<PAGE> 1
AIM HIGH INCOME MUNICIPAL FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT SEPTEMBER 30, 1998
<PAGE> 2
-------------------------------------
AIM HIGH INCOME MUNICIPAL FUND
For shareholders who seek
a high level of current income
exempt from federal taxes
The Fund invests in a
diversified portfolio of
fixed-income securities.
-------------------------------------
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM High Income Municipal Fund's performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
Unless otherwise indicated, the Fund's performance is computed at net asset
value without a sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class C
share performance reflects applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the Fund's Class B and Class C shares will differ from
that of Class A shares due to differing fees and expenses.
o Because Class A,B,and C shares have been offered for less than one year
(since 1/2/98), all total return figures for Class A, B, and C shares
reflect cumulative total return that has not been annualized.
o The 30-day yield is calculated on the basis of a formula defined by the SEC.
The formula is based on the portfolio's potential earnings from dividends,
interest, yield-to-maturity or yield-to-call of the bonds in the portfolio,
net of all expenses and expressed on an annualized basis.
o The taxable equivalent yield is calculated in the same manner as the 30-day
yield with an adjustment for a stated, assumed tax rate.
o The Fund's annualized distribution rate reflects the Fund's most recent
monthly dividend distribution multiplied by 12 and divided by the most
recent month-end net asset value.
o The Fund invests primarily in higher-yielding, lower-rated municipal bonds,
commonly known as "junk bonds." These bonds have a greater risk of price
fluctuation and loss of principal and income than the U.S. government
securities, such as U.S. Treasury bonds and bills, which offer a government
quarantee as to the repayment of principal and interest if held to maturity.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Lehman Brothers Municipal Bond Index is an unmanaged composite
representing an approximation of the performance of investment-grade
municipal bonds.
o The unmanaged Lipper High Yield Fund Index represents an average of the
performance of the 30 largest high-yield municipal bond funds tracked by
Lipper Analytical Services, Inc., an independent mutual funds performance
monitor.
o Government securities, such as U.S. Treasury bills, notes, and bonds, offer
a high degree of safety and are guaranteed as to the timely payment of
principal and interest if held to maturity. Fund shares are not insured and
their value and yield will vary with market conditions.
o An investment cannot be made in any of indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE
FDIC OR ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR ANY AFFIIATE;
AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
The economic and political uncertainty during the six-month
[PHOTO OF period ended September 30, 1998, affected various financial
Charles T. markets differently. The stock market, for example, was
Bauer, especially volatile. Uncertainty in stocks bolstered certain
Chairman of segments of the bond market--U.S. Treasury issues in
the Board of particular, whose safety has been a magnet for investors in
THE FUND uncertain times.
APPEARS HERE] This environment made municipal bonds especially
attractive. By the end of the reporting period, high-grade
municipal bonds were favorably priced in comparison to
federally taxable Treasury issues and were offering nearly
equivalent yields while high-yield municipal bonds were
offering greater yields in many instances. Moreover,
developments overseas had little impact on the ability of
municipal bond issuers--state and local governments, school
districts, hospitals and other entities--to meet their debt
obligations.
Despite the recent market volatility, we see several reasons for optimism,
particularly for municipal-bond investors. For one, the worst uncertainties are
overseas and are not likely to have much impact on municipal securities.
Secondly, there is much fundamental strength in the U.S. economy. As a result,
state and local governments are generating more revenue through taxes and user
fees to support municipal-bond issues. Lower interest rates also are making it
easier for the issuers of municipal securities to meet their debt obligations.
And while there has been much discussion about a flat tax or national sales tax
that would eliminate the tax-exempt status of municipal bonds, we believe the
chances of either plan being adopted are slim.
We continue to follow our disciplined fixed-income and equity investing
strategies. We believe that uncertain times underscore the need to think long
term. The fundamental principles of investing have not changed: broadly
diversify your portfolio, develop realistic expectations, and always check with
your financial consultant before making any investment decisions.
AIM FURTHER DIVERSIFIES ITS OFFERINGS
Prior to the close of the reporting period, AIM broadened its offerings to
shareholders through the addition of the GT Global group of mutual funds.
This transaction gives you, our shareholders, access to a greater variety of
investment choices through the expanded lineup of AIM funds. We encourage you to
discuss with your financial consultant how these funds may fit into your
portfolio.
YOUR FUND MANAGERS' COMMENTS
On the pages that follow, the managers of your AIM Fund discuss how the Fund
performed during the six months covered by this report and give their near-term
market outlook. We hope you will find their discussion informative.
We are pleased to send you this report on your Fund. If you have any
questions or comments, please contact our Client Services department at
800-959-4246 or visit our Web site at www.aimfunds.com. You can access
information about your account on our Web site and also on our automated AIM
Investor Line, 800-246-5463.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
---------------------------
. . . state and local governments
are generating
more revenue
through taxes and user fees
to support municipal-bond issues.
Lower interest rates also
are making it easier
for the issuers
of municipal securities to
meet their debt obligations.
---------------------------
<PAGE> 4
The Managers' Overview
HIGH-YIELD MUNICIPAL BONDS A BARGAIN
FOR INVESTORS
A roundtable discussion with the Fund management team for AIM High Income
Municipal Fund for the six months ended September 30, 1998.
- -------------------------------------------------------------------------------
Q. PRICES OF HIGHER-QUALITY BONDS, PARTICULARLY U.S. TREASURY ISSUES, SOARED
DURING THE REPORTING PERIOD. HOW DID THE FUND PERFORM?
A. During the reporting period, municipal bonds emerged as one of the best
bargains in the fixed-income market. Largely because of a significant surge
in new-issue supply, municipal bonds were favorably priced in comparison to
federally taxable U.S. Treasury securities. At the same time, high-yield
municipal bonds offered yields that were equivalent to-or in some cases,
greater-than those of U.S. Treasury issues. In conjunction with these
trends, your Fund continued to provide attractive current income (see chart
below), exempt from federal taxes, while maintaining relative share-price
stability.
Despite falling interest rates during the reporting period, the Fund
increased its holdings of higher yielding bonds. As a result, the Fund has
been able to raise its dividend every quarter since its inception on January
2, 1998.
For the six months ended September 30, 1998, cumulative total return was
4.81% for Class A shares and 4.43% for Class B and C shares. By comparison,
the total return of the Lehman Brothers Municipal Bond Index was 4.64% while
the total return of the Lipper High Yield Municipal Index was 4.52%.
During the reporting period, net asset value per share remained within a
relatively narrow range of $9.88 to $10.20. Net assets in the Fund more than
doubled from $21 million to $45 million.
Q. WHAT WAS THE MAJOR THEME IN THE BOND MARKET DURING THE REPORTING PERIOD?
A. Severe economic dislocations in Asia, Russia, and Latin America, combined
with political controversy in the U.S., precipitated a sharp drop in the
stock market and ignited a strong rally in the bond market. The rally,
however, was largely confined to higher-rated bonds, specifically U.S.
Treasury securities. In the unsettled market environment, investors flocked
to Treasury issues because of their relative safety and liquidity.
Treasury securities soared in price, sending their yields to historic
lows. For example, the yield of the benchmark 30-year Treasury bond fell
from 5.93% on March 31, 1998, to 4.97% at the end of the reporting
period-its lowest level since this issue came into existence in 1977. But
while the Treasury market soared, lower-rated bonds appreciated less
dramatically in value or actually dropped in price. That caused the yield
differentials between higher- and lower-rated bonds to widen substantially.
===============================================================================
AIM HIGH INCOME MUNICIPAL FUND OFFERS ATTRACTIVE INCOME
As of 9/30/98
- -------------------------------------------------------------------------------
30-DAY TAXABLE EQUIVALENT 30-DAY TAXABLE EQUIVALENT
DISTRIBUTION RATE DISTRIBUTION RATE* SEC YIELD 30-DAY SEC YIELD*
AT NAV AT MAXIMUM
OFFERING PRICE
Class A 5.25% 8.69% 5.29% 8.76%
Class B 4.51 7.47 4.80 7.95
Class C 4.51 7.47 4.80 7.95
*Assumes highest marginal federal tax rate of 39.6%
===============================================================================
===============================================================================
GROWTH IN ASSETS
- -------------------------------------------------------------------------------
As of 9/30/98
3/30/98 $21 Million
9/30/98 $45 Million
===============================================================================
The bond market was given a boost at the end of September when the
Federal Reserve Board (the Fed) decided to lower interest rates. This marked
the first Fed easing of monetary policy in more than two years.
Q. WHAT WERE THE MAJOR TRENDS IN THE MUNICIPAL BOND MARKET?
A. Unlike U.S. Treasury securities, municipal bonds appreciated only modestly
in price during the reporting period. Foreign investors, who helped drive up
the price of Treasury issues, generally do not buy municipal bonds because
they don't receive tax advantages from owning municipal securities.
A significant increase in new-issue supply also kept municipal-bond
prices relatively subdued. During the nine months ended September 30, more
than $200 billion in new municipal debt entered the market. At this pace,
1998 is on course to be the second-largest year on record in terms of new
issue volume, according to The Bond Buyer, a newspaper that tracks the
municipal bond market. Falling interest rates prompted many state and local
governments to refinance existing debt or to issue bonds to finance new
projects.
2
<PAGE> 5
At the same time municipal-bond supply was increasing, a budget surplus
allowed the federal government to cut back on the issuance of Treasury
securities, further enhancing their value. As a result, municipal-bond
prices were relatively low-and yields high-in comparison to Treasury issues.
Q. HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
A. Revenue bonds composed 100% of the portfolio. These bonds are paid with
income generated by specific projects-generally a more reliable source of
income than the tax dollars used to support general obligation bonds.
Because of public opposition, state and local governments are finding it
increasingly difficult to raise taxes to support general obligation bonds.
The Fund was well diversified with 86 holdings, representing several
market sectors and nearly every region of the U.S. The primary focus of the
portfolio was on bonds for essential service projects, especially health
care and housing. Demand for these services tends to remain constant,
regardless of economic trends. For example, an aging population is making
increasing use of the health-care system, and there is a growing demand for
low-income housing in particular.
Q. WHAT WAS THE CREDIT QUALITY OF THE PORTFOLIO?
A. As of September 30, 1998, the Fund had an average portfolio quality rating
equivalent to BB- as measured by Standard & Poor's (S&P), a widely known
credit-rating agency. S&P ratings are historical and are based on analysis
of the credit quality of the individual municipal securities in the
portfolio. Bonds rated BB or better composed approximately 11% of the
portfolio. Higher-quality, non-rated securities made up 90% of the Fund's
holdings. Most of the bonds in the portfolio were backed by collateral,
which can be sold to help pay the debt obligations on the bonds, if
necessary.
Q. CAN YOU BRIEFLY DESCRIBE THE BOND-SELECTION PROCESS?
A. Bonds are chosen only after a very thorough analysis that can involve
reviewing feasibility, environmental-impact, and other studies pertaining to
a specific project as well as actual visits to the project site and meetings
with project management teams. Each of our in-house analysts then writes
credit reports and internally rates each non-rated bond. We believe that our
internal rating system is more reliable than a rating assigned by an outside
agency. After a bond has been purchased, we continue to monitor its credit
quality as long as it remains in the portfolio.
Q. WHAT IS YOUR OUTLOOK FOR THE IMMEDIATE FUTURE?
A. Overall, the environment for bonds appears favorable. The inflation rate has
remained low despite strong economic growth over the past few years. Now
that economic growth is slowing, inflation appears to be even less of a
threat. Fed Chairman Alan Greenspan has indicated that the Fed may further
cut interest rates to prevent the economic situation from deteriorating.
Indeed, in mid October, after the reporting period ended, the Fed further
eased monetary policy. Additional rate cuts could prove beneficial for
bonds.
We are particularly optimistic about high-yield municipal bonds because
of their relatively attractive prices and yields in comparison to U.S.
Treasury issues. Near term, we expect the yields of municipal bonds to
remain comparable to those of Treasuries. We also believe tax-exempt funds
could continue to gain in popularity as more Americans become subject to the
higher tax brackets.
PORTFOLIO COMPOSITION
As of 9/30/98
===============================================================================
CREDIT RATING OF HOLDINGS
- -------------------------------------------------------------------------------
BB 2.8%
BBB 2.7%
A 5.0%
NR 89.5%
REVENUE BONDS 100%
NUMBER OF HOLDINGS 86
AVERAGE MATURITY 23.41 YEARS
DURATION 7.087 YEARS
===============================================================================
===============================================================================
TOP FIVE BOND HOLDINGS
As of 9/30/98, based on total net assets
- -------------------------------------------------------------------------------
Coupon Maturity %
1. Orange (County of) Housing Finance Authority 6.40% 07/01/32 3.35
2. Garden City Hospital Finance Authority 5.75% 09/01/17 3.34
3. Boulder (City of) Refunding Hospital Revenue Bond 5.85% 01/01/22 3.33
4. Ohio (State of) Solid Waste Revenue Bond 8.50% 08/01/22 2.57
5. Madison (County of) Hospital Improvement Refunding
Revenue Bond 6.25% 08/01/18 2.24
Please keep in mind the Fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
===============================================================================
3
<PAGE> 6
FOR CONSIDERATION
[GRAPHIC]
AIM PREPARES FOR THE YEAR 2000
The Year 2000. The words stir the imagination, making us wonder what the next
millennium will bring. But the words are also starting to make some people
worry, since there's been so much talk lately about a computer glitch called
"the Year 2000 problem." Because this is a problem that could affect most
American industries, including the mutual fund industry, we want to bring you
this update to let you know how AIM is getting ready.
What Is the Year 2000 Problem?
It has to do with the way that computers understand dates. Most computers were
programmed to recognize only the last two digits of a four-digit date ("98" for
1998). When the year 2000 hits, the computer will read "00"--but it may
interpret that as the year 1900. So, if the computer makes a calculation
involving a date of January 1, 2000, or later, it could be processed
incorrectly. Date-sensitive calculations are found in all kinds of places--from
elevators to air traffic control systems--but they are especially prevalent in
the financial services industry.
AIM's Year 2000 Compliance
AIM's technology team has been addressing Year 2000 issues for some time now.
Our internal team, together with an independent technology consultant, are
implementing a comprehensive Year 2000 Compliance Project for A I M Management
Group Inc. and its subsidiaries. So far, we've inventoried all software
applications that we rely on, and we've identified the applications that might
need adjustments to function properly when the year 2000 arrives. We are now in
the final phase of the project, making corrections and testing applications that
need adjustment. We plan to complete this phase during the fourth quarter of
1998.
An Industry-Wide Test
In the spring of 1999, AIM intends to participate in industry-wide testing that
should simulate the arrival of the year 2000. This should allow mutual fund
companies, banks, exchanges, and other players in the financial community to
test various kinds of transactions and to determine if any further adjustments
need to be made before the end of the year.
We believe our plans are quite comprehensive, and we're committed to monitoring
all software applications through the critical period, extending as far as
needed into the 21st century.
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
ALASKA-1.60%
Alaska (State of) Housing Finance Corp.;
Variable Rate Demand Series A RB
3.60%, 06/01/26(a) $ 725 $ 725,000
- --------------------------------------------------------------
COLORADO-1.67%
Colorado Health Facilities Authority
(Volunteers of America); Refunding and
Improvement Series A RB
5.875%, 07/01/28 750 759,128
- --------------------------------------------------------------
CONNECTICUT-2.16%
Connecticut (State of) Development
Authority (Watson Foods Co., Inc.
Project); IDR
5.90%, 06/01/28(b) 825 842,160
- --------------------------------------------------------------
Connecticut (State of) Special Tax
Obligation; Variable Rate Demand RB
3.55%, 12/01/10(a) 140 140,000
- --------------------------------------------------------------
982,160
- --------------------------------------------------------------
FLORIDA-3.35%
Orange (County of) Housing Finance
Authority (Brentwood Park Apartments);
Multifamily Housing Series G RB
6.40%, 07/01/32 1,500 1,522,890
- --------------------------------------------------------------
GEORGIA-6.21%
Fulton (County of) Housing Authority
(Azalea Manor Project); Multifamily
Housing RB
6.50%, 02/01/28 780 794,952
- --------------------------------------------------------------
Fulton (County of) Housing Authority
(Washington Court Project);
Multifamily Housing RB
6.40%, 02/01/19 775 793,747
- --------------------------------------------------------------
6.50%, 02/01/28 225 230,414
- --------------------------------------------------------------
Smyrna (City of) Hospital Authority
(Woodland Ridge Project); First
Mortgage RB
6.00%, 07/01/28 1,000 1,004,570
- --------------------------------------------------------------
2,823,683
- --------------------------------------------------------------
HAWAII-1.10%
Hawaii (State of) Department of
Transportation (Continental Airlines,
Inc.); Special Facilities RB
5.625%, 11/15/27(b) 500 500,130
- --------------------------------------------------------------
ILLINOIS-7.60%
Clay (County of); Hospital RB
5.70%, 12/01/18 500 506,310
- --------------------------------------------------------------
Crestwood (City of); Tax Increment
Revenue Refunding Non-Qualified Bonds
7.25%, 12/01/08 100 108,361
- --------------------------------------------------------------
Illinois Development Finance Authority
(American College Surgeons); Variable
Rate Demand RB
4.05%, 08/01/26(a) 704 704,000
- --------------------------------------------------------------
Illinois Health Facilities Authority
(Bohemian-Tabor Hills); Refunding
Series B RB
5.90%, 11/15/24 775 789,128
- --------------------------------------------------------------
Illinois Health Facilities Authority
(Lifelink Corp. Obligation Group);
Refunding RB
5.85%, 02/15/20 350 353,731
- --------------------------------------------------------------
5.70%, 02/15/24 650 652,378
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
ILLINOIS-(CONTINUED)
Illinois Health Facilities Authority;
Variable Rate Demand Series D RB
3.65%, 08/01/15(a) $ 233 $ 233,000
- --------------------------------------------------------------
Saint Charles (City of) (Tri-City Center
Associates Limited Project); IDR
7.50%, 11/01/13 100 106,730
- --------------------------------------------------------------
3,453,638
- --------------------------------------------------------------
INDIANA-0.77%
Goshen (Greencroft Obligation Group); RB
5.75%, 08/15/28 350 349,479
- --------------------------------------------------------------
IOWA-3.47%
Harlan (City of) (American Baptist Homes
Project); RB
5.75%, 05/15/28 750 756,270
- --------------------------------------------------------------
Iowa Finance Authority Community
Rehabilitation Providers (Lutheran
Children's Home Society-Bremwood
Project); RB
5.80%, 12/01/24 700 715,799
- --------------------------------------------------------------
Iowa Finance Authority (Park West
Housing Project); Multifamily
Refunding RB
8.00%, 10/01/23 100 104,117
- --------------------------------------------------------------
1,576,186
- --------------------------------------------------------------
KANSAS-1.28%
Atchison (City of) (Atchison Hospital
Association); Hospital RB
5.70%, 11/15/18 525 536,918
- --------------------------------------------------------------
Lawrence (City of) (Holiday Inn
Project); Commercial Development
Senior Refunding Series A RB
8.00%, 07/01/16 40 44,950
- --------------------------------------------------------------
581,868
- --------------------------------------------------------------
MARYLAND-0.45%
Fredrick (County of) Retirement
Community (Buckingham's Choice Inc.
Facility); Series A RB
5.90%, 01/01/17 200 205,792
- --------------------------------------------------------------
MASSACHUSETTS-1.12%
Boston (City of) Industrial Development
Financing Authority (Springhouse Inc.
Project); First Mortgage Refunding RB
6.00%, 07/01/28 500 509,665
- --------------------------------------------------------------
MICHIGAN-5.39%
Garden City Hospital Finance Authority
(Garden City Hospital OB Group);
Hospital Refunding Series A RB
5.75%, 09/01/17 1,500 1,519,290
- --------------------------------------------------------------
Michigan (State of) Strategic Fund
Limited Obligation (Holland Home
Project); RB
5.75%, 11/15/28 415 418,395
- --------------------------------------------------------------
Tawas (City of) Hospital Finance
Authority (St. Joseph Health System);
Refunding Series A RB
5.75%, 02/15/23 500 511,490
- --------------------------------------------------------------
2,449,175
- --------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
MINNESOTA-8.35%
Andover (City of) (Presbyterian Homes
Inc. Project); Elderly Housing RB
6.25%, 12/01/27 $ 500 $ 506,985
- --------------------------------------------------------------
Bloomington (City of) Housing and
Redevelopment Authority (Summerhouse
Bloomington Project); Senior Housing
RB
6.00%,11/01/16 790 805,697
- --------------------------------------------------------------
Columbia Heights (City of) Multifamily
and Health Care Facility (Crest View
Corp. Project); RB
6.00%, 03/01/33 500 509,695
- --------------------------------------------------------------
Duluth (City of) Economic Development
Authority (BSM Properties Inc.
Project); Health Care Facilities
Series A RB
5.875%, 12/01/28 500 511,570
- --------------------------------------------------------------
Minneapolis Health Care Facility
(Ebenezer Society Project); Series A
RB
7.00%, 07/01/12 100 105,785
- --------------------------------------------------------------
Moorhead (City of) Economic Development
Authority (Eventide Housing
Development Project); Multifamily
Refunding Series A RB
6.00%, 06/01/18 500 508,455
- --------------------------------------------------------------
Northfield (City of) Health Care
Facilities (Retirement Center);
Refunding and Improvement Series A RB
5.75%, 05/01/16 335 338,266
- --------------------------------------------------------------
6.00%, 05/01/28 500 507,975
- --------------------------------------------------------------
3,794,428
- --------------------------------------------------------------
MISSISSIPPI-0.61%
Ridgeland Urban Renewal (The Orchard
Limited Project); Refunding Series A
RB
7.75%, 12/01/15 250 274,810
- --------------------------------------------------------------
MISSOURI-5.59%
Bolivar (City of) Industrial Development
Authority (Citizens Memorial Health
Care Foundation); Refunding and
Improvement RB
5.75%, 07/01/17 500 504,305
- --------------------------------------------------------------
Good Shepherd Nursing Home District;
Nursing Home Facilities Refunding RB
5.90%, 08/15/23 500 512,410
- --------------------------------------------------------------
Madison (County of); Hospital Refunding
RB
5.875%, 10/01/26 500 511,240
- --------------------------------------------------------------
Springfield (City of) Industrial
Development Authority (Bethesda Living
Centers); Refunding Series A RB
5.625%, 08/15/18 200 201,798
- --------------------------------------------------------------
5.70%, 08/15/28 800 808,888
- --------------------------------------------------------------
2,538,641
- --------------------------------------------------------------
NEVADA-5.57%
Boulder (City of) (Boulder City Hospital
Inc. Project); Refunding Hospital RB
5.85%, 01/01/22 1,500 1,512,390
- --------------------------------------------------------------
Clark (County of) (Nevada Power Co.
Project); Refunding IDR
Series C, 5.50%, 10/01/30 500 504,680
- --------------------------------------------------------------
Series B, 5.90%, 10/01/30(b) 500 512,700
- --------------------------------------------------------------
2,529,770
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
NEW HAMPSHIRE-0.87%
New Hampshire Higher Educational and
Health Facilities Authority (Daniel
Webster College); RB
7.625%, 07/01/16 $ 100 $ 111,050
- --------------------------------------------------------------
New Hampshire Higher Educational and
Health Facilities Authority (Franklin
Pierce College); RB
6.00%, 10/01/18 30 30,671
- --------------------------------------------------------------
New Hampshire Higher Educational and
Health Facilities Authority (Monadnock
Community Hospital); Hospital RB
5.70%, 10/01/20 250 255,738
- --------------------------------------------------------------
397,459
- --------------------------------------------------------------
NEW JERSEY-2.23%
New Jersey Economic Development
Authority (Franciscan Oaks Project);
First Mortgage RB
5.75%, 10/01/23 500 505,875
- --------------------------------------------------------------
New Jersey Economic Development
Authority (Keswick Pines Inc.); First
Mortgage Refunding RB
5.75%, 01/01/24 500 509,495
- --------------------------------------------------------------
1,015,370
- --------------------------------------------------------------
NEW MEXICO-1.11%
Santa Fe (County of) (El Castillo
Retirement Project); Series A RB
5.625%, 05/15/25 500 502,295
- --------------------------------------------------------------
NEW YORK-3.32%
New York Industrial Development Agency
(Field Hotel Associates LP); Refunding
IDR
5.80%, 11/01/13 475 480,572
- --------------------------------------------------------------
6.00%, 11/01/28 500 507,660
- --------------------------------------------------------------
New York Industrial Development Agency
(Marymount Manhattan College Project);
Civic Facility RB
7.00%, 07/01/23 150 162,683
- --------------------------------------------------------------
Suffolk (County of) Industrial
Development Agency (Spellman High
Voltage Facility); Series A IDR
6.375%, 12/01/17(b) 350 358,362
- --------------------------------------------------------------
1,509,277
- --------------------------------------------------------------
NORTH CAROLINA-4.35%
Charlotte (City of) (Charlotte/Douglas
International Airport); Refunding
Special Facilities RB
5.60%, 07/01/27(b) 650 655,005
- --------------------------------------------------------------
North Carolina Medical Care Community
Health Care Facilities (Deerfield
Episcopal Retirement); First Mortgage
Series RB
6.00%, 11/01/19 300 308,121
- --------------------------------------------------------------
North Carolina Medical Care Community
Health Care Facilities (Glenaire
Project); First Mortgage Series RB
5.75%, 07/01/19 500 504,960
- --------------------------------------------------------------
5.85%, 07/01/27 500 507,710
- --------------------------------------------------------------
1,975,796
- --------------------------------------------------------------
NORTH DAKOTA-1.15%
Grand Forks Senior Housing (4000 Valley
Square Project); Special Term Series
RB
6.375%, 12/01/34 500 524,340
- --------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
OHIO-9.28%
Belmont (County of) Health Systems (East
Ohio Regional Hospital); Refunding and
Improvement RB
5.80%, 01/01/18 $ 800 $ 810,144
- --------------------------------------------------------------
Fairfield (City of) Economic Development
(Beverly Enterprises Project);
Refunding Series RB
8.50%, 01/01/03 190 205,645
- --------------------------------------------------------------
Madison (County of) (Madison County
Hospital Project); Hospital
Improvement Refunding RB
6.25%, 08/01/18 1,000 1,018,410
- --------------------------------------------------------------
6.40%, 08/01/28 1,000 1,018,270
- --------------------------------------------------------------
Ohio (State of) (CSC Limited Project);
Solid Waste RB
8.50%, 08/01/22(b) 1,100 1,166,187
- --------------------------------------------------------------
4,218,656
- --------------------------------------------------------------
OREGON-1.21%
Clackamas (County of) Hospital
Facilities Authority (Odd Fellows
Home); Refunding Series A RB
5.875%, 09/15/21 540 549,077
- --------------------------------------------------------------
PENNSYLVANIA-8.63%
Allegheny (County of) Industrial
Development Authority (USX Corp.);
Refunding Environmental Improvement RB
5.60%, 09/01/30 500 516,585
- --------------------------------------------------------------
Dauphin (County of) General Authority
(Hyatt Regency Hotel and Conference
Center); RB
6.20%, 01/01/29 1,000 1,009,500
- --------------------------------------------------------------
Doylestown Hospital Authority (Pine Run
Retirement Hospital); Hospital Series
A RB
7.20%, 07/01/03(c)(d) 150 173,323
- --------------------------------------------------------------
Lancaster (County of) Hospital Authority
(United Zion Community Health Center
Project); Refunding RB
5.75%, 03/15/24 460 462,314
- --------------------------------------------------------------
Philadelphia (City of) Authority for
Industrial Development (Baptist Home
of Philadelphia); Health Care
Facilities Series A RB
5.50%, 11/15/18 750 739,800
- --------------------------------------------------------------
Philadelphia (City of) Authority for
Industrial Development (Cathedral
Village Project); RB
5.70%, 04/01/15 500 511,375
- --------------------------------------------------------------
Philadelphia (City of) Authority for
Industrial Development (Paul's Run
Retirement Community); Health Care
Facilities Series A RB
5.875%, 05/15/28 500 511,595
- --------------------------------------------------------------
3,924,492
- --------------------------------------------------------------
SOUTH CAROLINA-1.10%
South Carolina Jobs Economic Development
Authority (Lutheran Homes); First
Mortgage Refunding Health Facilities
RB
5.70%, 05/01/26 500 502,175
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
SOUTH DAKOTA-1.11%
Lincoln (County of) (American Baptist
Homes Project); Refunding RB
5.75%, 11/15/24 $ 500 $ 505,185
- --------------------------------------------------------------
TENNESSEE-2.10%
Nashville and Davidson (County of)
Health and Educational Facilities
Board of Metro Government (Blakeford
at Green Hills); Refunding RB
5.65%, 07/01/16 355 358,833
- --------------------------------------------------------------
5.65%, 07/01/24 590 593,977
- --------------------------------------------------------------
952,810
- --------------------------------------------------------------
TEXAS-3.59%
Abilene (City of) Health Facilities
Development (Sears Methodist
Retirement); Corporate Retirement
Facilities Series A RB
5.875%, 11/15/18 1,000 1,004,660
- --------------------------------------------------------------
Bexar (County of) Housing Finance Corp.
(Villa Madrid/Cumberland Apartments);
Multifamily Housing Series A RB
7.25%, 05/01/16 200 204,704
- --------------------------------------------------------------
7.50%, 05/01/28 415 424,631
- --------------------------------------------------------------
1,633,995
- --------------------------------------------------------------
WEST VIRGINIA-1.12%
Braxton (County of) (Weyerhaeuser Co.
Project); Refunding Solid Waste
Disposal RB
5.40%, 05/01/25(b) 500 510,645
- --------------------------------------------------------------
WISCONSIN-5.01%
Wisconsin (State of) Health and
Educational Facilities Authority
(Beaver Dam Community Hospitals Inc);
RB
5.80%, 08/15/28 1,000 1,001,060
- --------------------------------------------------------------
Wisconsin (State of) Health and
Educational Facilities Authority
(Clement Manor, Inc.); Refunding RB
5.75%, 08/15/24 250 246,013
- --------------------------------------------------------------
Wisconsin (State of) Health and
Educational Facilities Authority (St.
Camillus Health Center); RB
5.75%, 07/01/28 500 500,120
- --------------------------------------------------------------
Wisconsin (State of) Health and
Educational Facilities Authority
(United Lutheran Home); RB
5.70%, 03/01/28 525 530,240
- --------------------------------------------------------------
2,277,433
- --------------------------------------------------------------
TOTAL INVESTMENTS-102.47% (Cost
$45,682,837) 46,575,448
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(2.47)% (1,122,117)
- --------------------------------------------------------------
NET ASSETS-100.00% $45,453,331
==============================================================
</TABLE>
Investment Abbreviations:
IDR - Industrial Development Revenue Bonds
RB - Revenue Bonds
Notes to Schedule of Investments:
(a) Demand security; payable upon demand by the Fund with usually no more than
seven calendar days' notice. Interest rates are redetermined periodically.
Rates shown are in effect on 09/30/98.
(b) Security subject to the alternative minimum tax.
(c) Secured by an escrow fund of U.S. Treasury obligations.
(d) Security has an irrevocable call or mandatory put by the issuer. Maturity
date reflects such call or put.
See Notes to Financial Statements.
7
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$45,682,837) $ 46,575,448
- ---------------------------------------------------------
Cash 807
- ---------------------------------------------------------
Receivables for:
Capital stock sold 108,105
- ---------------------------------------------------------
Interest 708,174
- ---------------------------------------------------------
Amount due from advisor 114,839
- ---------------------------------------------------------
Other assets 23,245
- ---------------------------------------------------------
Total assets 47,530,618
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 725,428
- ---------------------------------------------------------
Investments purchased 1,227,622
- ---------------------------------------------------------
Dividends 85,997
- ---------------------------------------------------------
Accrued administrative services fees 5,481
- ---------------------------------------------------------
Accrued directors' fees 2,156
- ---------------------------------------------------------
Accrued distribution fees 28,531
- ---------------------------------------------------------
Accrued operating expenses 2,072
- ---------------------------------------------------------
Total liabilities 2,077,287
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $ 45,453,331
=========================================================
NET ASSETS:
Class A $ 36,624,670
=========================================================
Class B $ 7,157,037
=========================================================
Class C $ 1,671,624
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 1,000,000,000
- ---------------------------------------------------------
Outstanding 3,589,196
=========================================================
Class B:
Authorized 1,000,000,000
- ---------------------------------------------------------
Outstanding 701,917
=========================================================
Class C:
Authorized 1,000,000,000
- ---------------------------------------------------------
Outstanding 163,911
=========================================================
Class A:
Net asset value and redemption price per
share $ 10.20
=========================================================
Offering price per share:
(Net asset value of
$10.20 divided by 95.25%) $ 10.71
=========================================================
Class B:
Net asset value and offering price per
share $ 10.20
=========================================================
Class C:
Net asset value and offering price per
share $ 10.20
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $ 981,771
- --------------------------------------------------------
EXPENSES:
Advisory fees 105,590
- --------------------------------------------------------
Administrative services fees 30,735
- --------------------------------------------------------
Distribution fees -- Class A 36,628
- --------------------------------------------------------
Distribution fees -- Class B 23,232
- --------------------------------------------------------
Distribution fees -- Class C 6,240
- --------------------------------------------------------
Transfer agent fees 5,099
- --------------------------------------------------------
Registration and filing fees 17,355
- --------------------------------------------------------
Other 37,625
- --------------------------------------------------------
Total expenses 262,504
- --------------------------------------------------------
Less: Fee waivers and expense
reimbursements (196,723)
- --------------------------------------------------------
Net expenses 65,781
- --------------------------------------------------------
Net investment income 915,990
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Net realized gain (loss) on sales of
investment securities (23,492)
- --------------------------------------------------------
Net unrealized appreciation of investment
securities 869,634
- --------------------------------------------------------
Net gain on investment securities 846,142
- --------------------------------------------------------
Net increase in net assets resulting from
operations $ 1,762,132
========================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND THE PERIOD JANUARY 2, 1998 (DATE
OPERATIONS COMMENCED) THROUGH MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
<S> <C> <C>
OPERATIONS:
Net investment income $ 915,990 $ 163,175
- -----------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities (23,492) (12,029)
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 869,634 22,977
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,762,132 174,123
- -----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (768,966) (147,248)
- -----------------------------------------------------------------------------------------
Class B (103,859) (10,991)
- -----------------------------------------------------------------------------------------
Class C (27,971) (3,590)
- -----------------------------------------------------------------------------------------
Net increase from capital stock transactions:
Class A 18,121,605 17,776,038
- -----------------------------------------------------------------------------------------
Class B 4,343,637 2,698,087
- -----------------------------------------------------------------------------------------
Class C 902,290 738,044
- -----------------------------------------------------------------------------------------
Net increase in net assets 24,228,868 21,224,463
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 21,224,463 --
- -----------------------------------------------------------------------------------------
End of period $45,453,331 $21,224,463
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $44,579,701 $21,212,169
- -----------------------------------------------------------------------------------------
Undistributed net investment income 16,540 1,346
- -----------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of investment
securities (35,521) (12,029)
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 892,611 22,977
- -----------------------------------------------------------------------------------------
$45,453,331 $21,224,463
=========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Tax-Exempt Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Company is organized as a Maryland corporation
consisting of four separate portfolios: AIM High Income Municipal Fund, AIM Tax-
Free Intermediate Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Exempt Bond Fund of
Connecticut. Matters affecting each portfolio or class are voted on exclusively
by the shareholders of such portfolio or class. The assets, liabilities and
operations of each portfolio are accounted for separately. Information presented
in these financial statements pertains only to AIM High Income Municipal Fund
(the "Fund"). The Fund currently offers three different classes of shares: the
Class A shares, the Class B shares and the Class C shares. Class A shares are
sold with a front-end sales charge. Class B and Class C shares are sold with a
contingent deferred sales charge. The investment objective of the Fund is to
achieve a high level of current income which is exempt from federal income
taxes.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations -- Portfolio securities are valued based on market
quotations or at fair value determined by a pricing service approved by the
Company's Board of Directors, provided that securities with a demand feature
exercisable within one to seven days will be valued at par. Prices provided
by the pricing service may be determined without exclusive reliance on quoted
prices and may reflect appropriate factors such as institution-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type
of issue, individual trading characteristics and other market data. Portfolio
securities for
9
<PAGE> 12
which prices are not provided by the pricing service are valued at the mean
between the last available bid and asked prices, unless the Board of
Directors, or persons designated by the Board of Directors, determines that
the mean between the last available bid and asked prices does not accurately
reflect the current market value of the security. Securities for which market
quotations either are not readily available or are questionable are valued at
fair value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors. Notwithstanding the above, short-term obligations with maturities
of 60 days or less are valued at amortized cost.
The Fund's investments include lower-rated and unrated debt securities
which may be more susceptible to adverse economic conditions than investment
grade holdings. These securities are often subordinated to the prior claims
of other senior lenders and uncertainties exist as to an issuer's ability to
meet principal and interest payments. Securities rated below investment grade
and comparable unrated securities represented approximately 95.03% of the
Fund's investment portfolio at the end of the period.
B. Securities Transactions and Investment Income -- Securities transactions are
recorded on a trade date basis. Realized gains and losses are computed on the
basis of specific identification of the securities sold. Interest income,
adjusted for amortization of premiums and original issue discounts, is earned
from settlement date and is recorded on the accrual basis.
C. Dividends and Distributions to Shareholders -- It is the policy of the Fund
to declare daily dividends from net investment income. Such dividends are
paid monthly. Net realized capital gains (including net short-term capital
gains and market discounts), if any, are distributed annually.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. In addition, the Fund intends to
invest in such municipal securities to allow it to qualify to pay "exempt
interest dividends," as defined in the Internal Revenue Code.
E. Expenses -- Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.60% of
the first $500 million of the Fund's average daily net assets, plus 0.55% of the
Fund's average daily net assets of the next $500 million, plus 0.50% of the next
$500 million of the Fund's average daily net assets, plus 0.45% of the Fund's
average daily net assets in excess of $1.5 billion. AIM has agreed to waive
advisory fees on the Fund. During the six months ended September 30, 1998, AIM
waived advisory fees and reimbursed expenses of $196,723.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain costs incurred in providing accounting
services to the Fund. During the six months ended September 30, 1998, the Fund
reimbursed AIM $30,735 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agent and
shareholder services to the Fund. During the six months ended September 30,
1998, the Fund paid AFS $3,038 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares ("Class B Plan") (collectively, the "Plans"). The Fund,
pursuant to the Class A and C Plan, pays AIM Distributors compensation at an
annual rate of 0.25% of the average daily net assets of the Class A shares and
1.00% of the average daily net assets of the Class C shares. The Fund, pursuant
to the Class B Plan, pays AIM Distributors an annual rate of 1.00% of the
average daily net assets of the Class B shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee by the Class B or Class C shares under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges, that may be paid by the respective
classes. During the six months ended September 30, 1998, the Class A shares,
Class B shares and Class C shares paid AIM Distributors $36,628, $23,232 and
$6,240, respectively, as compensation under the Plans.
Under the terms of a master distribution agreement between the Company and the
Fund, AIM Distributors acts as the exclusive distributor of the Fund's shares.
AIM Distributors received commissions of $18,659 from the sales of Class A
shares of the Fund during the six months ended September 30, 1998. Such
commissions are not an expense of the Fund. They are deducted from, and are not
included in, the proceeds from sales of Class A shares. During the six months
ended September 30, 1998, AIM Distributors received $11,473 in contingent
deferred sales charges imposed on redemptions of Fund shares. Certain officers
and directors of the Company are officers of AIM, AFS and AIM Distributors.
During the six months ended September 30, 1998, the Fund paid legal fees of
$2,237 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
10
<PAGE> 13
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the six months ended September 30, 1998 was
$30,928,312 and $7,570,556, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of September 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $901,636
- --------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (9,025)
- --------------------------------------------------------
Net unrealized appreciation of investment
securities $892,611
========================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 5-CAPITAL STOCK
Changes in capital stock outstanding during the six months ended September 30,
1998 and the period January 2, 1998 (date operations commenced) through March
31, 1998 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 2,038,719 $20,439,228 1,830,454 $18,280,746
--------- ----------- --------- -----------
Class B 456,096 4,589,321 270,282 2,698,095
--------- ----------- --------- -----------
Class C 100,427 1,008,191 73,780 736,528
--------- ----------- --------- -----------
Issued as
reinvestment of
dividends:
Class A 40,908 412,313 7,600 75,970
--------- ----------- --------- -----------
Class B 5,209 52,474 457 4,564
--------- ----------- --------- -----------
Class C 1,715 17,275 152 1,516
--------- ----------- --------- -----------
Reacquired:
Class A (270,387) (2,729,936) (58,098) (580,678)
--------- ----------- --------- -----------
Class B (29,667) (298,158) (460) (4,572)
--------- ----------- --------- -----------
Class C (12,163) (123,176) - -
--------- ----------- --------- -----------
2,330,857 $23,367,532 2,124,167 $21,212,169
========= =========== ========= ===========
</TABLE>
NOTE 6- FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A, Class B and
Class C capital stock outstanding during the six months ended September 30, 1998
and the period January 2, 1998 (date operations commenced) through March 31,
1998.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------- ------------------------- -------------------------
SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31,
1998 1998 1998 1998 1998 1998
------------- --------- ------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.99 $ 10.00 $ 9.99 $10.00 $ 9.99 $10.00
- ---------------------------------------------- ------- ------- ------ ------ ------ ------
Income from investment operations:
Net investment income 0.27 0.11 0.23 0.09 0.23 0.09
- ---------------------------------------------- ------- ------- ------ ------ ------ ------
Net gains (losses) on securities (both
realized and unrealized) 0.20 (0.01) 0.21 (0.01) 0.21 (0.01)
- ---------------------------------------------- ------- ------- ------ ------ ------ ------
Total from investment operations 0.47 0.10 0.44 0.08 0.44 0.08
- ---------------------------------------------- ------- ------- ------ ------ ------ ------
Less distributions:
Dividends from net investment income (0.26) (0.11) (0.23) (0.09) (0.23) (0.09)
- ---------------------------------------------- ------- ------- ------ ------ ------ ------
Net asset value, end of period $ 10.20 $ 9.99 $10.20 $ 9.99 $10.20 $ 9.99
============================================== ======= ======= ====== ====== ====== ======
Total return(a) 4.81% 1.04% 4.43% 0.81% 4.43% 0.79%
============================================== ======= ======= ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $36,625 $17,787 $7,157 $2,699 $1,672 $ 738
============================================== ======= ======= ====== ====== ====== ======
Ratio of expenses to average net assets(b) 0.25%(c) 0.25%(d) 1.00%(c) 1.00%(d) 1.00%(c) 1.00%(d)
============================================== ======= ======= ====== ====== ====== ======
Ratio of net investment income to average net
assets(e) 5.33%(c) 4.80%(d) 4.58%(c) 4.05%(d) 4.58%(c) 4.05%(d)
============================================== ======= ======= ====== ====== ====== ======
Portfolio turnover rate 23% 21% 23% 21% 23% 21%
============================================== ======= ======= ====== ====== ====== ======
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.33% (annualized) and 1.65% (annualized) for Class A, 2.08% (annualized)
and 2.44% (annualized) for Class B and 2.08% (annualized) and 2.44%
(annualized) for Class C for the periods ending September 30 and March 31,
1998, respectively.
(c) Ratios are annualized and based on average net assets of $29,222,234
$4,633,704 and $1,244,562 for Classes A, B and C, respectively.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 4.25% (annualized) and 3.40% (annualized) for Class A,
3.50% (annualized) and 2.61% (annualized) for Class B and 3.50% (annualized)
and 2.61% (annualized) for Class C for the periods ending September 30 and
March 31, 1998, respectively.
11
<PAGE> 14
Directors & Officers
<TABLE>
<CAPTION>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II TRANSFER AGENT
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Stuart W. Coco
President, Mercantile Bankshares Vice President The Bank of New York
90 Washington Street
Jack Fields Melville B. Cox 11th Floor
Chief Executive Officer Vice President New York, NY 10286
Texana Global, Inc.;
Formerly Member Karen Dunn Kelley COUNSEL TO THE FUND
of the U.S. House of Representatives Vice President
Ballard Spahr
Carl Frischling Renee A. Friedli Andrews & Ingersoll, LLP
Partner Assistant Secretary 1735 Market Street
Kramer, Levin, Naftalis & Frankel Philadelphia, PA 19103
P. Michelle Grace
Robert H. Graham Assistant Secretary COUNSEL TO THE DIRECTORS
President and Chief Executive Officer
A I M Management Group Inc. Jeffrey H. Kupor Kramer, Levin, Naftalis & Frankel
Assistant Secretary 919 Third Avenue
Prema Mathai-Davis New York, NY 10022
Chief Executive Officer, YWCA of the U.S.A.; Nancy L. Martin
Commissioner, New York City Dept. for the Assistant Secretary DISTRIBUTOR
Aging; and member of the Board of Directors,
Metropolitan Transportation Authority of Ofelia M. Mayo A I M Distributors, Inc.
New York State Assistant Secretary 11 Greenway Plaza
Suite 100
Lewis F. Pennock Lisa A. Moss Houston, TX 77046
Attorney Assistant Secretary
Ian W. Robinson Kathleen J. Pflueger
Consultant; Formerly Executive Assistant Secretary
Vice President and
Chief Financial Officer Samuel D. Sirko
Bell Atlantic Management Assistant Secretary
Services, Inc.
Stephen I. Winer
Louis S. Sklar Assistant Secretary
Executive Vice President
Hines Interests
Limited Partnership
</TABLE>
<PAGE> 15
HOW AIM MAKES INVESTING
EASY FOR YOU
o LOW INITIAL INVESTMENT. You can get your investment program started for as
little as $500. Subsequent investments can be made for only $50.
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS. Distributions may
be received in cash or reinvested in the Fund free of charge. Over time, the
power of compounding can significantly increase the value of your assets.
o AUTOMATIC INVESTMENT PLAN. You may build your investment by regularly
purchasing additional shares. Pre-authorized checks for $50 or more can be
drafted monthly from your personal checking account.
o EASY ACCESS TO YOUR MONEY. Your shares may be redeemed at net asset value
any day the New York Stock Exchange is open. The price of shares sold may be
more or less than their original cost, depending on market conditions.
o SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive checks of at least $50
monthly or quarterly through a systematic withdrawal plan.
o EXCHANGE PRIVILEGE. As your goals change, you may exchange all or part of
your assets for those of other funds within the same share class of The AIM
Family of Funds--Registered Trademark--. The exchange privilege may be
modified or discontinued for any of the AIM funds. Certain restrictions
apply.
o RETIREMENT PLANS. You may purchase shares of an AIM fund for your Individual
Retirement Account (IRA) or any other type of retirement plan, and earn
tax-deferred dollars for your retirement.
o TOLL-FREE ACCESS. Current shareholders can call our AIM Investor Line at
800-246-5463 for 24-hour-a-day account information. Or, of course, you may
contact your financial consultant for assistance.
o www.aimfunds.com. As a current shareholder, you can check account balances
24 hours a day over the Internet. State-of-the-art encryption lets you send
us questions that include confidential information without the fear of
eavesdropping, tampering, or forgery.
-------------------------------------
Current shareholders
can call our
AIM Investor Line at
800-246-5463
for 24-hour-a-day
account information.
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<PAGE> 16
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS
AIM Aggressive Growth Fund AIM Advisor International Value Fund
AIM Blue Chip Fund AIM Asian Growth Fund
AIM Capital Development Fund AIM Developing Markets Fund(1)
[PHOTO OF AIM Constellation Fund AIM Emerging Markets Fund(1)
11 GREENWAY PLAZA AIM Mid Cap Equity Fund(1),(A) AIM Europe Growth Fund(1)
APPEARS HERE] AIM Select Growth Fund(2) AIM European Development Fund
AIM Small Cap Growth Fund(1), (B) AIM International Equity
A I M Management Group Inc. AIM Small Cap Opportunities Fund Fund AIM International Growth Fund(1)
has provided leadership in AIM Value Fund AIM Japan Growth Fund(1)
the mutual fund industry AIM Weingarten Fund AIM Latin American Growth Fund(1)
since 1976 and managed AIM New Pacific Growth Fund(1)
approximately $91 billion in GROWTH & INCOME FUNDS
assets for more than 5.5 GLOBAL GROWTH FUNDS
million shareholders, AIM Advisor Flex Fund
including individual AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
investors, corporate AIM Advisor MultiFlex Fund AIM Global Growth Fund
clients, and financial AIM Advisor Real Estate Fund AIM Worldwide Growth Fund(1)
institutions, as of AIM Balanced Fund
September 30, 1998. The AIM AIM Basic Value Fund(1), (C) GLOBAL GROWTH & INCOME FUNDS
Family of Funds--Registered AIM Charter Fund
Trademark-- is distributed AIM Global Growth & Income Fund(1)
nationwide, AIM today is the INCOME FUNDS AIM Global Utilities Fund
11th-largest mutual fund
complex in the U.S. in AIM Floating Rate Fund(1) GLOBAL INCOME FUNDS
assets under management, AIM High Yield Fund
according to Strategic AIM High Yield Fund II AIM Emerging Markets Debt Fund(1), (D)
Insight, an independent AIM Income Fund AIM Global Government Income Fund(1)
mutual fund monitor. AIM Intermediate Government Fund AIM Global Income Fund
AIM Limited Maturity Treasury Fund AIM Strategic Income Fund(1)
TAX-FREE INCOME FUNDS THEME FUNDS
AIM High Income Municipal Fund AIM Global Consumer Products and Services Fund(1)
AIM Municipal Bond Fund AIM Global Financial Services Fund(1)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Health Care Fund(1)
AIM Tax-Free Intermediate Fund AIM Global Infrastructure Fund(1)
AIM Global Resources Fund(1)
MONEY MARKET FUNDS AIM Global Telecommunications Fund(1)
AIM Global Trends Fund(1), (E)
AIM Dollar Fund(1)
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
</TABLE>
(1) Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds.
(2) On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth Fund. (A)On
September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap Equity
Fund. (B)On September 8, 1998, AIM Small Cap Equity Fund was renamed and AIM
Small Cap Growth Fund. (C)On September 8, 1998, AIM America Value Fund was
renamed AIM Basic Value Fund. (D)On September 8, 1998, AIM Global High
Income Fund was renamed AIM Emerging Markets Debt Fund. (E)On September 8,
1998, AIM New Dimension Fund was renamed AIM Global Trends Fund. For more
complete information about any AIM Fund(s), including sales charges and
expenses, ask your financial consultant or securities dealer for a free
prospectus(es). Please read the prospectus(es) carefully before you invest
or send money.
INVEST WITH DISCIPLINE--REGISTERED TRADEMARK--
