<PAGE> 1
[AIM LOGO APPEARS HERE]
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
ANNUAL REPORT MARCH 31, 1998
<PAGE> 2
-------------------------------------------
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.
-------------------------------------------
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, those figures reflect the maximum 4.75% sales charge.
o During the fiscal year ended 3/31/98, 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.
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 the indexes 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.
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:
The fiscal year ended March 31, 1998, turned out to be a good
[PHOTO OF one for bonds, including tax-exempt municipal bonds. While
Charles T. yields were low enough to make the market inviting for bond
Bauer, issuers, they were still attractive to investors given the
Chairman of continued low rate of inflation.
the Board of During the first part of the year, concern about the
THE FUND inflationary potential of vigorous economic growth rendered
APPEARS HERE] bond market participants relatively cautious, as investors
expected the Federal Reserve Board (the Fed) to raise
interest rates to cool the expansion. Late in 1997, the focus
turned to the potential negative impact of Asia's financial
crisis in the U.S. and abroad. Expectations performed an
about face, and fixed-income markets rallied in anticipation
that the Fed would lower rates to counteract the dampening
effects from the Far East situation. The rally in
fixed-income markets was reflected in the yield on the benchmark 30-year U.S.
Treasury Bond, which fell from 6.27% just prior to the Hong Kong stock market
plunge on October 27 to 5.92% on December 31, 1997.
Municipal bonds participated in the rally and finished strongly in 1997. As
interest rates fell, more new municipal bonds entered the market, ending a
long-standing drought in new-issue supply and increasing liquidity.
By the close of the fiscal year, the much-anticipated economic slowdown had
yet to arrive. Municipal-bond and Treasury yields, which had continued their
downward spiral in January, headed upward in February as the chance of the Fed's
lowering rates was pushed further into the future. Just as the reporting period
closed, the Fed chose to leave the benchmark federal funds rate at 5.50%,
unchanged for a full 12 months. The yield on the 30-year U.S. Treasury Bond
stood at 5.93%, about the same as at the beginning of the quarter.
The following pages feature an interview with your Fund's managers. They
discuss their investment strategies, how your Fund performed in this context,
and their outlook for the future.
EDUCATION EVENT WILL OFFER INVESTORS A REVIEW OF INVESTMENT POSSIBILITIES
AIM has always championed investor education, convinced that a more
knowledgeable shareholder is a better customer. At AIM, we strongly believe
every investor is well served by fundamental information about the saving and
investing choices offered by the marketplace. A great deal of investment
information will be available during an upcoming event that we hope our
shareholders will participate in and learn from to the greatest extent possible.
The event concerns citizens' financial planning for retirement, a subject of
growing urgency as the population ages and the solvency of the Social Security
system is increasingly debatable.
The first National Summit on Retirement Savings will be held at the White
House in June. Under the auspices of the Department of Labor working through
public/private partnership, the summit's goal is to advance the public's
knowledge of retirement savings through development of a broad-based education
program and to develop recommendations for public/private action that would
promote private retirement savings among American workers. We encourage you to
look for further information on this White House summit in the national and
local press.
We are pleased to send you this report on your AIM Fund. Please contact our
Client Services department at 800-959-4246 if you have any questions or
comments. Remember that automated information about your account is available 24
hours a day on the AIM Investor Line, 800-246-5463. Account information and much
more can be accessed through our Web site, at www.aimfunds.com.
-----------------------------------
While yields were low enough
to make the market inviting
for bond issuers,
they were still attractive
to investors given the continued
low rate of inflation.
-----------------------------------
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE> 4
THE MANAGERS' OVERVIEW
MUNICIPAL BONDS ENJOY GOOD YEAR
- --------------------------------------------------------------------------------
A roundtable discussion with the Fund management team for AIM Tax-Exempt Bond
Fund of Connecticut for the fiscal year ended March 31, 1998.
Q. IT WAS GENERALLY A GOOD YEAR FOR BONDS. HOW DID THE FUND PERFORM?
A. Although the strong rally in the bond market lost some of its momentum
toward the end of the reporting period, it was still a good year for
fixed-income investments, including municipal issues. And while bond yields
dropped to their lowest levels in decades, they were still attractive
considering the low rate of inflation. In line with this trend, your Fund
continued to provide solid current income (see chart below), exempt from
federal taxes, while preserving relative stability of net asset value.
For the year ended March 31, 1998, total return was 7.78%. During the
fiscal year, net asset value per share remained within a relatively narrow
range of $10.73 to $11.17, continuing the Fund's history of relative price
stability as illustrated by the accompanying chart. The Fund's net assets
stood at $40.6 million at the end of the reporting period.
Q. WHAT WAS THE IMPACT OF THE LOW-INFLATION ENVIRONMENT ON FIXED-INCOME
SECURITIES?
A. Most types of bonds, including municipal issues, tended to appreciate in
value as the fiscal year progressed because of low inflation and falling
interest rates. For the 12-month period ended March 31, 1998, consumer
prices rose just 1.4% and the Federal Reserve Board (the Fed) left interest
rates unchanged. Borrowing costs actually declined as the year progressed
as it became increasingly evident that inflation was not a serious threat.
Bonds also were given a boost by last summer's agreement to balance the
federal budget and the turmoil that hit world stock markets in the fall.
Investors began shifting more assets into bonds, especially U.S. Treasury
securities, after global stock markets plunged in October following the
Asian currency devaluations. Early in 1998, however, the bond rally began
to lose some of its vigor as the economy continued to grow at a healthy
pace, dampening prospects that the Fed would lower interest rates in the
immediate future.
Q. WHAT WERE THE MAJOR TRENDS IN THE MUNICIPAL BOND MARKET?
A. The municipal-bond market tended to mirror the U.S. Treasury market. When
the U.S. Treasury market rallied strongly in the second half of 1997,
municipal bonds also appreciated in value, although not quite as
dramatically as Treasury issues.
The fiscal year also witnessed an increase in new-issue supply as many
state and local governments rushed to refinance existing debt to take
advantage of falling interest rates. Approximately $267 billion in new
municipal bonds entered the market in 1997, the largest amount in three
years. And some analysts are predicting
================================================================================
FUND PROVIDES ATTRACTIVE INCOME
- --------------------------------------------------------------------------------
As of 3/31/98
30-Day Distribution Rate at NAV 5.00%
Taxable Equivalent Distribution Rate* 8.67%
30-Day SEC Yield at Maximum Offering Price 3.48%
Taxable Equivalent 30-Day SEC Yield* 6.03%
* Assumes highest marginal federal tax rate of 39.6% and Connecticut state
rate of 4.5%.
================================================================================
================================================================================
HISTORY OF NET ASSET VALUE STABILITY
- --------------------------------------------------------------------------------
10/3/89 - 3/31/98
10/3/89 10.00% 9/92 10.66 9/95 10.86
12/89 10.05 12/92 10.65 12/95 11.01
3/90 9.99 3/93 10.88 3/96 10.81
6/90 10.03 6/93 11.08 6/96 10.76
9/90 10.40 9/93 11.33 9/96 10.80
12/90 10.07 12/93 11.29 12/96 10.88
3/91 10.11 3/94 10.69 3/97 10.77
6/91 10.19 6/94 10.63 6/97 10.90
9/91 10.40 9/94 10.58 9/97 11.01
12/91 10.52 12/94 10.34 12/97 11.09
3/92 10.31 3/95 10.71 3/98 11.04
6/92 10.55 6/95 10.77
================================================================================
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
TOP FIVE BOND HOLDINGS
As of 3/31/98, based on total net assets
<TABLE>
<CAPTION>
================================================================================
Coupon Maturity %
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Connecticut State Special Tax 6.50% 10/01/12 4.34
Obligation
2. Connecticut Development Authority 7.25% 10/15/15 4.20
3. Connecticut Health and Education 6.875% 07/01/09 3.81
Facilities Authority
4. Connecticut State Special Tax 6.80% 06/01/03 3.44
Obligation
5. Connecticut State Housing Mortgage 6.30% 11/15/17 3.39
Finance Program
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.
================================================================================
</TABLE>
that $240 billion in new municipal securities could be issued in 1998. We
believe the increase in supply will enhance liquidity in the municipal-bond
market.
Q. HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
A. We emphasized revenue bonds, which are paid with income generated by
various projects such as hospitals, highways, and housing. The
creditworthiness of revenue bonds tends to be less sensitive to the
political environment than that of general obligation bonds, which are paid
with tax dollars. Public opposition to tax hikes is making it increasingly
difficult for state and local governments to raise taxes to support general
obligation bond issues.
We particularly liked revenue bonds for essential services, such as
water and sewer service, gas and electric service, and solid waste
disposal. The demand for these services tends to remain constant regardless
of economic trends.
Q. ARE YOU CONTINUING TO MAINTAIN A HIGH-QUALITY PORTFOLIO?
A. Yes, as of March 31, 1998, the Fund had an average portfolio quality rating
of AA-/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.
Approximately 45% of the portfolio's holdings were securities rated
AAA, and 92% of the portfolio was rated A or better. Credit-enhanced
securities--those backed by insurance or escrowed with U.S. Treasury
securities--comprised about 39% of the portfolio.
Q. HOW DO YOU MANAGE FOR TAX EFFICIENCY?
A. We make every effort to avoid transactions that would result in capital
gains that are not offset by capital losses. For the past five years, the
Fund has paid no taxable capital gains distributions or ordinary income
distributions.
Q. DO YOU BELIEVE A FLAT TAX OR A NATIONAL SALES TAX WILL BE ADOPTED?
A. We believe that tax reform will not resurface as a serious issue until the
presidential election campaign in the year 2000. While there has been much
discussion about such far-reaching proposals as a flat tax or a national
sales tax--two plans that would eliminate the tax-exempt status of
municipal bonds--we don't think either will be adopted for several reasons.
For one, a flat tax could mean higher taxes for most Americans. We also
don't believe Washington would eliminate the tax-advantaged status of
municipal debt at a time when more public spending responsibilities are
being transferred to the state and local level.
Q. WHAT IS YOUR OUTLOOK FOR THE FUTURE?
A. We remain optimistic about bonds, including municipal issues. If the
economy continues to grow at a steady pace and inflation remains low, it
should bode well for fixed-income securities. In Connecticut, the economic
expansion has entered its sixth year, and this trend is expected to
continue in the coming months.
The yields and prices of municipal bonds are attractive in comparison to
taxable U.S. Treasury securities. Consequently, as Treasury supply
diminishes in response to a shrinking federal deficit and more Americans
become subject to higher tax brackets, municipal bonds could gain in
popularity.
If the Fed leaves monetary policy unchanged in the months ahead, we
expect bond yields to remain within a relatively narrow range around their
current levels. If yields rise, however, we are prepared to take advantage
of such a trend by investing in higher income-generating securities.
================================================================================
PORTFOLIO COMPOSITION
As of 3/31/98, based on total assets
- --------------------------------------------------------------------------------
GENERAL OBLIGATION BONDS 16%
CASH/CASH EQUIVALENTS 5%
REVENUE BONDS 79%
NUMBER OF HOLDINGS 67
AVERAGE MATURITY 11.3 Years
DURATION 4.3 Years
================================================================================
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 10/3/89-3/31/98. 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
3/31/89 - 3/31/98
- --------------------------------------------------------------------------------
AIM TAX-EXEMPT BOND LEHMAN BROTHERS
FUND OF CONNECTICUT MUNICIPAL BOND INDEX
- --------------------------------------------------------------------------------
10/3/89 $9,524 $10,000
3/31/90 9,789 10,431
3/31/91 10,613 11,393
3/31/92 11,622 12,532
3/31/93 13,082 14,102
3/31/94 13,560 14,429
3/31/95 14,345 15,501
3/31/96 15,240 16,801
3/31/97 15,977 17,717
3/31/98 17,219 19,618
================================================================================
Past performance cannot guarantee comparable future results.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 3/31/98, including sales charges
Inception (10/3/89) 6.61%
5 Years 4.63
1 Year 2.63*
*7.78% 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, 1998
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS-95.44%
EDUCATION-10.48%
Connecticut Health and
Education Facilities
Authority (Fairfield
University); Series F RB
6.875%, 07/01/09 BBB+ Baa1 $ 1,475 $ 1,543,779
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Quinnipiac College); RB
4.90%, Series D,
07/01/98 BBB- - 100 100,097
- ------------------------------------------------------------------
7.25%, Series 1989 B,
07/01/99(b)(c) AAA NRR 450 477,531
- ------------------------------------------------------------------
Connecticut Regional
School District No. 5;
Series 1992 GO
6.00%, 03/01/12(d) AAA Aaa 335 355,964
- ------------------------------------------------------------------
Connecticut Regional
School District No. 5
(Towns of Bethany,
Orange and Woodbridge);
1993 Issue GO
5.50%, 02/15/07(d) AAA Aaa 500 530,785
- ------------------------------------------------------------------
Connecticut State Higher
Education Supplemental
Loan Authority (Family
Education Loan Program);
Series 1990 A RB
7.50%, 11/15/10(e) - A1 1,205 1,244,476
- ------------------------------------------------------------------
4,252,632
- ------------------------------------------------------------------
ELECTRIC-4.24%
Connecticut Development
Authority (Connecticut
Power & Light Co.);
Series 1993 A PCR
3.65%, 09/01/28(g) A-1+ VMIG-1 15 15,000
- ------------------------------------------------------------------
Connecticut Development
Authority (New England
Power Co.); Series 1985
Fixed Rate PCR
7.25%, 10/15/15 A+ A1 1,600 1,703,200
- ------------------------------------------------------------------
1,718,200
- ------------------------------------------------------------------
GENERAL OBLIGATION-12.30%
Bridgeport (Town of),
Connecticut; Series A
Unlimited GO
6.00%, 09/01/06(d) AAA Aaa 875 971,198
- ------------------------------------------------------------------
Brooklyn (City of),
Connecticut; Unlimited
Tax GO
5.50%, 05/01/06(d) AAA Aaa 250 267,813
- ------------------------------------------------------------------
5.70%, 05/01/08(d) AAA Aaa 250 270,540
- ------------------------------------------------------------------
Chester (Town of),
Connecticut; Series 1989
GO
7.00%, 10/01/05 - A 190 200,657
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GENERAL OBLIGATION-(CONTINUED)
Connecticut (State of);
Series 1991 A GO
6.75%, 03/01/01(b)(c) NRR NRR $ 480 $ 522,384
- ------------------------------------------------------------------
Connecticut (State of)
(General Purpose Public
Improvement); GO
6.75%, Series 1991 A,
03/01/01(b)(c) NRR NRR 200 217,660
- ------------------------------------------------------------------
6.50%, Series 1992 A,
03/15/02(b)(c) NRR NRR 300 329,955
- ------------------------------------------------------------------
5.25%, Series 1972 Fixed
Rate, 07/01/02 AA- Aa3 190 190,163
- ------------------------------------------------------------------
Mansfield (City of),
Connecticut; Series 1990
GO
6.00%, 06/15/07 - A1 100 110,634
- ------------------------------------------------------------------
6.00%, 06/15/08 - A1 100 111,029
- ------------------------------------------------------------------
6.00%, 06/15/09 - A1 100 112,325
- ------------------------------------------------------------------
New Britain (City of),
Connecticut; Series 1992
Various Purpose GO
6.00%, 02/01/11(d) AAA Aaa 400 450,876
- ------------------------------------------------------------------
North Canaan (City of),
Connecticut; Series 1991
GO
6.50%, 01/15/08 - A 125 144,170
- ------------------------------------------------------------------
6.50%, 01/15/09 - A 125 144,540
- ------------------------------------------------------------------
6.50%, 01/15/10 - A 125 144,676
- ------------------------------------------------------------------
6.50%, 01/15/11 - A 125 144,208
- ------------------------------------------------------------------
Somers (City of),
Connecticut; Series 1990
Various Purpose GO
6.00%, 12/01/10 - A1 190 213,934
- ------------------------------------------------------------------
Westbrook (City of),
Connecticut; Series 1992
GO
6.40%, 03/15/10(d) AAA Aaa 380 441,188
- ------------------------------------------------------------------
4,987,950
- ------------------------------------------------------------------
HEALTH CARE-16.62%
Connecticut Health and
Education Facilities
Authority
(Bridgeport Hospital);
1992 Series A RB
6.625%, 07/01/18(d) AAA Aaa 500 549,275
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Capital Asset);
Series 1989 B RB
7.00%, 01/01/00(f) A A1 200 209,204
- ------------------------------------------------------------------
</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
(Danbury Hospital); 1991
Series E RB
6.50%, 07/01/14(d) AAA Aaa $ 750 $ 810,570
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Hospital For Special
Care); Series 1997 B RB
5.375%, 07/01/17 BBB Baa2 1,000 992,210
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Middlesex Hospital);
1992 Series G RB
6.25%, 07/01/02(b)(c) AAA Aaa 1,100 1,190,409
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(New Britain Memorial
Hospital); Series 1991 A
RB
7.75%, 07/01/02(b)(c) NRR NRR 500 577,740
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (Stamford
Hospital); Series F RB
5.40%, 07/01/09(d) AAA Aaa 1,000 1,061,330
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (Veteran
Memorial Medical
Center); Series 1996 A
RB
5.50%, 07/01/26(d) AAA Aaa 500 511,750
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (Yale-New
Haven Hospital); Series
1990 F RB
7.10%, 07/01/00(b)(c) AAA Aaa 775 840,193
- ------------------------------------------------------------------
6,742,681
- ------------------------------------------------------------------
HOUSING-13.50%
Connecticut Housing
Development Authority
(Housing Mortgage
Finance Program); RB
7.00%, Series 1991 A-1,
11/15/09 AA Aa2 450 482,135
- ------------------------------------------------------------------
6.55%, Series 1991 C,
Sub-Series C-3,
11/15/13 AA Aa2 310 332,112
- ------------------------------------------------------------------
7.00%, Series C,
11/15/99(e) AA Aa 320 330,550
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
Connecticut (State of)
(Housing
Mortgage Finance Program); RB
6.00%, Series 1993 E-1,
05/15/17 AA Aa $ 675 $ 707,258
- ------------------------------------------------------------------
5.95%, Series E-1,
05/15/17 AA Aa2 500 532,785
- ------------------------------------------------------------------
6.30%, Series C-1,
11/15/17 AA Aa 1,270 1,373,530
- ------------------------------------------------------------------
6.25%, Series C-2,
11/15/18 AA Aa2 750 810,675
- ------------------------------------------------------------------
6.70%, Series C-2,
11/15/22(e) AA Aa2 365 393,415
- ------------------------------------------------------------------
5.85%, Series C-2,
11/15/28(e) AA Aa3 500 513,110
- ------------------------------------------------------------------
5,475,570
- ------------------------------------------------------------------
LEASE RENTAL-1.07%
Connecticut (State of)
(Middletown Courthouse
Facilities Project);
1991 Issue Lease-Rental
Revenue Certificates of
Participation
6.25%, 12/15/10(d) AAA Aaa 400 431,932
- ------------------------------------------------------------------
RESOURCE RECOVERY-5.53%
Connecticut State Resource
Recovery Authority
(American Ref-Fuel
Co.-Southeastern
Connecticut Project);
Series 1988 A RB
8.00%, 11/15/15(e) AA- Baa1 500 527,300
- ------------------------------------------------------------------
Connecticut State Resource
Recovery Authority
(Bridgeport Resco
Corp.-Ltd. Partners);
1985 Issue RB
8.625%, Project B,
01/01/04 A A 670 685,913
- ------------------------------------------------------------------
7.625%, Project A,
01/01/09 A A 1,000 1,030,000
- ------------------------------------------------------------------
2,243,213
- ------------------------------------------------------------------
TRANSPORTATION-18.93%
Connecticut State Special
Tax Obligation
(Transportation
Infrastructure); RB
5.10%, Series 1992 B,
09/01/99 AA- A1 1,000 1,017,800
- ------------------------------------------------------------------
6.25%, Series 1991 B,
10/01/01(b)(c) NRR Aaa 1,000 1,086,680
- ------------------------------------------------------------------
6.80%, Series A,
06/01/03(b)(c) NRR NRR 1,250 1,396,225
- ------------------------------------------------------------------
6.50%, Series 1991 B,
10/01/10 AA- A1 530 623,227
- ------------------------------------------------------------------
3.65%, Series 1990 I,
12/01/10(g) A-1+ VMIG-1 235 235,000
- ------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<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(b) AA- Aaa $ 1,000 $ 1,029,490
- ------------------------------------------------------------------
6.80%, Series 1989 C,
12/01/99(b)(c) AAA NRR 500 532,865
- ------------------------------------------------------------------
6.50%, Series 1991 B,
10/01/12 AA- A1 1,500 1,758,945
- ------------------------------------------------------------------
7,680,232
- ------------------------------------------------------------------
WATER & SEWER-8.95%
Connecticut Development
Authority (Pfizer Inc.);
Series 1982 Refunding
PCR
6.55%, 02/15/13 AAA Aaa 250 275,335
- ------------------------------------------------------------------
Connecticut Development
Authority Water Facility
(Bridgeport Hydraulic
Co. Project); Refunding
RB
7.25%, Series 1990,
06/01/20 A+ - 800 861,008
- ------------------------------------------------------------------
6.15%, 04/01/35(e) A+ - 250 266,500
- ------------------------------------------------------------------
Connecticut State Clean
Water Fund; Series 1991
Clean Water RB
7.00%, 01/01/11 AAA Aaa 1,100 1,201,585
- ------------------------------------------------------------------
Manchester (City of)
Connecticut Eighth
Utilities Fire District;
Series 1991 GO
6.75%, 08/15/06 - Aa3 180 207,286
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WATER & SEWER-(CONTINUED)
South Central Connecticut
Regional Water
Authority; Eighth Series
1990 A Water System RB
6.60%, 08/01/00(b)(c) NRR NRR $ 250 $ 268,560
- ------------------------------------------------------------------
South Central Connecticut
Regional Water
Authority; Series 1988
Water System RB
6.80%, 08/01/98(b)(c) NRR NRR 535 550,954
- ------------------------------------------------------------------
3,631,228
- ------------------------------------------------------------------
MISCELLANEOUS-3.82%
Connecticut Development
Authority (Economic
Development Projects);
1992 Series Refunding
Bonds
6.00%, 11/15/08 AA- Aa 500 523,085
- ------------------------------------------------------------------
Guam (Government of);
Series 1995 A GO
5.25%, 09/01/99 BBB - 250 252,490
- ------------------------------------------------------------------
5.375%, 09/01/00 BBB - 250 252,298
- ------------------------------------------------------------------
Puerto Rico Commonwealth
(Highway and
Transportation
Authority); Series X RB
5.20%, 07/01/03 A Baa1 500 523,520
- ------------------------------------------------------------------
1,551,393
- ------------------------------------------------------------------
TOTAL INVESTMENTS-95.44% 38,715,031(h)
- ------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-4.56% 1,851,523
- ------------------------------------------------------------------
NET ASSETS-100.00% $40,566,554
==================================================================
</TABLE>
ABBREVIATIONS:
<TABLE>
<S> <C>
GO - General Obligation Bonds
NRR - Not re-rated
PCR - Pollution Control Revenue Bonds
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") . 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 by the issuer. Market
value and maturity date reflect such call or put.
(d) Secured by bond insurance.
(e) Security subject to alternative minimum tax.
(f) Secured by a letter of credit.
(g) Demand security; payable upon demand by the Fund at specified time
intervals no greater than thirteen months. Interest rate is
redetermined periodically. Rate shown is the rate in effect on
03/31/98.
(h) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
7
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$36,201,660) $ 38,715,031
- ---------------------------------------------------------
Cash 18,763
- ---------------------------------------------------------
Receivables for:
Capital stock sold 1,304,788
- ---------------------------------------------------------
Interest 716,571
- ---------------------------------------------------------
Investment for deferred compensation plan 18,177
- ---------------------------------------------------------
Other assets 3,239
- ---------------------------------------------------------
Total assets 40,776,569
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 67,320
- ---------------------------------------------------------
Dividends 66,493
- ---------------------------------------------------------
Deferred compensation 18,177
- ---------------------------------------------------------
Accrued advisory fees 11,167
- ---------------------------------------------------------
Accrued administrative services fees 3,749
- ---------------------------------------------------------
Accrued transfer agent fees 2,110
- ---------------------------------------------------------
Accrued distribution fees 24,283
- ---------------------------------------------------------
Accrued operating expenses 16,716
- ---------------------------------------------------------
Total liabilities 210,015
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $ 40,566,554
- ---------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Authorized 1,000,000,000
- ---------------------------------------------------------
Outstanding 3,673,346
=========================================================
Net asset value and redemption price per
share $ 11.04
=========================================================
Offering price per share:
(Net asset value of $11.04
divided by 95.25%) $ 11.59
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $2,277,828
========================================================
EXPENSES:
Advisory fees 193,137
- --------------------------------------------------------
Administrative services fees 46,188
- --------------------------------------------------------
Custodian fees 3,464
- --------------------------------------------------------
Transfer agent fees 25,913
- --------------------------------------------------------
Directors' fees 8,111
- --------------------------------------------------------
Distribution fees 96,569
- --------------------------------------------------------
Other 52,663
- --------------------------------------------------------
Total expenses 426,045
- --------------------------------------------------------
Less: Fees waived by advisor (86,950)
- --------------------------------------------------------
Net expenses 339,095
- --------------------------------------------------------
Net investment income 1,938,733
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
SECURITIES:
Net realized gain on sales of investment
securities 42,016
- --------------------------------------------------------
Net unrealized appreciation of investment
securities 921,449
- --------------------------------------------------------
Net gain on investment securities 963,465
- --------------------------------------------------------
Net increase in net assets resulting from
operations $2,902,198
========================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,938,733 $ 2,015,395
- -----------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities 42,016 (111,639)
- -----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities 921,449 (75,618)
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,902,198 1,828,138
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (1,940,749) (1,983,768)
- -----------------------------------------------------------------------------------------
Net increase (decrease) from capital stock transactions 1,486,630 (1,081,336)
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets 2,448,079 (1,236,966)
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 38,118,475 39,355,441
- -----------------------------------------------------------------------------------------
End of period $40,566,554 $38,118,475
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $38,229,116 $36,742,486
- -----------------------------------------------------------------------------------------
Undistributed net investment income 34,688 36,704
- -----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (210,621) (252,637)
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 2,513,371 1,591,922
- -----------------------------------------------------------------------------------------
$40,566,554 $38,118,475
=========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Tax-Exempt Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Company is organized as a Maryland corporation
consisting of four separate portfolios: AIM Tax-Exempt Bond Fund of Connecticut,
AIM High Income Municipal Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free
Intermediate Fund. Matters affecting each portfolio are voted on exclusively by
the shareholders of such portfolio. The assets, liabilities and operations of
each portfolio are accounted for separately. Information presented in these
financial statements pertains only to AIM Tax-Exempt 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 preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations--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 income. Such dividends are paid
monthly. Net realized capital gains (including net short-term capital gains
and market discounts), if any, are distributed annually.
9
<PAGE> 12
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 $211,744, 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. 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, 1998, AIM
voluntarily waived advisory fees of $86,950.
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, 1998, the Fund reimbursed
AIM $46,188 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, 1998, the Fund
paid AFS $17,902 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 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, 1998, the Fund paid AIM
Distributors $96,569 as compensation under the Plan.
AIM Distributors received commissions of $29,650 from sales of shares of the
Fund's capital stock during the year ended March 31, 1998. 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. Certain officers and directors of the
Company are officers of AIM, AFS and AIM Distributors.
During the year ended March 31, 1998, the Fund paid legal fees of $3,296 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) $500,000,000 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.
Prior to an amendment of the line of credit on July 15, 1997, the Fund was
limited to borrowing up to the lesser of i) $325,000,000 or ii) the limits set
by its prospectus for borrowings. During the year ended March 31, 1998, 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 0.05% 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, 1998 were $2,164,955 and
$1,908,400, respectively. The amount of unrealized appreciation (depreciation)
of investment securities as of March 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $2,514,177
- --------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (806)
- --------------------------------------------------------
Net unrealized appreciation of investment
securities $2,513,371
========================================================
</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, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sold 542,798 $ 5,974,834 522,830 $ 5,656,859
- ------------------- -------- ----------- -------- -----------
Issued as
reinvestment of
dividends 111,509 1,225,791 115,643 1,250,693
- ------------------- -------- ----------- -------- -----------
Reacquired (520,818) (5,713,995) (739,882) (7,988,888)
- ------------------- -------- ----------- -------- -----------
133,489 $ 1,486,630 (101,409) $(1,081,336)
=================== ======== =========== ======== ===========
</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 four-year period ended March 31,
1998, the three months ended March 31, 1994 and the year ended December 31,
1993.
<TABLE>
<CAPTION>
MARCH 31,
----------------------------------------------------------- DECEMBER 31,
1998 1997 1996 1995 1994 1993
------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.77 $ 10.81 $ 10.71 $ 10.69 $ 11.29 $ 10.65
- ------------------------------------------------ ------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.55 0.56 0.56 0.56 0.15 0.60
- ------------------------------------------------ ------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 0.27 (0.05) 0.10 0.04 (0.61) 0.65
- ------------------------------------------------ ------- -------- -------- -------- -------- --------
Total from investment operations 0.82 0.51 0.66 0.60 (0.46) 1.25
- ------------------------------------------------ ------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.55) (0.55) (0.56) (0.57) (0.14) (0.60)
- ------------------------------------------------ ------- -------- -------- -------- -------- --------
Distributions from net realized gains -- -- -- -- -- (0.01)
- ------------------------------------------------ ------- -------- -------- -------- -------- --------
Returns of capital -- -- -- (0.01) -- --
- ------------------------------------------------ ------- -------- -------- -------- -------- --------
Total distributions (0.55) (0.55) (0.56) (0.58) (0.14) (0.61)
================================================ ======= ======== ======== ======== ======== ========
Net asset value, end of period $ 11.04 $ 10.77 $ 10.81 $ 10.71 $ 10.69 $ 11.29
================================================ ======= ======== ======== ======== ======== ========
Total return(a) 7.78% 4.84% 6.24% 5.78% (4.06)% 11.99%
================================================ ======= ======== ======== ======== ======== ========
Ratio/supplemental data:
Net assets, end of period (000s omitted) $40,567 $ 38,118 $ 39,355 $ 38,289 $ 42,361 $ 46,224
================================================ ======= ======== ======== ======== ======== ========
Ratio of expenses to average net assets(b) 0.88%(c) 0.72% 0.66% 0.55% 0.50%(d) 0.34%
================================================ ======= ======== ======== ======== ======== ========
Ratio of net investment income to average net
assets(b) 5.02%(c) 5.18% 5.16% 5.37% 5.32%(d) 5.42%
================================================ ======= ======== ======== ======== ======== ========
Portfolio turnover rate 5% 17% 17% 7% 2% 5%
================================================ ======= ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements are
1.11%, 1.09%, 1.16%, 1.13%, 1.23% (annualized), and 1.30%, for the periods
1998-93, respectively. Ratios of net investment income to average net assets
prior to fee waivers and/or expense reimbursements are 4.79%, 4.81%, 4.66%,
4.79%, 4.59% (annualized), and 4.45%, for the periods 1998-93, respectively.
(c) Ratios are based on average daily net assets of $38,627,413.
(d) 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, 1998, 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 four-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 and the financial highlights. Our procedures included confirmation of
securities owned as of March 31, 1998, 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 on Connecticut as of March 31, 1998, 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 four-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 1, 1998
12
<PAGE> 15
Directors & Officers
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II TRANSFER AGENT
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
Director, AEGEON USA; CUSTODIAN
Formerly Vice Chairman and President, Stuart W. Coco
Mercantile-Safe Deposit & Trust Co.; and Vice President The Bank of New York
President, Mercantile Bankshares 90 Washington Street
Melville B. Cox 11th Floor
Jack Fields Vice President New York, NY 10286
Chief Executive Officer
Texana Global, Inc.; Karen Dunn Kelley COUNSEL TO THE FUND
Formerly Member Vice President
of the U.S. House of Representatives Ballard Spahr
Renee A. Bamford Andrews & Ingersoll, LLP
Carl Frischling Assistant Secretary 1735 Market Street
Partner Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel P. Michelle Grace
Assistant Secretary COUNSEL TO THE DIRECTORS
Robert H. Graham
President and Chief Executive Officer Jeffrey H. Kupor Kramer, Levin, Naftalis & Frankel
A I M Management Group Inc. Assistant Secretary 919 Third Avenue
New York, NY 10022
John F. Kroeger Nancy L. Martin
Formerly Consultant Assistant Secretary DISTRIBUTOR
Wendell & Stockel Associates, Inc.
Ofelia M. Mayo A I M Distributors, Inc.
Lewis F. Pennock Assistant Secretary 11 Greenway Plaza
Attorney Suite 100
Lisa A. Moss Houston, TX 77046
Ian W. Robinson Assistant Secretary
Consultant; Formerly Executive AUDITORS
Vice President and Kathleen J. Pflueger
Chief Financial Officer Assistant Secretary KPMG Peat Marwick LLP
Bell Atlantic Management 700 Louisiana
Services, Inc. Samuel D. Sirko Houston, TX 77002
Assistant Secretary
Louis S. Sklar
Executive Vice President Stephen I. Winer
Hines Interests Assistant Secretary
Limited Partnership
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
We are required by Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end as to the federal tax status of dividends paid by the
Fund during its fiscal year ended March 31, 1998.
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,
1998. Of this amount, 100% qualified as tax-exempt interest dividends for
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 Asian Growth Fund
AIM Capital Development Fund
AIM Constellation Fund
AIM European Development Fund
AIM Global Aggressive Growth Fund
GROWTH OF CAPITAL
AIM Advisor International Value Fund
AIM Blue Chip Fund
AIM Global Growth Fund
AIM International Equity Fund
Aim Select Growth Fund
AIM Value Fund
[PHOTO OF AIM Weingarten Fund
11 GREENWAY PLAZA
APPEARS HERE] GROWTH AND INCOME OR INCOME WITH CAPITAL GROWTH
AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund
AIM Charter Fund
AIM Global Utilities Fund
HIGH CURRENT INCOME OR CURRENT INCOME
AIM High Yield Fund
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM High Income Municipal Fund
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Fund
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund
A I M Management Group Inc. has provided leadership in the AIM Money Market Fund
mutual fund industry since 1976 and managed approximately AIM Tax-Exempt Cash Fund
$89 billion in assets for more than 3.9 million
shareholders, including individual investors, corporate *AIM Aggressive Growth Fund was closed to new investors
clients, and financial institutions as of March 31, 1998. on June 5, 1997. For more complete information about any AIM
The AIM Family of Funds--Registered Trademark-- is Fund(s), including sales charges and expenses, ask your
distributed nationwide, and AIM today ranks among the financial consultant or securities dealer for a free
nation's top 15 mutual fund companies in assets under prospectus(es). Please read the prospectus(es) carefully before
management, according to Lipper Analytical Services, Inc. you invest or send money.
INVEST WITH DISCIPLINE-SM-
</TABLE>
