arising out of or in any way
connected with such representation.
7/97
<PAGE> 3
16 We will supply you with copies of the Prospectuses and Statements of
Additional Information of the Funds (including any amendments thereto) in
reasonable quantities upon request. You will provide all customers with a
Prospectus prior to or at the time such customer purchases Shares. You will
provide any customer who so requests a copy of the Statement of Additional
Information on file with the U.S. Securities and Exchange Commission.
17 You shall be solely responsible for the accuracy, timeliness and
completeness of any orders transmitted by you on behalf of your customers
by wire or telephone for purchases, exchanges or redemptions, and shall
indemnify us against any claims by your customers as a result of your
failure to properly transmit their instructions.
18 No advertising or sales literature, as such terms are defined by the NASD,
of any kind whatsoever will be used by you with respect to the Funds or us
unless first provided to you by us or unless you have obtained our prior
written approval.
19 All expenses incurred in connection with your activities under this
Agreement shall be borne by you.
20 This Agreement shall not be assignable by you. This Agreement shall be
constructed in accordance with the laws of the State of Texas.
21 Any notice to you shall be duly given if mailed or telegraphed to you at
your address as registered from time to time with the NASD.
22 This Agreement constitutes the entire agreement between the undersigned and
supersedes all prior oral or written agreements between the parties hereto.
A I M DISTRIBUTORS, INC.
Date: By: X
------------------ ---------------------------------------
The undersigned accepts your invitation to become a Selected Dealer and agrees
to abide by the foregoing terms and conditions. The undersigned acknowledges
receipt of prospectuses for use in connection with offers and sales of the
Funds.
Date: By: X
------------------ --------------------------------------
Signature
--------------------------------------
Print Name Title
--------------------------------------
Dealer's Name
--------------------------------------
Address
--------------------------------------
City State Zip
Please sign both copies and return one copy of each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
7/97
<PAGE> 4
[AIM LOGO APPEARS HERE]
A I M DISTRIBUTORS, INC.
SCHEDULE "A" TO
SELECTED DEALER AGREEMENT
<TABLE>
<CAPTION>
Shares Sold Shares Sold
Fund With Sales Charges* With CDSC**
- --------------------------------------------------------------------------------
<S> <C> <C>
AIM Advisor Cash Management Fund No No
AIM Advisor Flex Fund Yes Yes
AIM Advisor Income Fund Yes Yes
AIM Advisor International Value Fund Yes Yes
AIM Advisor Large Cap Value Fund Yes Yes
AIM Advisor MultiFlex Fund Yes Yes
AIM Advisor Real Estate Fund Yes Yes
AIM Aggressive Growth Fund Yes No
AIM Balanced Fund Yes Yes
AIM Blue Chip Fund Yes Yes
AIM Capital Development Fund Yes Yes
AIM Charter Fund Yes Yes
AIM Constellation Fund Yes Yes
AIM Global Aggressive Growth Fund Yes Yes
AIM Global Growth Fund Yes Yes
AIM Global Income Fund Yes Yes
AIM Global Utilities Fund Yes Yes
AIM Growth Fund Yes Yes
AIM High Income Municipal Fund Yes Yes
AIM High Yield Fund Yes Yes
AIM Income Fund Yes Yes
AIM Intermediate Government Fund Yes Yes
AIM International Equity Fund Yes Yes
AIM Limited Maturity Treasury Shares Yes No
AIM Money Market Fund Yes Yes
AIM Cash Reserve Shares No No
AIM Municipal Bond Fund Yes Yes
AIM Tax-Exempt Bond Fund of Connecticut Yes No
AIM Tax-Exempt Cash Fund No No
AIM Tax-Free Intermediate Shares Yes No
</TABLE>
7/97
<PAGE> 5
<TABLE>
Shares Sold Shares Sold
Fund With Sales Charges* With CDSC**
- --------------------------------------------------------------------------------
<S> <C> <C>
AIM Value Fund Yes Yes
AIM Weingarten Fund Yes Yes
</TABLE>
A I M Distributors may from time to time make payments of finders fees
or sponsor other incentive programs as described in the applicable fund
prospectus and statement of additional information, which are incorporated
herein by reference as they may be amended from time to time.
*Trades at $1 million and over breakpoint automatically subject to CDSC with
exception of AIM Advisor Cash Fund, AIM Cash Reserve Shares, AIM Limited
Maturity Treasury Shares, AIM Tax-Exempt Cash Fund and AIM Tax-Free
Intermediate Shares.
**For all Funds sold with CDSC (includes Class B and Class C shares) except for
AIM Constellation Fund, which offers only Class C shares.
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
7/97
<PAGE> 1
EXHIBIT 6(c)
[AIM LOGO APPEARS HERE]
A I M DISTRIBUTORS, INC.
BANK ACTING AS AGENT
FOR ITS CUSTOMERS
Agreement Relating to Shares
of AIM Family of Mutual Funds
(Confirmation and Prospectus to be sent by A I M Distributors,
Inc. to Customer)
A I M Distributors, Inc. is the exclusive national distributor of the shares of
the registered investment companies listed on Schedule A hereto which may be
amended from time to time by us (the "Funds"). As exclusive agent for the
Funds, we are offering to make available shares of common stock or of
beneficial interest, as the case may be, of the Funds (the "Shares") for
purchase by your customers on the following terms:
1 In all sales of Shares you shall act as agent for your customers, and in no
transaction shall you have any authority to act as agent for any Fund or
for us.
2 The customers in question are, for all purposes, your customers and not
customers of A I M Distributors, Inc. In receiving orders from your
customers who purchase Shares, A I M Distributors, Inc. is not soliciting
such customers and, therefore, has no responsibility for determining
whether Shares are suitable investments for such customers.
3 It is hereby understood that in all cases in which you place orders with us
for the purchase of Shares (a) you are acting as agent for the customer;
(b) the transactions are without recourse against you by the customer; (c)
as between you and the customer, the customer will have full beneficial
ownership of the securities; (d) each such transaction is initiated solely
upon the order of the customer; and (e) each such transaction is for the
account of the customer and not for your account.
4 Orders received from you will be accepted by us only at the public offering
price applicable to each order, as established by the then current
Prospectus of the appropriate Fund, subject to the discounts (defined
below) provided in such Prospectus. Following receipt from you of any order
to purchase Shares for the account of a customer, we shall confirm such
order to you in writing. We shall be responsible for sending your customer
a written confirmation of the order with a copy of the appropriate Fund's
current Prospectus. We shall send you a copy of such confirmation.
Additional instructions may be forwarded to you from time to time. All
orders are subject to acceptance or rejection by us in our sole discretion.
5 Members of the general public, including your customers, may purchase
Shares only at the public offering price determined in the manner described
in the current Prospectus of the appropriate Fund. With respect to the
Funds, the Shares of which are indicated on the attached Schedule A as
being sold with a sales charge (i.e. the "Load Funds"), you will be allowed
to retain a commission or concession from the public offering price
provided in such Load Funds' current Prospectus. With respect to the Funds,
the Shares of which are indicated on the attached Schedule A as being sold
with a contingent deferred sales charge (the "CDSC Funds"), you will be
paid a commission or concession as disclosed in the CDSC Fund's then
current prospectus. With respect to the Funds whose Shares are indicated on
the attached Schedule as being sold without a sales charge or a contingent
deferred sales charge, (i.e. the "No-Load Funds"), you will not be allowed
to retain any commission or concession. All commissions or concessions set
forth in any of the Load Funds' or CDSC Funds' Prospectus are subject to
change without notice by us and will comply with any changes in regulatory
requirements.
6 The tables of sales charges and discounts set forth in the current
Prospectus of each Fund are applicable to all purchases made at any one
time by any "purchaser", as defined in the current Prospectus. For this
purpose, a purchaser may aggregate concurrent purchases of securities of
any of the Funds.
7 Reduced sales charges may also be available as a result of quantity
discounts, rights of accumulation or letters of intent. Further information
as to such reduced sales charges, if any, is set forth in the appropriate
Fund Prospectus. In such case, your discount will be based upon such
reduced sales charge; however, in the case of a letter of intent signed by
your customer, an adjustment to a higher discount will thereafter be made
to reflect actual purchases by your customer if he should fail to fulfill
his letter of intent. You agree to advise us promptly as to the amounts of
any sales made by you to your customers qualifying for reduced sales
charges. If you fail to so advise us of any letter of intent signed by your
customer or of any right of accumulation available to him of which he has
made you aware, you will be liable to us for the return of any discount
plus interest thereon.
8 By accepting this Agreement you agree:
a. that you will purchase Shares only from us;
b. that you will purchase Shares from us only to cover purchase orders
already received from your customers; and
c. that you will not withhold placing with us orders received from your
customers so as to profit yourself as a result of such withholdings.
9 We will not accept from you a conditional order for Shares on any basis.
10 Payment for Shares ordered from us shall be in the form of a wire transfer
or a cashiers check mailed to us. Payment shall be made within three (3)
business days after our acceptance of the order placed on behalf of your
customer. Payment shall be equal to the public offering price less the
discount retained by you hereunder.
7/97
<PAGE> 2
11 If payment is not received within ten (10) business days of our acceptance
of the order, we reserve the right to cancel the sale or, at our option, to
sell Shares to the Fund at the then prevailing net asset value. In this
event you agree to be responsible for any loss resulting to the Fund from
the failure to make payment as aforesaid.
12 Shares sold hereunder shall be available in book-entry form on the books of
the Funds' Transfer Agent unless other instructions have been given.
13 No person is authorized to make any representations concerning Shares of
any Fund except those contained in the applicable current Prospectus and
printed information subsequently issued by the appropriate Fund or by us as
information supplemental to such Prospectus. You agree that you will not
make Shares available to your customers except under circumstances that
will result in compliance with the applicable Federal and State Securities
and Banking Laws and that you will not furnish to any person any
information contained in the then current Prospectus or cause any
advertisement to be published in any newspaper or posted in any public
place without our consent and the consent of the appropriate Fund.
14 Sales and exchanges of Shares may only be made in those states and
jurisdictions where Shares are registered or qualified for sale to the
public. We agree to advise you currently of the identity of those states
and jurisdictions in which the Shares are registered or qualified for
sales, and you agree to indemnify us and/or the Funds for any claim,
liability, expense or loss in any way arising out of a sale of Shares in
any state or jurisdiction not identified by us as a state or jurisdiction
in which such Shares are so registered or qualified. We agree to indemnify
you for any claim, liability, expense or loss in any way arising out of a
sale of shares in any state or jurisdiction identified by us as a state or
jurisdiction in which shares are so registered or qualified.
15 You shall be solely responsible for the accuracy, timeliness and
completeness of any orders transmitted by you on behalf of your customers
by wire or telephone for purchases, exchanges or redemptions, and shall
indemnify us against any claims by your customers as a result of your
failure to properly transmit their instructions.
16 All sales will be made subject to our receipt of Shares from the
appropriate Fund. We reserve the right, in our discretion, without notice,
to modify, suspend or withdraw entirely the offering of any Shares and,
upon notice, to change the sales charge or discount or to modify, cancel or
change the terms of this Agreement. You agree that any order to purchase
Shares of the Funds placed by you after any notice of amendment to this
Agreement has been sent to you shall constitute your agreement to any such
agreement.
17 The names of your customers shall remain your sole property and shall not
be used by us for any purpose except for servicing and information mailings
in the normal course of business to Fund Shareholders.
18 Your acceptance of this Agreement constitutes a representation that you are
a "Bank" as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, as amended, and are duly authorized to engage in the transactions to
be performed hereunder.
All communications to us should be sent to A I M Distributors, Inc., Eleven
Greenway Plaza, Suite 1919, Houston, Texas 77046. Any notice to you shall
be duly given if mailed or telegraphed to you at the address specified by
you below or to such other address as you shall have designated in writing
to us. This Agreement shall be construed in accordance with the laws of the
State of Texas.
A I M DISTRIBUTORS, INC.
Date: By: X
------------------ ---------------------------------------
The undersigned agrees to abide by the foregoing terms and conditions.
Date: By: X
------------------ --------------------------------------
Signature
--------------------------------------
Print Name Title
--------------------------------------
Dealer's Name
--------------------------------------
Address
--------------------------------------
City State Zip
Please sign both copies and return one copy of each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
7/97
<PAGE> 3
[AIM LOGO APPEARS HERE]
A I M DISTRIBUTORS, INC.
SCHEDULE "A" TO
BANK SELLING GROUP AGREEMENT
<TABLE>
<CAPTION>
Shares Sold Shares Sold
Fund With Sales Charges* With CDSC**
- --------------------------------------------------------------------------------
<S> <C> <C>
AIM Advisor Cash Management Fund No No
AIM Advisor Flex Fund Yes Yes
AIM Advisor Income Fund Yes Yes
AIM Advisor International Value Fund Yes Yes
AIM Advisor Large Cap Value Fund Yes Yes
AIM Advisor MultiFlex Fund Yes Yes
AIM Advisor Real Estate Fund Yes Yes
AIM Aggressive Growth Fund Yes No
AIM Balanced Fund Yes Yes
AIM Blue Chip Fund Yes Yes
AIM Capital Development Fund Yes Yes
AIM Charter Fund Yes Yes
AIM Constellation Fund Yes Yes
AIM Global Aggressive Growth Fund Yes Yes
AIM Global Growth Fund Yes Yes
AIM Global Income Fund Yes Yes
AIM Global Utilities Fund Yes Yes
AIM Growth Fund Yes Yes
AIM High Income Municipal Fund Yes Yes
AIM High Yield Fund Yes Yes
AIM Income Fund Yes Yes
AIM Intermediate Government Fund Yes Yes
AIM International Equity Fund Yes Yes
AIM Limited Maturity Treasury Shares Yes No
AIM Money Market Fund Yes Yes
AIM Cash Reserve Shares No No
AIM Municipal Bond Fund Yes Yes
AIM Tax-Exempt Bond Fund of Connecticut Yes No
AIM Tax-Exempt Cash Fund No No
AIM Tax-Free Intermediate Shares Yes No
</TABLE>
7/97
<PAGE> 4
<TABLE>
Shares Sold Shares Sold
Fund With Sales Charges* With CDSC**
- --------------------------------------------------------------------------------
<S> <C> <C>
AIM Value Fund Yes Yes
AIM Weingarten Fund Yes Yes
</TABLE>
A I M Distributors may from time to time make payments of finders fees
or sponsor other incentive programs as described in the applicable fund
prospectus and statement of additional information, which are incorporated
herein by reference as they may be amended from time to time.
*Trades at $1 million and over breakpoint automatically subject to CDSC with
exception of AIM Advisor Cash Management Fund, AIM Cash Reserve Shares, AIM
Limited Maturity Treasury Shares, AIM Tax-Exempt Cash Fund and AIM Tax-Free
Intermediate Shares.
**For all Funds sold with CDSC (includes Class B and Class C shares) except for
AIM Constellation Fund, which offers only Class C shares.
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
7/97
<PAGE> 1
EXHIBIT 9(a)(4)
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
AIM TAX-EXEMPT FUNDS, INC.
AND
A I M FUND SERVICES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 5 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 6 COVENANTS OF THE FUND AND THE TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 7 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 8 ADDITIONAL FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 9 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 10 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 11 TEXAS LAW TO APPLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 12 MERGER OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 13 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the ____ day of _______________, 1997, by and
between AIM TAX-EXEMPT FUNDS, INC., a Maryland corporation, having its
principal office and place of business at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046 (the "Fund"), and A I M Fund Services, Inc., a Delaware
corporation having its principal office and place of business at 11 Greenway
Plaza, Suite 100, Houston, Texas 77046 (the "Transfer Agent").
WHEREAS, the Transfer Agent is registered as such with the Securities
and Exchange Commission (the "SEC"); and
WHEREAS, the Fund is authorized to issue shares in separate series and
classes, with each such series representing interests in a separate portfolio
of securities and other assets and each such class having different
distribution arrangements; and
WHEREAS, the Fund on behalf of each class of each of the portfolios
thereof (the "Portfolios") desires to appoint the Transfer Agent as its
transfer agent, and agent in connection with certain other activities, with
respect to the Portfolios, and the Transfer Agent desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE 1
TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints the Transfer Agent to act as,
and the Transfer Agent agrees to act as, its transfer agent for the authorized
and issued shares of common stock of the Fund representing interests in each
class of each of the respective Portfolios ("Shares"), dividend disbursing
agent, and agent in connection with any accumulation or similar plans provided
to shareholders of each of the Portfolios (the "Shareholders"), including
without limitation any periodic investment plan or periodic withdrawal program,
as provided in the currently effective prospectus and statement of additional
information (the "Prospectus") of the Fund on behalf of the Portfolios.
1.02 The Transfer Agent agrees that it will perform the following
services:
(a) The Transfer Agent shall, in accordance with procedures
established from time to time by agreement between the Fund on behalf of each
of the Portfolios, as applicable, and the Transfer Agent:
(i) receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian of the Fund
authorized pursuant to the Charter of the Fund (the
"Custodian");
(ii) pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the
appropriate Shareholder account;
1
<PAGE> 4
(iii) receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
(iv) at the appropriate time as and when it receives
monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over in
the appropriate manner such monies as instructed by
the Fund;
(v) effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
Shares;
(vii) maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(viii) record the issuance of Shares of the Fund and
maintain pursuant to SEC Rule 17Ad-1O(e) a record of
the total number of Shares which are authorized,
based upon data provided to it by the Fund, and
issued and outstanding.
The Transfer Agent shall also provide the Fund on a regular basis with
the total number of Shares which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of Shares, to monitor the
issuance of such Shares or to take cognizance of any laws relating to the issue
or sale of such Shares, which function shall be the sole responsibility of the
Fund.
(b) In addition to the services set forth in the above paragraph
(a), the Transfer Agent shall: (i) perform the customary services of a transfer
agent, including but not limited to: maintaining all Shareholder accounts,
mailing Shareholder reports and prospectuses to current Shareholders, preparing
and mailing confirmation forms and statements of accounts to Shareholders for
all purchases and redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information.
(c) Procedures as to who shall provide certain of these services
in Article 1 may be established from time to time by agreement between the Fund
on behalf of each Portfolio and the Transfer Agent. The Transfer Agent may at
times perform only a portion of these services and the Fund or its agent may
perform these services on the Fund's behalf.
ARTICLE 2
FEES AND EXPENSES
2.01 For performance by the Transfer Agent pursuant to this
Agreement, the Fund agrees on behalf of each of the Portfolios to pay the
Transfer Agent fees as set out in the initial fee schedule attached hereto.
Such fees and out-of-pocket expenses and advances identified under Section 2.02
below may be changed from time to time subject to mutual written agreement
between the Fund and the Transfer Agent.
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse the Transfer Agent for out-of-pocket expenses or advances
incurred by the Transfer Agent for the
2
<PAGE> 5
items set out in the fee schedule attached hereto. In addition, any other
expenses incurred by the Transfer Agent at the request or with the consent of
the Fund, will be reimbursed by the Fund on behalf of the applicable Shares.
2.03 The Fund agrees on behalf of each of the Portfolios to pay all
fees and reimbursable expenses following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to the Transfer Agent by
the Fund at least seven (7) days prior to the mailing date of such materials.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the state of Delaware.
3.02 It is duly qualified to carry on its business in Delaware and
in Texas.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
3.06 It is registered as a Transfer Agent as required by the
federal securities laws.
3.07 This Agreement is a legal, valid and binding obligation to it.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
4.01 It is a business corporation duly organized and existing and
in good standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform this Agreement.
4.04 It is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended.
3
<PAGE> 6
4.05 A registration statement under the Securities Act of 1933, as
amended on behalf of each of the Portfolios is currently effective and will
remain effective, with respect to all Shares of the Fund being offered for
sale.
ARTICLE 5
INDEMNIFICATION
5.01 The Transfer Agent shall not be responsible for, and the Fund
shall on behalf of the applicable Portfolio, indemnify and hold the Transfer
Agent harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) all actions of the Transfer Agent or its agents or
subcontractors required to be taken pursuant to this Agreement, provided that
such actions are taken in good faith and without negligence or willful
misconduct;
(b) the Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder;
(c) the reliance on or use by the Transfer Agent or its agents or
subcontractors of information, records and documents or services which (i) are
received or relied upon by the Transfer Agent or its agents or subcontractors
and/or furnished to it or performed by on behalf of the Fund, and (ii) have
been prepared, maintained and/or performed by the Fund or any other person or
firm on behalf of the Fund; provided such actions are taken in good faith and
without negligence or willful misconduct;
(d) the reliance on, or the carrying out by the Transfer Agent or
its agents or subcontractors of any instructions or requests of the Fund on
behalf of the applicable Portfolio; provided such actions are taken in good
faith and without negligence or willful misconduct; or
(e) the offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
5.02 The Transfer Agent shall indemnify and hold the Fund harmless
from and against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to any action
or failure or omission to act by the Transfer Agent as result of the Transfer
Agent's lack of good faith, negligence or willful misconduct.
5.03 At any time the Transfer Agent may apply to any officer of the
Fund for instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Transfer
Agent under this Agreement, and the Transfer Agent and its agents or
subcontractors shall not be liable to and shall be indemnified by the Fund on
behalf of the applicable Portfolio for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The
Transfer Agent shall be protected and indemnified in acting upon any paper or
document furnished by or on behalf of the Fund, reasonably believed to be
genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided to the Transfer
Agent or its agents or subcontractors by machine readable input, telex, CRT
data entry or other similar means authorized by the Fund, and shall not
4
<PAGE> 7
be held to have notice of any change of authority of any person, until receipt
of written notice thereof from the Fund.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to
the other for any damages resulting from such failure to perform or otherwise
from such causes.
5.05 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for
any consequential damages arising out of any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim. The party
seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent.
ARTICLE 6
COVENANTS OF THE FUND AND THE TRANSFER AGENT
6.01 The Fund shall, upon request, on behalf of each of the
Portfolios promptly furnish to the Transfer Agent the following:
(a) a certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of the Transfer Agent and the execution
and delivery of this Agreement; and
(b) a copy of the Charter and By-Laws of the Fund and all
amendments thereto.
6.02 The Transfer Agent shall keep records relating to the services
to be performed hereunder, in the form and manner as it may deem advisable. To
the extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the Rules thereunder, the Transfer Agent agrees that all such
records prepared or maintained by the Transfer Agent relating to the services
to be performed by the Transfer Agent hereunder are the property of the Fund
and will be preserved, maintained and made available in accordance with such
Section and Rules, and will be surrendered promptly to the Fund on and in
accordance with its request.
6.03 The Transfer Agent and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.04 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund and to secure instructions from an authorized officer of the Fund as to
such inspection. The Transfer Agent reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder records
to such person.
5
<PAGE> 8
ARTICLE 7
TERMINATION OF AGREEMENT
7.01 This Agreement may be terminated by either party upon sixty
(60) days written notice to the other.
7.02 Should the Fund exercise its right to terminate this
Agreement, all out-of-pocket expenses associated with the movement of records
and material will be borne by the Fund on behalf of the applicable Portfolios.
Additionally, the Transfer Agent reserves the right to charge for any other
reasonable expenses associated with such termination and/or a charge equivalent
to the average of three (3) months' fees.
ARTICLE 8
ADDITIONAL FUNDS
8.01 In the event that the Fund establishes one or more series of
Shares in addition to the Portfolios with respect to which it desires to have
the Transfer Agent render services as transfer agent under the terms hereof, it
shall so notify the Transfer Agent in writing, and if the Transfer Agent agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
ARTICLE 9
ASSIGNMENT
9.01 Except as provided in Section 9.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
9.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
9.03 The Transfer Agent may, without further consent on the part of
the Fund, subcontract for the performance hereof with any entity which is duly
registered as a transfer agent pursuant to Section 17A(c)(1) of the Securities
Exchange Act of 1934 as amended ("Section 17A(c)(1)"); provided, however, that
the Transfer Agent shall be as fully responsible to the Fund for the acts and
omissions of any subcontractor as it is for its own acts and omissions.
ARTICLE 10
AMENDMENT
10.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution
of the Board of Directors of the Fund.
ARTICLE 11
TEXAS LAW TO APPLY
11.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Texas.
6
<PAGE> 9
ARTICLE 12
MERGER OF AGREEMENT
12.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
ARTICLE 13
COUNTERPARTS
13.01 This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
AIM TAX-EXEMPT FUNDS, INC.
By:
---------------------------------
President
ATTEST:
- --------------------------------
Assistant Secretary
A I M FUND SERVICES, INC.
By:
---------------------------------
President
ATTEST:
- --------------------------------
Assistant Secretary
7
<PAGE> 10
FEE SCHEDULE
1. For performance by the Transfer Agent pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Transfer Agent an
annualized fee for shareholder accounts that are open during any monthly
period as set forth below, and an annualized fee of $.70 per shareholder
account that is closed during any monthly period. Both fees shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of
1/12 of the annualized fee for all such accounts.
<TABLE>
<CAPTION>
Per Account Fee
Fund Type Annualized
--------- ----------
<S> <C>
Annual/Semi-Annual Dividends $15.15
Quarterly & Monthly Dividend 17.15
Daily Accrual 19.65
</TABLE>
2. The Transfer Agent shall provide the AIM Funds with an annualized credit
to the monthly billings of (a) $1.50 for each open account in excess of
100,000 open AIM Funds Accounts up to and including 125,000 open AIM Funds
Accounts; (b) $1.75 for each open account in excess of 125,000 open AIM
Funds Accounts up to and including 150,000 open AIM Funds Accounts; (c)
$2.00 for each open AIM Funds Account in excess of 150,000 open AIM Funds
Accounts up to and including 200,000 open AIM Funds Accounts; (d) $2.25
for each open AIM Funds Account in excess of 200,000 open AIM Funds
Accounts up to and including 500,000 open AIM Funds Accounts; (e) $2.50
for each open AIM Funds Account in excess of 500,000 open AIM Funds
Accounts up to and including 1,000,000 open AIM Funds Accounts; and (f)
$3.00 for each open AIM Funds Account in excess of 1,000,000 open AIM
Funds Accounts.
3. In addition, beginning on the anniversary date of the execution of the
Remote Services Agreement with The Shareholder Services Group, Inc., and
on each subsequent anniversary date, the per account fees shall each be
increased by a percentage amount equal to the percentage increase in the
then current Consumer Price Index (all urban consumers) or its successor
index, though in no event shall such increase be greater than a 7%
increase over the previous fees.
4. Other Fees
IRA Annual Maintenance Fee $10 per IRA account per year
(paid by investor per tax I.D. number).
Balance Credit The total fees due to the Transfer
Agent from all funds affiliated with
the Fund shall be reduced by an amount
equal to one half of investment income
earned by the Transfer Agent on the
DDA balances of the disbursement
accounts for those funds.
Remote Services Fee $3.60 per open account per year,
payable monthly and $1.80 per closed
account per year, payable monthly.
8
<PAGE> 11
5. OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
- Microfiche/microfilm production & equipment
- Magnetic media tapes and freight
- Printing costs, including, without limitation, certificates,
envelopes, checks, stationery, confirmations and statements
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct
pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment and
any expenses incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Banking charges, including without limitation incoming and
outgoing wire charges @ $8.00 per wire
- Rendering fees as billed
- Federal Reserve charges for check clearance
- Record retention, retrieval and destruction costs, including, but
not limited to exit fees charged by third party record keeping
vendors
- Third party audit reviews
- All client specific Systems enhancements will be at the Funds'
cost.
- Certificate Insurance
- Such other miscellaneous expenses reasonably incurred by the
Transfer Agent in performing its duties and responsibilities
under this Agreement
- Checkwriting fee of $.75 per check redemption.
The Fund agrees that postage and mailing expenses will be paid on the day
of or prior to mailing. In addition, the Fund will promptly reimburse the
Transfer Agent for any other unscheduled expenses incurred by the Transfer
Agent whenever the Fund and the Transfer Agent mutually agree that such
expenses are not otherwise properly borne by the Transfer Agent as part of
its duties and obligations under the Agreement.
9
<PAGE> 1
EXHIBIT 9(b)(5)
AMENDMENT NO. 1
TO
MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated
February 28, 1997, by and between A I M Advisors, Inc., a Delaware corporation,
and AIM Tax-Exempt Funds, Inc., a Maryland corporation, is hereby amended as
follows:
Appendix A to the Agreement is hereby deleted in its entirety and
replaced with the following:
"AIM TAX-EXEMPT FUNDS, INC.
APPENDIX A TO MASTER ADMINISTRATIVE SERVICES AGREEMENT
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Fund
AIM High Income Municipal Fund"
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: , 1997
--------------------------------
A I M ADVISORS, INC.
Attest: By:
------------------------------- -------------------------------
Assistant Secretary President
(SEAL)
AIM TAX-EXEMPT FUNDS, INC.
Attest: By:
------------------------------- -------------------------------
Assistant Secretary President
(SEAL)
<PAGE> 1
EXHIBIT 10
[BALLARD SPAHR ANDREWS & INGERSOLL LETTERHEAD]
October 2, 1997
AIM Tax-Exempt Funds, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046
Re: Securities Act File No. 33-66242
Investment Company Act File No. 811-7890
Gentlemen:
We have acted as counsel to AIM Tax-Exempt Funds, Inc. (the "Company"),
a corporation organized under the laws of the State of Maryland and registered
with the Securities and Exchange Commission under the Investment Company Act of
1940 ("1940 Act") as an open-end series management investment company.
This opinion is given in connection with the filing by the Company of
Post-Effective Amendment No. 6 to its Registration Statement on Form N-1A
("Registration Statement") under the Securities Act of 1933 and Amendment No. 7
under the 1940 Act relating to the registration of an indefinite number of
shares of common stock, par value $.001 per share, of a new separate portfolio
of the Company, the AIM High Income Municipal Fund (the "Shares").
In connection with our giving this opinion, we have examined a copy of
the Charter of the Company, and originals or copies, certified or otherwise
identified to our satisfaction, of such other documents, corporate records and
other instruments as we have deemed necessary or advisable for purposes of this
opinion. We have also examined the prospectus included in the Registration
Statement substantially in the form in which it is to become effective (the
"Prospectus"). As to various questions of fact material to our opinion, we
have relied upon information provided by officers of the Company.
<PAGE> 2
AIM Tax-Exempt Funds, Inc.
October 2, 1997
Page 2
Based on the foregoing, we are of the opinion that the Shares to be
offered for sale pursuant to the Prospectus are, to the extent of the number of
Shares authorized to be issued by the Company in its Charter, duly authorized
and, when sold, issued and paid for as described in the Prospectus, will have
been legally issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ BALLARD SPAHR ANDREWS & INGERSOLL
<PAGE> 1
EXHIBIT 11(a)
CONSENT OF COUNSEL
AIM TAX-EXEMPT FUNDS, INC.
We hereby consent to the use of our name and to the reference
to our firm under the caption "General Information - Legal Counsel" in the
Prospectus for the AIM High Income Municipal Fund, a portfolio of AIM Tax-
Exempt Funds, Inc. (the "Company"), and under the caption Miscellaneous
Information - Legal Matters in the Statement of Additional Information for the
Company, which is included in Post-Effective Amendment No. 6 to the
Registration Statement under the Securities Act of 1933 (No. 33-66242) and
Amendment No. 7 to the Registration Statement under the Investment Company Act
of 1940 (No. 811-7890) on Form N-1A of the Company.
/s/ BALLARD SPAHR ANDREWS & INGERSOLL
Philadelphia, Pennsylvania
October 1, 1997
<PAGE> 1
EXHIBIT 11(b)
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees and Shareholders
AIM Tax-Exempt Funds, Inc.
We consent to the use of our reports on the AIM Tax-Exempt Cash Fund, AIM
Tax-Free Intermediate Fund, and the AIM Tax-Exempt Bond Fund of Connecticut
dated May 2, 1997 included herein and the reference to our firm under the
heading "Audit Reports" in the Statement of Additional Information.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
October 6, 1997
<PAGE> 1
EXHIBIT 11(c)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of Post-Effective Amendment No. 6 to the registration
statement of AIM Tax-Exempt Funds, Inc. on Form N-1A (the "Registration
Statement") of our report dated February 16, 1993, relating to the selected per
share data and ratios appearing in the December 31, 1992 Annual Report to
Shareholders of AIM Tax-Exempt Cash Fund and AIM Tax-Exempt Bond Fund of
Connecticut. We also consent to the references to us under the heading
"Financial Highlights" in the Prospectus and under the heading "Audit Reports"
in the Statement of Additional Information.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Houston, Texas
October 2, 1997
<PAGE> 1
EXHIBIT 13
October ____, 1997
Board of Directors
AIM Tax-Exempt Funds, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
RE: INITIAL CAPITAL INVESTMENT IN NEW PORTFOLIO OF AIM TAX-EXEMPT
FUNDS, INC. (THE "FUND")
Gentlemen:
We are purchasing shares of the Fund for the purpose of providing
initial investment for a new investment portfolio of the Fund. The purpose of
this letter is to set forth our understanding of the conditions of and our
promises and representations concerning this investment.
We hereby agree to purchase shares equal to the following dollar amount
for the portfolio:
AIM High Income Municipal Fund - Class A $ ___________
AIM High Income Municipal Fund - Class B $ ___________
AIM High Income Municipal Fund - Class C $ ___________
We understand that the initial net asset value per share of each class
of the portfolio named above will be $10.00.
We hereby represent that we are purchasing these shares solely for our
own account and solely for investment purposes without any intent of
distributing or reselling said shares. We further represent that disposition
of said shares will only be by direct redemption to or repurchase by the Fund.
We further agree to provide the applicable Fund with at least ten days'
advance written notice of any intended redemption and agree that we will work
with the Fund with respect to the amount of such redemption so as not to place
a burden on the Fund and to facilitate normal portfolio management of the Fund.
Sincerely yours,
A I M ADVISORS, INC.
By:
----------------------------
Robert H. Graham
<PAGE> 1
EXHIBIT 15(a)(4)
SECOND AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM TAX-EXEMPT FUNDS, INC.
(CLASS A SHARES)
SECTION 1. AIM Tax-Exempt Funds, Inc. (the "Fund") may act as a
distributor of the Class A Shares of the AIM Tax-Exempt Cash Fund, and AIM Tax-
Exempt Bond Fund of Connecticut series portfolios (the "Shares") of which the
Fund is the issuer, pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "1940 Act"), according to the terms of this Distribution Plan (the
"Plan").
SECTION 2. The Fund may incur as a distributor of the Shares,
expenses of up to twenty-five one-hundredths of one percent (0.25%) per annum
of the average daily net assets of the Fund attributable to the Shares, subject
to any applicable limitations imposed from time to time by applicable rules of
the National Association of Securities Dealers, Inc.
SECTION 3. Amounts set forth in Section 2 may be expended when and if
authorized in advance by the Fund's Board of Directors. Such amounts may be
used to finance any activity which is primarily intended to result in the sale
of the Shares, including, but not limited to, expenses of organizing and
conducting sales seminars, advertising programs, finders fees, printing of
prospectuses and statements of additional information (and supplements thereto)
and reports for other than existing shareholders, preparation and distribution
of advertising material and sales literature, supplemental payments to dealers
and other institutions as asset-based sales charges. Amounts set forth in
Section 2 may also be used to finance payments of service fees under a
shareholder service arrangement to be established by A I M Distributors, Inc.
("Distributors") as the Fund's distributor in accordance with Section 4, and
the costs of administering the Plan. To the extent that amounts paid hereunder
are not used specifically to reimburse Distributors for any such expense, such
amounts may be treated as compensation for Distributors' distribution-related
services. All amounts expended pursuant to the Plan shall be paid to
Distributors and are the legal obligation of the Fund and not of Distributors.
That portion of the amounts paid under the Plan that is not paid or advanced by
Distributors to dealers or other institutions that provide personal continuing
shareholder service as a service fee pursuant to Section 4 shall be deemed an
asset-based sales charge. No provision of this Plan shall be interpreted to
prohibit any payments by the Fund during periods when the Fund has suspended or
otherwise limited sales.
SECTION 4.
(a) Amounts expended by the Fund under the Plan shall
be used in part for the implementation by Distributors of
shareholder service arrangements with respect to the Shares. The
maximum service fee paid to any service provider shall be
twenty-five one-hundredths of one percent (0.25%) per annum of
the average daily net assets of the Fund attributable to the
Shares owned by the customers of such service provider.
<PAGE> 2
(b) Pursuant to this program, Distributors may enter
into agreements substantially in the form attached hereto as
Exhibit A ("Service Agreements") with such broker-dealers
("Dealers") as may be selected from time to time by Distributors
for the provision of distribution-related personal shareholder
services in connection with the sale of Shares to the Dealers'
clients and customers ("Customers") to Customers who may from
time to time directly or beneficially own Shares. The
distribution-related personal continuing shareholder services to
be rendered by Dealers under the Service Agreements may include,
but shall not be limited to, the following: (i) distributing
sales literature; (ii) answering routine Customer inquiries
concerning the Fund and the Shares; (iii) assisting Customers in
changing dividend options, account designations and addresses,
and in enrolling into any of several retirement plans offered in
connection with the purchase of Shares; (iv) assisting in the
establishment and maintenance of customer accounts and records,
and in the processing of purchase and redemption transactions;
(v) investing dividends and capital gains distributions
automatically in Shares; and (vi) providing such other
information and services as the Fund or the Customer may
reasonably request.
(c) Distributors may also enter into Bank Shareholder
Service Agreements substantially in the form attached hereto as
Exhibit B ("Bank Agreements") with selected banks acting in an
agency capacity for their customers ("Banks"). Banks acting in
such capacity will provide some or all of the shareholder
services to their customers as set forth in the Bank Agreements
from time to time.
(d) Distributors may also enter into Shareholder
Service Agreements substantially in the form attached hereto as
Exhibit C ("Bank Trust Department Agreements and Brokers for Bank
Trust Department Agreements") with selected bank trust
departments and brokers for bank trust departments. Such bank
trust departments and brokers for bank trust departments will
provide some or all of the shareholder services to their
customers as set forth in the Bank Trust Department Agreements
and Brokers for Bank Trust Department Agreements from time to
time.
SECTION 5. This Plan has been approved by a vote of at least a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Shares.
SECTION 6. This Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority of
both (a) the Board of Directors of the Fund, and (b) those directors of the
Fund who are not "interested persons" of the Fund (as defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it (the "Dis-interested Directors"), cast in
person at a meeting called for the purpose of voting on this Plan or such
agreements.
SECTION 7. Unless sooner terminated pursuant to Section 9, this Plan
shall continue in effect for a period until June 30, 1998, and thereafter shall
continue in effect so long as such continuance is specifically approved, at
least annually, in the manner provided for approval of this Plan in Section 6.
SECTION 8. Distributors shall provide to the Fund's Board of
Directors and the Board of Directors shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
-2-
<PAGE> 3
SECTION 9. This Plan may be terminated at any time by vote of a
majority of the Dis-interested Directors, or by vote of a majority of the
outstanding voting securities of the Shares. If this Plan is terminated, the
obligation of the Fund to make payments pursuant to this Plan will also cease
and the Fund will not be required to make any payments beyond the termination
date even with respect to expenses incurred prior to the termination date.
SECTION 10. Any agreement related to this Plan shall be made in
writing, and shall provide:
(a) that such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the Dis-
interested Directors or by a vote of the outstanding voting
securities of the Fund attributable to the Shares, on not more
than sixty (60) days' written notice to any other party to the
agreement; and
(b) that such agreement shall terminate automatically
in the event of its assignment.
SECTION 11. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 5 hereof, and no
material amendment to the Plan shall be made unless approved in the manner
provided for in Section 6 hereof.
AIM TAX-EXEMPT FUNDS, INC.
(on behalf of its Class A Shares)
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
----------------------------- ----------------------------------
Assistant Secretary President
Effective as of August 6, 1993, as amended as of September 10, 1994.
Amended and restated for all Portfolios as of June 30, 1997, as further amended
and restated as of August 4, 1997.
-3-
<PAGE> 1
EXHIBIT 15(a)(5)
THIRD AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM TAX-EXEMPT FUNDS, INC.
(CLASS A AND CLASS C SHARES)
SECTION 1. AIM Tax-Exempt Funds, Inc. (the "Fund") on behalf of
the series of its common stock set forth in Schedule A to this plan (the
"Portfolios"), may act as a distributor of the shares, other than the Class B
shares, of such Portfolios (hereinafter referred to as "Class A and Class C
Shares") of which the Fund is the issuer, pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"), according to the terms of this
Distribution Plan (the "Plan").
SECTION 2. The Fund may incur as a distributor of the Class A
and Class C Shares, expenses at the annual rates set forth on Schedule A hereto
of the average daily net assets of the Fund attributable to the Class A and
Class C Shares, subject to any limitations imposed from time to time by
applicable rules of the National Association of Securities Dealers, Inc.
SECTION 3. Amounts set forth in Section 2 may be used to finance
any activity which is primarily intended to result in the sale of the Class A
and Class C Shares, including, but not limited to, expenses of organizing and
conducting sales seminars, advertising programs, finders fees, printing of
prospectuses and statements of additional information (and supplements thereto)
and reports for other than existing shareholders, preparation and distribution
of advertising material and sales literature, overhead, supplemental payments
to dealers and other institutions as asset-based sales charges. Amounts set
forth in Section 2 may also be used to finance payments of service fees under a
shareholder service arrangement to be established by A I M Distributors, Inc.
("Distributors") as the Fund's distributor in accordance with Section 4, and
the costs of administering the Plan. To the extent that amounts paid hereunder
are not used specifically to reimburse Distributors for any such expense, such
amounts may be treated as compensation for Distributors' distribution-related
services. All amounts expended pursuant to the Plan shall be paid to
Distributors and are the legal obligation of the Fund and not of Distributors.
That portion of the amounts paid under the Plan that is not paid or advanced by
Distributors to dealers or other institutions that provide personal continuing
shareholder service as a service fee pursuant to Section 4 shall be deemed an
asset-based sales charge. No provision of this Plan shall be interpreted to
prohibit any payments by the Fund during periods when the Fund has suspended or
otherwise limited sales.
SECTION 4.
(a) Amounts expended by the Fund under the Plan
shall be used in part for the implementation by Distributors
of shareholder service arrangements with respect to the Class
A and Class C Shares. The maximum service fee paid to any
service provider shall be twenty-five one-hundredths of one
percent (0.25%) per annum of the average daily net assets of
the Fund attributable to the Class A and Class C Shares owned
by the customers of such service provider.
<PAGE> 2
(b) Pursuant to this program, Distributors may
enter into agreements substantially in the form attached
hereto as Exhibit A ("Service Agreements") with such
broker-dealers ("Dealers") as may be selected from time to
time by Distributors for the provision of distribution-related
personal shareholder services in connection with the sale of
Class A and Class C Shares to the Dealers' clients and
customers ("Customers") who may from time to time directly or
beneficially own Class A and Class C Shares. The
distribution-related personal continuing shareholder services
to be rendered by Dealers under the Service Agreements may
include, but shall not be limited to, the following: (i)
distributing sales literature; (ii) answering routine Customer
inquiries concerning the Fund and the Class A and Class C
Shares; (iii) assisting Customers in changing dividend
options, account designations and addresses, and in enrolling
into any of several retirement plans offered in connection
with the purchase of Class A and Class C Shares; (iv)
assisting in the establishment and maintenance of customer
accounts and records, and in the processing of purchase and
redemption transactions; (v) investing dividends and capital
gains distributions automatically in Class A and Class C
Shares; and (vi) providing such other information and services
as the Fund or the Customer may reasonably request.
(c) Distributors may also enter into Bank
Shareholder Service Agreements substantially in the form
attached hereto as Exhibit B ("Bank Agreements") with selected
banks acting in an agency capacity for their customers
("Banks"). Banks acting in such capacity will provide some or
all of the shareholder services to their customers as set
forth in the Bank Agreements from time to time.
(d) Distributors may also enter into Agency
Pricing Agreements substantially in the form attached hereto
as Exhibit C ("Pricing Agreements") with selected retirement
plan service providers acting in an agency capacity for their
customers ("Retirement Plan Providers"). Retirement Plan
Providers acting in such capacity will provide some or all of
the shareholder services to their customers as set forth in
the Pricing Agreements from time to time.
(e) Distributors may also enter into Shareholder
Service Agreements substantially in the form attached hereto
as Exhibit D ("Bank Trust Department Agreements and Brokers
for Bank Trust Department Agreements") with selected bank
trust departments and brokers for bank trust departments.
Such bank trust departments and brokers for bank trust
departments will provide some or all of the shareholder
services to their customers as set forth in the Bank Trust
Department Agreements and Brokers for Bank Trust Department
Agreements from time to time.
SECTION 5. Any amendment to this Plan that requires the
approval of the shareholders of a Class pursuant to Rule 12b-1 under the 1940
Act shall become effective as to such Class upon the approval of such amendment
by a "majority of the outstanding voting securities" (as defined in the 1940
Act) of such Class, provided that the Board of Directors of the Fund has
approved such amendment in accordance with the provisions of Section 6 of this
Plan.
SECTION 6. This Plan, any amendment to this Plan and any
agreements related to this Plan shall become effective immediately upon the
receipt by the Fund of both (a) the affirmative vote of a majority of the Board
of Directors of the Fund, and (b) the affirmative vote of a majority of those
directors of the Fund who are not "interested persons" of the Fund (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it (the "Dis-interested
Directors"), cast in person at a meeting called for the purpose of voting on
-2-
<PAGE> 3
this Plan or such agreements. Notwithstanding the foregoing, no such amendment
that requires the approval of the shareholders of a Class of a Fund shall become
effective as to such Class until such amendment has been approved by the
shareholders of such Class in accordance with the provisions of Section 5 of
this Plan.
SECTION 7. Unless sooner terminated pursuant to Section 9, this
Plan shall continue in effect until June 30, 1998 and thereafter shall continue
in effect so long as such continuance is specifically approved, at least
annually, in the manner provided for approval of this Plan in Section 6.
SECTION 8. Distributors shall provide to the Fund's Board of
Directors and the Board of Directors shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
SECTION 9. This Plan may be terminated, with respect to the
Class A and Class C Shares of each Portfolio, at any time by vote of a majority
of the Dis-interested Directors, or by vote of a majority of the outstanding
voting securities of the Class A and Class C Shares of such Portfolios. If
this Plan is terminated, the obligation of the Fund to make payments pursuant
to this Plan will also cease and the Fund will not be required to make any
payments beyond the termination date even with respect to expenses incurred
prior to the termination date.
SECTION 10. Any agreement related to this Plan shall be made in
writing, and shall provide:
(a) that such agreement may be terminated at any
time, without payment of any penalty, by vote of a majority of
the Dis-interested Directors or by a vote of the outstanding
voting securities of the Class A and Class C Shares of each
Portfolio, on not more than sixty (60) days' written notice to
any other party to the agreement; and
(b) that such agreement shall terminate
automatically in the event of its assignment.
SECTION 11. This Plan may not be amended to increase materially
the amount of distribution expenses provided for in Section 2 hereof unless
such amendment is approved in the manner provided in Section 5 hereof, and no
material amendment to the Plan shall be made unless approved in the manner
provided for in Section 6 hereof.
AIM TAX-EXEMPT FUNDS, INC.
(on behalf of its Class A and Class C Shares)
Attest: By:
-------------------------- ---------------------------------------
Assistant Secretary President
Amended and restated for all Portfolios as of September , 1997.
-------
-3-
<PAGE> 4
SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM TAX-EXEMPT FUNDS, INC.
(CLASS A AND CLASS C SHARES)
(DISTRIBUTION FEE)
<TABLE>
<CAPTION>
MINIMUM MAXIMUM MAXIMUM
ASSET-BASED SERVICE AGGREGATE
FUND SALES CHARGE FEE ANNUAL FEE
---- ------------ ----------------- ----------
<S> <C> <C> <C>
Class A Shares
--------------
AIM Tax-Exempt Cash Fund 0.00% 0.25% 0.25%
AIM Tax-Exempt Bond Fund of Connecticut 0.00% 0.25% 0.25%
AIM Tax-Free Intermediate Fund 0.00% 0.00% 0.00%
AIM High Income Municipal Fund 0.00% 0.25% 0.25%
Class C Shares
--------------
AIM High Income Municipal Fund 0.75% 0.25% 1.00%
</TABLE>
-4-
<PAGE> 1
EXHIBIT 15(a)(6)
MASTER DISTRIBUTION PLAN
OF
AIM TAX-EXEMPT FUNDS, INC.
(CLASS B SHARES)
(SECURITIZATION FEATURE)
SECTION 1. AIM Tax-Exempt Funds, Inc. (the "Fund"), on behalf of the
series of common stock set forth in Schedule A to this plan (the "Portfolios"),
may pay for distribution of the Class B Shares of such Portfolios (the
"Shares") which the Fund issues from time to time, pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "1940 Act"), according to the terms of
this Distribution Plan (the "Plan").
SECTION 2. The Fund may incur expenses for and pay any institution
selected to act as the Fund's agent for distribution of the Shares of any
Portfolio from time to time (each, a "Distributor") at the rates set forth on
Schedule A hereto based on the average daily net assets of each class of Shares
subject to any applicable limitations imposed by the Conduct Rules of the
National Association of Securities Dealers, Inc. in effect from time to time
(the "Conduct Rules"). All such payments are the legal obligation of the Fund
and not of any Distributor or its designee.
SECTION 3.
(a) Amounts set forth in Section 2 may be used to
finance any activity which is primarily intended to result in the
sale of the Shares, including, but not limited to, expenses of
organizing and conducting sales seminars and running advertising
programs, payment of finders fees, printing of prospectuses and
statements of additional information (and supplements thereto)
and reports for other than existing shareholders, preparation and
distribution of advertising material and sales literature,
payment of overhead and supplemental payments to dealers and
other institutions as asset-based sales charges. Amounts set
forth in Section 2 may also be used to finance payments of
service fees under a shareholder service arrangement, which may
be established by each Distributor in accordance with Section 4,
the costs of administering the Plan. To the extent that amounts
paid hereunder are not used specifically to reimburse the
Distributor for any such expense, such amounts may be treated as
compensation for the Distributor's distribution-related services.
No provision of this Plan shall be interpreted to prohibit any
payments by the Fund during periods when the Fund has suspended
or otherwise limited sales.
(b) Subject to the provisions of Sections 8 and 9
hereof, amounts payable pursuant to Section 2 in respect of
Shares of each Portfolio shall be paid by the Fund to the
Distributor in respect of such Shares or, if more than one
institution has acted or is acting as Distributor in respect of
such Shares, then amounts payable pursuant to Section 2 in
respect of such Shares shall be paid to each such Distributor in
proportion to the number of such Shares sold by or attributable
to such Distributor's distribution efforts in respect of such
Shares in accordance with allocation provisions of each
Distributor's distribution agreement (the "Distributor's 12b-1
Share") notwithstanding that such Distributor's distribution
agreement with the Fund may have been terminated. That portion
of the amounts paid under the Plan that is not
<PAGE> 2
paid or advanced by the Distributor to dealers or other
institutions that provide personal continuing shareholder service
as a service fee pursuant to Section 4 shall be deemed an
asset-based sales charge.
(c) Any Distributor may assign, transfer or pledge
("Transfer") to one or more designees (each an "Assignee"), its
rights to all or a designated portion of its Distributor's 12b-1
Share from time to time (but not such Distributor's duties and
obligations pursuant hereto or pursuant to any distribution
agreement in effect from time to time, if any, between such
Distributor and the Fund), free and clear of any offsets or
claims the Fund may have against such Distributor. Each such
Assignee's ownership interest in a Transfer of a specific
designated portion of a Distributor's 12b-1 Share is hereafter
referred to as an "Assignee's 12b-1 Portion." A Transfer
pursuant to this Section 3(c) shall not reduce or extinguish any
claims of the Fund against the Distributor.
(d) Each Distributor shall promptly notify the Fund in
writing of each such Transfer by providing the Fund with the name
and address of each such Assignee.
(e) A Distributor may direct the Fund to pay an
Assignee's 12b-1 Portion directly to such Assignee. In such
event, the Distributor shall provide the Fund with a monthly
calculation of the amount of (i) the Distributor's 12b-1 Share,
and (ii) each Assignee's 12b-1 Portion, if any, for such month
(the "Monthly Calculation"). In such event, the Fund shall,
upon receipt of such notice and Monthly Calculation from the
Distributor, make all payments required under such distribution
agreement directly to the Assignee in accordance with the
information provided in such notice and Monthly Calculation upon
the same terms and conditions as if such payments were to be paid
to the Distributor.
(f) Alternatively, in connection with a Transfer, a
Distributor may direct the Fund to pay all of such Distributor's
12b-1 Share from time to time to a depository or collection agent
designated by any Assignee, which depository or collection agent
may be delegated the duty of dividing such Distributor's 12b-1
Share between the Assignee's 12b-1 Portion and the balance of the
Distributor's 12b-1 Share (such balance, when distributed to the
Distributor by the depository or collection agent, the
"Distributor's 12b-1 Portion"), in which case only the
Distributor's 12b-1 Portion may be subject to offsets or claims
the Fund may have against such Distributor.
SECTION 4.
(a) Amounts expended by the Fund under the Plan shall
be used in part for the implementation by the Distributor of
shareholder service arrangements with respect to the Shares. The
maximum service fee payable to any provider of such shareholder
service shall be twenty-five one-hundredths of one percent
(0.25%) per annum of the average daily net assets of the Shares
attributable to the customers of such service provider. All such
payments are the legal obligation of the Fund and not of any
Distributor or its designee.
(b) Pursuant to this Plan, the Distributor may enter
into agreements substantially in the form attached hereto as
Exhibit A ("Service Agreements") with such broker-dealers
("Dealers") as may be selected from time to time by the
Distributor for the provision of continuing shareholder services
in connection with
-2-
<PAGE> 3
Shares held by such Dealers' clients and customers ("Customers")
who may from time to time directly or beneficially own Shares.
The personal continuing shareholder services to be rendered by
Dealers under the Service Agreements may include, but shall not
be limited to, some or all of the following: (i) distributing
sales literature; (ii) answering routine Customer inquiries
concerning the Fund and the Shares; (iii) assisting Customers in
changing dividend options, account designations and addresses,
and enrolling in any of several retirement plans offered in
connection with the purchase of Shares; (iv) assisting in the
establishment and maintenance of Customer accounts and records,
and in the processing of purchase and redemption transactions;
(v) investing dividends and capital gains distributions
automatically in Shares; (vi) performing sub-accounting; (vii)
providing periodic statements showing a Customer's shareholder
account balance and the integration of such statements with those
of other transactions and balances in the Customer's account
serviced by such institution; (viii) forwarding applicable
prospectuses, proxy statements, and reports and notices to
Customers who hold Shares; and (ix) providing such other
information and administrative services as the Fund or the
Customer may reasonably request.
(c) The Distributor may also enter into Bank
Shareholder Service Agreements substantially in the form attached
hereto as Exhibit B ("Bank Agreements") with selected banks and
financial institutions acting in an agency capacity for their
customers ("Banks"). Banks acting in such capacity will provide
some or all of the shareholder services to their customers as set
forth in the Bank Agreements from time to time.
(d) The Distributor may also enter into Agency Pricing
Agreements substantially in the form attached hereto as Exhibit C
("Pricing Agreements") with selected retirement plan service
providers acting in an agency capacity for their customers
("Retirement Plan Providers"). Retirement Plan Providers
acting in such capacity will provide some or all of the
shareholder services to their customers as set forth in the
Pricing Agreements from time to time.
(e) The Distributor may also enter into Shareholder
Service Agreements substantially in the form attached hereto as
Exhibit D ("Bank Trust Department Agreements and Brokers for Bank
Trust Department Agreements") with selected bank trust
departments and brokers for bank trust departments. Such bank
trust departments and brokers for bank trust departments will
provide some or all of the shareholder services to customers as
set forth in the Bank Trust Department Agreements and Brokers for
Bank Trust Department Agreements from time to time.
SECTION 5. This Plan shall not take effect until (i) it has been
approved, together with any related agreements, by votes of the majority of
both (a) the Board of Directors of the Fund, and (b) those directors of the
Fund who are not "interested persons" of the Fund (as defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it (the "Dis-interested Directors"), cast in
person at a meeting called for the purpose of voting on this Plan or such
agreements, and (ii) the execution by the Fund and A I M Distributors, Inc. of
a Master Distribution Agreement in respect of the Shares.
SECTION 6. Unless sooner terminated pursuant to Section 8, this Plan
shall continue in effect until June 30, 1998, and thereafter shall continue in
effect so long as such continuance is specifically approved, at least annually,
in the manner provided for approval of this Plan in Section 5.
-3-
<PAGE> 4
SECTION 7. Each Distributor shall provide to the Fund's Board of
Directors and the Board of Directors shall review, at least quarterly, a
written report of the amounts expended for distribution of the Shares and the
purposes for which such expenditures were made.
SECTION 8. This Plan may be terminated with respect to the Shares of
any Portfolio at any time by vote of a majority of the Dis-interested
Directors, or by vote of a majority of outstanding Shares of such Portfolio.
Upon termination of this Plan with respect to any or all such Classes, the
obligation of the Fund to make payments pursuant to this Plan with respect to
such Classes shall terminate, and the Fund shall not be required to make
payments hereunder beyond such termination date with respect to expenses
incurred in connection with Shares sold prior to such termination date,
provided, in each case that each of the requirements of a Complete Termination
of this Plan in respect of such class, as defined below, are met. A
termination of this Plan with respect to any or all Shares of any or all
Portfolios shall not affect the obligation of the Fund to withhold and pay to
any Distributor contingent deferred sales charges to which such distributor is
entitled pursuant to any distribution agreement. For purposes of this Section
8 a "Complete Termination" of this Plan in respect of any Portfolio shall mean
a termination of this Plan in respect of such Portfolio, provided that: (i) the
Dis-interested Directors of the Fund shall have acted in good faith and shall
have determined that such termination is in the best interest of the Fund and
the shareholders of such Portfolio; (ii) and the Fund does not alter the terms
of the contingent deferred sales charges applicable to Shares outstanding at
the time of such termination; and (iii) unless the applicable Distributor at
the time of such termination was in material breach under the distribution
agreement in respect of such Portfolio, the Fund shall not, in respect of such
Portfolio, pay to any person or entity, other than such Distributor or its
designee, either the asset-based sales charge or the service fee (or any
similar fee) in respect of the Shares sold by such Distributor prior to such
termination.
SECTION 9. Any agreement related to this Plan shall be made in
writing, and shall provide:
(a) that such agreement may be terminated with respect
to the Shares of any or all Portfolios at any time, without
payment of any penalty, by vote of a majority of the
Dis-interested Directors or by a vote of the majority of the
outstanding Shares of such Portfolio, on not more than sixty (60)
days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically
in the event of its assignment; provided, however, that, subject
to the provisions of Section 8 hereof, if such agreement is
terminated for any reason, the obligation of the Fund to make
payments of (i) the Distributor's Share in accordance with the
directions of the Distributor pursuant to Section 3(e) or (f)
hereof if there exist Assignees for all or any portion of such
Distributor's 12b-1 Share, and (ii) the remainder of such
Distributor's 12b-1 Share to such Distributor if there are no
Assignees for such Distributor's Share, pursuant to such
agreement and this Plan will continue with respect to the Shares
until such Shares are redeemed or automatically converted into
another class of shares of the Fund.
-4-
<PAGE> 5
SECTION 10. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved by a vote of at least a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Shares, and no material
amendment to the Plan shall be made unless approved in the manner provided for
in Section 5 hereof.
AIM TAX-EXEMPT FUNDS, INC.
(on behalf of its Class B Shares)
Attest: By:
------------------------------ ------------------------------
Assistant Secretary President
Effective as of September , 1997
-------
-5-
<PAGE> 6
SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM TAX-EXEMPT FUNDS, INC.
(CLASS B SHARES)
(DISTRIBUTION FEE)
<TABLE>
<CAPTION>
MAXIMUM
ASSET-BASED SERVICE AGGREGATE
FUND SALES CHARGE FEE ANNUAL FEE
---- ------------ ------- ----------
<S> <C> <C> <C>
AIM High Income Municipal Fund 0.75% 0.25% 1.00%
(Class B Shares)
</TABLE>
-6-
<PAGE> 1
EXHIBIT 15(b)
EXHIBIT A
SHAREHOLDER SERVICE AGREEMENT
[LOGO APPEARS HERE] FOR SALE OF SHARES
A I M Distributors, Inc. OF THE AIM MUTUAL FUNDS
This Shareholder Service Agreement (the "Agreement") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act") by each
of the AIM-managed mutual funds (or designated classes of such funds) listed on
Schedule A to this Agreement (the "Funds"), under a Distribution Plan (the
"Plan") adopted pursuant to said Rule. This Agreement, being made between A I M
Distributors, Inc. ("Distributors"), solely as agent for the Funds, and the
undersigned authorized dealer, defines the services to be provided by the
authorized dealer for which it is to receive payments pursuant to the Plan
adopted by each of the Funds. The Plan and the Agreement have been approved by
a majority of the directors of each of the Funds, including a majority of the
directors who are not interested persons of such Funds, and who have no direct
or indirect financial interest in the operation of the Plan or related
agreements (the "Dis-interested Directors"), by votes cast in person at a
meeting called for the purpose of voting on the Plan. Such approval included a
determination that in the exercise of their reasonable business judgement and
in light of their fiduciary duties, there is a reasonable likelihood that the
Plan will benefit such Fund and its shareholders.
1 To the extent that you provide distribution-related continuing personal
shareholder services to customers who may, from time to time, directly or
beneficially own shares of the Funds, including but not limited to,
distributing sales literature, answering routine customer inquiries
regarding the Funds, assisting customers in changing dividend options,
account designations and addresses, and in enrolling into any of several
special investment plans offered in connection with the purchase of the
Fund's shares, assisting in the establishment and maintenance of customer
accounts and records and in the processing of purchase and redemption
transactions, investing dividends and capital gains distributions
automatically in shares and providing such other services as the Funds or
the customer may reasonably request, we, solely as agent for the Funds,
shall pay you a fee periodically or arrange for such fee to be paid to you.
2 The fee paid with respect to each Fund will be calculated at the end of each
payment period (as indicated in Schedule A) for each business day of the
Fund during such payment period at the annual rate set forth in Schedule A
as applied to the average net asset value of the shares of such Fund
purchased or acquired through exchange on or after the Plan Calculation
Date shown for such Fund on Schedule A. Fees calculated in this manner
shall be paid to you only if your firm is the dealer of record at the close
of business on the last business day of the applicable payment period, for
the account in which such shares are held (the "Subject Shares"). In cases
where Distributors has advanced payment to you of the first year's fee for
shares sold at net asset value and subject to contingent deferred sales
charge, no additional payments will be made to you during the first year
the Subject Shares are held.
3 The total of the fees calculated for all of the Funds listed on Schedule A
for any period with respect to which calculations are made shall be paid
to you within 45 days after the close of such period.
4 We reserve the right to withhold payment with respect to the Subject Shares
purchased by you and redeemed or repurchased by the Fund or by us as Agent
within seven (7) business days after the date of our confirmation of such
purchase. We reserve the right at any time to impose minimum fee payment
requirements before any periodic payments will be made to you hereunder.
5 This Agreement does not require any broker-dealer to provide transfer
agency and recordkeeping related services as nominee for its customers.
6 You shall furnish us and the Funds with such information as shall
reasonably be requested either by the directors of the Funds or by us with
respect to the fees paid to you pursuant to this Agreement.
7 We shall furnish the directors of the Funds, for their review on a
quarterly basis, a written report of the amounts expended under the Plan by
us and the purposes for which such expenditures were made.
8 Neither you nor any of your employees or agents are authorized to make any
representation concerning shares of the Funds except those contained in
the then current Prospectus for the Funds, and you shall have no authority
to act as agent for the Funds or for Distributors.
7/97
<PAGE> 2
9 We may enter into other similar Shareholder Service Agreements with any
other person without your consent.
10 This Agreement and Schedule A may be amended at any time without your
consent by Distributors mailing a copy of an amendment to you at the address
set forth below. Such amendment shall become effective on the date
specified in such amendment unless you elect to terminate this Agreement
within thirty (30) days of your receipt of such amendment.
11 This Agreement may be terminated with respect to any Fund at any time
without payment of any penalty by the vote of a majority of the directors
of such Fund who are Dis-interested Directors or by a vote of a majority of
the Fund's outstanding shares, on sixty (60) days' written notice. It will
be terminated by any act which terminates either the Selected Dealer
Agreement between your firm and us or the Fund's Distribution Plan, and in
any event, it shall terminate automatically in the event of its assignment
as that term is defined in the 1940 Act.
12 The provisions of the Distribution Agreement between any Fund and us,
insofar as they relate to the Plan, are incorporated herein by reference.
This Agreement shall become effective upon execution and delivery hereof
and shall continue in full force and effect as long as the continuance of
the Plan and this related Agreement are approved at least annually by a
vote of the directors, including a majority of the Dis-interested
Directors, cast in person at a meeting called for the purpose of voting
thereon. All communications to us should be sent to the address of
Distributors as shown at the bottom of this Agreement. Any notice to you
shall be duly given if mailed or telegraphed to you at the address
specified by you below.
13 You represent that you provide to your customers who own shares of the
Funds personal services as defined from time to time in applicable
regulations of the National Association of Securities Dealers, Inc., and
that you will continue to accept payments under this Agreement only so long
as you provide such services.
14 This Agreement shall be construed in accordance with the laws of the State
of Texas.
A I M DISTRIBUTORS, INC.
Date:________________ By: X____________________________________________
The undersigned agrees to abide by the foregoing terms and conditions.
Date:________________ By: X____________________________________________
Signature
____________________________________________
Print Name Title
____________________________________________
Dealer's Name
____________________________________________
Address
____________________________________________
City State Zip
Please sign both copies and return one copy of
each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
7/97
<PAGE> 3
SCHEDULE "A"
[LOGO APPEARS HERE] SHAREHOLDER SERVICE AGREEMENT
A I M Distributors, Inc.
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ------------------------------------------------------------------------------------------
<S> <C> <C>
AIM Advisor Flex Fund A Shares 0.25 August 4, 1997
AIM Advisor Flex Fund C Shares 1.00** August 4, 1997
AIM Advisor Income Fund A Shares 0.25 August 4, 1997
AIM Advisor Income Fund C Shares 1.00** August 4, 1997
AIM Advisor International Value Fund A Shares 0.25 August 4, 1997
AIM Advisor International Value Fund C Shares 1.00** August 4, 1997
AIM Advisor Large Cap Value Fund A Shares 0.25 August 4, 1997
AIM Advisor Large Cap Value Fund C Shares 1.00** August 4, 1997
AIM Advisor MultiFlex Fund A Shares 0.25 August 4, 1997
AIM Advisor MultiFlex Fund C Shares 1.00** August 4, 1997
AIM Advisor Real Estate Fund A Shares 0.25 August 4, 1997
AIM Advisor Real Estate Fund C Shares 1.00** August 4, 1997
AIM Aggressive Growth Fund A Shares 0.25 July 1, 1992
AIM Balanced Fund A Shares 0.25 October 18, 1993
AIM Balanced Fund B Shares 0.25 October 18, 1993
AIM Balanced Fund C Shares 1.00** August 4, 1997
AIM Blue Chip Fund A Shares 0.25 June 3, 1996
AIM Blue Chip Fund B Shares 0.25 October 1, 1996
AIM Blue Chip Fund C Shares 1.00** August 4, 1997
AIM Capital Development Fund A Shares 0.25 July 17, 1996
AIM Capital Development Fund B Shares 0.25 October 1, 1996
AIM Capital Development Fund C Shares 1.00** August 4, 1997
AIM Charter Fund A Shares 0.25 November 18, 1986
AIM Charter Fund B Shares 0.25 June 15, 1995
AIM Charter Fund C Shares 1.00** August 4, 1997
AIM Constellation Fund A Shares 0.25 September 9, 1986
AIM Constellation Fund C Shares 1.00** August 4, 1997
AIM Global Aggressive Growth Fund A Shares 0.50 September 15, 1994
AIM Global Aggressive Growth Fund B Shares 0.25 September 15, 1994
AIM Global Aggressive Growth Fund C Shares 1.00** August 4, 1997
AIM Global Growth Fund A Shares 0.50 September 15, 1994
AIM Global Growth Fund B Shares 0.25 September 15, 1994
AIM Global Growth Fund C Shares 1.00** August 4, 1997
AIM Global Income Fund A Shares 0.50 September 15, 1994
</TABLE>
7/97
<PAGE> 4
SCHEDULE "A"
[LOGO APPEARS HERE] SHAREHOLDER SERVICE AGREEMENT
A I M Distributors, Inc.
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ---------------------------------------------------------------------------------------
<S> <C> <C>
AIM Global Income Fund B Shares 0.25 September 15, 1994
AIM Global Income Fund C Shares 1.00** August 4, 1997
AIM Global Utilities Fund A Shares 0.25 July 1, 1992
AIM Global Utilities Fund B Shares 0.25 September 1, 1993
AIM Global Utilities Fund C Shares 1.00** August 4, 1997
AIM Growth Fund A Shares 0.25 July 1, 1992
AIM Growth Fund B Shares 0.25 September 1, 1993
AIM Growth Fund C Shares 1.00** August 4, 1997
AIM High Income Municipal Fund A Shares 0.25
AIM High Income Municipal Fund B Shares 0.25
AIM High Income Municipal Fund C Shares 1.00**
AIM High Yield Fund A Shares 0.25 July 1, 1992
AIM High Yield Fund B Shares 0.25 September 1, 1993
AIM High Yield Fund C Shares 1.00** August 4, 1997
AIM Income Fund A Shares 0.25 July 1, 1992
AIM Income Fund B Shares 0.25 September 1, 1993
AIM Income Fund C Shares 1.00** August 4, 1997
AIM Intermediate Government Fund A Shares 0.25 July 1, 1992
AIM Intermediate Government Fund B Shares 0.25 September 1, 1993
AIM Intermediate Government Fund C Shares 1.00** August 4, 1997
AIM International Equity Fund A Shares 0.25 May 21, 1992
AIM International Equity Fund B Shares 0.25 September 15, 1994
AIM International Equity Fund C Shares 1.00** August 4, 1997
AIM Limited Maturity Treasury Shares 0.15 December 2, 1987
AIM Money Market Fund A Shares 0.25 October 18, 1993
AIM Money Market Fund B Shares 0.25 October 18, 1993
AIM Money Market Fund C Shares 1.00** August 4, 1997
AIM Cash Reserve Shares 0.25 October 18, 1993
AIM Municipal Bond Fund A Shares 0.25 July 1, 1992
AIM Municipal Bond Fund B Shares 0.25 September 1, 1993
AIM Municipal Bond Fund C Shares 1.00** August 4, 1997
AIM Tax-Exempt Bond Fund of Connecticut A Shares 0.25 July 1, 1992
AIM Tax-Exempt Cash Fund A Shares 0.10 July 1, 1992
AIM Value Fund A Shares 0.25 July 1, 1992
AIM Value Fund B Shares 0.25 October 18, 1993
AIM Value Fund C Shares 1.00** August 4, 1997
</TABLE>
7/97
<PAGE> 5
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ---------------------------------------------------------------------------------------
<S> <C> <C>
AIM Weingarten Fund A Shares 0.25 September 9, 1986
AIM Weingarten Fund B Shares 0.25 June 15, 1995
AIM Weingarten Fund C Shares 1.00** August 4, 1997
</TABLE>
* Frequency of Payments: Quarterly, B and C share payments begin after an
initial 12 month holding period. Where the broker dealer or financial
institution waives the 1% up-front commission on Class C shares, payments
commence immediately.
** Of this amount, 0.25% is paid as a shareholder servicing fee and 0.75%
(0.35% for AIM Income Fund) is paid as an asset-based sales charge, as those
terms are defined under the rules of the National Association of Security
Dealers, Inc.
Minimum Payments: $50 (with respect to all funds in the aggregate.)
No payment pursuant to this Schedule is payable to a dealer, bank or other
service provider for the first year with respect to sales of $1 million or
more, at no load, in cases where A I M Distributors, Inc. has advanced the
service fee to the dealer, bank or other service provider.
7/97
<PAGE> 1
EXHIBIT 15(c)
EXHIBIT B
[LOGO APPEARS HERE] BANK SHAREHOLDER
A I M Distributors, Inc. SERVICE AGREEMENT
We desire to enter into an Agreement with A I M Distributors, Inc. (the
"Company") acting as agent for the "AIM Funds", for servicing of our agency
clients who are shareholders of, and the administration of such shareholder
accounts in the shares of the AIM Funds (hereinafter referred to as the
"Shares"). Subject to the Company's acceptance of this Agreement, the terms and
conditions of this Agreement shall be as follows:
1 We shall provide continuing personal shareholder and administration
services for holders of the Shares who are also our clients. Such services
to our clients may include, without limitation, some or all of the
following: answering shareholder inquiries regarding the Shares and the AIM
Funds; performing subaccounting; establishing and maintaining shareholder
accounts and records; processing and bunching customer purchase and
redemption transactions; providing periodic statements showing a
shareholder's account balance and the integration of such statements with
those of other transactions and balances in the shareholder's other
accounts serviced by us; forwarding applicable AIM Funds prospectuses, proxy
statements, reports and notices to our clients who are holders of Shares;
and such other administrative services as you reasonably may request, to
the extent we are permitted by applicable statute, rule or regulations to
provide such services. We represent that we shall accept fees hereunder
only so long as we continue to provide personal shareholder services to our
clients.
2 Shares purchased by us as agents for our clients will be registered (choose
one) (in our name or in the name of our nominee) (in the names of our
clients). The client will be the beneficial owner of the Shares purchased
and held by us in accordance with the client's instructions and the client
may exercise all applicable rights of a holder of such Shares. We agree to
transmit to the AIM Funds' transfer agent in a timely manner, all purchase
orders and redemption requests of our clients and to forward to each
client any proxy statements, periodic shareholder reports and other
communications received from the Company by us on behalf of our clients.
The Company agrees to pay all out-of-pocket expenses actually incurred by
us in connection with the transfer by us of such proxy statements and
reports to our clients as required by applicable law or regulation. We
agree to transfer record ownership of a client's Shares to the client
promptly upon the request of a client. In addition, record ownership will
be promptly transferred to the client in the event that the person or
entity ceases to be our client.
3 Within five (5) business days of placing a purchase order we agree to send
(i) a cashiers check to the Company, or (ii) a wire transfer to the AIM
Funds' transfer agent, in an amount equal to the amount of all purchase
orders placed by us on behalf of our clients and accepted by the Company.
4 We agree to make available to the Company, upon the Company's request, such
information relating to our clients who are beneficial owners of Shares and
their transactions in such Shares as may be required by applicable laws and
regulations or as may be reasonably requested by the Company. The names of
our customers shall remain our sole property and shall not be used by the
Company for any other purpose except as needed for servicing and
information mailings in the normal course of business to holders of the
Shares.
5 We shall provide such facilities and personnel (which may be all or any
part of the facilities currently used in our business, or all or any
personnel employed by us) as may be necessary or beneficial in carrying out
the purposes of this Agreement.
6 Except as may be provided in a separate written agreement between the
Company and us, neither we nor any of our employees or agents are
authorized to assist in distribution of any of the AIM Funds' shares except
those contained in the then current Prospectus applicable to the Shares;
and we shall have no authority to act as agent for the Company or the AIM
Funds. Neither the AIM Funds, A I M Advisors, Inc. nor A I M Distributors,
Inc. will be a party, nor will they be represented as a party, to any
agreement that we may enter into with our clients.
7/97
<PAGE> 2
7 In consideration of the services and facilities described herein, we shall
receive from the Company on behalf of the AIM Funds an annual service fee,
payable at such intervals as may be set forth in Schedule A hereto, of a
percentage of the aggregate average net asset value of the Shares owned
beneficially by our clients during each payment period, as set forth in
Schedule A hereto. We understand that this Agreement and the payment of
such service fees has been authorized and approved by the Boards of
Directors/Trustees of the AIM Funds, and is subject to limitations imposed
by the National Association of Securities Dealers, Inc. In cases where the
Company has advanced payments to us of the first year's fee for shares sold
with a contingent deferred sales charge, no payments will be made to us
during the first year the subject Shares are held.
8 The AIM Funds reserve the right, at their discretion and without notice, to
suspend the sale of any Shares or withdraw the sale of Shares.
9 We understand that the Company reserves the right to amend this Agreement
or Schedule A hereto at any time without our consent by mailing a copy of
an amendment to us at the address set forth below. Such amendment shall
become effective on the date specified in such amendment unless we elect to
terminate this Agreement within thirty (30) days of our receipt of such
amendment.
10 This Agreement may be terminated at any time by the Company on not less
than 15 days' written notice to us at our principal place of business. We,
on 15 days' written notice addressed to the Company at its principal place
of business, may terminate this Agreement, said termination to become
effective on the date of mailing notice to us of such termination. The
Company's failure to terminate for any cause shall not constitute a waiver
of the Company's right to terminate at a later date for any such cause.
This Agreement shall terminate automatically in the event of its assignment,
the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the Investment Company Act of 1940, as amended.
11 All communications to the Company shall be sent to it at Eleven Greenway
Plaza, Suite 1919, Houston, Texas, 77046-1173. Any notice to us shall be
duly given if mailed or telegraphed to us at this address shown on this
Agreement.
12 This Agreement shall become effective as of the date when it is executed
and dated below by the Company. This Agreement and all rights and
obligations of the parties hereunder shall be governed by and construed
under the laws of the State of Texas.
A I M DISTRIBUTORS, INC.
Date:________________ By: X____________________________________________
The undersigned agrees to abide by the foregoing terms and conditions.
Date:________________ By: X____________________________________________
Signature
____________________________________________
Print Name Title
____________________________________________
Dealer's Name
____________________________________________
Address
____________________________________________
City State Zip
Please sign both copies and return one copy of
each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
7/97
<PAGE> 3
SCHEDULE "A" TO BANK
[LOGO APPEARS HERE] SHAREHOLDER SERVICE AGREEMENT
A I M Distributors, Inc.
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ------------------------------------------------------------------------------------------
<S> <C> <C>
AIM Advisor Flex Fund A Shares 0.25 August 4, 1997
AIM Advisor Flex Fund C Shares 1.00** August 4, 1997
AIM Advisor Income Fund A Shares 0.25 August 4, 1997
AIM Advisor Income Fund C Shares 1.00** August 4, 1997
AIM Advisor International Value Fund A Shares 0.25 August 4, 1997
AIM Advisor International Value Fund C Shares 1.00** August 4, 1997
AIM Advisor Large Cap Value Fund A Shares 0.25 August 4, 1997
AIM Advisor Large Cap Value Fund C Shares 1.00** August 4, 1997
AIM Advisor MultiFlex Fund A Shares 0.25 August 4, 1997
AIM Advisor MultiFlex Fund C Shares 1.00** August 4, 1997
AIM Advisor Real Estate Fund A Shares 0.25 August 4, 1997
AIM Advisor Real Estate Fund C Shares 1.00** August 4, 1997
AIM Aggressive Growth Fund A Shares 0.25 July 1, 1992
AIM Balanced Fund A Shares 0.25 October 18, 1993
AIM Balanced Fund B Shares 0.25 October 18, 1993
AIM Balanced Fund C Shares 1.00** August 4, 1997
AIM Blue Chip Fund A Shares 0.25 June 3, 1996
AIM Blue Chip Fund B Shares 0.25 October 1, 1996
AIM Blue Chip Fund C Shares 1.00** August 4, 1997
AIM Capital Development Fund A Shares 0.25 June 17, 1996
AIM Capital Development Fund B Shares 0.25 October 1, 1996
AIM Capital Development Fund C Shares 1.00** August 4, 1997
AIM Charter Fund A Shares 0.25 November 18, 1986
AIM Charter Fund B Shares 0.25 June 15, 1995
AIM Charter Fund C Shares 1.00** August 4, 1997
AIM Constellation Fund A Shares 0.25 September 9, 1986
AIM Constellation Fund C Shares 1.00** August 4, 1997
AIM Global Aggressive Growth Fund A Shares 0.50 September 15, 1994
AIM Global Aggressive Growth Fund B Shares 0.25 September 15, 1994
AIM Global Aggressive Growth Fund C Shares 1.00** August 4, 1997
AIM Global Growth Fund A Shares 0.50 September 15, 1994
AIM Global Growth Fund B Shares 0.25 September 15, 1994
AIM Global Growth Fund C Shares 1.00** August 4, 1997
AIM Global Income Fund A Shares 0.50 September 15, 1994
</TABLE>
7/97
<PAGE> 4
SCHEDULE "A" TO BANK
[LOGO APPEARS HERE] SHAREHOLDER SERVICE AGREEMENT
A I M Distributors, Inc.
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ----------------------------------------------------------------------------------------
<S> <C> <C>
AIM Global Income Fund B Shares 0.25 September 15, 1994
AIM Global Income Fund C Shares 1.00** August 4, 1997
AIM Global Utilities Fund A Shares 0.25 July 1, 1992
AIM Global Utilities Fund B Shares 0.25 September 1, 1993
AIM Global Utilities Fund C Shares 1.00** August 4, 1997
AIM Growth Fund A Shares 0.25 July 1, 1992
AIM Growth Fund B Shares 0.25 September 1, 1993
AIM Growth Fund C Shares 1.00** August 4, 1997
AIM High Income Municipal Fund A Shares 0.25
AIM High Income Municipal Fund B Shares 0.25
AIM High Income Municipal Fund C Shares 1.00**
AIM High Yield Fund A Shares 0.25 July 1, 1992
AIM High Yield Fund B Shares 0.25 September 1, 1993
AIM High Yield Fund C Shares 1.00** August 4, 1997
AIM Income Fund A Shares 0.25 July 1, 1992
AIM Income Fund B Shares 0.25 September 1, 1993
AIM Income Fund C Shares 1.00** August 4, 1997
AIM Intermediate Government Fund A Shares 0.25 July 1, 1992
AIM Intermediate Government Fund B Shares 0.25 September 1, 1993
AIM Intermediate Government Fund C Shares 1.00** August 4, 1997
AIM International Equity Fund A Shares 0.25 May 21, 1992
AIM International Equity Fund B Shares 0.25 September 15, 1994
AIM International Equity Fund C Shares 1.00** August 4, 1997
AIM Limited Maturity Treasury Shares 0.15 December 2, 1987
AIM Money Market Fund A Shares 0.25 October 18, 1993
AIM Money Market Fund B Shares 0.25 October 18, 1993
AIM Money Market Fund C Shares 1.00** August 4, 1997
AIM Cash Reserve Shares 0.25 October 18, 1993
AIM Municipal Bond Fund A Shares 0.25 July 1, 1992
AIM Municipal Bond Fund B Shares 0.25 September 1, 1993
AIM Municipal Bond Fund C Shares 1.00** August 4, 1997
AIM Tax-Exempt Bond Fund of Connecticut A Shares 0.25 July 1, 1992
AIM Tax-Exempt Cash Fund A Shares 0.10 July 1, 1992
AIM Value Fund A Shares 0.25 July 1, 1992
AIM Value Fund B Shares 0.25 October 18, 1993
AIM Value Fund C Shares 1.00** August 4, 1997
</TABLE>
7/97
<PAGE> 5
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ---------------------------------------------------------------------------------------
<S> <C> <C>
AIM Weingarten Fund A Shares 0.25 September 9, 1986
AIM Weingarten Fund B Shares 0.25 June 15, 1995
AIM Weingarten Fund C Shares 1.00** August 4, 1997
</TABLE>
* Frequency of Payments: Quarterly, B and C share payments begin after an
initial 12 month holding period. Where the broker dealer or financial
institution waives the 1% up-front commission on Class C shares, payments
commence immediately.
** Of this amount, 0.25% is paid as a shareholder servicing fee and 0.75%
(0.35% for AIM Income Fund) is paid as an asset-based sales charge, as those
terms are defined under the rules of the National Association of Security
Dealers, Inc.
Minimum Payments: $50 (with respect to all funds in the aggregate.)
No payment pursuant to this Schedule is payable to a dealer, bank or other
service provider for the first year with respect to sales of $1 million or
more, at no load, in cases where A I M Distributors, Inc. has advanced the
service fee to the dealer, bank or other service provider.
7/97
<PAGE> 1
EXHIBIT 15(d)
EXHIBIT C
A I M DISTRIBUTORS, INC.
[LOGO APPEARS HERE] SHAREHOLDER SERVICE AGREEMENT
A I M Distributors, Inc.
(BANK TRUST DEPARTMENTS)
____________________, 19_____
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with A I M Distributors, Inc. ("AIM
Distributors") as agent on behalf of the funds listed on Schedule A hereto (the
"Funds"), for the servicing of our clients who are shareholders of, and the
administration of accounts in, the Funds. We understand that this Shareholder
Service Agreement (the "Agreement") has been adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act") by each of the Funds,
under a Distribution Plan (the "Plan") adopted pursuant to said Rule, and is
subject to applicable rules of the National Association of Securities Dealers,
Inc. ("NASD"). This Agreement defines the services to be provided by us for
which we are to receive payments pursuant to the Plan. The Plan and the
Agreement have been approved by a majority of the directors or trustees of the
applicable Fund, including a majority of directors or trustees who are not
interested persons of the applicable Fund, and who have no direct or indirect
financial interest in the operation of the Plan or related agreements, by votes
cast in person at a meeting called for the purpose of voting on the Plan. Such
approval included a determination by the directors or trustees of the
applicable Fund, in the exercise of their reasonable business judgement and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Plan will benefit the Fund and the holders of its Shares. The terms and
conditions of this Agreement shall be as follows:
1. To the extent that we provide continuing personal shareholder services
and administrative support services to our customers who may from time
to time own shares of the Funds of record or beneficially, including but
not limited to, forwarding sales literature, answering routine customer
inquiries regarding the Funds, assisting customers in changing dividend
options, account designations and addresses, and in enrolling into any
of several special investment plans offered in connection with the
purchase of the Funds' shares, assisting in the establishment and
maintenance of customer accounts and records and in the processing of
purchase and redemption transactions, investing dividends and capital
gains distributions automatically in shares of the Funds and providing
such other services as AIM Distributors or the customer may reasonably
request, you shall pay us a fee periodically. We represent that we
shall accept fees hereunder only so long as we continue to provide such
personal shareholder services.
2. We agree to transmit to AIM Distributors in a timely manner, all
purchase orders and redemption requests of our clients and to forward to
each client all proxy statements, periodic shareholder reports and other
communications received from AIM Distributors by us relating to shares
of the Funds owned by our clients. AIM Distributors, on behalf of the
Funds, agrees
<PAGE> 2
Shareholder Service Agreement Page 2
(Bank Trust Departments)
to pay all out-of-pocket expenses actually incurred by us in connection
with the transfer by us of such proxy statements and reports to our
clients as required under applicable laws or regulations.
3. We agree to make available upon AIM Distributors's request, such
information relating to our clients who are beneficial owners of Fund
shares and their transactions in such shares as may be required by
applicable laws and regulations or as may be reasonably requested by AIM
Distributors.
4. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record
ownership will be promptly transferred to the client in the event that
the person or entity ceases to be our client.
5. Neither we nor any of our employees or agents are authorized to make any
representation to our clients concerning the Funds except those
contained in the then current prospectuses applicable to the Funds,
copies of which will be supplied to us by AIM Distributors; and we shall
have no authority to act as agent for any Fund or AIM Distributors.
Neither a Fund, nor A I M Advisors, Inc. ("AIM") will be a party, nor
will they be represented as a party, to any agreement that we may enter
into with our clients and neither a Fund nor AIM shall participate,
directly or indirectly, in any compensation that we may receive from our
clients in connection with our acting on their behalf with respect to
this Agreement.
6. In consideration of the services and facilities described herein, we
shall receive a maximum annual service fee and asset-based sales charge,
payable monthly, as set forth on Schedule A hereto. We understand that
this Agreement and the payment of such service fees and asset-based
sales charge has been authorized and approved by the Board of Directors
or Trustees of the applicable Fund, and that the payment of fees
thereunder is subject to limitations imposed by the rules of the NASD.
7. AIM Distributors reserves the right, in its discretion and without
notice, to suspend the sale of any Fund or withdraw the sale of shares
of a Fund, or upon notice to us, to amend this Agreement. We agree that
any order to purchase shares of the Funds placed by us after notice of
any amendment to this Agreement has been sent to us shall constitute our
agreement to any such amendment.
8. All communications to AIM Distributors shall be duly given if mailed to
A I M Distributors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173. Any notice to us shall be duly given if mailed to us at the
address specified by us in this Agreement or to such other address as we
shall have designated in writing to AIM Distributors.
9. This Agreement may be terminated at any time by AIM Distributors on not
less than 60 days' written notice to us at our principal place of
business. We, on 60 days' written notice addressed to AIM Distributors
at its principal place of business, may terminate this Agreement. AIM
Distributors may also terminate this Agreement for cause on violation by
us of any of the provisions of this Agreement, said termination to
become effective on the date of mailing notice to us of such
termination. AIM Distributors's failure to terminate for any cause
shall not
<PAGE> 3
Shareholder Service Agreement Page 3
(Bank Trust Departments)
constitute a waiver of AIM Distributors's right to terminate at a later
date for any such cause. This Agreement may be terminated with respect
to any Fund at any time by the vote of a majority of the directors or
trustees of such Fund who are disinterested directors or by a vote of a
majority of the Fund's outstanding shares, on not less than 60 days'
written notice to us at our principal place of business. This Agreement
will be terminated by any act which terminates a Fund's Distribution
Agreement with AIM Distributors, the Agreement for Purchase of Shares of
The AIM Family of Funds--Registered Trademark-- between us and AIM
Distributors or a Fund's Distribution Plan, and in any event, it shall
terminate automatically in the event of its assignment by us, the term
"assignment" for this purpose having the meaning defined in Section
2(a)(4) of the 1940 Act.
10. We represent that our activities on behalf of our clients and pursuant
to this Agreement either (i) are not such as to require our registration
as a broker-dealer in the state(s) in which we engage in such
activities, or (ii) we are registered as a broker-dealer in the state(s)
in which we engage in such activities. We represent that we are
registered as a broker-dealer with the NASD if required under applicable
law.
11. This Agreement and the Agreement for Purchase of Shares of The AIM
Family of Funds--Registered Trademark-- through Bank Trust Departments
constitute the entire agreement between us and AIM Distributors and
supersede all prior oral or written agreements between the parties
hereto. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which shall constitute the same
instrument.
12. This Agreement and all rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of Texas.
13. This Agreement shall become effective as of the date when it is executed
and dated by AIM Distributors.
<PAGE> 4
Shareholder Service Agreement Page 4
(Bank Trust Departments)
The undersigned agrees to abide by the foregoing terms and conditions.
-------------------------------------
(Firm Name)
-------------------------------------
(Address)
-------------------------------------
City/State/Zip/County
By:
------------------------------
Name:
--------------------------------
Title:
------------------------------
Dated:
-------------------------------
ACCEPTED:
A I M DISTRIBUTORS, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Dated:
----------------------------------
Please sign both copies and return to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
<PAGE> 5
Shareholder Service Agreement Page 5
(Bank Trust Departments)
SCHEDULE A
<TABLE>
<CAPTION>
Funds Fees
----- ----
<S> <C>
AIM Equity Funds, Inc.
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund (Retail Class)
AIM Constellation Fund (Retail Class)
AIM Weingarten Fund (Retail Class)
* AIM Aggressive Growth Fund
AIM Funds Group
AIM Balanced Fund
AIM Global Utilities Fund
AIM Growth Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Value Fund
AIM International Funds, Inc.
AIM International Equity Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Global Income Fund
AIM Investment Securities Funds
Limited Maturity Treasury Portfolio
AIM Tax-Exempt Funds, Inc.
AIM High Income Municipal Fund
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
Intermediate Portfolio
</TABLE>
__________________________________
*Shares of AIM Aggressive Growth Fund may only be sold to current
shareholders who maintain open accounts in AIM Aggressive Growth Fund.
<PAGE> 6
A I M DISTRIBUTORS, INC.
SHAREHOLDER SERVICE AGREEMENT
[LOGO APPEARS HERE]
A I M Distributors, Inc. (BROKERS FOR BANK TRUST DEPARTMENTS)
____________________, 19_____
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with A I M Distributors, Inc. ("AIM
Distributors") as agent on behalf of the funds listed on Schedule A hereto (the
"Funds"), for the servicing of our clients who are shareholders of, and the
administration of accounts in, the Funds. We understand that this Shareholder
Service Agreement (the "Agreement") has been adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act") by each of the Funds,
under a Distribution Plan (the "Plan") adopted pursuant to said Rule, and is
subject to applicable rules of the National Association of Securities Dealers,
Inc. ("NASD"). This Agreement defines the services to be provided by us for
which we are to receive payments pursuant to the Plan. The Plan and the
Agreement have been approved by a majority of the directors or trustees of the
applicable Fund, including a majority of directors or trustees who are not
interested persons of the applicable Fund, and who have no direct or indirect
financial interest in the operation of the Plan or related agreements, by votes
cast in person at a meeting called for the purpose of voting on the Plan. Such
approval included a determination by the directors or trustees of the
applicable Fund, in the exercise of their reasonable business judgement and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Plan will benefit the Fund and the holders of its Shares. The terms and
conditions of this Agreement shall be as follows:
1. To the extent that we provide continuing personal shareholder services
and administrative support services to our customers who may from time
to time own shares of the Funds of record or beneficially, including but
not limited to, forwarding sales literature, answering routine customer
inquiries regarding the Funds, assisting customers in changing dividend
options, account designations and addresses, and in enrolling into any
of several special investment plans offered in connection with the
purchase of the Funds' shares, assisting in the establishment and
maintenance of customer accounts and records and in the processing of
purchase and redemption transactions, investing dividends and capital
gains distributions automatically in shares of the Funds and providing
such other services as AIM Distributors or the customer may reasonably
request, you shall pay us a fee periodically. We represent that we
shall accept fees hereunder only so long as we continue to provide such
personal shareholder services.
2. We agree to transmit to AIM Distributors in a timely manner, all
purchase orders and redemption requests of our clients and to forward to
each client all proxy statements, periodic shareholder reports and other
communications received from AIM Distributors by us relating to shares
of the Funds owned by our clients. AIM Distributors, on behalf of the
Funds, agrees
<PAGE> 7
Shareholder Service Agreement Page 2
(Brokers for Bank Trust Departments)
to pay all out-of-pocket expenses actually incurred by us in connection
with the transfer by us of such proxy statements and reports to our
clients as required under applicable laws or regulations.
3. We agree to transfer to AIM Distributors in a timely manner as set forth
in the applicable prospectus, federal funds in an amount equal to the
amount of all purchase orders placed by us and accepted by AIM
Distributors. In the event that AIM Distributors fails to receive such
federal funds on such date (other than through the fault of AIM
Distributors), we shall indemnify the applicable Fund and AIM
Distributors against any expense (including overdraft charges) incurred
by the applicable Fund and/or AIM Distributors as a result of the
failure to receive such federal funds.
4. We agree to make available upon AIM Distributors's request, such
information relating to our clients who are beneficial owners of Fund
shares and their transactions in such shares as may be required by
applicable laws and regulations or as may be reasonably requested by AIM
Distributors.
5. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record
ownership will be promptly transferred to the client in the event that
the person or entity ceases to be our client.
6. Neither we nor any of our employees or agents are authorized to make any
representation to our clients concerning the Funds except those
contained in the then current prospectuses applicable to the Funds,
copies of which will be supplied to us by AIM Distributors; and we shall
have no authority to act as agent for any Fund or AIM Distributors.
Neither a Fund, nor A I M Advisors, Inc. ("AIM") will be a party, nor
will they be represented as a party, to any agreement that we may enter
into with our clients and neither a Fund nor AIM shall participate,
directly or indirectly, in any compensation that we may receive from our
clients in connection with our acting on their behalf with respect to
this Agreement.
7. In consideration of the services and facilities described herein, we
shall receive a maximum annual service fee and asset-based sales charge,
payable monthly, as set forth on Schedule A hereto. We understand that
this Agreement and the payment of such service fees and asset-based
sales charge has been authorized and approved by the Board of Directors
or Trustees of the applicable Fund, and that the payment of fees
thereunder is subject to limitations imposed by the rules of the NASD.
8. AIM Distributors reserves the right, in its discretion and without
notice, to suspend the sale of any Fund or withdraw the sale of shares
of a Fund, or upon notice to us, to amend this Agreement. We agree that
any order to purchase shares of the Funds placed by us after notice of
any amendment to this Agreement has been sent to us shall constitute our
agreement to any such amendment.
9. All communications to AIM Distributors shall be duly given if mailed to
<PAGE> 8
Shareholder Service Agreement Page 3
(Brokers for Bank Trust Departments)
A I M Distributors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173. Any notice to us shall be duly given if mailed to us at the
address specified by us in this Agreement or to such other address as we
shall have designated in writing to AIM Distributors.
10. This Agreement may be terminated at any time by AIM Distributors on not
less than 60 days' written notice to us at our principal place of
business. We, on 60 days' written notice addressed to AIM Distributors
at its principal place of business, may terminate this Agreement. AIM
Distributors may also terminate this Agreement for cause on violation
by us of any of the provisions of this Agreement, said termination to
become effective on the date of mailing notice to us of such
termination. AIM Distributors's failure to terminate for any cause
shall not constitute a waiver of AIM Distributors's right to terminate
at a later date for any such cause. This Agreement may be terminated
with respect to any Fund at any time by the vote of a majority of the
directors or trustees of such Fund who are disinterested directors or by
a vote of a majority of the Fund's outstanding shares, on not less than
60 days' written notice to us at our principal place of business. This
Agreement will be terminated by any act which terminates a Fund's
Distribution Agreement with AIM Distributors, the Selected Dealer
Agreement between us and AIM Distributors or a Fund's Distribution Plan,
and in any event, shall terminate automatically in the event of its
assignment by us, the term "assignment" for this purpose having the
meaning defined in Section 2(a)(4) of the 1940 Act.
11. We represent that our activities on behalf of our clients and pursuant
to this Agreement either (i) are not such as to require our registration
as a broker-dealer in the state(s) in which we engage in such
activities, or (ii) we are registered as a broker-dealer in the state(s)
in which we engage in such activities. We represent that we are
registered as a broker-dealer with the NASD if required under applicable
law.
12. This Agreement and all rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of Texas.
This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which shall constitute the same
instrument. This Agreement shall not relieve us or AIM Distributors
from any obligations either may have under any other agreements between
us.
13. This Agreement shall become effective as of the date when it is executed
and dated by AIM Distributors.
<PAGE> 9
Shareholder Service Agreement Page 4
(Brokers for Bank Trust Departments)
The undersigned agrees to abide by the foregoing terms and conditions.
-------------------------------------------------
(Firm Name)
-------------------------------------------------
(Address)
-------------------------------------------------
City/State/Zip/County
By:
------------------------------------------
Name:
--------------------------------------------
Title:
------------------------------------------
Dated:
-------------------------------------------
ACCEPTED:
A I M DISTRIBUTORS, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Dated:
-----------------------------
Please sign both copies and return to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
<PAGE> 10
Shareholder Service Agreement Page 5
(Brokers for Bank Trust Departments)
SCHEDULE A
<TABLE>
<CAPTION>
Funds Fees
----- ----
<S> <C>
AIM Equity Funds, Inc.
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund (Retail Class)
AIM Constellation Fund (Retail Class)
AIM Weingarten Fund (Retail Class)
* AIM Aggressive Growth Fund
AIM Funds Group
AIM Balanced Fund
AIM Global Utilities Fund
AIM Growth Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Value Fund
AIM International Funds, Inc.
AIM International Equity Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Global Income Fund
AIM Investment Securities Funds
Limited Maturity Treasury Portfolio
AIM Tax-Exempt Funds, Inc.
AIM High Income Municipal Fund
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
Intermediate Portfolio
</TABLE>
__________________________________
*Shares of AIM Aggressive Growth Fund may only be sold to current
shareholders who maintain open accounts in AIM Aggressive Growth Fund.
<PAGE> 1
EXHIBIT 18(b)
SECOND AMENDED AND RESTATED MULTIPLE CLASS PLAN
OF
THE AIM FAMILY OF FUNDS
1. This Second Amended and Restated Multiple Class Plan (the "Plan")
adopted in accordance with Rule 18f-3 under the Act shall govern the
terms and conditions under which the Funds may issue separate Classes
of Shares representing interests in one or more Portfolios of each
Fund.
2. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
a. Act - Investment Company Act of 1940, as amended.
b. CDSC - contingent deferred sales charge.
c. CDSC Period - the period of years following acquisition of
Shares during which such Shares may be assessed a CDSC upon
redemption.
d. Class - a class of Shares of a Fund representing an interest
in a Portfolio.
e. Class A Shares - shall mean those Shares designated as Class
A Shares in the Fund's organizing documents, as well as those
Shares deemed to be Class A Shares for purposes of this Plan.
f. Class B Shares - shall mean those Shares designated as Class
B Shares in the Fund's organizing documents.
g. Class C Shares - shall mean those Shares designated as Class
C Shares in the Fund's organizing documents, as well as those
Shares deemed to be Class C Shares for purposes of this Plan.
h. Directors - the directors or trustees of a Fund.
i. Distribution Expenses - expenses incurred in activities which
are primarily intended to result in the distribution and sale
of Shares as defined in a Plan of Distribution and/or
agreements relating thereto.
j. Distribution Fee - a fee paid by a Fund to the Distributor
to compensate the Distributor for Distribution Expenses.
k. Distributor - A I M Distributors, Inc. or Fund Management
Company, as applicable.
l. Fund - those investment companies advised by A I M Advisors,
Inc. which have adopted this Plan.
1
<PAGE> 2
m. Institutional Shares - shall mean Shares of a Fund
representing an interest in a Portfolio offered for sale to
institutional customers as may be approved by the Directors
from time to time and as set forth in the Fund's prospectus.
n. Plan of Distribution - Any plan adopted under Rule 12b-1
under the Act with respect to payment of a Distribution Fee.
o. Portfolio - a series of the Shares of a Fund constituting a
separate investment portfolio of the Fund.
p. Service Fee - a fee paid to financial intermediaries for the
ongoing provision of personal services to Fund shareholders
and/or the maintenance of shareholder accounts.
q. Share - a share of common stock of or beneficial interest in
a Fund, as applicable.
3. Allocation of Income and Expenses.
a. Distribution and Service Fees - Each Class shall bear
directly any and all Distribution Fees and/or Service Fees
payable by such Class pursuant to a Plan of Distribution
adopted by the Fund with respect to such Class.
b. Transfer Agency and Shareholder Recordkeeping Fees - Each
Class shall bear directly the transfer agency fees and
expenses and other shareholder recordkeeping fees and
expenses specifically attributable to that Class; provided,
however, that where two or more Classes of a Portfolio pay
such fees and/or expenses at the same rate or in the same
amount, those Classes shall bear proportionately such fees
and expenses based on the relative net assets attributable to
each such Class.
c. Allocation of Other Expenses - Each Class shall bear
proportionately all other expenses incurred by a Fund based
on the relative net assets attributable to each such Class.
d. Allocation of Income, Gains and Losses - Except to the extent
provided in the following sentence, each Portfolio will
allocate income and realized and unrealized capital gains and
losses to a Class based on the relative net assets of each
Class. Notwithstanding the foregoing, each Portfolio that
declares dividends on a daily basis will allocate income on
the basis of settled shares.
e. Waiver and Reimbursement of Expenses - A Portfolio's adviser,
underwriter or any other provider of services to the
Portfolio may waive or reimburse the expenses of a particular
Class or Classes.
4. Distribution and Servicing Arrangements. The distribution and
servicing arrangements identified below will apply for the following
Classes offered by a Fund with respect to a Portfolio. The provisions
of the Fund's prospectus describing the distribution and servicing
arrangements in detail are incorporated herein by this reference.
2
<PAGE> 3
a. Class A Shares. Class A Shares shall be offered at net asset
value plus a front-end sales charge as approved from time to
time by the Directors and set forth in the Fund's prospectus,
may be reduced or eliminated for certain money market fund
shares, for larger purchases, under a combined purchase
privilege, under a right of accumulation, under a letter of
intent or for certain categories of purchasers as permitted
by Rule 22(d) of the Act and as set forth in the Fund's
prospectus. Class A Shares that are not subject to a
front-end sales charge as a result of the foregoing shall be
subject to a CDSC for the CDSC Period set forth in
Section 5(a) of this Plan if so provided in the Fund's
prospectus. The offering price of Shares subject to a
front-end sales charge shall be computed in accordance with
Rule 22c-1 and Section 22(d) of the Act and the rules and
regulations thereunder. Class A Shares shall be subject to
ongoing Service Fees and/or Distribution Fees approved from
time to time by the Directors and set forth in the Fund's
prospectus. Although AIM Cash Reserve Shares, AIM Limited
Maturity Treasury Shares, AIM Tax-Free Intermediate Shares
and shares of AIM Tax-Exempt Bond Fund of Connecticut and AIM
Tax Exempt Cash Fund are not designated as "Class A", they
are substantially similar to Class A Shares as defined herein
and shall be deemed to be Class A Shares for the purposes of
this Plan.
b. Class B Shares. Class B Shares shall be (i) offered at net
asset value, (ii) subject to a CDSC for the CDSC Period set
forth in Section 5(b), (iii) subject to ongoing Service Fees
and Distribution Fees approved from time to time by the
Directors and set forth in the Fund's prospectus, and (iv)
converted to Class A Shares eight years from the end of the
calendar month in which the shareholder's order to purchase
was accepted as set forth in the Fund's prospectus.
c. Class C Shares. Class C Shares shall be (i) offered at net
asset value, (ii) subject to a CDSC for the CDSC Period set
forth in Section 5(c), and (iii) subject to ongoing Service
Fees and Distribution Fees approved from time to time by the
Directors and set forth in the Fund's prospectus.
d. Institutional Shares. Institutional Shares shall be (i)
offered at net asset value, (ii) offered only to certain
categories of institutional customers as approved from time
to time by the Directors and as set forth in the Fund's
prospectus and (iii) may be subject to ongoing Service Fees
and/or Distribution Fees as approved from time to time by the
Directors and set forth in the Fund's prospectus.
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares that
do not incur a front-end sales charge and of Class B Shares and Class
C Shares as follows:
a. Class A Shares. The CDSC Period for Class A Shares shall be
18 months. The CDSC Rate shall be as set forth in the Fund's
prospectus, the relevant portions of which are incorporated
herein by this reference. No CDSC shall be imposed on Class A
Shares unless so provided in a Fund's prospectus.
b. Class B Shares. The CDSC Period for the Class B Shares
shall be six years. The CDSC Rate for the Class B Shares
shall be as set forth in the Fund's prospectus, the relevant
portions of which are incorporated herein by this reference.
3
<PAGE> 4
c. Class C Shares. The CDSC Period for the Class C Shares shall
be one year. The CDSC Rate for the Class C Shares shall be as
set forth in the Fund's prospectus, the relevant portions of
which are incorporated herein by reference.
d. Method of Calculation. The CDSC shall be assessed on an
amount equal to the lesser of the then current market value
or the cost of the Shares being redeemed. No sales charge
shall be imposed on increases in the net asset value of the
Shares being redeemed above the initial purchase price. No
CDSC shall be assessed on Shares derived from reinvestment of
dividends or capital gains distributions. The order in which
Shares are to be redeemed when not all of such Shares would
be subject to a CDSC shall be determined by the Distributor
in accordance with the provisions of Rule 6c-10 under the
Act.
e. Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares and disclosed in
the Fund's prospectus or statement of additional information
and, for the Class A Shares, as allowed under Rule 6c-10
under the Act.
6. Exchange Privileges. Exchanges of Shares shall be permitted between
Funds as follows:
a. Class A Shares may be exchanged for Class A Shares of another
Portfolio, subject to certain limitations set forth in the
Fund's prospectus as it may be amended from time to time,
relevant portions of which are incorporated herein by this
reference.
b. Class B Shares may be exchanged for Class B Shares of another
Portfolio at their relative net asset value.
c. Class C Shares may be exchanged for Class C Shares of any
other Portfolio at their relative net asset value.
d. Depending upon the Portfolio from which and into which an
exchange is being made and when the shares were purchased,
shares being acquired in an exchange may be acquired at their
offering price, at their net asset value or by paying the
difference in sales charges, as disclosed in the Fund's
prospectus and statement of additional information.
e. CDSC Computation. The CDSC payable upon redemption of Class A
Shares, Class B Shares and Class C Shares subject to a CDSC
shall be computed in the manner described in the Fund's
prospectus.
7. Service and Distribution Fees. The Service Fee and Distribution Fee
applicable to any Class shall be those set forth in the Fund's
prospectus, relevant portions of which are incorporated herein by this
reference. All other terms and conditions with respect to Service Fees
and Distribution Fees shall be governed by the Plan of Distribution
adopted by the Fund with respect to such fees and Rule 12b-1 of the
Act.
4
<PAGE> 5
8. Conversion of Class B Shares.
a. Shares Received upon Reinvestment of Dividends and
Distributions - Shares purchased through the reinvestment of
dividends and distributions paid on Shares subject to
conversion shall be treated as if held in a separate
sub-account. Each time any Shares in a Shareholder's account
(other than Shares held in the sub-account) convert to
Class A Shares, a proportionate number of Shares held in the
sub-account shall also convert to Class A Shares.
b. Conversions on Basis of Relative Net Asset Value - All
conversions shall be effected on the basis of the relative
net asset values of the two Classes without the imposition of
any sales load or other charge.
c. Amendments to Plan of Distribution for Class A Shares - If
any amendment is proposed to the Plan of Distribution under
which Service Fees and Distribution Fees are paid with
respect to Class A Shares of a Fund that would increase
materially the amount to be borne by those Class A Shares,
then no Class B Shares shall convert into Class A Shares of
that Fund until the holders of Class B Shares of that Fund
have also approved the proposed amendment. If the holders of
such Class B Shares do not approve the proposed amendment,
the Directors of the Fund and the Distributor shall take such
action as is necessary to ensure that the Class voting
against the amendment shall convert into another Class
identical in all material respects to Class A Shares of the
Fund as constituted prior to the amendment.
9. This Plan shall not take effect until a majority of the Directors of a
Fund, including a majority of the Directors who are not interested
persons of the Fund, shall find that the Plan, as proposed and
including the expense allocations, is in the best interests of each
Class individually and the Fund as a whole.
10. This Plan may not be amended to materially change the provisions of
this Plan unless such amendment is approved in the manner specified in
Section 9 above.
5
