<PAGE> 1
[AIM LOGO APPEARS HERE]
[PHOTO APPEARS HERE]
AIM TAX-EXEMPT BOND
FUND OF CONNECTICUT
ANNUAL REPORT
MARCH 31, 1997
<PAGE> 2
ABOUT FUND PERFORMANCE DATA THROUGHOUT THIS REPORT:
o AIM Tax-Exempt Bond Fund of Connecticut's performance figures are
historical and reflect reinvestment of all distributions and changes
in net asset value. Unless otherwise indicated, the Fund's performance
is computed at net asset value without a sales charge. When sales
charges are included in performance figures, performance reflects the
maximum 4.75% sales charge.
o During the fiscal year ended 3/31/97, the Fund paid distributions of
$0.552 per share.
o The 30-day yield is calculated on the basis of a formula defined by
the SEC. The formula is based on the portfolio's potential earnings
from dividends, interest, yield-to-maturity or yield-to-call of the
bonds in the portfolio, net of all expenses and expressed on an
annualized basis.
o The taxable-equivalent yield is calculated in the same manner as the
30-day yield with an adjustment for a stated, assumed tax rate.
o The Fund's annualized distribution rate reflects the Fund's most
recent monthly dividend distribution multiplied by 12 and divided by
the most recent month-end net asset value.
o The Fund's investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less
than their original cost.
o The Fund's portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any particular security.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Lehman Brothers Municipal Bond Index is an unmanaged composite
representing an approximation of the performance of investment-grade
municipal bonds. Index performance is from 9/30/89 to 3/31/97.
o The unmanaged Lipper Connecticut Tax-Exempt Municipal Fund Category
represents an average of the performance of all Connecticut municipal
bond funds tracked by Lipper Analytical Services, Inc., an independent
mutual fund performance monitor.
o Government securities, such as U.S. Treasury bills, notes, and bonds,
offer a high degree of safety and are guaranteed as to the timely
payment of principal and interest if held to maturity. Fund shares are
not insured and their value and yield will vary with market
conditions.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not
reflect sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY
THE FDIC OR ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR
OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE;
AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.
------------------------------
AIM TAX-EXEMPT BOND
FUND OF CONNECTICUT
------------------------------
For shareholders who seek
to earn a high level
of current income
that is free of both
federal and Connecticut taxes.
------------------------------
This report may be distributed only to current shareholders
or to persons who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
Concerns over higher interest rates and surprisingly strong
[PHOTO OF economic growth dominated bond market performance during the
Charles T. year ended March 31, 1997. Bond investors were well served
Bauer, by holding portfolios of relatively short duration, such as
Chairman of AIM Tax-Exempt Bond Fund of Connecticut.
the Board of As 1997 proves to be yet another volatile year for
THE FUND investing, it is ever more important to remain focused on
APPEARS HERE] your personal investment objectives. There are a few basic
strategies that may help you stay on track. First, you
should keep a long-term outlook. If you leave your money
invested over the long term, you can help avoid the results
of the volatility that generally accompanies financial
markets over the short term. Those who try to "time" the
market-move money in and out of the market based on some
gauge of future market performance-tend to be less
successful than investors using disciplined, long-term
investment strategies. That's because no one, not even expert market watchers,
can consistently predict what the market will do next.
Another strategy, diversification, may help you cushion the effects
of a volatile market and enhance your return potential. A mutual fund is
already diversified because it invests in many securities. You can diversify
even further by placing some of your assets in several different types of
domestic and international funds that may include stocks, bonds, and money
market securities.
Finally, no matter what your investment goals or time horizon, it
makes good sense to review your portfolio regularly with your financial
consultant. In rapidly changing markets, you need an investment professional on
your side who can explain what is happening and how your portfolio may be
affected. Your financial consultant can help you create and follow a regular
investment plan-investing a certain amount of money at regular intervals-that
can help you stay on track regardless of day-to-day market activity.
At AIM, we meet the challenge of changing financial markets through
the consistent application of disciplined investment strategies that have served
our shareholders well for more than 20 years. We are pleased that AIM funds,
overall, have turned in attractive, and often impressive performance when
measured against benchmark indexes and peer group performance.
AIM/INVESCO MERGER FINALIZED
We are pleased to announce that the merger of A I M Management Group Inc. and
INVESCO plc was concluded on February 28, 1997. AIM is now part of one of the
world's largest independent investment management groups with approximately
$160 billion in assets under management as of March 31, 1997.
The merger creates a company with the financial strength necessary to
meet your needs in an increasingly competitive financial services environment,
both in the United States and worldwide. Though now under one holding company,
AIM and INVESCO will continue to operate as separate entities. Therefore, this
merger will not change the portfolio management, investment style, or name of
any of the AIM funds you own. The merger's completion begins a new and
promising era for AIM, one we believe will yield exciting opportunities.
We appreciate the trust you have placed in us and we look forward to
our continued close association. If you have any questions or comments about
this report, we invite you to call Client Services at 800-959-4246 during
normal business hours. For automated account information 24 hours a day, call
the AIM Investor Line at 800-246-5463. We also invite you to visit AIM's
award-winning Web site at http://www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
The annual shareholder meeting of AIM Tax-Exempt Funds, Inc., and AIM
Tax-Exempt Bond Fund of Connecticut was held on February 7, 1997. For details
of the business transacted at that meeting, please see Supplementary Proxy
Information - Shareholder Meeting after the Financial Statements in this
report.
----------------------------
In rapidly changing markets,
you need an investment
professional on your side
who can explain what is
happening and how your
portfolio may be affected.
----------------------------
<PAGE> 4
The Managers' Overview
FUND PROVIDES SOLID INCOME DESPITE
VOLATILE MARKET
A roundtable discussion with the Fund management team for AIM Tax-Exempt Bond
Fund of Connecticut for the fiscal year ended March 31, 1997.
- --------------------------------------------------------------------------------
Q. HOW DID AIM TAX-EXEMPT BOND FUND OF CONNECTICUT PERFORM DURING THE
REPORTING PERIOD?
A. The Fund continued to provide competitive current income exempt from
federal and Connecticut state income taxes. As of March 31, 1997, the
Fund's 30-day distribution rate was 5.13%. Translated into its taxable
equivalent, the Fund's 30-day distribution rate at net asset value was
8.89%, assuming the highest marginal federal tax rate of 39.6% and the
Connecticut rate of 4.5%. The Fund's 30-day yield was 4.33%, when
calculated at maximum offering price. Its 30-day taxable equivalent
yield was 7.51%, assuming the highest marginal federal tax rate of
39.6% and the Connecticut rate of 4.5%.
During the fiscal year covered by this report, the Fund posted
a total return of 4.84%, equaling that of the Lipper Connecticut Tax
Exempt Municipal Fund Category.
Preservation of principal is one of the Fund's primary goals.
Despite volatile market conditions during the reporting period, net asset
value per share remained within a range of $10.66 to $10.95, thus
continuing the Fund's history of relative price stability shown on
the accompanying chart.
Q. WHAT WERE THE MAJOR TRENDS IN THE BOND MARKET DURING THE FISCAL YEAR?
A. Volatility dominated fixed-income markets. The year opened with bond
prices declining and yields rising, a trend that continued until
September. The market then staged a rally that lasted until December
when bond prices again began to fall. Bond prices resumed an upward
climb at the end of January, only to go into a mid- February decline
that lasted through the end of the reporting period. The volatility
that characterized the market was reflected in the yield on the
30-year U.S. Treasury bond, which ranged from a high of 7.19% in July
to a low of 6.35% in November before closing the year at 7.01%
Q. WHAT PROMPTED SUCH MARKET VOLATILITY?
A. Concerns that the Federal Reserve Board would raise interest rates to
slow rapid economic growth and contain inflation kept investors on
edge for most of the year. The regular release of economic data, which
might provide some clues on the central bank's impending actions,
often produced significant fluctuations in the market. Despite healthy
economic growth in the last three quarters of 1996, however, there was
little evidence of inflationary pressures. Consequently, the Fed left
interest rates unchanged in the last half of 1996.
But early in 1997, there were heightened concerns that wage
pressures-the product of a tight job market-might ignite inflation. During
the fiscal year ended March 31, 1997, the average hourly wage increased at
an annualized rate of 4.0%. In congressional testimony, Fed Chairman Alan
Greenspan stressed the "importance of acting promptly-ideally
pre-emptively-to keep inflation low." On March 25, the Fed increased the
federal funds rate-the rate banks charge each other for overnight loans-from
5.25% to 5.50%. Immediately, investors began speculating whether this was
the first in a series of rate increases and that perpetuated market
volatility.
Q. HOW DID MUNICIPAL SECURITIES PERFORM DURING THE REPORTING PERIOD?
A. Early in the reporting period, talk of a possible flat tax, which
would eliminate the federal tax-exempt status of municipal
<TABLE>
<CAPTION>
==================================================================================
Stability of Net Asset Value
- ----------------------------------------------------------------------------------
10/3/89-3/31/97
<S> <C>
10/3/89 $10.00
10.19
3/90 9.99
10.03
9.77
10.07
3/91 10.11
10.19
10.40
10.52
3/92 10.31
10.55
10.66
10.65
3/93 10.88
11.08
11.33
11.29
3/94 10.69
10.63
10.58
10.34
3/95 10.71
10.77
10.86
11.01
3/96 10.81
10.76
10.80
10.88
3/97 10.77
================================================================================
</TABLE>
Source: Towers Data Systems HYPO--Registered Trademark--. There is no guarantee
the Fund will maintain a constant NAV. Investment return will vary so that you
may have a gain or a loss when you sell shares. Past performance cannot
guarantee comparable future results.
2
<PAGE> 5
bonds, kept investors jittery. However, after a flat tax ceased to be an
issue, municipal bonds performed quite well and to a certain extent seemed
less sensitive to inflation concerns than taxable fixed-income
securities.
For most of the year, municipal bonds provided better total returns
than taxable U.S. Treasury securities. A general lack of new issues
throughout much of the period tended to keep municipal bond prices
relatively high. As a result, municipal bonds tended to decline less in
value than U.S. Treasuries in the volatile market environment.
Q. GIVEN MARKET CONDITIONS, WHAT WAS YOUR STRATEGY FOR THE FUND DURING
THE PERIOD?
A. We maintained our focus on revenue bonds, whose creditworthiness tends
to be less sensitive to the political environment than general
obligation bonds.
As of March 31, 1997, the Fund was 72% invested in revenue bonds and
28% invested in general obligation bonds. At the end of the reporting
period, the Fund had a weighted average maturity of 11.8 years and a
duration of 4.6 years. Funds with shorter duration tend to be less sensitive
to market fluctuations.
The Fund also continued to invest in high-quality issues with good
liquidity. As of March 31, 1997, approximately 39% of the portfolio's
holdings were securities rated AAA, and 89% of the portfolio was rated A or
better. Credit-enhanced securities-which are backed by insurance or escrowed
with U.S. Treasuries-comprised about 36% of the portfolio.
The Fund had an average portfolio quality rating of AA-as measured by
Standard & Poor's Corporation (S&P) and Moody's Investors Service, Inc., two
widely known credit rating agencies. S&P and Moody's ratings are historical
and are based on analysis of the credit quality of the individual municipal
securities in the Fund's portfolio.
Q. IN RECENT YEARS, HAS THE FUND PAID ANY TAXABLE DISTRIBUTIONS?
A. No, because the Fund is managed for maximum tax efficiency. "Efficiency"
for a tax-exempt fund refers to its ability to pay distributions that are
free from federal income and capital gains taxes. To manage the Fund for tax
efficiency, we make every effort to avoid transactions that would result in
capital gains that are not offset by capital losses. For the past four
years, the Fund has paid no taxable capital gains distributions or ordinary
income distributions.
Q. DO YOU THINK A FLAT TAX WILL BE APPROVED?
A. Although talk of a flat tax resurfaced in 1997, we believe the chances one
will be adopted are relatively slim. For one, it could mean higher taxes
for most Americans. Secondly, no flat-tax bill has been formally proposed.
If one were to be proposed, it would most likely encounter significant
opposition from various lobbying groups. Finally, with more and more
spending burdens being shifted to the states, it is unlikely the federal
government would hinder the ability of the states to raise money by
eliminating the tax-exempt status of municipal bonds.
In Connecticut, the state General Assembly opened its six-month
session on January 8, 1997, with tax reform a key issue. One proposal would
lower the state income tax. Whether a tax cut is feasible will depend on
the size of the state budget, expected to be approved in late May or early
June.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. Although the economy continues to grow at a healthy pace, inflation
remains moderate. Consumer prices rose just 2.8% for the year ended
March 31, 1997, according to the U.S. Department of Labor. In
Connecticut, the economy continues to recover from the state's 1989E92
recession. If such an environment can be sustained, it should prove
favorable for the financial markets.
However, some analysts warn that if national economic growth
doesn't decelerate, it could ultimately lead to inflation, and that
could cause the Fed to continue tightening monetary policy. Market
observers will be closely watching leading economic indicators over
the next few months to predict whether the Fed will raise interest
rates again. The release of key data, such as employment information,
could cause dramatic, short-term fluctuations in the market. In such a
scenario, investors should remain focused on their long-term
objectives.
<TABLE>
<CAPTION>
Portfolio Composition
As of 3/31/97
===========================================================================================
Top 5 Holdings
===========================================================================================
<S> <C> <C>
1. Connecticut Development Authority
7.25% (10/15/15) Number of Holdings 65
2. Connecticut State Special Tax Obligation
6.50% (10/01/12)
3. Connecticut Health & Education Pie Chart
6.875% (7/01/09)
General Obligation 28%
4. Connecticut State Special Tax Obligation Revenue 72%
6.80% (06/01/03)
5. Connecticut State Higher Education Average Maturity 11.8 Years
Supplemental Loan Authority
7.50% (11/15/10) Duration 4.6 Years
===========================================================================================
</TABLE>
Please keep in mind the Fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
3
<PAGE> 6
Long-Term Performance
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT VS. BENCHMARK INDEX
The chart below compares your Fund to a benchmark index. It is intended to give
you a general idea of how your Fund performed compared to the bond market over
the period 10/3/89-3/31/97. It is important to understand the difference
between your Fund and an index. Your Fund's total return is shown with a sales
charge and includes Fund expenses and management fees. An index measures the
performance of a hypothetical portfolio, in this case the Lehman Brothers
Municipal Bond Index. Unlike your Fund, the index is not managed; therefore,
there are no sales charges, expenses or fees. You cannot invest in an index.
But if you could buy all the securities that make up a particular index, you
would incur expenses that would affect the return on your investment.
===============================================================================
Growth of a $10,000 Investment
10/3/89-3/31/97
(In thousands)
<TABLE>
<CAPTION>
AIM Tax-Exempt Bond Fund of Connecticut Lehman Bros. Muni Bond Index
<S> <C> <C>
10/3/89 $9,524 $10,000
3/90 9,789 10,430
3/91 10,613 11,393
3/92 11,622 12,532
3/93 13,082 14,102
3/94 13,560 14,429
3/95 14,345 15,501
3/96 15,240 16,800
3/97 15,977 17,717
===============================================================================
</TABLE>
Past performance cannot guarantee comparable future results.
===============================================================================
Average Annual Total Returns
As of 3/31/97, including sales charges
Inception (10/3/89) 6.46%
5 Years 5.54%
1 Year -0.14%*
*4.84% excluding sales charges
===============================================================================
Your Fund's total return includes sales charges, expenses, and management fees.
For Fund performance calculations and descriptions of indexes cited on this
page, please refer to the inside front cover.
4
<PAGE> 7
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>
5
<PAGE> 8
<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>
6
<PAGE> 9
<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.
7
<PAGE> 10
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.
8
<PAGE> 11
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
9
<PAGE> 12
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>
10
<PAGE> 13
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.
11
<PAGE> 14
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.
KPMG Peat Marwick LLP
Houston, Texas
May 2, 1997
- --------------------------------------------------------------------------------
SUPPLEMENTAL PROXY INFORMATION -- SHAREHOLDER MEETING
An annual meeting of shareholders of the Company was held on February 7, 1997.
The meeting was held for the following purposes:
(1) To elect directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson, and Louis Sklar.
(2) To approve a new Investment Advisory Agreement between the Company and AIM.
(3) To approve the elimination of the fundamental investment policy prohibiting
or restricting investments in other investment companies and/or the
amendment of certain related fundamental investment policies.
(4) Ratification of KPMG Peat Marwick LLP as independent accountants for the
Company's fiscal year ended March 31, 1997.
The following votes were cast with respect to each item:
<TABLE>
<CAPTION>
Votes
Director/Matter Votes for Against Abstentions
--------------- --------- ------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 29,429,450 0 563,009
Bruce L. Crockett........................................... 29,437,312 0 555,147
Owen Daly II................................................ 29,429,450 0 563,009
Carl Frischling............................................. 29,437,312 0 555,147
Robert H. Graham............................................ 29,437,312 0 555,147
John F. Kroeger............................................. 29,432,862 0 559,597
Lewis F. Pennock............................................ 29,449,040 0 543,419
Ian W. Robinson............................................. 29,431,702 0 560,757
Louis Sklar................................................. 29,436,693 0 555,766
(2) Approval of the new Investment Advisory Agreement........... 2,562,395 11,882 126,971
(3) Elimination of Fundamental Investment Policy................ 2,134,444 44,740 127,013
(4) KPMG Peat Marwick LLP....................................... 28,993,166 98,416 900,876
</TABLE>
12
<PAGE> 15
Directors & Officers
<TABLE>
<S> <C> <C>
Board of Directors Officers OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham http://www.aimfunds.com
Bruce L. Crockett President
Formerly Director, President, and INVESTMENT ADVISOR
Chief Executive Officer John J. Arthur
COMSAT Corporation Senior Vice President and Treasurer A I M Advisors, Inc.
11 Greenway Plaza
Owen Daly II Gary T. Crum Suite 100
Director Senior Vice President Houston, TX 77046-1173
Cortland Trust Inc.
Carol F. Relihan TRANSFER AGENT
Jack Fields Senior Vice President and Secretary
Formerly Member of the A I M Fund Services, Inc.
U.S. House of Representatives Dana R. Sutton P.O. Box 4739
Vice President and Assistant Treasurer Houston, TX 77210-4739
Carl Frischling
Partner Stuart W. Coco CUSTODIAN
Kramer, Levin, Naftalis & Frankel Vice President
The Bank of New York
Robert H. Graham Melville B. Cox 90 Washington Street, 11th Floor
President and Chief Executive Officer Vice President New York, NY 10286
A I M Management Group Inc.
Karen Dunn Kelley COUNSEL TO THE FUND
John F. Kroeger Vice President
Formerly Consultant Ballard Spahr
Wendell & Stockel Associates, Inc. P. Michelle Grace Andrews & Ingersoll
Assistant Secretary 1735 Market Street
Lewis F. Pennock Philadelphia, PA 19103
Attorney David L. Kite
Assistant Secretary COUNSEL TO THE DIRECTORS
Ian W. Robinson
Consultant; Former Executive Vice President and Nancy L. Martin Kramer, Levin, Naftalis & Franke
Chief Financial Officer Assistant Secretary 919 Third Avenue
Bell Atlantic Management Services, Inc. New York, NY 10022
Ofelia M. Mayo
Louis S. Sklar Assistant Secretary DISTRIBUTOR
Executive Vice President
Hines Interests Kathleen J. Pflueger A I M Distributors, Inc.
Limited Partnership Assistant Secretary 11 Greenway Plaza
Suite 100
Samuel D. Sirko Houston, TX 77046-1173
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
REQUIRED FEDERAL INCOME TAX INFO
We are required by Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end as to the the federal tax status of dividends paid by
the Fund during its fiscal year ended March 31, 1997.
AIM Tax-Exempt Bond Fund of Connecticut paid ordinary dividends in the amounts
of $0.552 per share to shareholders during the Fund's tax year ended March 31,
1997. Of this amount, 100% qualified as tax-exempt interest dividends for the
federal income tax purposes.
For the purpose of preparing your annual federal income tax returns, however,
you should report the amounts as reflected on the appropriate Form 1099-DIV.
<PAGE> 16
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
AIM Blue Chip Fund
AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
[PHOTO OF GROWTH AND INCOME
11 Greenway Plaza AIM Balanced Fund
APPEARS HERE] AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund
HIGH CURRENT INCOME
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of CT
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
HIGH DEGREE OF SAFETY AND CURRENT INCOME
AIM Limited Maturity Treasury Shares
STABILITY, LIQUIDITY, AND CURRENT INCOME
AIM Money Market Fund
A I M Management Group Inc. has provided leadership in STABILITY, LIQUIDITY, AND CURRENT TAX-FREE INCOME
the mutual fund industry since 1976 and managed AIM Tax-Exempt Cash Fund
approximately $70 billion in assets for more than 3.5
million shareholders, including individual investors, *AIM Aggressive Growth Fund was closed to new investors
corporate clients, and financial institutions, as of on July 18, 1995. For more complete information about
May 12, 1997. The AIM Family of Funds--Registered any AIM Fund(s), including sales charges and
Trademark-- is distributed nationwide, and AIM today expenses, ask your financial consultant or securities
ranks among the nation's top 15 mutual fund companies dealer for a free prospectus(es). Please read
in assets under management, according to Lipper the prospectus(es) carefully before you invest or
Analytical Services, Inc. send money.
[AIM LOGO APPEARS HERE] ---------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 100 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
---------------
</TABLE>
