<PAGE> 1
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
AIM TAX-EXEMPT FUNDS, INC.
AIM TAX-EXEMPT CASH FUND
AIM TAX-FREE INTERMEDIATE FUND
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
PROSPECTUS
JULY 29, 1998
AIM Tax-Exempt Funds, Inc. (the "Company") is designed for investors
seeking income which is exempt from federal income taxes and, for
investments in one portfolio of the Company, Connecticut taxes. This
Prospectus contains information about the three mutual funds listed
below (the "Funds"), which are separate series portfolios of the
Company.
AIM TAX-EXEMPT CASH FUND: The Fund's investment objective is to earn
the highest level of current income free from federal income taxes
that is consistent with safety of principal and liquidity. AN
INVESTMENT IN AIM TAX-EXEMPT CASH FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT
THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
AIM TAX-FREE INTERMEDIATE FUND: The Fund's investment objective is to
generate as high a level of tax-exempt income as is consistent with
preservation of capital by investing in high quality,
intermediate-term municipal securities having a maturity of ten and
one-half years or less.
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT: The Fund's investment
objective is to earn a high level of current 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 FUND
MAY INVEST IN LOWER RATED DEBT SECURITIES, COMMONLY REFERRED TO AS
"JUNK BONDS." JUNK BONDS ARE CONSIDERED TO BE SPECULATIVE WITH REGARD
TO THE PAYMENT OF INTEREST AND RETURN OF PRINCIPAL. PURCHASERS SHOULD
CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THIS
FUND. FOR A DISCUSSION OF CERTAIN RISK FACTORS ASSOCIATED WITH THE
FUND, SEE "AIM TAX-EXEMPT BOND FUND OF CONNECTICUT -- QUALITY
STANDARDS" UNDER "INVESTMENT PROGRAM."
This Prospectus sets forth basic information that a prospective investor
should know about the Funds before investing. It should be read and
retained for future reference. A Statement of Additional Information,
dated July 29, 1998, has been filed with the United States Securities
and Exchange Commission (the "SEC") and is incorporated herein by
reference. The Statement of Additional Information is available without
charge upon written request to the Company at P.O. Box 4739, Houston,
Texas 77210-4739 or by calling (800) 347-4246. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information
regarding the Company. Additional information about the Funds may also
be obtained on the Web at http://www.aimfunds.com.
THE FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE FUNDS' SHARES ARE NOT FEDERALLY INSURED
OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF
THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
SUMMARY.................................... 2 How to Purchase Shares................ A-1
THE FUNDS.................................. 3 Terms and Conditions of Purchase of
Table of Fees and Expenses............... 3 the AIM Funds...................... A-2
Financial Highlights..................... 4 Special Plans......................... A-9
Performance.............................. 7 Exchange Privilege.................... A-11
Investment Program....................... 7 How to Redeem Shares.................. A-13
Management............................... 13 Determination of Net Asset Value...... A-17
Organization of the Company.............. 15 Dividends, Distributions and Tax
INVESTOR'S GUIDE TO THE AIM Matters............................ A-18
FAMILY OF FUNDS--Registered Trademark--.. A-1 General Information................... A-20
Introduction to The AIM Family of APPENDIX................................ A-21
Funds................................. A-1 APPLICATION INSTRUCTIONS................ B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUNDS. AIM Tax-Exempt Funds, Inc. (the "Company") is a Maryland
corporation organized as an open-end series management investment company.
Currently, the Company has four separate series portfolios. This Prospectus
relates solely to the Class A shares of three portfolios, which are: AIM
TAX-EXEMPT CASH FUND, AIM TAX-FREE INTERMEDIATE FUND and AIM TAX-EXEMPT BOND
FUND OF CONNECTICUT (collectively, the "Funds"). The Company also offers other
classes of shares in one other investment portfolio, AIM HIGH INCOME MUNICIPAL
FUND, which pursues a unique investment objective. Shares of the other Portfolio
of the Company have different sales charges and expenses, which may affect
performance. To obtain information about the other Portfolio of the Company call
(800) 347-4246.
MANAGEMENT. A I M Advisors, Inc. ("AIM") serves as the Funds' investment
advisor pursuant to a Master Investment Advisory Agreement (the "Advisory
Agreement"). AIM, together with its subsidiaries, manages or advises
approximately 90 investment company portfolios encompassing a broad range of
investment objectives. Under the terms of the Advisory Agreement, AIM supervises
all aspects of each Fund's operations and provides investment advisory services
to each Fund. As compensation for these services, AIM receives a fee based on
the respective average daily net assets of each Fund. Under a Master
Administrative Services Agreement, AIM may be reimbursed by each Fund for its
costs of performing, or arranging for the performance of, certain accounting and
other administrative services for the Funds. Under a Transfer Agency and Service
Agreement, A I M Fund Services, Inc. ("AFS"), AIM's wholly owned subsidiary and
a registered transfer agent, receives a fee for its provision of transfer
agency, dividend distribution and disbursement, and shareholder services to the
Funds.
PURCHASING SHARES. Class A shares of AIM TAX-EXEMPT CASH FUND are offered
by this Prospectus at net asset value. Class A shares of AIM TAX-FREE
INTERMEDIATE FUND are offered by this Prospectus at net asset value plus a
maximum sales charge of 1% of the public offering price per share, which sales
charge is reduced on purchases of $100,000 or more. Class A shares of AIM TAX-
EXEMPT BOND FUND OF CONNECTICUT are offered by this Prospectus at net asset
value plus a maximum sales charge of 4.75% of the public offering price, which
sales charge is reduced on purchases of $50,000 or more. Initial investments in
each Fund generally must be at least $500, and subsequent investments must be at
least $50. The distributor of the Funds' shares is A I M Distributors, Inc.
("AIM Distributors"), P.O. Box 4739, Houston, Texas 77210-4739. See "How to
Purchase Shares" and "Special Plans."
EXCHANGE PRIVILEGE. The Funds are among those mutual funds distributed by
AIM Distributors (collectively, "The AIM Family of Funds"). Shares of the Funds
may be exchanged for shares of other funds in The AIM Family of Funds in the
manner and subject to the policies and charges set forth herein. See "Exchange
Privilege."
REDEEMING SHARES. Shareholders may redeem all or a portion of their shares
at net asset value, generally without charge. A contingent deferred sales charge
of 1% may apply to certain redemptions of shares of AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, where purchases of $1 million or more are made at net asset value.
See "How To Redeem Shares."
DISTRIBUTIONS. Dividends from net investment income are declared daily and
paid monthly, and distributions from net capital gains, if any, are paid
annually, although AIM TAX-EXEMPT CASH FUND may pay distributions of short-term
capital gains more frequently. Dividends and distributions paid by a Fund may be
reinvested at their net asset value (without payment of a sales charge) in the
Fund's shares or, subject to certain conditions, in shares of another fund in
The AIM Family of Funds. See "Dividends, Distributions and Tax Matters" and
"Special Plans."
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM Link, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos and La Familia AIM de Fondos and Design are registered
service marks and Invest With Discipline and AIM Bank Connection are service
marks of A I M Management Group Inc.
2
<PAGE> 3
THE FUNDS
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor in the Funds understand
the various costs that an investor will bear, both directly and indirectly. The
fees and expenses set forth in the table are based on expenses of the Funds for
the most recent fiscal year, except where they have been restated to reflect
current fee waivers. In addition, the rules of the SEC require that the maximum
sales charge be reflected in the table, even though certain investors may
qualify for reduced sales charges. See "How to Purchase Shares."
<TABLE>
<CAPTION>
AIM
AIM AIM TAX-EXEMPT
TAX-EXEMPT TAX-FREE BOND FUND
CASH INTERMEDIATE OF
FUND FUND CONNECTICUT
---- ---- -----------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on purchases of shares (as
a % of offering price)............................ None 1.00% 4.75%
Maximum sales load on reinvested dividends and
distributions..................................... None None None
Deferred sales load.................................. None None None*
Redemption fees...................................... None None None
Exchange fee......................................... None None None
Annual Operating Expenses (as a % of average net
assets)
Management fees...................................... 0.35% 0.30% 0.40%**
Rule 12b-1 distribution plan payments................ 0.10%** None 0.25%
Other expenses....................................... 0.38% 0.15% 0.35%
---- ---- ----
Total fund operating expenses................ 0.83%** 0.45% 1.00%**
==== ==== ====
</TABLE>
- ------------
* Purchases of $1 million or more are not subject to an initial sales charge.
However, a contingent deferred sales charge of 1% applies to certain
redemptions made within 18 months from the date such shares were purchased.
See the Investor's Guide, under the caption "How to Redeem
Shares -- Contingent Deferred Sales Charge Program for Large Purchases."
** After fee waivers. With respect to AIM TAX-EXEMPT CASH FUND, absent a
partial fee waiver, Rule 12b-1 distribution plan payments would have been
0.25% and total fund operating expenses would have been 0.98%. With respect
to AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, absent a partial fee waiver,
management fees would have been 0.50% and total fund operating expenses
would have been 1.10%.
EXAMPLES. An investor in each of the Funds would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual return and (2) redemption at
the end of each time period:
<TABLE>
<CAPTION>
AIM
AIM AIM TAX-EXEMPT
TAX-EXEMPT TAX-FREE BOND FUND
CASH INTERMEDIATE OF
FUND FUND CONNECTICUT
---- ---- -----------
<S> <C> <C> <C>
1 Year......................................... $ 8 $15 $ 57
3 Years........................................ $ 26 $24 $ 77
5 Years........................................ $ 46 $35 $100
10 Years....................................... $103 $66 $164
</TABLE>
As a result of 12b-1 distribution plan payments, a long-term shareholder of
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT may pay more than the economic
equivalent of the maximum front-end sales charges permitted by rules of the
National Association of Securities Dealers, Inc. Given the maximum front-end
sales charge and 12b-1 distribution plan payments applicable to shares of AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM estimates that it would require a
substantial number of years to exceed the maximum permissible front-end sales
charges.
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED TO BE REPRESENTATIVE OF THE
FUNDS' ACTUAL OR FUTURE EXPENSES, WHICH MAY BE GREATER OR LESS THAN THOSE SHOWN.
In addition, while the examples assume a 5% annual return, the Funds' actual
performance will vary and may result in an actual return that is greater or less
than 5%.The examples assume reinvestment of all dividends and distributions and
that the percentage amounts for total operating expenses remain the same for
each year. The examples assume payment of a sales charge at the time of purchase
(if applicable); actual expenses may vary for purchases of $1 million or more
which are made at net asset value and are subject to a contingent deferred sales
charge for 18 months following the end of the calendar month of purchase.
3
<PAGE> 4
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
AIM TAX-EXEMPT CASH FUND*
Shown below are the condensed financial highlights for the four years ended
March 31, 1998, 1997, 1996 and 1995, the three months ended March 31, 1994 and
the year ended December 31, 1993, which have been audited by KPMG Peat Marwick
LLP, independent auditors, whose reports thereon were unqualified. The condensed
financial highlights shown below for periods prior to the period ended December
31, 1993 was derived from financial statements audited by other independent
public accountants. The report of KPMG Peat Marwick LLP, independent auditors,
for the fiscal year ended March 31, 1998 is included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------------------------------------------------------- -------------------
1998 1997 1996 1995 1994 1993 1992(a)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income.................. 0.03 0.03 0.03 0.03 0.004 0.02 0.02
------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income... (0.03) (0.03) (0.03) (0.03) (0.004) (0.02) (0.02)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= =======
Total return............................ 3.12% 2.82% 2.92% 2.54% 1.73%(b) 1.78% 2.42%
======= ======= ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $51,934 $56,880 $30,014 $30,365 $33,658 $35,230 $41,291
======= ======= ======= ======= ======= ======= =======
Ratio of expenses to average net
assets............................... 0.83%(c)(d) 1.04%(d) 1.05%(d) 1.01%(d) 1.00%(b)(d) 1.00%(d) 0.98%(d)
======= ======= ======= ======= ======= ======= =======
Ratio of net investment income to
average net assets................... 3.07%(c)(e) 2.78%(e) 2.97%(e) 2.53%(e) 1.75%(b)(e) 1.76%(e) 2.42%(e)
======= ======= ======= ======= ======= ======= =======
<CAPTION>
DECEMBER 31,
-------------------------------------
1991 1990 1989 1988
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income.................. 0.04 0.05 0.05 0.05
------- ------- ------- -------
Less distributions:
Dividends from net investment income... (0.04) (0.05) (0.05) (0.05)
------- ------- ------- -------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total return............................ 3.91% 5.17% 5.62% 4.65%
======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $43,366 $43,302 $45,995 $51,597
======= ======= ======= =======
Ratio of expenses to average net
assets............................... 0.98% 0.99% 0.93% 0.83%
======= ======= ======= =======
Ratio of net investment income to
average net assets................... 3.87% 5.05% 5.48% 4.54%
======= ======= ======= =======
</TABLE>
- ---------------
* On October 15, 1993 the Fund redomesticated from a portfolio of a
Massachusetts business trust to a portfolio of the Company. In addition, on
April 30, 1985 shareholders of the Fund approved a plan of reorganization
whereby the Fund, which was a Maryland corporation, became a portfolio of a
Massachusetts business trust.
(a) The Fund changed investment advisors on June 30, 1992.
(b) Annualized.
(c) Ratios are based on average daily net assets of $52,086,316.
(d) After waiver of fees and/or expense reimbursements. Ratios of expenses to
average net assets prior to waiver of fees and/or expense reimbursements
were 0.98%, 1.19%, 1.20%, 1.16%, 1.14% (annualized), 1.36% and 1.00% for the
periods 1998-1992, respectively.
(e) After waiver of fees and/or expense reimbursements. Ratios of income to
average net assets prior to waiver of fees and/or expense reimbursements
were 2.92%, 2.63%, 2.82%, 2.38%, 1.61% (annualized), 1.40% and 2.40% for the
periods 1998-1992, respectively.
4
<PAGE> 5
- --------------------------------------------------------------------------------
AIM TAX-FREE INTERMEDIATE FUND*
Shown below are the condensed financial highlights for each of the years in
the nine-year period ended March 31, 1998, the eleven months ended March 31,
1989 and the period from May 11, 1987 (date operations commenced) through April
30, 1988. The following information has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon was unqualified. The report of KPMG
Peat Marwick LLP, independent auditors, for the fiscal year ended March 31, 1998
is included in the Statement of Additional Information.
<TABLE>
<CAPTION>
MARCH 31,
-----------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991
-------- -------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.............. $ 10.73 $ 10.79 $ 10.67 $ 10.62 $ 10.74 $ 10.27 $ 10.07 $ 9.89
Income from
investment
operations:
Net investment
income............ 0.50 0.50 0.52 0.49 0.48 0.53 0.62 0.63
Net gains (losses)
on securities
(both realized and
unrealized)....... 0.32 (0.04) 0.12 0.04 (0.10) 0.47 0.20 0.18
-------- -------- ------- ------- ------- ------- ------- ------
Total from
investment
operations........ 0.82 0.46 0.64 0.53 0.38 1.00 0.82 0.81
-------- -------- ------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net
investment
income............ (0.50) (0.52) (0.52) (0.48) (0.48) (0.53) (0.62) (0.63)
Distributions from
net realized
capital gains..... -- -- -- -- (0.02) -- -- --
-------- -------- ------- ------- ------- ------- ------- ------
Total
distributions..... (0.05) (0.52) (0.52) (0.48) (0.50) (0.53) (0.62) (0.63)
-------- -------- ------- ------- ------- ------- ------- ------
Net asset value, end
of period........... $ 11.05 $ 10.73 $ 10.79 $ 10.67 $ 10.62 $ 10.74 $ 10.27 $10.07
======== ======== ======= ======= ======= ======= ======= ======
Total return(a)...... 7.79% 4.33% 6.06% 5.17% 3.47% 10.01% 8.39% 8.39%
======== ======== ======= ======= ======= ======= ======= ======
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted).......... $200,969 $173,342 $83,066 $82,355 $99,757 $70,120 $38,773 $6,184
======== ======== ======= ======= ======= ======= ======= ======
Ratio of expenses to
average net
assets............ 0.45%(b) 0.56% 0.65% 0.59% 0.61%(c) 0.38%(c) 0.02%(c) 0.50%(c)
======== ======== ======= ======= ======= ======= ======= ======
Ratio of net
investment income
to average net
assets............ 4.56%(b) 4.63% 4.81% 4.65% 4.37%(c) 5.00%(c) 5.78%(c) 6.29%(c)
======== ======== ======= ======= ======= ======= ======= ======
Portfolio turnover
rate.............. 22% 26% 32% 75% 26% 29% 15% 0%
======== ======== ======= ======= ======= ======= ======= ======
<CAPTION>
MARCH 31,
----------------- APRIL 30,
1990 1989 1988
------ ------ ---------
<S> <C> <C> <C>
Net asset value,
beginning of
period.............. $ 9.69 $ 9.88 $10.00
Income from
investment
operations:
Net investment
income............ 0.62 0.56 0.55
Net gains (losses)
on securities
(both realized and
unrealized)....... 0.20 (0.19) (0.12)
------ ------ ------
Total from
investment
operations........ 0.82 0.37 0.43
------ ------ ------
Less distributions:
Dividends from net
investment
income............ (0.62) (0.56) (0.55)
Distributions from
net realized
capital gains..... -- -- --
------ ------ ------
Total
distributions..... (0.62) (0.56) (0.55)
------ ------ ------
Net asset value, end
of period........... $ 9.89 $ 9.69 $ 9.88
====== ====== ======
Total return(a)...... 8.66% 3.85% 4.46%
====== ====== ======
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted).......... $5,231 $4,413 $5,594
====== ====== ======
Ratio of expenses to
average net
assets............ 0.50%(c) 0.53%(c)(d) 0.50%(c)(d)
====== ====== ======
Ratio of net
investment income
to average net
assets............ 6.27%(c) 6.74%(c)(d) 5.86%(c)(d)
====== ====== ======
Portfolio turnover
rate.............. 12% 31% 80%
====== ====== ======
</TABLE>
- ---------------
* On October 15, 1993 the Fund redomesticated from a portfolio of another
Maryland corporation to a portfolio of the Company.
(a) Does not deduct sales charges and for periods less than one year, total
return is not annualized.
(b) Ratios are based on average net assets of $188,975,800.
(c) After waiver of advisory fees and/or expense reimbursements. The ratios of
expenses to average net assets and net investment income to average net
assets prior to waivers and/or expense reimbursements were as follows:
<TABLE>
<CAPTION>
Net Investment
Period ended Expenses Income
------------ ------------------------- -------------------------
<S> <C> <C>
1994 0.64% 4.35%
1993 0.66% 4.71%
1992 0.98% 4.81%
1991 1.79% 5.00%
1990 1.91% 4.86%
1989 2.09% (Annualized) 5.18%(Annualized)
1988 1.57% (Annualized) 4.79%(Annualized)
</TABLE>
(d) Annualized.
5
<PAGE> 6
- --------------------------------------------------------------------------------
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT*
Shown below are the condensed financial highlights for 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, which have been audited by KPMG Peat
Marwick LLP, independent auditors, whose reports thereon were unqualified. The
condensed financial highlights shown below for periods prior to the period ended
December 31, 1993 was derived from financial statements audited by other
independent accountants. The report of KPMG Peat Marwick LLP, independent
auditors, for the fiscal year ended March 31, 1998 is included in the Statement
of Additional Information.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------------------------------------------------- -----------------------------
1998 1997 1996 1995 1994 1993 1992(a) 1991
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 10.77 $ 10.81 $ 10.71 $ 10.69 $ 11.29 $ 10.65 $ 10.52 $ 10.07
Income from investment
operations:
Net investment
income............... 0.55 0.56 0.56 0.56 0.15 0.60 0.66 0.69
Net gains (losses) on
securities (both
realized and
unrealized).......... 0.27 (0.05) 0.10 0.04 (0.61) 0.65 0.17 0.50
------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations........... 0.82 0.51 0.66 0.60 (0.46) 1.25 0.83 1.19
------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income.... (0.55) (0.55) (0.56) (0.57) (0.14) (0.60) (0.66) (0.69)
Distributions from net
realized capital
gains................ -- -- -- -- -- (0.01) (0.04) (0.05)
Returns of capital..... -- -- -- (0.01) -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total distributions.... (0.55) (0.55) (0.56) (0.58) (0.14) (0.61) (0.70) (0.74)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 11.04 $ 10.77 $ 10.81 $ 10.71 $ 10.69 $ 11.29 $ 10.65 $ 10.52
======= ======= ======= ======= ======= ======= ======= =======
Total return(b)......... 7.78% 4.84% 6.24% 5.78% (4.06)% 11.99% 8.22% 12.23%
======= ======= ======= ======= ======= ======= ======= =======
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted)............. $40,567 $38,118 $39,355 $38,289 $42,361 $46,224 $33,110 $27,298
======= ======= ======= ======= ======= ======= ======= =======
Ratio of expenses to
average net
assets(c)............ 0.88%(d) 0.72% 0.66% 0.55% 0.50%(e) 0.34% 0.25% 0.25%
======= ======= ======= ======= ======= ======= ======= =======
Ratio of net investment
income to average net
assets(c)............ 5.02%(d) 5.18% 5.16% 5.37% 5.32%(e) 5.42% 6.25% 6.73%
======= ======= ======= ======= ======= ======= ======= =======
Portfolio turnover
rate................. 5% 17% 17% 7% 2% 5% 43% 43%
======= ======= ======= ======= ======= ======= ======= =======
<CAPTION>
DECEMBER 31,
-----------------
1990 1989
------- ------
<S> <C> <C>
Net asset value,
beginning of period.... $ 10.19 $10.00
Income from investment
operations:
Net investment
income............... 0.67 0.14
Net gains (losses) on
securities (both
realized and
unrealized).......... (0.10) 0.16
------- ------
Total from investment
operations........... 0.57 0.30
------- ------
Less distributions:
Dividends from net
investment income.... (0.69) (0.11)
Distributions from net
realized capital
gains................ -- --
Returns of capital..... -- --
------- ------
Total distributions.... (0.69) (0.11)
------- ------
Net asset value, end of
period................. $ 10.07 $10.19
======= ======
Total return(b)......... 5.88% 3.06%
======= ======
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted)............. $16,685 $6,556
======= ======
Ratio of expenses to
average net
assets(c)............ 0.25% 0.25%(e)
======= ======
Ratio of net investment
income to average net
assets(c)............ 6.82% 6.21%(e)
======= ======
Portfolio turnover
rate................. 57% 63%
======= ======
</TABLE>
- ---------------
* On October 15, 1993 the Fund redomesticated from a portfolio of a
Massachusetts business trust to a portfolio of the Company.
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges and for periods less than one year, total
return is not annualized.
(c) After waiver of advisory fees and/or expense reimbursements. Ratios of
expenses to average net assets prior to waiver of advisory fees and/or
expense reimbursements are 1.11%, 1.09%, 1.16%, 1.13%, 1.23% (annualized),
1.30%, 1.12%, 1.26%, 1.33% and 1.99% (annualized) for the period 1998-1989,
respectively. Ratios of net investment income to average net assets prior to
waiver of advisory fees and/or expense reimbursements are 4.79%, 4.81%,
4.66%, 4.79%, 4.59% (annualized), 4.45%, 5.38%, 5.72%, 5.74% and 4.48%
(annualized) for the period 1998-1989, respectively.
(d) Ratios are based on average daily net assets of $38,627,413.
(e) Annualized.
6
<PAGE> 7
- --------------------------------------------------------------------------------
PERFORMANCE
The performance of each Fund may be quoted in advertising in terms of yield
or total return. Both types of performance are based on historical results and
are not intended to indicate future performance. All advertisements for each
Fund will disclose the maximum sales charge imposed on purchases of that Fund's
shares. If any advertised performance data does not reflect the maximum sales
charge, such advertisement will disclose that the sales charge has not been
deducted in computing the performance data, and that, if reflected, the maximum
sales charge would reduce the performance quoted. See the Statement of
Additional Information for further details concerning performance comparisons
used in advertisements by the Funds. The annual reports of the Funds contain
management's discussion of fund performance and may be obtained without charge
upon written request to the Company at P.O. Box 4739, Houston, Texas 77210-4739
or by calling (800) 347-4246.
A Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the performance
of a Fund over a stated period of time. An average annual total return reflects
the hypothetical annually compounded return that would have produced the same
cumulative total return if the Fund's performance had been constant over the
entire period. BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN A
FUND'S RETURNS, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS
ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual returns into
income results and capital gain or loss.
Yield is computed in accordance with standardized formulas described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, yield
information may not provide a basis for comparison with investments which pay a
fixed rate of interest for a stated period of time. Yield reflects investment
income net of expenses over the relevant period attributable to a Fund share,
expressed as an annualized percentage of the maximum offering price per share
for AIM TAX-FREE INTERMEDIATE FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT,
and net asset value per share for AIM TAX-EXEMPT CASH FUND.
Yield is a function of the type and quality of a Fund's investments, the
maturity of the securities held in a Fund's portfolio and the operating expense
ratio of the Fund. A shareholder's investment in a Fund is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in a Fund. A tax-equivalent yield is calculated in the same
manner as the standard yield with an adjustment for a stated, assumed tax rate.
The Funds may also demonstrate the effect of such tax-equivalent adjustments
generally by comparing various yield levels with their corresponding
tax-equivalent yields, given a stated tax rate.
From time to time and in its discretion, AIM or its affiliates may waive
all or a portion of advisory or distribution fees and/or assume certain expenses
of any Fund. Such a practice will have the effect of increasing the Fund's yield
and total return.
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
AIM TAX-EXEMPT CASH FUND
AIM TAX-EXEMPT CASH FUND's investment objective is to earn the highest
level of current income free from federal income taxes that is consistent with
safety of principal and liquidity. The Fund's policy is to invest at least 80%
of its net assets in securities which are exempt from federal income taxes. This
objective will not be changed without the approval of a majority of the Fund's
outstanding shares (within the meaning of the Investment Company Act of 1940
(the "1940 Act")). There can be no assurance that the Fund will attain its
objective. As used in this Prospectus and the Statement of Additional
Information, interest which is "tax-exempt" or "exempt from federal income
taxes" means interest on municipal securities which is excluded from gross
income for federal income tax purposes, and which does not give rise to federal
alternative minimum tax liability.
The Fund may invest up to 20% of its net assets in money market instruments
that may be subject to federal taxes. Such taxable instruments may include,
without limitation, repurchase agreements, bankers' acceptances and commercial
paper. Money market instruments in which the Fund may invest will be "Eligible
Securities" as defined in Rule 2a-7 under the 1940 Act, as such Rule may be
amended from time to time. The securities in which the Fund invests may include
but shall not be limited to the following:
MUNICIPAL SECURITIES. "Municipal Securities" can be broadly classified as
follows: (a) "general obligation" bonds, debentures and notes, which are secured
as to payment of principal and interest by a state or local government's pledge
of its full faith, credit and taxing power and (b) "revenue" bonds, debentures
and notes, which are payable only from the revenues derived from a particular
facility or class of facilities, from the proceeds of a special excise tax or
from some other specifically identified revenue source. Municipal Securities,
such as those listed below, include short-term obligations issued or guaranteed
by any state, territory or possession of the United States, or by the District
of Columbia, or by any political subdivision, agency, municipality or
instrumentality thereof.
BOND ANTICIPATION NOTES usually are general obligations of state and local
governmental issuers which are sold to obtain interim financing for projects
that will eventually be funded through the sale of long-term debt obligations or
bonds.
7
<PAGE> 8
TAX ANTICIPATION NOTES are issued by state and local governments to finance
the current operations of such governments. Repayment is generally to be derived
from specific future tax revenues. Tax anticipation notes are usually general
obligations of the issuer.
REVENUE ANTICIPATION NOTES are issued by governments or governmental bodies
with the expectation that future revenues from a designated source will be used
to repay the notes. In general, they also constitute general obligations of the
issuer.
TAX-EXEMPT COMMERCIAL PAPER (MUNICIPAL PAPER) is identical to taxable
commercial paper, except that tax-exempt commercial paper is issued by states,
municipalities and their agencies.
VARIABLE OR FLOATING RATE INSTRUMENTS are Municipal Securities which have
variable or floating interest rates which are readjusted on set dates (such as
the last day of the month or calendar quarter) in the case of variable rates or
whenever a specified interest rate charge occurs in the case of a floating rate
instrument. Such readjustment may be based either upon a predetermined standard,
such as a bank prime rate or the U.S. Treasury bill rate, or upon prevailing
market conditions. Variable or floating interest rates generally reduce changes
in the market price of Municipal Securities from their original purchase price
because, upon readjustment, such rates approximate market rates. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation or
depreciation is less for variable or floating rate Municipal Securities than for
fixed income securities. Many variable or floating rate securities are subject
to redemption or repurchase at par, plus accrued interest, upon demand by the
Fund (frequently upon no more than seven days' notice). The terms of such demand
instruments require payment of principal and accrued interest from the issuer or
a guarantor. Frequently such obligations are secured by letters of credit or
other credit support arrangements provided by financial institutions. For a
further discussion of such instruments, see the Statement of Additional
Information.
QUALITY STANDARDS. AIM TAX-EXEMPT CASH FUND will limit its investments to
those securities which at the date of purchase are "Eligible Securities" as
defined in Rule 2a-7, as such Rule may be amended from time to time. Generally,
"Eligible Securities" are securities that are rated in one of the two highest
rating categories by two nationally recognized statistical rating organizations
("NRSROs"), or if rated only by one NRSRO, are rated in one of the two highest
rating categories by that NRSRO, or if unrated, are determined by AIM (under the
supervision of and pursuant to guidelines established by the Board of Directors)
to be of comparable quality to a rated security that meets such quality
standards. Eligible securities also include securities issued by a registered
investment company that is a money market fund and U.S. government securities.
Since AIM TAX-EXEMPT CASH FUND invests in securities backed by banks and other
financial institutions, changes in the credit quality of these institutions
could cause losses to the Fund and affect its share price.
MATURITIES. AIM TAX-EXEMPT CASH FUND will attempt to maintain a constant
net asset value per share of $1.00 and, to this end, values its assets by the
amortized cost method and rounds the per share net asset value of its shares in
compliance with applicable rules and regulations. Accordingly, the Fund invests
only in securities having remaining maturities of 397 days or less and maintains
a dollar weighted average portfolio maturity of 90 days or less. The maturity of
a security held by the Fund is determined in compliance with applicable rules
and regulations. Certain securities bearing interest at rates that are adjusted
prior to the stated maturity of the instrument or that are subject to redemption
or repurchase agreements are deemed to have maturities shorter than their stated
maturities.
SYNTHETIC MUNICIPAL INSTRUMENTS. AIM believes that certain synthetic
municipal instruments provide opportunities for mutual funds to invest in high
credit quality securities providing attractive returns, even in market
conditions where the supply of short-term tax-exempt instruments may be limited.
Synthetic municipal instruments (sometimes referred to as "derivative municipal
instruments") are securities the value of and return on which are derived from
underlying securities. Synthetic municipal instruments comprise a large
percentage of tax-exempt securities eligible for purchase by tax-exempt money
market funds. The types of synthetic municipal instruments in which AIM
TAX-EXEMPT CASH FUND may invest involve the deposit into a trust or custodial
account of one or more long-term tax-exempt bonds or notes ("Underlying Bonds"),
and the sale of certificates evidencing interests in the trust or custodial
account to investors such as the Fund. The trustee or custodian receives the
long-term fixed rate interest payments on the Underlying Bonds, and pays
certificate holders short-term floating or variable interest rates which are
reset periodically. Synthetic municipal instruments typically are created by a
bank, broker-dealer or other financial institution (a "Sponsor"). Typically, a
portion of the interest paid on the Underlying Bonds which exceeds the interest
paid to the certificate holders is paid to the Sponsor or other investors. For
further information regarding specific types of synthetic municipal instruments
in which the Fund may invest, see the Statement of Additional Information.
All such instruments must meet the minimum quality standards required for
the Fund's investments and must present minimal credit risks. In selecting
synthetic municipal instruments for the Fund, AIM considers the creditworthiness
of the issuer of the Underlying Bond, the Sponsor and the party providing
certificate holders with a conditional right to sell their certificates at
stated times and prices (a demand feature). Typically, a certificate holder
cannot exercise the demand feature upon the occurrence of certain conditions,
such as where the issuer of the Underlying Bond defaults on interest payments.
Moreover, because synthetic municipal instruments involve a trust or custodial
account and a third party conditional demand feature, they involve complexities
and potential risks that may not be present where a municipal security is owned
directly.
The tax-exempt character of the interest paid to certificate holders is
based on the assumption that the holders have an ownership interest in the
Underlying Bonds; however, the Internal Revenue Service has not issued a ruling
addressing this issue. In the event
8
<PAGE> 9
the Internal Revenue Service issues an adverse ruling or successfully litigates
this issue, it is possible that the interest paid to the Fund on certain
synthetic municipal instruments would be deemed to be taxable. The Fund relies
on opinions of special tax counsel on this ownership question and opinions of
bond counsel regarding the tax-exempt character of interest paid on the
Underlying Bonds.
WHEN-ISSUED OR DELAYED DELIVERY SECURITIES. AIM TAX-EXEMPT CASH FUND may
purchase securities on a "when-issued" basis, that is, delivery of and payment
for the securities is not fixed at the date of purchase but is set after the
securities are issued (normally within forty-five days after the date of the
transaction), and may purchase or sell securities on a delayed delivery basis.
The payment obligation and the interest rate that will be received on the
delayed delivery securities are fixed at the time the buyer enters into the
commitment. The Fund will only make commitments to purchase when-issued or
delayed delivery securities with the intention of actually acquiring such
securities, but may sell these securities before the settlement date if it is
deemed advisable. No more than 25% of the Fund's net assets may be committed to
when-issued or delayed delivery securities.
Investments in when-issued or delayed delivery securities may increase the
Fund's exposure to market fluctuations and may increase the possibility that the
Fund will incur short-term gains subject to federal taxation or short-term
losses if the Fund engages in portfolio transactions in order to honor a
when-issued or delayed delivery commitment. In a delayed delivery transaction,
the Fund relies on the other party to complete the transaction. If the
transaction is not completed, the Fund may miss a price or yield considered to
be advantageous. The Fund will employ techniques designed to reduce such risks.
If the Fund purchases a when-issued or delayed delivery security, it will
direct its custodian bank to segregate liquid assets (including temporary
investments and Municipal Securities) in an amount equal to the when-issued or
delayed delivery commitment. If the market value of such segregated securities
declines, additional cash or securities will be segregated on a daily basis so
that the market value of the segregated cash or securities will equal the amount
of the Fund's when-issued or delayed delivery commitments. To the extent assets
of the Fund are segregated, they will not be available for new investments or to
meet redemptions.
For a more complete description of when-issued and delayed delivery
securities, see the Statement of Additional Information.
PARTICIPATION INTERESTS AND MUNICIPAL LEASES. The Fund may purchase
participation interests or custodial receipts from financial institutions. These
participation interests give the purchaser an undivided interest in one or more
underlying Municipal Securities. The Fund may also invest in municipal leases
and participation interests therein. Such obligations, which may take the form
of a lease or an installment sales contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities. Interest payments on qualifying municipal leases are exempt from
federal income taxes.
OTHER CONSIDERATIONS. The ability of the Fund to attain its investment
objective depends on the continuing ability of the issuers or guarantors of
Municipal Securities held by the Fund to meet their obligations for the payment
of interest and principal when due. The securities in which the Fund invests may
not yield as high a level of current income as longer term or lower grade
securities, which generally have less liquidity and greater fluctuation in
value.
The investment policies and standards stated above are not fundamental
policies of the Fund and may be changed by the Board of Directors without
shareholder approval. Shareholders will be notified before any material change
in the foregoing investment policies becomes effective.
AIM TAX-FREE INTERMEDIATE FUND
The investment objective of AIM TAX-FREE INTERMEDIATE FUND is to generate
as high a level of tax-exempt income as is consistent with preservation of
capital by investing in high quality, intermediate-term Municipal Securities
having a maturity of ten and one-half years or less. No assurance can be given
that the Fund's investment objective will be achieved.
MUNICIPAL SECURITIES. Municipal Securities which are considered appropriate
for investment by the Fund (provided that the interest paid thereon, in the
opinion of bond counsel, is exempt from federal income taxes) include debt
obligations issued to obtain funds for various public purposes, including the
construction of a wide range of public facilities, the refunding of outstanding
obligations, the obtaining of funds for general operating expenses and the
lending of such funds to other public institutions and facilities. Certain types
of industrial development bonds issued by or on behalf of public authorities to
obtain funds to provide for the construction, equipment, repair or improvement
of privately operated facilities ("private activity bonds") also are considered
appropriate for investment by the Fund. The Fund will seek to avoid the purchase
of those private activity bonds the interest on which could give rise to an
alternative minimum tax liability for shareholders under the Internal Revenue
Code of 1986, as amended (the "Code"). See "Dividends, Distributions and Tax
Matters" herein and the Statement of Additional Information.
VARIABLE OR FLOATING RATE INSTRUMENTS. The Fund may invest in Municipal
Securities which have variable or floating interest rates. All variable or
floating rate instruments must meet the quality standards of the Fund. AIM will
monitor the pricing, quality and liquidity of the variable or floating rate
Municipal Securities held by the Fund. For additional information regarding such
instruments see "AIM TAX-EXEMPT CASH FUND -- Variable or Floating Rate
Instruments" above and the Statement of Additional Information.
QUALITY STANDARDS. The following quality standards apply at the time a
security is purchased. Information concerning the ratings criteria of Moody's
Investors Service, Inc. ("Moody's"), Standard and Poor's Ratings Services
("S&P"), and Fitch Investors Service, Inc. ("Fitch") appears in Appendix A to
this Prospectus and/or in the Statement of Additional Information.
9
<PAGE> 10
AIM TAX-FREE INTERMEDIATE FUND may purchase Municipal Securities which meet
any of the following quality criteria:
(a) They are rated within the three highest ratings for municipal
obligations by Moody's (Aaa, Aa or A) or S&P (AAA, AA or A), or have
received a comparable rating from another NRSRO; or
(b) They are rated within the two highest ratings for short-term
municipal obligations by Moody's (MIG 1/VMIG 1/P-1 or MIG 2/VMIG 2/P-2), or
S&P (SP-1/A-1 or SP-2/A-2), or have received a comparable rating from
another NRSRO; or
(c) They are guaranteed as to payment of principal and interest by the
U.S. Government; or
(d) They are fully collateralized by an escrow of U.S. Government or
other high quality securities; or
(e) They are not rated, if other Municipal Securities of the same
issuer are rated A or better by Moody's or S&P, or have received a
comparable rating from another NRSRO; or
(f) They are not rated, but are determined by AIM to be of comparable
quality to the rated obligations in which the Fund may invest.
Since AIM TAX-FREE INTERMEDIATE FUND invests in securities backed by
insurance companies and other financial institutions, changes in the financial
condition of these institutions could cause losses to the Fund and affect its
share price.
MATURITIES. The Fund may invest only in Municipal Securities which have
maturities of ten and one-half years or less, and will maintain a dollar
weighted average maturity of more than three years and not more than seven and
one-half years. For purposes of this limitation, the maturity of an instrument
will be considered to be the earlier of:
(a) the stated maturity of the instrument; or
(b) the date, if any, on which the issuer has agreed to redeem or
purchase the instrument; or
(c) in the case of a variable rate instrument, the next date on which
the coupon rate is to be adjusted.
WHEN-ISSUED OR DELAYED DELIVERY SECURITIES. The Fund may purchase Municipal
Securities on a when-issued or delayed delivery basis, but no more than 25% of
the Fund's net assets may be committed to such investments. For further
information regarding such investments see "AIM TAX-EXEMPT CASH FUND --
When-Issued or Delayed Delivery Securities" above and the Statement of
Additional Information.
PARTICIPATION INTERESTS AND MUNICIPAL LEASES. The Fund may purchase
participation interests or custodial receipts from financial institutions. These
participation interests give the purchaser an undivided interest in one or more
underlying Municipal Securities. The Fund may also invest in municipal leases
and participation interests therein. Such obligations, which may take the form
of a lease or an installment sales contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities. Interest payments on qualifying municipal leases are exempt from
federal income taxes.
TEMPORARY INVESTMENTS. The Fund may from time to time on a temporary basis
or for defensive purposes, make certain investments which may result in taxable
ordinary income; however, the Fund intends to minimize taxable income through
investment, when possible, in short-term tax-exempt securities. Short-term
taxable investments may include obligations of the U.S. Government, its agencies
or instrumentalities, and repurchase agreements (instruments under which the
seller agrees to repurchase the security at a specified time and price) relating
thereto; commercial paper rated within the highest rating category by a NRSRO;
and certificates of deposit of domestic banks with assets of $1.5 billion or
more as of the date of their most recently published financial statements.
It is a fundamental policy of the Fund to invest its assets so that at
least 80% of the Fund's assets will be invested in securities that generate
interest that is exempt from federal income taxes. The Fund will seek to avoid
the purchase of "private activity bonds" the interest on which could give rise
to an alternative minimum tax liability for individuals and other noncorporate
shareholders.
PORTFOLIO TURNOVER. Ordinarily, the Fund does not purchase securities with
the intention of engaging in short-term trading. However, any particular
security will be sold, and the proceeds reinvested, whenever such action is
deemed prudent in light of the Fund's investment objective, regardless of the
holding period of that security. A higher rate of portfolio turnover may result
in higher transaction costs. Also, to the extent that higher portfolio turnover
results in a higher rate of net realized capital gains to the Fund, the portion
of the Fund's distributions constituting taxable capital gain may increase. It
is expected that total portfolio turnover in any year will be less than 100%.
See "Dividends, Distributions and Tax Matters."
OTHER CONSIDERATIONS. The ability of the Fund to achieve its investment
objective depends upon the continuing ability of the issuers or guarantors of
Municipal Securities held by the Fund to meet their obligations for the payment
of interest and principal when due. The securities in which the Fund invests may
not yield as high a level of current income as longer term or lower grade
securities, which generally have less liquidity and greater fluctuation in
value. The net asset value of shares of the Fund will generally vary inversely
with changes in prevailing interest rates.
10
<PAGE> 11
Unless otherwise noted, the investment policies and standards stated above
are not fundamental policies of the Fund and may be changed by the Board of
Directors without shareholder approval. Shareholders will be notified before any
material change in the foregoing investment policies becomes effective.
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT's investment objective is to earn a
high level of current income free from federal taxes and Connecticut taxes by
investing at least 80% of its net assets in municipal bonds and other Municipal
Securities. This objective is a fundamental policy and will not be changed
without the approval of a majority of the Fund's outstanding shares (within the
meaning of the 1940 Act). There can be no assurance that the Fund will attain
its objective.
MUNICIPAL SECURITIES. To achieve its objective, the Fund intends to invest
up to 100% of its assets, and no less than 80% of its net assets, in municipal
bonds and other Municipal Securities issued by the State of Connecticut and
authorities, agencies, instrumentalities and political subdivisions of the State
of Connecticut, or other entities, the interest from which, in the opinion of
bond counsel for the issuer, is exempt from federal income taxes (including the
alternative minimum tax) and from Connecticut income taxes on individuals. The
Fund will maintain at least 65% of its assets in municipal bonds. This 65%
figure represents a minimum level of investment; the actual level of investment
will, of course, fluctuate in accordance with AIM's assessment of market
conditions. See "Tax Matters" in the Statement of Additional Information for a
further discussion of federal and Connecticut tax considerations. The net asset
value of shares of the Fund can be expected to rise when market interest rates
decline and to fall when market interest rates rise.
The Fund may invest in high quality, taxable short-term money market
instruments such as certificates of deposit, commercial paper, bankers'
acceptances, short-term U.S. Government obligations, repurchase agreements and
reverse repurchase agreements, pending investment in portfolio securities or to
meet anticipated short-term cash needs such as dividend payments or redemptions
of shares. Such investments generally will have maturities of 60 days or less
and normally will be held to maturity.
Municipal bonds include debt obligations issued to obtain funds for various
public purposes, including the construction of public facilities, the refunding
of outstanding obligations, the obtaining of funds for general operating
expenses and the providing of loans to public institutions and facilities. The
principal and interest payments on industrial development bonds or pollution
control bonds are often the sole responsibility of the industrial user and
therefore may not be backed by the taxing power of the issuing municipality.
Such obligations are included within the term municipal bonds if the interest
paid thereon qualifies as exempt from federal income tax, although such interest
may be subject to the alternative minimum tax.
VARIABLE OR FLOATING RATE INSTRUMENTS. The Fund may invest in Municipal
Securities which have variable or floating interest rates. All variable or
floating rate instruments must meet the quality standards of the Fund. AIM will
monitor the pricing, quality and liquidity of the variable or floating rate
Municipal Securities held by the Fund. For further information regarding such
instruments, see "AIM TAX-EXEMPT CASH FUND -- Variable or Floating Rate
Instruments" above and the Statement of Additional Information.
QUALITY STANDARDS. At least 80% of the municipal bonds purchased by the
Fund will be rated within the four highest rating categories, or will be
obligations of issuers having an issue of outstanding municipal bonds rated
within the four highest rating categories, of any NRSRO. A description of
municipal bond ratings is contained in the Statement of Additional Information.
The Fund will maintain less than 35% of its net assets in bonds and other
Municipal Securities rated below Baa/BBB by Moody's or S&P, respectively, or a
comparable rating of any other NRSRO. During the last fiscal year, the Fund did
not invest in any such securities, and the Fund expects to invest less than 5%
of its net assets in such securities during the current fiscal year. See
Appendix A to this Prospectus and the Statement of Additional Information for
information regarding bond rating categories. Up to 20% of the Fund's net assets
may be invested in unrated municipal bonds and other Municipal Securities if in
the judgment of AIM, after considering available information as to the
creditworthiness of the issuer and its ability to meet its future debt
obligations, such investments are similar in quality to those bonds and other
Municipal Securities rated within the four highest NRSRO rating categories
mentioned above. For purposes of the foregoing percentage limitations, municipal
bonds (i) which have been collateralized with U.S. Government securities held in
escrow until the municipal securities refunding date or final maturity, but (ii)
which have not been re-rated by a NRSRO, will be treated by the Fund as the
equivalent of Aaa/AAA rated securities.
Securities held by the Fund that are rated below Baa/BBB by Moody's or S&P,
respectively, may be subject to certain risk factors to which other securities
are not subject to the same degree. An economic downturn tends to disrupt the
market for high yield bonds and adversely affect their values. Such an economic
downturn may be expected to result in increased price volatility of high yield
bonds and an increase in issuers' defaults on such bonds.
Also, many issuers of high yield bonds are substantially leveraged, which
may impair their ability to meet their obligations. In some cases, the
securities in which the Fund invests are subordinated to the prior payment of
senior indebtedness, thus potentially limiting the Fund's ability to recover
full principal or to receive payments when senior securities are in default.
The credit rating of a security does not necessarily address its market
value risk. Also, ratings may from time to time be changed to reflect
developments in the issuer's financial condition. Securities held by the Fund
may have speculative characteristics which are apt to increase in number and
significance with each lower rating category.
11
<PAGE> 12
When the secondary market for high yield bonds becomes increasingly
illiquid, or in the absence of readily available market quotations for such
bonds, the relative lack of reliable, objective data makes the responsibility of
the Board of Directors to value the Fund's securities more difficult, judgment
plays a greater role in the valuation of portfolio securities. Also, increased
illiquidity of the high yield bond market may affect the Fund's ability to
dispose of portfolio securities at a desirable price.
In addition, if the Fund experiences unexpected net redemptions, it could
be forced to sell its high yield bonds without regard to their investment
merits, thereby decreasing the asset base upon which the Fund's expenses can be
spread and possibly reducing the Fund's rate of return. Also, prices of high
yield bonds have been found to be less sensitive to interest rate changes and
more sensitive to adverse economic changes and individual issuer developments
than are more highly rated instruments.
WHEN-ISSUED OR DELAYED DELIVERY SECURITIES. The Fund may purchase
securities on a when-issued or delayed delivery basis. For further information
regarding such securities, see "AIM TAX-EXEMPT CASH FUND -- When-Issued or
Delayed Delivery Securities" above and the Statement of Additional Information.
PARTICIPATION INTERESTS AND MUNICIPAL LEASES. The Fund may purchase
participation interests or custodial receipts from financial institutions. These
participation interests give the purchaser an undivided interest in one or more
underlying Municipal Securities. The Fund may also invest in municipal leases
and participation interests therein. Such obligations, which may take the form
of a lease or an installment sales contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities. Interest payments on qualifying municipal leases are exempt from
federal income taxes.
TEMPORARY INVESTMENTS. For temporary defensive purposes, the Fund may
invest up to 35% of its net assets in municipal bond obligations and in other
Municipal Securities issued by or on behalf of states (including the State of
Connecticut), territories and possessions of the United States and the District
of Columbia and their political subdivisions, agencies, authorities and
instrumentalities which are free from federal income taxes but are subject to
Connecticut income taxes, and up to 20% of its net assets in money market
instruments that may not be exempt from federal income taxes.
RISK FACTORS IN CONCENTRATING IN CONNECTICUT MUNICIPAL OBLIGATIONS. Since
the Fund invests primarily in obligations of the State of Connecticut, the
marketability and market value of these obligations may be affected by the
regional economy, certain Connecticut constitutional amendments, legislative
measures, executive orders, administrative regulations and voter initiatives.
The ability of the Fund to achieve its objective is affected by the ability of
municipal issuers to meet their payment obligations. Problems which may arise in
the foregoing areas and which are not resolved could adversely affect the
various Connecticut issuers' abilities to meet their financial obligations.
INTEREST RATE FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may purchase
and sell interest rate futures contracts or purchase options thereon to hedge
its portfolio against changes in interest rates. An interest rate futures
contract is an agreement between two parties to buy and sell a debt security for
a set price on a future date. The Fund may purchase and sell futures contracts
and related options in order to hedge the value of its portfolio against changes
in market conditions. Generally, the Fund may elect to close a position in a
futures contract by taking an opposite position which will operate to terminate
the Fund's position in the futures contract. See the Statement of Additional
Information for a description of interest rate futures contracts and options on
futures contracts, including certain related risks.
The Fund will not purchase or sell futures contracts or purchase related
options thereon, if immediately thereafter the sum of the amount of margin
deposits and premiums on open positions with respect to futures contracts and
related options would exceed 5% of the market value of the Fund's total assets.
The Fund will not hedge more than 20% of its assets at one time.
PORTFOLIO TURNOVER. Ordinarily, the Fund does not purchase securities with
the intention of engaging in short-term trading. However, any particular
security will be sold, and the proceeds reinvested, whenever such action is
deemed prudent in light of the Fund's investment objective, regardless of the
holding period of that security. A higher rate of portfolio turnover may result
in higher transaction costs. Also, to the extent that higher portfolio turnover
results in a higher rate of net realized capital gains to the Fund, the portion
of the Fund's distributions constituting taxable capital gain may increase. It
is expected that total portfolio turnover in any year will be less than 100%.
See "Dividends, Distributions and Tax Matters."
Unless otherwise noted, the investment policies and standards stated above
are not fundamental policies of the Fund and may be changed by the Board of
Directors without shareholder approval. Shareholders will be notified before any
material change in the foregoing investment policies becomes effective.
INVESTMENT RESTRICTIONS
Each of the Funds' investment programs is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. The most significant of these restrictions are set forth
below, and other investment restrictions are set forth in the Statement of
Additional Information. In addition to the restrictions described herein, AIM
TAX-EXEMPT CASH FUND must comply with the requirements of Rule 2a-7 under the
1940 Act which may be more restrictive. Pursuant to these restrictions:
(1) Neither AIM TAX-EXEMPT CASH FUND nor AIM TAX-FREE INTERMEDIATE
FUND will, with respect to 75% of its total assets, purchase the securities
of any issuer if such purchase would cause more than 5% of the value of its
total assets to be
12
<PAGE> 13
invested in the securities of such issuer (except securities issued,
guaranteed or sponsored by the U.S. Government or its agencies and
instrumentalities and, with respect to AIM TAX-EXEMPT CASH FUND, except as
permitted by Rule 2a-7, as amended from time to time, and except that each
such Fund may purchase securities of other investment companies to the
extent permitted by applicable law or exemptive order).
(2) The Funds will not borrow money or issue senior securities except
for temporary or emergency purposes, except that the Funds may enter into
reverse repurchase agreements and may purchase when-issued securities
(consistent with their respective investment policies and objectives), and
except that AIM TAX-EXEMPT BOND FUND OF CONNECTICUT may enter into
financial futures contracts and may borrow from banks provided that no
borrowing exceeds one-third of the value of its total assets. The Funds
will not purchase securities while borrowings in excess of 5% of their
respective total assets are outstanding and, in addition, AIM TAX-EXEMPT
CASH FUND will not borrow money if such borrowing will exceed the borrowing
limits established by the Securities and Exchange Commission (the "SEC")
for money market funds, as amended from time to time.
(3) AIM TAX-FREE INTERMEDIATE FUND and AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT will not invest more than 15% of the value of their respective
net assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days. AIM TAX-EXEMPT CASH FUND will
not invest more than 10% of its net assets in such securities.
Restrictions (1) and (2) above are matters of fundamental policy and may
not be changed without shareholder approval. Restriction (3) above is a
non-fundamental policy which may be changed by the Board of Directors. For
additional investment restrictions applicable to the Funds, see the Statement of
Additional Information.
- --------------------------------------------------------------------------------
MANAGEMENT
The overall management of the business and affairs of the Funds is vested
in the Company's Board of Directors. The Board of Directors approves all
significant agreements between the Company, on behalf of the Funds, and persons
or companies furnishing services to the Funds, including the investment advisory
agreement and administrative services agreement with AIM, the agreement with AIM
Distributors regarding distribution of each Fund's shares, the agreement with
The Bank of New York as the custodian and the agreement with AFS as transfer
agent. The day-to-day operations of each Fund are delegated to the officers of
the Company and to AIM, subject always to the objective and policies of the
applicable Fund and to the general supervision of the Board of Directors.
Certain directors and officers of the Company are affiliated with AIM and A I M
Management Group Inc. ("AIM Management"), the parent corporation of AIM. AIM
Management is a holding company engaged in the financial services business and
is an indirect subsidiary of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are
an independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific region. Information concerning the Board of Directors may be found
in the Statement of Additional Information.
For a discussion of AIM Management and its subsidiaries' Year 2000
Compliance Project, see "General Information -- Year 2000 Compliance Project."
INVESTMENT ADVISOR. A I M Advisors, Inc., 11 Greenway Plaza, Suite 100,
Houston, Texas 77046, serves as the investment advisor to each Fund pursuant to
a Master Investment Advisory Agreement (the "Advisory Agreement"). AIM was
organized in 1976 and, together with its subsidiaries, manages or advises
approximately 90 investment company portfolios encompassing a broad range of
investment objectives.
Under the terms of the Advisory Agreement, AIM supervises all aspects of
each Fund's operations and provides investment advisory services to the Funds.
The Advisory Agreement also provides that, upon the request of the Board of
Directors, AIM may perform or arrange for certain accounting and other
administrative services for the Funds which are not required to be performed by
AIM under the Advisory Agreement. AIM and the Company have entered into a Master
Administrative Services Agreement (the "Administrative Services Agreement"),
pursuant to which AIM is entitled to receive from each Fund reimbursement of its
costs or such reasonable compensation as may be approved by the Board of
Directors. Currently, AIM is reimbursed for the services of the Funds' principal
financial officer and his staff, and any expenses related to fund accounting
services. In addition, A I M Fund Services Inc., 11 Greenway Plaza, Suite 100,
Houston, Texas 77046, a wholly owned subsidiary of AIM and a registered transfer
agent, receives a fee pursuant to a Transfer Agency and Service Agreement for
its provision of transfer agency, dividend distribution and disbursement, and
shareholder services to the Funds.
In accordance with policies established by the Board of Directors, AIM may
take into account sales of shares of the Funds and other funds advised by AIM in
selecting broker-dealers to effect portfolio transactions on behalf of the
Funds. For a discussion of AIM's brokerage allocation policies, see the
Statement of Additional Information under the caption "Portfolio Transactions."
PORTFOLIO MANAGEMENT. AIM uses a team approach and disciplined investment
strategy in providing investment advisory services to all its accounts,
including the Funds. AIM's investment staff consists of approximately 135
individuals. While individual members of AIM's investment staff are assigned
primary responsibility for the day-to-day management of each of AIM's accounts,
all accounts are reviewed on a regular basis by AIM's Investment Policy
Committee to ensure that they are being invested in accordance
13
<PAGE> 14
with the accounts' and AIM's investment policies. The individuals on the
investment team primarily responsible for the day-to-day management of AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT and AIM TAX-FREE INTERMEDIATE FUND are
Richard A. Berry and Stephen D. Turman. Mr. Berry is Vice President of A I M
Capital Management, Inc. ("AIM Capital"), a wholly owned subsidiary of AIM, and
has been responsible for AIM TAX-EXEMPT BOND FUND OF CONNECTICUT since 1992 and
for AIM TAX-FREE INTERMEDIATE FUND since 1987. He has been associated with AIM
and/or its subsidiaries since 1987, and has been an investment professional
since 1968. Mr. Turman is Vice President of AIM Capital, and has been
responsible for AIM TAX-EXEMPT BOND FUND OF CONNECTICUT since 1992 and for AIM
TAX-FREE INTERMEDIATE FUND since 1988. He has been associated with AIM and/or
its subsidiaries since 1985 and has been an investment professional since 1983.
FEES AND EXPENSES. For the year ended March 31, 1998, AIM TAX-EXEMPT CASH
FUND paid 0.35% of its average daily net assets to AIM for its advisory
services, and its total expenses for the same period, stated as a percentage of
its average daily net assets, were 0.83%. For the year ended March 31, 1998, AIM
TAX-FREE INTERMEDIATE FUND paid 0.30% of its average daily net assets to AIM for
its advisory services, and its total expenses for the same period, stated as a
percentage of its average daily net assets were 0.45%. For the year ended March
31, 1998, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT paid 0.27% of its average
daily net assets to AIM for its advisory fees and its total expenses for the
same period, stated as a percentage of its average daily net assets, were 0.88%.
For the year ended March 31, 1998, AIM TAX-EXEMPT CASH FUND paid 0.07% of
its average daily net assets to AIM as reimbursement for administrative
services. For the year ended March 31, 1998, AIM TAX-FREE INTERMEDIATE FUND paid
0.02% of its average daily net assets to AIM as reimbursement for administrative
services. For the year ended March 31, 1998, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT paid 0.12% of its average daily net assets to AIM as reimbursement
for administrative services.
FEE WAIVERS. In order to increase the yield to investors, AIM or its
affiliates may from time to time voluntarily waive or reduce advisory or
distribution fees, while retaining the ability to be reimbursed for such fees
prior to the end of each fiscal year. Fee waivers or reductions, other than
those which may be set forth in the Advisory Agreement, may be rescinded at any
time without notice to investors; provided, however, that the Board of Directors
of the applicable Fund will be notified of the discontinuance of each fee waiver
described below.
For the year ended March 31, 1998, AIM voluntarily waived 0.23% of its
advisory fee from AIM TAX-EXEMPT BOND FUND OF CONNECTICUT. Had it not waived
such fee, the advisory fee would have been 0.50% of that Fund's average daily
net assets for this period.
DISTRIBUTOR. The Company has entered into a Master Distribution Agreement
relating to the Funds (the "Distribution Agreement") with A I M Distributors,
Inc. ("AIM Distributors"), a registered broker-dealer and a wholly owned
subsidiary of AIM, to act as the distributor of the Funds' shares. The address
of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain
directors and officers of the Company are affiliated with AIM Distributors. The
Distribution Agreement provides AIM Distributors with the exclusive right to
distribute shares of the Funds through affiliated broker-dealers and through
other broker-dealers with whom AIM Distributors has entered into selected dealer
agreements.
DISTRIBUTION PLAN. The Company has adopted a Master Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to AIM TAX-EXEMPT
CASH FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT. The Company has not
adopted such a plan with respect to AIM TAX-FREE INTERMEDIATE FUND. Under the
Plan, AIM TAX-EXEMPT CASH FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT each
pays compensation of 0.25% per annum of its respective average daily net assets
to AIM Distributors for the purpose of financing any activity which is primarily
intended to result in the sale of shares of each respective Fund. The Plan is
designed to compensate AIM Distributors for certain promotional and other
sales-related costs, and to implement an incentive program which 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 such Funds. Under the Plan, AIM Distributors may in its discretion
from time to time agree to waive voluntarily all or any portion of its fee,
while retaining its ability to be reimbursed for such fee prior to the end of
the fiscal year. Currently, AIM Distributors has voluntarily elected to waive a
portion of its compensation payable by AIM TAX-EXEMPT CASH FUND such that the
compensation paid pursuant to the Plan equals 0.10% per annum of that Fund's
average daily net assets. This waiver may be rescinded by AIM Distributors at
any time and without further notice to investors.
Activities that may be financed under the Plan include, but are not limited
to, the following: printing of prospectuses and statements of additional
information and reports for other than existing shareholders, overhead,
preparation and distribution of advertising material and sales literature,
supplemental payments to dealers and other institutions such as asset-based
sales charges or as payments of service fees under shareholder service
arrangements, and the cost of administering the Plan. Amounts payable by AIM
TAX-EXEMPT CASH FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT under the Plan
need not be directly related to the expenses actually incurred by AIM
Distributors on behalf of each Fund. Thus, even if AIM Distributors' actual
expenses exceed the fee payable to AIM Distributors thereunder at any given
time, such Funds will not be obligated to pay more than that fee, and, if AIM
Distributors' expenses are less than the fee it receives, AIM Distributors will
retain the full amount of the fee.
The Plan may be terminated at any time by a vote of a majority of those
directors who are not "interested persons" of the Company or by a vote of the
holders of a majority of the outstanding shares of AIM TAX-EXEMPT CASH FUND or
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT.
14
<PAGE> 15
Certain financial institutions which have entered into service agreements
and which sell shares of AIM TAX-EXEMPT CASH FUND and/or AIM TAX-EXEMPT BOND
FUND OF CONNECTICUT on an agency basis, may receive payments from those Funds
pursuant to the Plan. AIM Distributors does not act as principal, but rather as
agent, for those Funds in making such payments. The Funds will obtain a
representation from such financial institutions that they will either be
licensed as dealers as required under applicable state law, or that they will
not engage in activities which would constitute acting as a "dealer" as defined
under applicable state law.
Payments pursuant to the Plan are subject to any applicable limitations
imposed by rules of the National Association of Securities Dealers, Inc. (the
"NASD"). The Plan conforms to rules of the NASD by limiting payments made to
dealers and other financial institutions who provide continuing personal
shareholder services to their customers who purchase and own shares of AIM
TAX-EXEMPT CASH FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT to no more than
0.25% per annum of the average daily net assets of each Fund attributable to the
customers of such dealers or financial institutions, and by imposing a cap on
the total sales charges, including asset-based sales charges, that may be paid
by each Fund. As a result of AIM Distributors' waiver of compensation due from
AIM TAX-EXEMPT CASH FUND, payments to dealers and other financial institutions
by that Fund will be limited to 0.10% of that Fund's average daily net assets.
For additional information concerning the operation of the Plan see the
Statement of Additional Information.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE COMPANY
The Company was incorporated in Maryland on May 3, 1993. Shares of common
stock of the Company are currently divided into four portfolios, AIM TAX-EXEMPT
CASH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT (each of which currently offers only Class A shares) and AIM HIGH
INCOME MUNICIPAL FUND (which currently offers Class A, Class B and Class C
shares).
Each class of shares of the same Fund represent interests in that Fund's
assets and have identical voting, dividend, liquidation and other rights on the
same terms and conditions, except that each class of shares bears differing
class-specific expenses, is subject to differing sales loads, conversion
features and exchange privileges, and has exclusive voting rights on matters
pertaining to that class' distribution plan (although holders of Class A and
Class C shares and holders of Class B shares of AIM HIGH INCOME MUNICIPAL FUND
must approve any material increase in fees payable with respect to the Fund
under the Class A and C Plan).
Shareholders of each Fund are entitled to one vote per share (with
proportionate voting for fractional shares), irrespective of the relative net
asset value of the different classes of shares, where applicable, of a Fund.
However, on matters affecting one portfolio of the Company or one class of
shares, a separate vote of shareholders of that portfolio or class is required.
Shareholders of a portfolio or class are not entitled to vote on any matter
which does not affect that portfolio or class but which requires a separate vote
of another portfolio or class. An example of a matter which would be voted on
separately by shareholders of a portfolio is the approval of an advisory
agreement, and an example of a matter which would be voted on separately by
shareholders of each class of shares is approval of a distribution plan. When
issued, shares of each Fund are fully paid and nonassessable, have no preemptive
or subscription rights, and are fully transferable. Other than the automatic
conversion of Class B shares to Class A shares, there are no conversion rights.
Shares do not have cumulative voting rights, which means that in situations in
which shareholders elect directors, holders of more than 50% of the shares
voting for the election of directors can elect all of the directors of the
Company, and the holders of less than 50% of the shares voting for the election
of directors will not be able to elect any directors.
Under Maryland law and the Company's By-laws, the Company need not hold an
annual meeting of shareholders unless a meeting is otherwise required under the
1940 Act to elect directors. Shareholders may remove directors from office, and
a meeting of shareholders may be called at the request of the holders of 10% or
more of the Company's outstanding shares.
15
<PAGE> 16
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND SHAREHOLDER
ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS --Registered Trademark--
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM ADVISOR FLEX FUND AIM GLOBAL UTILITIES FUND
AIM ADVISOR INTERNATIONAL VALUE FUND AIM HIGH INCOME MUNICIPAL FUND
AIM ADVISOR LARGE CAP VALUE FUND AIM HIGH YIELD FUND
AIM ADVISOR MULTIFLEX FUND AIM INCOME FUND
AIM ADVISOR REAL ESTATE FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM AGGRESSIVE GROWTH FUND AIM INTERNATIONAL EQUITY FUND
AIM ASIAN GROWTH FUND AIM LIMITED MATURITY TREASURY FUND
AIM BALANCED FUND AIM MONEY MARKET FUND(*)
AIM BLUE CHIP FUND AIM MUNICIPAL BOND FUND
AIM CAPITAL DEVELOPMENT FUND AIM SELECT GROWTH FUND
AIM CHARTER FUND AIM SMALL CAP OPPORTUNITIES FUND
AIM CONSTELLATION FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM EUROPEAN DEVELOPMENT FUND AIM TAX-EXEMPT CASH FUND(*)
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM TAX-FREE INTERMEDIATE FUND
AIM GLOBAL GROWTH FUND AIM VALUE FUND
AIM GLOBAL INCOME FUND AIM WEINGARTEN FUND
</TABLE>
(*) Class A shares of AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve Shares of
AIM MONEY MARKET FUND are offered to investors at net asset value, without
payment of a sales charge, as described below. Other funds, including the
Class A, Class B and Class C shares of AIM MONEY MARKET FUND, are sold with
an initial sales charge or subject to a contingent deferred sales charge
upon redemption, as described below.
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds ("AIM Funds"), an investor must submit a fully completed new Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by A I M Distributors, Inc. ("AIM
Distributors") to sell shares of the AIM Funds.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed IRS Form W-8 (for non-resident aliens) or Form
W-9 (certifying exempt status) accompanying the registration information will be
subject to backup withholding. See the Account Application for applicable
Internal Revenue Service penalties. The minimum initial investment is $500,
except for accounts initially established through an Automatic Investment Plan,
which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for an Individual Retirement Arrangement ("IRA") or Roth IRA is $250.
There are no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, Simplified Employee Pension
("SEP") accounts, Salary Reduction ("SARSEP") accounts, Savings Incentive Match
Plans for Employee IRA ("SIMPLE IRA") accounts, 403(b) plans or 457 (state
deferred compensation) plans (except that the minimum initial investment for
salary deferrals for such plans is $25), or for investment of dividends and
distributions of any of the AIM Funds into any existing AIM Funds account.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus are offered
pursuant to separate prospectuses. Copies of other prospectuses may be obtained
by calling (800) 347-4246.
MCF-07/98
A-1
<PAGE> 17
INITIAL AND SUBSEQUENT PURCHASES BY WIRE: To insure prompt credit to his
account, an investor or his dealer should call AFS' Client Services Department
at (800) 959-4246 prior to sending a wire to receive a reference number for the
wire. The following wire instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
HOW TO PURCHASE ADDITIONAL SHARES. Additional shares may be purchased directly
through AIM Distributors or through any dealer who has entered into an agreement
with AIM Distributors. The minimum investment for subsequent purchases is $50.
The minimum employee salary deferral investment for participants in
money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or 457 plans is
$25. There are no such minimum investment requirements for investment of
dividends and distributions of any of the AIM Funds into any other existing AIM
Funds account.
BY MAIL: Investors must indicate their account number and the name of the Fund
being purchased. The remittance slip from a confirmation statement should be
used for this purpose, and sent to AFS.
BY AIM BANK CONNECTION(SM): To purchase additional shares by electronic funds
transfer, please contact the Client Services Department of AFS for detail.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE
CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND, AIM
AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE CHIP
FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND,
AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH INCOME
MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM SMALL CAP OPPORTUNITIES FUND,AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM
TAX-FREE INTERMEDIATE FUND, AIM VALUE FUND and AIM WEINGARTEN FUND, collectively
(other than AIM AGGRESSIVE GROWTH FUND, AIM LIMITED MATURITY TREASURY FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT and AIM TAX-FREE INTERMEDIATE FUND), the
"Multiple Class Funds," may be purchased at their respective net asset value
plus a sales charge as indicated below, except that Class A shares of AIM TAX-
EXEMPT CASH FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold
without a sales charge and Class B shares (the "Class B shares") and Class C
shares ("Class C shares") of the Multiple Class Funds are sold at net asset
value subject to a contingent deferred sales charge payable upon certain
redemptions. These contingent deferred sales charges are described under the
caption "How to Redeem Shares -- Multiple Distribution System." Securities
dealers and other persons entitled to receive compensation for selling or
servicing shares of a Multiple Class Fund may receive different compensation for
selling or servicing one particular class of shares over another class in the
same Multiple Class Fund. Factors an investor should consider prior to
purchasing Class A, Class B or Class C shares (or, if applicable, AIM Cash
Reserve Shares) of a Multiple Class Fund are described below under "Special
Information Relating to Multiple Class Funds." For information on purchasing any
of the AIM Funds and to receive a prospectus, please call (800) 347-4246. As
described below, the sales charge otherwise applicable to a purchase of shares
of a fund may be reduced if certain conditions are met. In order to take
advantage of a reduced sales charge, the prospective investor or his dealer must
advise AIM Distributors that the conditions for obtaining a reduced sales charge
have been met. Net asset value is determined in the manner described under the
caption "Determination of Net Asset Value." The following tables show the sales
charge and dealer concession at various investment levels for the AIM Funds.
MCF-07/98
A-2
<PAGE> 18
SALES CHARGES AND DEALER CONCESSIONS
GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds include Class A shares of each of AIM ADVISOR FLEX FUND, AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, AIM AGGRESSIVE GROWTH FUND, AIM ASIAN GROWTH FUND, AIM BLUE CHIP
FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND,
AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL UTILITIES FUND, AIM INTERNATIONAL
EQUITY FUND, AIM MONEY MARKET FUND, AIM SELECT GROWTH FUND, AIM SMALL CAP
OPPORTUNITIES FUND, AIM VALUE FUND and AIM WEINGARTEN FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION(1) PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
- ---------------
(1) AIM Small Cap Opportunities Fund will not accept any single purchase in
excess of $250,000.
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
GROUP II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: the Class A shares of each of AIM ADVISOR REAL ESTATE FUND,
AIM BALANCED FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND,
AIM GLOBAL INCOME FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM
INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM MUNICIPAL BOND FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
MCF-07/98
A-3
<PAGE> 19
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are the Class A shares of each of AIM LIMITED MATURITY TREASURY
FUND and AIM TAX-FREE INTERMEDIATE FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than Class A shares of each of AIM LIMITED MATURITY TREASURY FUND and AIM
TAX-FREE INTERMEDIATE FUND as follows: 1% of the first $2 million of such
purchases, plus 0.80% of the next $1 million of such purchases, plus 0.50% of
the next $17 million of such purchases, plus 0.25% of amounts in excess of $20
million of such purchases. See "Contingent Deferred Sales Charge Program for
Large Purchases." AIM Distributors may make payments to dealers and institutions
who are dealers of record for purchases of $1 million or more of Class A shares
(or shares which normally involve payment of initial sales charges), and which
are sold at net asset value and are not subject to a contingent deferred sales
charge, in an amount up to 0.10% of such purchases of Class A shares of AIM
LIMITED MATURITY TREASURY FUND, and in an amount up to 0.25% of such purchases
of Class A shares of AIM TAX-FREE INTERMEDIATE FUND.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.00% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price of the Class C
shares sold by the dealer or institution, and will consist of a sales commission
of 0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. After the first full year, AIM Distributors will make such
payments quarterly to dealers and institutions based on the average net asset
value of Class C shares which are attributable to shareholders for whom the
dealers and institutions are designated as dealers of record. These commissions
are not paid on sales to investors exempt from the CDSC, including shareholders
of record on April 30, 1995 who purchase additional shares in any of the Funds
on or after May 1, 1995, and in circumstances where AIM Distributors grants an
exemption on particular transactions.
MCF-07/98
A-4
<PAGE> 20
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of the New York Stock Exchange ("NYSE"), which is generally 4:00 p.m.
Eastern Time (and which is hereinafter referred to as "NYSE Close") on any
business day of an AIM Fund will be confirmed at the price next determined.
Orders received after NYSE Close will be confirmed at the price determined on
the next business day of the AIM Fund. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent.
Any loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. Please see "How to Purchase
Shares -- Purchases by Wire" for information on obtaining a reference number for
wire orders, which will facilitate the handling of such orders and ensure prompt
credit to an investor's account. A "business day" of an AIM Fund is any day on
which the NYSE is open for business. It is expected that the NYSE will be closed
during the next twelve months on Saturdays and Sundays and on the days on which
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class Funds
currently offer two or more classes of shares through separate distribution
systems (the "Multiple Distribution System"). Although each class of shares of a
particular Multiple Class Fund represents an interest in the same portfolio of
investments, each class is subject to a different distribution structure and, as
a result, differing expenses. This Multiple Distribution System allows investors
to select the class that is best suited to the investor's needs and objectives.
In considering the options afforded by the Multiple Distribution System,
investors should consider both the applicable initial sales charge or contingent
deferred sales charge, as well as the ongoing expenses borne by each class of
shares and other relevant factors, such as whether his or her investment goals
are long-term or short-term.
CLASS A SHARES are sold subject to the initial sales charges described
above and are subject to the other fees and expenses described herein.
Class A shares of AIM MONEY MARKET FUND are designed to meet the needs of
an investor who wishes to establish a dollar cost averaging program,
pursuant to which Class A shares an investor owns may be exchanged at net
asset value for Class A shares of another Multiple Class Fund or shares of
another AIM Fund which is not a Multiple Class Fund, subject to the terms
and conditions described under the caption "Exchange Privilege -- Terms and
Conditions of Exchanges."
CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Rule 12b-1 Plan payments of 1.00%
per annum on the average daily net assets of a Multiple Class Fund
attributable to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the date such shares were purchased are subject to a
contingent deferred sales charge ranging from 5% for redemptions made
within the first year to 1% for redemptions made within the sixth year. No
contingent deferred sales charge will be imposed if Class B shares are
redeemed after six years from the date such shares were purchased.
Redemptions of Class B shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B
shares was made. Following such conversion of their Class B shares,
investors will be relieved of the higher Rule 12b-1 Plan payments
associated with Class B shares. See "Management -- Distribution Plans."
CLASS C SHARES are sold without an initial sales charge. Thus the entire
purchase price of Class C shares is immediately invested in Class C shares.
Class C shares are subject, however, to Rule 12b-1 Plan payments of 1.00%
per annum on the average daily net assets of a Multiple Class Fund
attributable to Class C shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class C shares redeemed
within one year from the date such shares were purchased are subject to a
1.00% contingent deferred sales charge. No contingent deferred sales charge
will be imposed if Class C shares are redeemed after one year from the date
such shares were purchased. Redemptions of Class C shares and associated
charges are further described under the caption "How to Redeem
Shares -- Multiple Distribution System."
AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold without an
initial sales charge and are not subject to a contingent deferred sales
charge; however, they are subject to the other fees and expenses described
in the prospectus for AIM MONEY MARKET FUND.
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon Eastern Time or NYSE Close on any
business day of the Fund will be confirmed at the price next determined. Net
asset value is normally determined at 12:00 noon Eastern Time and NYSE Close on
each business day of AIM MONEY MARKET FUND.
MCF-07/98
A-5
<PAGE> 21
SPECIAL INFORMATION RELATING TO AIM MONEY MARKET FUND AND AIM TAX-EXEMPT CASH
FUND (THE "MONEY MARKET FUNDS"). Because each Money Market Fund uses the
amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of such funds will remain constant at $1.00 per share.
However, there is no assurance that each Money Market Fund can maintain a $1.00
net asset value per share. In order to earn dividends with respect to AIM MONEY
MARKET FUND on the same day that a purchase is made, purchase payments in the
form of federal funds must be received by the Transfer Agent before 12:00 noon
Eastern Time on that day. Purchases made by payments in any other form, or
payments in the form of federal funds received after such time but prior to NYSE
Close, will begin to earn dividends on the next business day following the date
of purchase. The Money Market Funds generally will not issue share certificates
but will record investor holdings in noncertificate form and regularly advise
the shareholder of his ownership position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM MONEY MARKET FUND and Class
B and Class C shares of the Multiple Class Funds will not be taken into account
in determining whether a purchase qualifies for a reduction in initial sales
charges.
The term "purchaser" means:
- an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, Roth IRA, a single-participant
money-purchase/profit-sharing plan or an individual participant in a 403(b)
Plan (unless such 403(b) plan qualifies as the purchaser as defined below);
- a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
- a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
- a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP"), a Savings Incentive Match
Plans for Employees IRA ("SIMPLE IRA") where the employer has notified AIM
Distributors in writing that all of its related employee SEP, SARSEP or
SIMPLE IRA accounts should be linked;
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
- the discretionary advised accounts of A I M Advisors, Inc. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by vir-
MCF-07/98
A-6
<PAGE> 22
tue of the foregoing definition, to the reduced sales charge. No person or
entity may distribute shares of the AIM Funds without payment of the applicable
sales charge other than to persons or entities who qualify for a reduction in
the sales charge as provided herein.
(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for
(i) Class A shares of AIM TAX-EXEMPT CASH FUND, and AIM Cash Reserve Shares of
AIM MONEY MARKET FUND and (ii) Class B and Class C shares of the Multiple Class
Funds) within the following 13 consecutive months. By marking the LOI section on
the account application and by signing the account application, the purchaser
indicates that he understands and agrees to the terms of the LOI and is bound by
the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND
and (ii) Class B and Class C shares of the Multiple Class Funds) at the time of
the proposed purchase. Rights of Accumulation are also available to holders of
the Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992. To determine
whether or not a reduced initial sales charge applies to a proposed purchase,
AIM Distributors takes into account not only the money which is invested upon
such proposed purchase, but also the value of all shares of the AIM Funds
(except for (i) Class A shares of AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve
Shares of AIM MONEY MARKET FUND and (ii) Class B and Class C shares of the
Multiple Class Funds) owned by such purchaser, calculated at their then current
public offering price. If a purchaser so qualifies for a reduced sales charge,
the reduced sales charge applies to the total amount of money then being
invested by such purchaser and not just to the portion that exceeds the
breakpoint above which a reduced sales charge applies. For example, if a
purchaser already owns qualifying shares of any AIM Fund with a value of $20,000
and wishes to invest an additional $20,000 in a fund with a maximum initial
sales charge of 5.50%, the reduced initial sales charge of 5.25% will apply to
the full $20,000 purchase and not just to the $15,000 in excess of the $25,000
breakpoint. To qualify for obtaining the discount applicable to a particular
purchase, the purchaser or his dealer must furnish AFS with a list of the
account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a fund
(see "Dividends,
MCF-07/98
A-7
<PAGE> 23
Distributions and Tax Matters"); (b) exchanges of shares of certain other funds
(see "Exchange Privilege"); (c) use of the reinstatement privilege (see "How to
Redeem Shares"); or (d) a merger, consolidation or acquisition of assets of a
fund.
Shareholders of record of Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
shares of the particular AIM Fund(s) whose shares they owned on such date, at
net asset value (without payment of a sales charge) for as long as they
continuously own Class A shares of such AIM Fund(s) having a market value of at
least $500. In addition, discretionary advised clients of any investment
advisors whose clients held Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A shares of the applicable AIM
Fund(s) at the net asset value of such shares.
The following persons may purchase shares of the AIM Funds without payment of
an initial sales charge: (a) A I M Management Group Inc. ("AIM Management") and
its affiliated companies; (b) any current or retired officer, director, trustee
or employee, or any member of the immediate family (including spouse, children,
parents and parents of spouse) of any such person, of AIM Management or its
affiliates or of certain mutual funds which are advised or managed by AIM, or
any trust established exclusively for the benefit of such persons; (c) any
employee benefit plan established for employees of AIM Management or its
affiliates; (d) any current or retired officer, director, trustee or employee,
or any member of the immediate family (including spouse, children, parents and
parents of spouse) of any such person, or of CIGNA Corporation or of any of its
affiliated companies, or of First Data Investor Services Group (formerly The
Shareholders Services Group, Inc.); (e) any investment company sponsored by
CIGNA Investments, Inc. or any of its affiliated companies for the benefit of
its directors' deferred compensation plans; (f) discretionary advised clients of
AIM or AIM Capital; (g) registered representatives and employees of dealers who
have entered into agreements with AIM Distributors (or financial institutions
that have arrangements with such dealers with respect to the sale of shares of
the AIM Funds) and any member of the immediate family (including spouse,
children, parents and parents of spouse) of any such person, provided that
purchases at net asset value are permitted by the policies of such person's
employer; (h) certain broker-dealers, investment advisers or bank trust
departments that provide asset allocation, similar specialized investment
services or investment company transaction services for their customers, that
charge a minimum annual fee for such services, and that have entered into an
agreement with AIM Distributors with respect to their use of the AIM Funds in
connection with such services; (i) any employee, or any member of the immediate
family (including spouse, children, parents and parents of spouse) of any
employee, of Triformis Inc; and (j) former or current Class A shareholders of
the AIM/GT Funds (those funds which are advised by AIM and sub-advised by
INVESCO (NY), Inc.), but only to the extent that their purchase order is entered
with an instruction to have all or a portion of the proceeds from a redemption
of Class A shares of the AIM/GT Funds (on which a sales charge was paid)
invested in Class A shares of the AIM Funds.
In addition, shares of any AIM Fund (except AIM Small Cap Opportunities Fund)
may be purchased at net asset value, without payment of a sales charge, by
pension, profit-sharing or other employee benefit plans created pursuant to a
plan qualified under Section 401 of the Code or plans under Section 457 of the
Code, or employee benefit plans created pursuant to Section 403(b) of the Code
and sponsored by nonprofit organizations defined under Section 501(c)(3) of the
Code. Such plans will qualify for purchases at net asset value provided that (1)
the total amount invested in the plan is at least $1,000,000, (2) the sponsor
signs a $1,000,000 LOI, (3) such shares are purchased by an employer-sponsored
plan with at least 100 eligible employees, or (4) all of the plan's transactions
are executed through a single financial institution or service organization who
has entered into an agreement with AIM Distributors with respect to their use of
the AIM Funds in connection with such accounts. Section 403(b) plans sponsored
by public educational institutions will not be eligible for net asset value
purchases based on the aggregate investment made by the plan or the number of
eligible employees. Participants in such plans will be eligible for reduced
sales charges based solely on the aggregate value of their individual
investments in the applicable AIM Fund. PLEASE NOTE THAT TAX-EXEMPT FUNDS ARE
NOT APPROPRIATE INVESTMENTS FOR SUCH PLANS. AIM Distributors may pay investment
dealers or other financial service firms for share purchases (measured on an
annual basis) of the Load Funds (as defined on page A-10 herein) sold at net
asset value to an employee benefit plan in accordance with this paragraph as
follows: 1% of the first $2 million of such purchases, plus 0.80% of the next $1
million of such purchases, plus 0.50% of the next $17 million of such purchases,
plus 0.25% of amounts in excess of $20 million of such purchases and up to 0.10%
of the net asset value of any Class A shares of AIM LIMITED MATURITY TREASURY
FUND sold at net asset value to an employee benefit plan in accordance with this
paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A shares of such funds may also be purchased at net asset
value by other unit investment trusts approved by the Board of Directors of AIM
Equity Funds, Inc. Unit holders of such trusts may elect to invest cash
distributions from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND at net asset value, including: (a) distributions of any
dividend income or other income received by such trusts; (b) distributions of
any net capital gains received in respect of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sale of Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such trusts;
and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided: (a) that the investment in Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND is effected within 30 days of such
redemption or repurchase; and (b) that the unit holder or his dealer provides
AIM Distributors with a letter which: (i) identifies the
MCF-07/98
A-8
<PAGE> 24
name, address and telephone number of the dealer who sold to the unit holder the
units to be redeemed or repurchased; and (ii) states that the investment in
Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND is being funded
exclusively by the proceeds from the redemption or repurchase of units of such
trusts.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns shares which are not subject to a contingent deferred sales charge, can
arrange for monthly, quarterly or annual amounts (but not less than $50) to be
drawn against the balance of his account in the designated AIM Fund.
Shareholders who own shares subject to a contingent deferred sales charge, can
only arrange for monthly or quarterly withdrawals under a Systematic Withdrawal
Plan. Payment of this amount can be made on any day of the month the shareholder
specifies, except the thirtieth or thirty-first day of each month in which a
payment is to be made. A minimum account balance of $5,000 is required to
establish a Systematic Withdrawal Plan, but there is no requirement thereafter
to maintain any minimum investment. With respect to shares subject to a
contingent deferred sales charge (all classes) no contingent deferred sales
charge will be imposed on withdrawals made under a Systematic Withdrawal Plan,
provided that the amounts withdrawn under such a plan do not exceed on an annual
basis 12% of the account value at the time the shareholder elects to participate
in the Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to
shares subject to a contingent deferred sales charge that exceed on an annual
basis 12% of such account will be subject to a contingent deferred sales charge
on the amounts exceeding 12% of the account value at the time the shareholder
elects to participate in the Systematic Withdrawal Plan.
Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested in shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic Withdrawal Plan, the Transfer Agent redeems sufficient full
and fractional shares at their net asset value in effect at the time of each
such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the Multiple Class Funds and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND), it is disadvantageous to effect such
purchases while a Systematic Withdrawal Plan is in effect.
The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make regular systematic
investments may establish an Automatic Investment Plan. Under this plan
withdrawal is made on the shareholder's bank account in the amount specified by
the shareholder (minimum $50 per investment, per account) and on a day or
date(s) specified by the shareholder. The proceeds are invested in shares of the
designated AIM Fund at the applicable offering price determined on the date of
the withdrawal. An Automatic Investment Plan may be discontinued upon 10 days'
prior notice to the Transfer Agent or AIM Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; dividends and distributions attributable to Class C
shares may be rein-
MCF-07/98
A-9
<PAGE> 25
vested in Class C shares of the same fund or in Class C shares of another
Multiple Class Fund; and dividends and distributions attributable to AIM Cash
Reserve Shares of AIM MONEY MARKET FUND may be reinvested in additional shares
of such fund, in Class A shares of another Multiple Class Fund or in shares of
another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" for a description
of payment dates for these options. In order to qualify to have dividends and
distributions of one AIM Fund invested in shares of another AIM Fund, the
following conditions must be satisfied: (a) the shareholder must have an account
balance in the dividend paying fund of at least $5,000; (b) the account must be
held in the name of the shareholder (i.e., the account may not be held in
nominee name); and (c) the shareholder must have requested and completed an
authorization relating to the reinvestment of dividends into another AIM Fund.
Shares of AIM Small Cap Opportunities Fund will not be available for automatic
dividend reinvestments until August 10, 1998. An authorization may be given on
the account application or on an authorization form available from AIM
Distributors. An AIM Fund will waive the $5,000 minimum account value
requirement if the shareholder has an account in the fund selected to receive
the dividends and distributions with a value of at least $500.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." The account from
which exchanges are to be made must have a value of at least $5,000 when a
shareholder elects to begin this program, and the exchange minimum is $50 per
transaction. All of the accounts that are part of this program must have
identical registrations. The net asset value of shares purchased under this
program may vary, and may be more or less advantageous than if shares were not
exchanged automatically. There is no charge for entering the Dollar Cost
Averaging program. Sales charges may apply, as described under the caption
"Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM
TAX-EXEMPT CASH FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the
following prototype retirement plans available to corporations, individuals and
employees of non-profit organizations and public schools: combination
money-purchase/profit-sharing plans; 403(b) plans; IRA plans; Roth IRA plans;
SARSEP plans; SEP plans; and SIMPLE IRA plans (collectively, "retirement
accounts"). Information concerning these plans, including the custodian's fees
and the forms necessary to adopt such plans, can be obtained by calling or
writing the AIM Funds or AIM Distributors. Shares of the AIM Funds are also
available for investment through existing 401(k) plans (for both individuals and
employers) adopted under the Code. The plan custodian currently imposes an
annual $10 maintenance fee with respect to each retirement account for which it
serves as the custodian. This fee is generally charged in December. Each AIM
Fund and/or the custodian reserve the right to change this maintenance fee and
to initiate an establishment fee (not to exceed its cost).
MCF-07/98
A-10
<PAGE> 26
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds,
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds, listed below
and referred to herein as the "Load Funds," are sold at a public offering price
that includes a maximum sales charge of 5.50% or 4.75% of the public offering
price of such shares; Class A shares (or shares which normally involve the
payment of initial sales charges) of certain of the AIM Funds, listed below and
referred to herein as the "Lower Load Funds," are sold at a public offering
price that includes a maximum sales charge of 1.00% of the public offering price
of such shares; and Class A shares or shares of certain other funds, listed
below and referred to herein as the "No Load Funds," are sold at net asset
value, without payment of a sales charge.
<TABLE>
<S> <C> <C>
LOAD FUNDS: LOWER LOAD FUNDS:
AIM ADVISOR FLEX FUND -- AIM GLOBAL GROWTH AIM LIMITED MATURITY TREASURY FUND
CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR INTERNATIONAL AIM GLOBAL INCOME AIM TAX-FREE INTERMEDIATE FUND
VALUE FUND -- CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR LARGE CAP AIM GLOBAL UTILITIES NO LOAD FUNDS:
VALUE FUND -- CLASS A FUND -- CLASS A
AIM ADVISOR MULTIFLEX AIM HIGH INCOME MUNICIPAL AIM MONEY MARKET FUND
FUND -- CLASS A FUND -- CLASS A -- AIM CASH RESERVE SHARES
AIM ADVISOR REAL ESTATE AIM HIGH YIELD FUND -- CLASS A AIM TAX-EXEMPT CASH FUND -- CLASS A
FUND -- CLASS A AIM INCOME FUND -- CLASS A
AIM AGGRESSIVE GROWTH AIM INTERMEDIATE GOVERNMENT
FUND -- CLASS A FUND -- CLASS A
AIM ASIAN GROWTH FUND -- CLASS A AIM INTERNATIONAL EQUITY
AIM BALANCED FUND -- CLASS A FUND -- CLASS A
AIM BLUE CHIP FUND -- CLASS A AIM MONEY MARKET
AIM CAPITAL DEVELOPMENT FUND -- CLASS A
FUND -- CLASS A AIM MUNICIPAL BOND
AIM CHARTER FUND -- CLASS A FUND -- CLASS A
AIM CONSTELLATION AIM SELECT GROWTH FUND -- CLASS A
FUND -- CLASS A AIM SMALL CAP OPPORTUNITIES
AIM EUROPEAN DEVELOPMENT FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM GLOBAL AGGRESSIVE GROWTH OF CONNECTICUT -- CLASS A
FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM WEINGARTEN FUND -- CLASS A
</TABLE>
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund on
the terms described on the chart below, except that (i) Load Fund share
purchases of $1,000,000 or more which are subject to a contingent deferred sales
charge may not be exchanged for Lower Load Funds or for AIM TAX-EXEMPT CASH
FUND; (II) LOWER LOAD FUND SHARE PURCHASES OF $1,000,000 OR MORE AND AIM Cash
Reserve Shares of AIM MONEY MARKET FUND and AIM TAX-EXEMPT CASH FUND PURCHASES
MAY BE EXCHANGED FOR LOAD FUND SHARES IN AMOUNTS OF $1,000,000 OR MORE WHICH
WILL THEN BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE; HOWEVER, FOR
PURPOSES OF CALCULATING THE CONTINGENT DEFERRED SALES CHARGE ON THE LOAD FUND
SHARES ACQUIRED, THE 18-MONTH PERIOD SHALL BE COMPUTED FROM THE DATE OF SUCH
EXCHANGE; (iii) Class A shares may be exchanged for Class A shares, (iv) Class B
shares may be exchanged only for Class B shares; (v) Class C shares may only be
exchanged for Class C shares; and (vi) AIM Cash Reserve Shares of AIM MONEY
MARKET FUND may not be exchanged for Class A, Class B or Class C shares of AIM
MONEY MARKET FUND. Class A shares and Class B shares of AIM Small Cap
Opportunities Fund will not be available for purchase through an exchange from
another AIM Fund until August 10, 1998. Class C shares of AIM SMALL CAP
OPPORTUNITIES FUND are currently not available.
MCF-07/98
A-11
<PAGE> 27
DEPENDING UPON THE FUND FROM WHICH AND INTO WHICH AN EXCHANGE IS BEING MADE,
SHARES BEING ACQUIRED IN AN EXCHANGE MAY BE ACQUIRED AT THEIR OFFERING PRICE OR
AT THEIR NET ASSET VALUE (WITHOUT PAYMENT OF A SALES CHARGE) AS SET FORTH IN THE
TABLE BELOW FOR SHARES INITIALLY PURCHASED PRIOR TO MAY 1, 1994:
<TABLE>
<CAPTION>
MULTIPLE CLASS FUNDS:
LOWER LOAD NO LOAD ------------------------------
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B CLASS C
----- -------------- ----------------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Funds..........
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund or any Fund or any Lower Load
Lower Load Fund. Fund; otherwise,
Offering Price.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable Not Applicable
Funds.......... acquired upon exchange of any
Load Fund. Otherwise, difference
in sales charge will apply.
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund. Fund or any Lower Load
Difference in sales charge will Fund; otherwise,
apply if No Load shares were Offering Price.
acquired upon exchange of Lower
Load Fund shares.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
Class C........ Not Applicable Not Applicable Not Applicable Not Applicable Net Asset Value
</TABLE>
An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A, Class B and Class C shares of a Multiple Class Fund
cannot be exchanged for each other), except that AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may be exchanged for Class A shares of another Multiple Class
Fund; (b) the dollar amount of the exchange must be at least equal to the
minimum investment applicable to the shares of the fund acquired through such
exchange; (c) the shares of the fund acquired through exchange must be qualified
for sale in the state in which the shareholder resides; (d) the exchange must be
made between accounts having identical registrations and addresses; (e) the full
amount of the purchase price for the shares being exchanged must have already
been received by the fund; (f) the account from which shares have been exchanged
must be coded as having a certified taxpayer identification number on file or,
in the alternative, an appropriate Internal Revenue Service ("IRS") Form W-8
(certificate of foreign status) or Form W-9 (certifying exempt status) must have
been received by the fund; (g) newly acquired shares (through either an initial
or subsequent investment) are held in an account for at least ten business days,
and all other shares are held in an account for at least one day, prior to the
exchange; and (h) certificates representing shares must be returned before
shares can be exchanged. There is no fee for exchanges among the AIM Funds.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received
MCF-07/98
A-12
<PAGE> 28
after NYSE Close will result in the redemption of shares at their net asset
value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. Normally, shares of an AIM Fund to be acquired
by exchange are purchased at their net asset value or applicable offering price,
as the case may be, determined on the date that such request is received, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is determined that a fund would be materially disadvantaged
by an immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into a fund paying daily dividends (See "Dividends, Distributions and
Tax Matters -- Dividends and Distributions," below), and the release of the
exchange proceeds is delayed for the foregoing five-day period, such shareholder
will not begin to accrue dividends until the sixth business day after the
exchange. Shares purchased by check may not be exchanged until it is determined
that the check has cleared, which may take up to ten business days from the date
that the check is received. See "Terms and Conditions of Purchase of the AIM
Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AFS. The request should contain the account registration and
account number, the dollar amount or number of shares to be exchanged, and the
names of the funds from which and into which the exchange is to be made. The
request should comply with all of the requirements for redemption by mail,
except those required for redemption of IRAs. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AFS at (800) 959-4246. If a shareholder is unable to reach
AFS by telephone, he may also request exchanges by telegraph or use overnight
courier services to expedite exchanges by mail, which will be effective on the
business day received by the Transfer Agent as long as such request is received
prior to NYSE Close. The Transfer Agent and AIM Distributors will not be liable
for any loss, expense or cost arising out of any telephone exchange request that
they reasonably believe to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
Social Security Number and current address, and mailings of confirmations
promptly after the transaction.
EXCHANGES OF CLASS B AND CLASS C SHARES. A contingent deferred sales charge
will not be imposed in connection with exchanges among Class B shares or among
Class C shares. For purposes of determining a shareholder's holding period of
Class B or Class C shares in the calculation of the applicable contingent
deferred sales charge, the period of time during which Class B or Class C shares
were held prior to an exchange will be added to the holding period of the
applicable Class B or Class C shares acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors. In
addition to the obligation of the fund(s) named on the cover page to redeem
shares, AIM Distributors also repurchases shares. Although a contingent deferred
sales charge may be applicable to certain redemptions, as described below, there
is no redemption fee imposed when shares are redeemed or repurchased; however,
dealers may charge service fees for handling repurchase transactions.
MULTIPLE DISTRIBUTION SYSTEM. Class B shares. Class B shares purchased under
the Multiple Distribution System may be redeemed on any business day of a
Multiple Class Fund at the net asset value per share next determined following
receipt of the redemption order, as described under the caption "Timing and
Pricing of Redemption Orders," less the applicable contingent deferred sales
charge shown in the table below. No deferred sales charge will be imposed (i) on
redemptions of Class B shares following six years from the date such shares were
purchased, (ii) on Class B shares acquired through reinvestments of dividends
and distributions attrib-
MCF-07/98
A-13
<PAGE> 29
utable to Class B shares or (iii) on amounts that represent capital appreciation
in the shareholder's account above the purchase price of the Class B shares.
<TABLE>
<CAPTION>
YEAR CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
-------- -------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
Class C Shares. Class C shares purchased under the Multiple Distribution
System may be redeemed on any business day of a Multiple Class Fund at the net
asset value per share next determined following receipt of the redemption order,
as described under the caption "Timing and Pricing of Redemption Orders," less a
1% contingent deferred sales charge. No deferred sales charge will be imposed
(i) on redemptions of Class C shares following one year from the date such
shares were purchased; (ii) on Class C shares acquired through reinvestment of
dividends and distributions attributable to Class C shares; (iii) on amounts
that represent capital appreciation in the shareholder's account above the
purchase price of the Class C shares; (iv) on redemptions of additional
purchases of shares of AIM ADVISOR FLEX FUND, AIM ADVISOR INTERNATIONAL VALUE
FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND, and AIM
ADVISOR REAL ESTATE FUND, by shareholders of record on April 30, 1995 of these
funds (shareholders whose broker/dealers maintain a single omnibus account with
the Transfer Agent on behalf of those shareholders, perform sub-accounting
functions with respect to those shareholders, and are unable to segregate
shareholders of record prior to April 30, 1995 from shareholders whose accounts
were opened after that date will be subject to a CDSC on all purchases made
after March 1, 1996).
Waivers. Contingent deferred sales charges on Class B and Class C shares will
be waived on redemptions (1) following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust (provided AIM Distributors is notified of such death or
post-purchase disability at the time of the redemption request and is provided
with satisfactory evidence of such death or post-purchase disability), (2) in
connection with certain distributions from individual retirement accounts,
custodial accounts maintained pursuant to Code Section 403(b), deferred
compensation plans qualified under Code Section 457 and plans qualified under
Code Section 401 (collectively, "Retirement Plans"), (3) pursuant to a
Systematic Withdrawal Plan, provided that amounts withdrawn under such plan do
not exceed on an annual basis 12% of the value of the shareholder's investment
in Class B or Class C shares at the time the shareholder elects to participate
in the Systematic Withdrawal Plan, (4) effected pursuant to the right of a
Multiple Class Fund to liquidate a shareholder's account if the aggregate net
asset value of shares held in the account is less than the designated minimum
account size described in the prospectus of such Multiple Class Fund, (5)
effected by AIM of its investment in Class B or Class C shares and (6) of Class
C shares where such investor's dealer of record, due to the nature of the
investor's account, notifies AIM Distributors prior to the time of investment
that the dealer waives the payment otherwise payable to the dealer described in
the fifth paragraph under the caption "Terms and Conditions of Purchase of the
AIM Funds -- All Groups of AIM Funds."
Waiver category (1) above applies only to redemptions of Class B or Class C
shares held at the time of death or initial determination of post-purchase
disability.
Waiver category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or
beneficiaries who are age 70- 1/2 or older, and only with respect to that
portion of such distributions which does not exceed 12% annually of the
participant's or beneficiary's account value in a particular AIM Fund;
(ii) in kind transfers of assets where the participant or beneficiary
notifies AIM Distributors of such transfer no later than the time such
transfer occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement
Plan invested in Class B or Class C shares of one or more Multiple Class
Funds;
(iv) tax-free returns of excess contributions or returns of excess
deferral amounts; and
(v) distributions upon the death or disability (as defined in the
Code) of the participant or beneficiary.
MCF-07/98
A-14
<PAGE> 30
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B and Class C shares of a Multiple Class Fund and purchases
of shares of the No Load Funds and Lower Load Funds, A CONTINGENT DEFERRED SALES
CHARGE OF 1% APPLIES TO PURCHASES OF $1,000,000 OR MORE THAT ARE REDEEMED WITHIN
18 MONTHS OF THE DATE OF PURCHASE. For a description of the AIM Funds
participating in this program, see "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions." This charge will be 1% of the
lesser of the value of the shares redeemed (excluding reinvested dividends and
capital gain distributions) or the total original cost of such shares. In
determining whether a contingent deferred sales charge is payable, and the
amount of any such charge, shares not subject to the contingent deferred sales
charge are redeemed first (including shares purchased by reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-MONTH PERIOD (i) shares of any Load
Fund or AIM Cash Reserve Shares of AIM MONEY MARKET FUND which were acquired
through an exchange of shares which previously were subject to the 1% contingent
deferred sales charge will be credited with the period of time such exchanged
shares were held, and (ii) shares of any Load Fund which are subject to the 1%
contingent deferred sales charge and which were acquired through an exchange of
shares of a Lower Load Fund or a No Load Fund which previously were not subject
to the 1% contingent deferred sales charge will not be credited with the period
of time such exchanged shares were held. The charge will be waived in the
following circumstances: (1) redemptions of shares by employee benefit plans
("Plans") qualified under Sections 401 or 457 of the Code, or Plans created
under Section 403(b) of the Code and sponsored by nonprofit organizations as
defined under Section 501(c)(3) of the Code, where shares are being redeemed in
connection with employee terminations or withdrawals, and (a) the total amount
invested in a Plan is at least $1,000,000, (b) the sponsor of a Plan signs a
letter of intent to invest at least $1,000,000 in one or more of the AIM Funds,
or (c) the shares being redeemed were purchased by an employer-sponsored Plan
with at least 100 eligible employees; provided, however, that Plans created
under Section 403(b) of the Code which are sponsored by public educational
institutions shall qualify under (a), (b) or (c) above on the basis of the value
of each Plan participant's aggregate investment in the AIM Funds, and not on the
aggregate investment made by the Plan or on the number of eligible employees;
(2) redemptions of shares following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at least
$1,000,000; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of record, due to the nature of
the investor's account, notifies AIM Distributors prior to the time of
investment that the dealer waives the payments otherwise payable to the dealer
as described in the third paragraph under the caption "Terms and Conditions of
Purchase of the AIM Funds -- All Groups of AIM Funds"; and (5) pursuant to a
Systematic Withdrawal Plan, provided that amounts withdrawn under such plan do
not exceed on an annual basis 12% of the value of the shareholder's investment
in Class A shares at the time the shareholder elects to participate in the
Systematic Withdrawal Plan.
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnerships, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
In addition to these requirements, shareholders who have invested in a fund to
establish an IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares: (a) a statement
as to whether or not the shareholder has attained age 59- 1/2; and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information; and (e) the proceeds of the
redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be gen-
MCF-07/98
A-15
<PAGE> 31
uine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction.
EXPEDITED REDEMPTIONS (AIM Cash Reserve Shares of AIM MONEY MARKET FUND
ONLY). If a redemption order is received prior to 11:30 a.m. Eastern Time, the
redemption will be effective on that day and AIM MONEY MARKET FUND will endeavor
to transmit payment on that same business day. If the redemption order is
received after 11:30 a.m. and prior to NYSE Close, the redemption will be made
at the next determined net asset value and payment will generally be transmitted
on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve Shares of
AIM MONEY MARKET FUND). After completing the appropriate authorization form,
shareholders may use checks to effect redemptions from AIM TAX-EXEMPT CASH FUND
and the AIM Cash Reserve Shares of AIM MONEY MARKET FUND. This privilege does
not apply to retirement accounts or qualified plans. Checks may be drawn in any
amount of $250 or more. Checks drawn against insufficient shares in the account,
against shares held less than ten business days, or in amounts of less than the
applicable minimum will be returned to the payee. The payee of the check may
cash or deposit it in the same way as an ordinary bank check. When a check is
presented to the Transfer Agent for payment, the Transfer Agent will cause a
sufficient number of shares of such fund to be redeemed to cover the amount of
the check. Shareholders are entitled to dividends on the shares redeemed through
the day on which the check is presented to the Transfer Agent for payment.
TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds
(other than AIM MONEY MARKET FUND) are redeemed at their net asset value next
computed after a request for redemption in proper form (including signature
guarantees and other required documentation for written redemptions) is received
by the Transfer Agent, except that shares that are subject to a contingent
deferred sales charge, may be subject to the imposition of deferred sales
charges that will be deducted from the redemption proceeds. See "Multiple
Distribution System" and "Contingent Deferred Sales Charge Program for Large
Purchases." Orders for the redemption of shares received in proper form prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer's failure to
submit a request for redemption within the prescribed time frame will be borne
by that dealer. Telephone redemption requests must be made by NYSE Close on any
business day of an AIM Fund and will be confirmed at the price determined as of
the close of that day. No AIM Fund will accept requests which specify a
particular date for redemption or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally made within seven days
following the redemption date. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders." A charge for special handling
(such as wiring of funds or expedited delivery services) may be made by the
Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent to other
than the bank of record for the account; (4) redemptions requesting proceeds to
be sent to a new address or an address that has been changed within the past 30
days; (5) requests to transfer the registration of shares to another owner; (6)
telephone exchange and telephone redemption authorization forms; (7) changes in
previously designated wiring or electronic funds transfer instructions; and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the Securities and
Exchange Commission ("SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the NYSE Medallion Signature Program,
provided that in either event, the amount of the transaction involved does not
exceed
MCF-07/98
A-16
<PAGE> 32
the surety coverage amount indicated on the medallion. For information regarding
whether a particular institution or organization qualifies as an "eligible
guarantor institution," an investor should contact the Client Services
Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY). Within 90 days of a redemption,
a shareholder may invest all or part of the redemption proceeds in Class A
shares of any AIM Fund at the net asset value next computed after receipt by the
Transfer Agent of the funds to be reinvested; provided, however, if the
redemption was made from Class A shares of either AIM LIMITED MATURITY TREASURY
FUND or AIM TAX-FREE INTERMEDIATE FUND, the reinvested proceeds will be subject
to the difference in sales charge between the shares redeemed and the shares the
proceeds are reinvested in. The shareholder must ask the Transfer Agent for such
privilege at the time of reinvestment. A realized gain on the redemption is
taxable, and reinvestment may alter any capital gains payable. If there has been
a loss on the redemption and shares of the same fund are repurchased, all of the
loss may not be tax deductible, depending on the timing and amount reinvested.
Under the Code, if the redemption proceeds of fund shares on which a sales
charge was paid are reinvested in (or exchanged for) shares of another AIM Fund
at a reduced sales charge within 90 days of the payment of the sales charge, the
shareholder's basis in the fund shares redeemed may not include the amount of
the sales charge paid, thereby reducing the loss or increasing the gain
recognized from the redemption; however, the shareholder's basis in the fund
shares purchased will include the sales charge. Each AIM Fund may amend, suspend
or cease offering this privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation. This privilege may only be
exercised once each year by a shareholder with respect to each AIM Fund.
Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares and who subsequently reinvest a portion or
all of the value of the redeemed shares in Class A shares of any AIM Fund within
90 days after such redemption may do so at net asset value if such privilege is
claimed at the time of reinvestment. Such reinvested proceeds will not be
subject to either a front-end sales charge at the time of reinvestment or an
additional contingent deferred sales charge upon subsequent redemption. In order
to exercise this reinvestment privilege, the shareholder must notify the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B or Class C shares.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon Eastern Time and NYSE Close with
respect to AIM MONEY MARKET FUND), on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an AIM Fund's share
will be determined as of the close of the NYSE on such day. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE.The net asset
value per share is calculated by subtracting a class' liabilities from its
assets and dividing the result by the total number of class shares outstanding.
The determination of net asset value per share is made in accordance with
generally accepted accounting principles. Among other items, liabilities include
accrued expenses and dividends payable, and total assets include portfolio
securities valued at their market value, as well as income accrued but not yet
received. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the supervision of
the fund's officers and in accordance with methods which are specifically
authorized by its governing Board of Directors or Trustees. Short-term
obligations with maturities of 60 days or less, and the securities held by the
Money Market Funds, are valued at amortized cost as reflecting fair value. AIM
HIGH INCOME MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT and AIM TAX-FREE INTERMEDIATE FUND value variable rate securities
that have an unconditional demand or put feature exercisable within seven days
or less at par, which reflects the market value of such securities.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund.
MCF-07/98
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<PAGE> 33
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund's policy regarding the payment of dividends and distributions is
set forth below.
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM ADVISOR FLEX FUND..................... declared and paid quarterly quarterly annually
AIM ADVISOR INTERNATIONAL VALUE FUND...... declared and paid annually annually annually
AIM ADVISOR LARGE CAP VALUE FUND.......... declared and paid quarterly quarterly annually
AIM ADVISOR MULTIFLEX FUND................ declared and paid quarterly quarterly annually
AIM ADVISOR REAL ESTATE FUND.............. declared and paid quarterly quarterly annually
AIM AGGRESSIVE GROWTH FUND................ declared and paid annually annually annually
AIM ASIAN GROWTH FUND..................... declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BLUE CHIP FUND........................ declared and paid annually annually annually
AIM CAPITAL DEVELOPMENT FUND.............. declared and paid annually annually annually
AIM CHARTER FUND.......................... declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................... declared and paid annually annually annually
AIM EUROPEAN DEVELOPMENT FUND............. declared and paid annually annually annually
AIM GLOBAL AGGRESSIVE GROWTH FUND......... declared and paid annually annually annually
AIM GLOBAL GROWTH FUND.................... declared and paid annually annually annually
AIM GLOBAL INCOME FUND.................... declared daily; paid monthly annually annually
AIM GLOBAL UTILITIES FUND................. declared daily; paid monthly annually annually
AIM HIGH INCOME MUNICIPAL FUND............ declared daily; paid monthly annually annually
AIM HIGH YIELD FUND....................... declared daily; paid monthly annually annually
AIM INCOME FUND........................... declared daily; paid monthly annually annually
AIM INTERMEDIATE GOVERNMENT FUND.......... declared daily; paid monthly annually annually
AIM INTERNATIONAL EQUITY FUND............. declared and paid annually annually annually
AIM LIMITED MATURITY TREASURY FUND........ declared daily; paid monthly annually annually
AIM MONEY MARKET FUND..................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................... declared daily; paid monthly annually annually
AIM SELECT GROWTH FUND.................... declared and paid annually annually annually
AIM SMALL CAP OPPORTUNITIES FUND.......... declared and paid annually annually annually
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT... declared daily; paid monthly annually annually
AIM TAX-EXEMPT CASH FUND.................. declared daily; paid monthly at least annually annually
AIM TAX-FREE INTERMEDIATE FUND............ declared daily; paid monthly annually annually
AIM VALUE FUND............................ declared and paid annually annually annually
AIM WEINGARTEN FUND....................... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods.
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to a class are reinvested in additional
shares of such class, absent an election by a shareholder to receive cash or to
have such dividends and distributions reinvested in like shares of another
Multiple Class Fund, to the extent permitted. For funds that do not declare a
dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the ex-dividend date. For funds that declare
a dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or the
dividend portion thereof, in cash, or to invest such dividends and distributions
in shares of another fund in the AIM Funds; provided that (i) dividends and
distributions attributable to Class B shares may only be reinvested in Class B
shares, (ii) dividends and distributions attributable to Class C shares may only
be reinvested in Class C shares (iii) dividends and distributions attributable
to Class A shares may not be reinvested in Class B or Class C shares, and (iv)
dividends and distributions attributable to the AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may not be reinvested in the Class A shares of that Fund or in
any Class B or Class C shares. Investors who have not previously selected such a
reinvestment option on the account application form may contact the Transfer
Agent at any time to obtain a form to authorize such reinvestments in another
AIM Fund. Such reinvestments into the AIM Funds are not subject to sales
charges, and shares so purchased are automatically credited to the account of
the shareholder.
Dividends on Class B and Class C shares are expected to be lower than those
for Class A shares or AIM Cash Reserve Shares because of higher distribution
fees paid by Class B and Class C shares. Dividends on all shares may also be
affected by other class-specific expenses.
MCF-07/98
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<PAGE> 34
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
TAX MATTERS
Each AIM Fund has qualified and intends to qualify for treatment as a
regulated investment company under Subchapter M of the Code. As long as a fund
qualifies for this tax treatment, it is not subject to federal income taxes on
net investment income and capital gains that are distributed to shareholders.
Each fund, for purposes of determining taxable income, distribution requirements
and other requirements of Subchapter M, is treated as a separate corporation.
Therefore, no fund may offset its gains against another fund's losses and each
fund must individually comply with all of the provisions of the Code which are
applicable to its operations.
TAX TREATMENT OF DISTRIBUTIONS -- GENERAL. Because each AIM Fund intends to
distribute substantially all of its net investment income and net realized
capital gains to its shareholders, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
the imposition of a non-deductible 4% excise tax calculated as a percentage of
certain undistributed amounts of taxable ordinary income and capital gain net
income. Nevertheless, shareholders normally are subject to federal income taxes,
and any applicable state and local income taxes, on the dividends and
distributions received by them from a fund whether in the form of cash or
additional shares of a fund, except for tax-exempt dividends paid by AIM HIGH
INCOME MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM TAX-EXEMPT CASH FUND, and AIM TAX-FREE INTERMEDIATE FUND (the
"Tax-Exempt Funds") which are exempt from federal tax. Dividends paid by a fund
(other than capital gain distributions) may qualify for the federal 70%
dividends received deduction for corporate shareholders to the extent of the
qualifying dividends received by the fund on domestic common or preferred stock.
It is not likely that dividends received from AIM ADVISOR INTERNATIONAL VALUE
FUND, AIM ADVISOR REAL ESTATE FUND, AIM ASIAN GROWTH FUND, AIM EUROPEAN
DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM
GLOBAL INCOME FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM
INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND,
AIM LIMITED MATURITY TREASURY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND
FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND or AIM
TAX-FREE INTERMEDIATE FUND will qualify for this dividends received deduction.
Shortly after the end of each year, shareholders will receive information
regarding the amount and federal income tax treatment of all distributions paid
during the year. Certain dividends declared in October, November or December of
a calendar year are taxable to shareholders as though received on December 31 of
that year if paid to shareholders during January of the following calendar year.
No gain or loss will be recognized by shareholders upon the automatic conversion
of Class B shares of a Multiple Class Fund into Class A shares of such Fund.
With respect to tax-exempt shareholders, distributions from the Funds will not
be subject to federal income taxation to the extent permitted under the
applicable tax-exemption.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, SHAREHOLDERS OF A FUND MUST
FURNISH THE FUND WITH THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER
PENALTIES OF PERJURY THAT THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT
SUBJECT TO BACKUP WITHHOLDING FOR ANY REASON.
Under existing provisions of the Code, nonresident alien individuals, foreign
partnerships and foreign corporations may be subject to federal income tax
withholding at a 30% rate on ordinary income dividends and distributions and
return of capital distributions. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE OR LOCAL TAX
LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED HEREIN.
ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE STATEMENT OF ADDITIONAL
INFORMATION.
TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may give rise to a federal alternative minimum tax liability, may
affect the amount of social security benefits subject to federal income tax, may
affect the deductibility of interest on certain indebtedness of the shareholder,
and may have other collateral federal income tax consequences. The Tax-Exempt
Funds may invest in Municipal Securities the interest on which will constitute
an item of tax preference and which therefore could give rise to a federal
alternative minimum tax liability for shareholders, and may invest up to 20% of
their net assets in such securities and
MCF-07/98
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other taxable securities. For additional information concerning the alternative
minimum tax and certain collateral tax consequences of the receipt of
exempt-interest dividends, see the Statements of Additional Information
applicable to the Tax-Exempt Funds.
The Tax-Exempt Funds may pay dividends to shareholders which are taxable, but
will endeavor to avoid investments which would result in taxable dividends. The
percentage of dividends which constitute exempt-interest dividends, and the
percentage thereof (if any) which constitute an item of tax preference, will be
determined annually. This percentage may differ from the actual percentages for
any particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional shares.
Distributions of net long-term capital gains will be taxable as long-term
capital gains, whether received in cash or additional shares, and regardless of
the length of time a particular shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM INTERMEDIATE GOVERNMENT FUND and AIM LIMITED MATURITY TREASURY
FUND -- SPECIAL TAX INFORMATION. Certain states exempt from state income taxes
dividends paid by mutual funds out of interest on U.S. Treasury and certain
other U.S. government obligations, and investors should consult with their own
tax advisors concerning the availability of such exemption.
AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ASIAN GROWTH FUND, AIM EUROPEAN
DEVELOPMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM GLOBAL AGGRESSIVE GROWTH
FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND AND AIM GLOBAL UTILITIES
FUND -- SPECIAL TAX INFORMATION. For taxable years in which it is eligible to do
so, each of these funds may elect to pass through to shareholders credits for
foreign taxes paid. If the fund makes such an election, a shareholder who
receives a distribution (1) will be required to include in gross income his
proportionate share of foreign taxes allocable to the distribution and (2) may
claim a credit or deduction for such share for his taxable year in which the
distribution is received, subject to the general limitations imposed on the
allowance of foreign tax credits and deductions. Shareholders should also note
that certain gains or losses attributable to fluctuations in exchange rates or
foreign currency forward contracts may increase or decrease the amount of income
of the fund available for distribution to shareholders, and should note that if
such losses exceed other income during a taxable year, the fund would not be
able to pay ordinary income dividends.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM LIMITED MATURITY TREASURY FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE
INTERMEDIATE FUND, for which The Bank of New York, 90 Washington Street, 11th
Floor, New York, New York 10286, serves as custodian. Chase Bank of Texas, N.A.,
P.O. Box 2558, Houston, Texas 77252-8084, serves as Sub-Custodian for retail
purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each AIM Fund's transfer agent and dividend
payment agent.
LEGAL COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll, LLP,
Philadelphia, Pennsylvania, serves as counsel to the AIM Funds and passes upon
legal matters.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties (the "Software"). Many
software systems in use today are unable to distinguish between the year 2000
from the year 1900. This defect if not cured will likely adversely affect the
services that AIM Management, its subsidiaries and other service providers
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the fourth quarter of
1998.
MCF-07/98
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<PAGE> 36
Software applications acquired by AIM Management and its subsidiaries after
completion of the Project will be reviewed to confirm Year 2000 compliance upon
installation.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
MCF-07/98
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<PAGE> 37
APPENDIX A
- --------------------------------------------------------------------------------
DESCRIPTIONS OF RATING CATEGORIES
The following are descriptions of ratings assigned by Moody's Investors
Service, Inc. ("Moody's") and Standard and Poor's Ratings Services ("S&P") to
certain debt securities in which AIM TAX-FREE INTERMEDIATE FUND and
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT may invest. See the Statement
of Additional Information for descriptions of other Moody's and S&P rating
categories and those of other rating agencies.
MOODY'S: Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. These are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements,
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
S&P: AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C -- Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the lowest degree of speculation and
C the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or large exposures
to adverse conditions.
A-22
<PAGE> 38
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Give Social Security GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for the Requester of Form W-9 (which can be obtained
from the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF-07/98
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<PAGE> 39
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney-in-fact to surrender for redemption any and all unissued
shares held by the Transfer Agent in the designated account(s), or in any other
account with any of the AIM Funds, present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and
mailing address of the shares to be purchased are identical to the registration
of the shares being redeemed. An investor acknowledges by signing the form that
he understands and agrees that the Transfer Agent and AIM Distributors may not
be liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction. The Transfer Agent
reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone exchange privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any exchanges must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "Exchange Privilege -- Exchanges
by Mail").
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by the Transfer Agent in the designated account(s), present
or future, with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption. An investor acknowledges by signing the
form that he understands and agrees that the Transfer Agent and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any redemptions must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "How to Redeem
Shares -- Redemptions by Mail").
MCF-07/98
B-2
<PAGE> 40
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
Investment Advisor
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Custodian
The Bank of New York
90 Washington Street, 11th Floor
New York, NY 10286
Principal Underwriter
A I M Distributors, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Independent Accountants
KPMG Peat Marwick LLP
700 Louisiana
Houston, TX 77002
For more complete information about any other Fund in The AIM Family of Funds,
including charges and expenses, please call (800) 347-4246, or write to A I M
Distributors, Inc. and request a free prospectus. Please read the prospectus
carefully before you invest or send money.
TAX-PRO-1
