<PAGE> 1
AIM TAX-EXEMPT BOND FUND
OF CONNECTICUT
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT SEPTEMBER 30, 1998
<PAGE> 2
-------------------------------------
AIM Tax-Exempt Bond Fund
of Connecticut
For shareholders who seek
to earn a high level
of current income
that is free of both
federal and Connecticut taxes.
-------------------------------------
ABOUT FUND PERFORMANCE DATA THROUGHOUT THIS REPORT:
o AIM Tax-Exempt Bond Fund of Connecticut's performance figures are historical
and reflect reinvestment of all distributions and changes in net asset
value. Unless otherwise indicated, the Fund's performance is computed at net
asset value without a sales charge. When sales charges are included in
performance figures, those figures reflect the maximum 4.75% sales charge.
o The 30-day yield is calculated on the basis of a formula defined by the SEC.
The formula is based on the portfolio's potential earnings from dividends,
interest, yield-to-maturity or yield-to-call of the bonds in the portfolio,
net of all expenses and expressed on an annualized basis.
o The taxable-equivalent yield is calculated in the same manner as the 30-day
yield with an adjustment for a stated, assumed tax rate.
o The Fund's annualized distribution rate reflects the Fund's most recent
monthly dividend distribution multiplied by 12 and divided by the most
recent month-end net asset value.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The Fund's portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any particular security.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Government securities, such as U.S. Treasury bills, notes, and bonds, offer
a high degree of safety and are guaranteed as to the timely payment of
principal and interest if held to maturity. Fund shares are not insured and
their value and yield will vary with market conditions.
o An investment cannot be made in the indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE
FDIC OR ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR ANY AFFILIATE;
AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
The 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
Municipal Bonds a Bargain for Investors
A roundtable discussion with the Fund management team for AIM Tax-Exempt Bond
Fund of Connecticut 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-quality
municipal bonds offered more than 95% of the yield of U.S. Treasury
issues--the highest level in 12 years. In conjunction with these trends,
your Fund continued to provide attractive current income (see chart below),
exempt from federal taxes and Connecticut state taxes, while maintaining
relative share-price stability.
For the six months ended September 30, 1998, total return was 3.36%. Net
asset value per share remained within a relatively narrow range of $10.97 to
$11.13, extending the Fund's track record of relative price stability as
illustrated by the accompanying chart.
================================================================================
FUND OFFERS SOLID INCOME
As of 9/30/98
- --------------------------------------------------------------------------------
8.60%
5.86%
4.96%
3.38%
[BAR CHART]
30-Day Taxable 30-Day Taxable
Distribu- Equivalent SEC Yield Equivalent
tion Rate Distribu- at 30-Day
at NAV tion Rate* Maximum SEC Yield*
Offering
Price
* Assumes highest marginal federal tax rate of 39.6% and Connecticut state rate
of 4.5%.
================================================================================
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.
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
================================================================================
HISTORY OF NET ASSET VALUE STABILITY
- --------------------------------------------------------------------------------
10/3/89 - 9/30/98
10.00 10/3/89 10.71 3/95
9.99 3/90 10.81 3/96
10.11 3/91 10.77 3/97
10.31 3/92 11.04 3/98
10.88 3/93 11.13 9/98
10.69 3/94
================================================================================
Source: Towers Data Systems HYPO--Registered Trademark--. There is no guarantee
the Fund will maintain a constant NAV. Investment return will vary so that you
may have a gain or a loss when you sell shares. Past performance cannot
guarantee comparable future results.
2
<PAGE> 5
The Managers' Overview
PORTFOLIO COMPOSITION
As of 9/30/98, based on total net assets
================================================================================
TOP FIVE BOND HOLDINGS COUPON MATURITY %
- --------------------------------------------------------------------------------
1. Connecticut State Special 6.50% 10/01/12 4.4
Tax Obligation
2. Connecticut Development Authority 7.25% 10/15/15 4.2
3. Connecticut Health and 6.875% 07/01/99 3.8
Education Facilities Authority
4. Connecticut State Special 6.80% 06/01/03 3.5
Tax Obligation
5. Connecticut State Housing Mortgage 6.30% 11/15/17 3.4
Finance Program
NUMBER OF HOLDINGS 66 WEIGHTED AVERAGE MATURITY 11.2 YEARS
DURATION 4.0 YEARS
================================================================================
================================================================================
Cash/Cash Equivalents
General 2%
Obligation
Bonds Revenue
16% Bonds
82%
[PIE CHART]
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.
================================================================================
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.
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 DID YOU MANAGE THE FUND?
A. At the end of the reporting period, revenue bonds comprised 82% of the
Fund's holdings while general obligation bonds comprised 16%. Over the past
six months, we have slightly increased our revenue-bond holdings. Revenue
bonds are paid with income generated by various projects while
general-obligation bonds are paid with tax dollars. State and local
governments have found it difficult to raise taxes to support
general-obligation bond issues because of public opposition. We like revenue
bonds because their creditworthiness tends to be less sensitive to the
political environment than that of general-obligation bonds.
We focused on revenue bonds for essential services, such as solid waste
disposal and water and sewer service. The demand for essential services
tends to be less affected by economic trends.
Q. ARE YOU STILL MAINTAINING A HIGH-QUALITY PORTFOLIO?
A. Yes, as of September 30, 1998, the Fund had an average portfolio quality
rating of AA-/Aa- as measured by Standard & Poor's Corporation (S&P) and
Moody's Investors Service, Inc. (Moody's), two widely known credit rating
agencies. S&P and Moody's ratings are historical and are based on analysis
of the credit quality of the individual municipal securities in the Fund's
portfolio.
Approximately 47% of the portfolio's holdings were securities rated AAA,
and 95% of the portfolio was rated A or better. Credit-enhanced
securities--those backed by insurance or escrowed with U.S. Treasury
securities--comprised about 44% of the portfolio.
Q. HOW TAX EFFICIENT IS THE FUND?
A. For more than five years, the Fund has paid no taxable capital gains or
ordinary income distributions. We make every effort to avoid transactions
that would result in capital gains that are not offset by capital losses.
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.
In Connecticut, the economy has almost fully recovered from the downturn
of 1989-1992, although Hartford and other major metropolitan areas have
tended to lag the rest of the state. The state economy, which has expanded
rapidly over the past three years, is expected to grow more moderately in
the months ahead. The inflation rate in Connecticut has reflected the low
national average.
We are particularly optimistic about 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 rising earnings push more Americans into
higher tax brackets.
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>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MUNICIPAL OBLIGATIONS-98.20%
EDUCATION-9.94%
Connecticut Health and
Education Facilities
Authority (Fairfield
University); Series F RB
6.875%, 07/01/99(b)(c) NRR NRR $ 1,475 $ 1,542,437
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Quinnipiac College);
Series 1989 B RB
7.25%, 07/01/99(b)(c) AAA NRR 450 471,965
- ------------------------------------------------------------------
Connecticut Regional
School District No. 5;
Series 1992 GO
6.00%, 03/01/12(d) AAA Aaa 335 362,309
- ------------------------------------------------------------------
Connecticut Regional
School District No. 5
(Towns of Bethany,
Orange and Woodbridge);
1993 Issue GO
5.50%, 02/15/07(d) AAA Aaa 500 539,805
- ------------------------------------------------------------------
Connecticut State Higher
Education Supplemental
Loan Authority (Family
Education Loan Program);
Series 1990 A RB
7.50%, 11/15/10(e) - A1 1,165 1,190,956
- ------------------------------------------------------------------
4,107,472
- ------------------------------------------------------------------
ELECTRIC-4.87%
Connecticut Development
Authority (Connecticut
Power & Light Co.);
Series 1993 A PCR
3.60%, 09/01/28(f) A-1+ VMIG-1 327 327,000
- ------------------------------------------------------------------
Connecticut Development
Authority (New England
Power Co.); Series 1985
Fixed Rate PCR
7.25%, 10/15/15 A+ A1 1,600 1,685,712
- ------------------------------------------------------------------
2,012,712
- ------------------------------------------------------------------
GENERAL OBLIGATION-11.88%
Bridgeport (Town of),
Connecticut; Series A
Unlimited GO
6.00%, 09/01/06(d) AAA Aaa 875 998,935
- ------------------------------------------------------------------
Brooklyn (City of),
Connecticut; Unlimited
Tax GO
5.50%, 05/01/06(d) AAA Aaa 250 276,518
- ------------------------------------------------------------------
5.70%, 05/01/08(d) AAA Aaa 250 277,888
- ------------------------------------------------------------------
Chester (Town of),
Connecticut; Series 1989
GO
7.00%, 10/01/05 - A 190 199,316
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GENERAL OBLIGATION-(CONTINUED)
Connecticut (State of);
Series 1991 A GO
6.75%, 03/01/01(b)(c) NRR NRR $ 480 $ 522,168
- ------------------------------------------------------------------
Connecticut (State of)
(General Purpose Public
Improvement);
6.75%, Series 1991 A GO,
03/01/01(b)(c) NRR NRR 200 217,570
- ------------------------------------------------------------------
6.50%, Series 1992 A GO,
03/15/02(b)(c) NRR NRR 300 331,182
- ------------------------------------------------------------------
Mansfield (City of),
Connecticut; Series 1990
GO
6.00%, 06/15/07 - A1 100 113,928
- ------------------------------------------------------------------
6.00%, 06/15/08 - A1 100 114,292
- ------------------------------------------------------------------
6.00%, 06/15/09 - A1 100 116,499
- ------------------------------------------------------------------
New Britain (City of),
Connecticut; Series 1992
Various Purpose GO
6.00%, 02/01/11(d) AAA Aaa 400 466,160
- ------------------------------------------------------------------
North Canaan (City of),
Connecticut; Series 1991
GO
6.50%, 01/15/08 - A 125 147,949
- ------------------------------------------------------------------
6.50%, 01/15/09 - A 125 149,481
- ------------------------------------------------------------------
6.50%, 01/15/10 - A 125 150,106
- ------------------------------------------------------------------
6.50%, 01/15/11 - A 125 150,346
- ------------------------------------------------------------------
Somers (City of),
Connecticut; Series 1990
Various Purpose GO
6.00%, 12/01/10 - A1 190 222,880
- ------------------------------------------------------------------
Westbrook (City of),
Connecticut; Series 1992
GO
6.40%, 03/15/10(d) AAA Aaa 380 456,870
- ------------------------------------------------------------------
4,912,088
- ------------------------------------------------------------------
HEALTH CARE-17.74%
Connecticut Development
Authority (Elim Park
Baptist Home); Refunding
Series A RB
5.375%, 12/01/18 BBB+ - 500 505,610
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Bridgeport Hospital);
1992 Series A RB
6.625%, 07/01/18(d) AAA Aaa 500 552,825
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Capital Asset);
Series 1989 B RB
7.00%, 01/01/00(g) A+ A1 200 207,312
- ------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
HEALTH CARE-(CONTINUED)
Connecticut Health and
Education Facilities
Authority
(Danbury Hospital);
Series 1991 E RB
6.50%, 07/01/14(d) AAA Aaa $ 750 $ 814,650
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Hospital For Special
Care); Series 1997 B RB
5.375%, 07/01/17 BBB Baa2 1,000 1,023,270
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(Middlesex Hospital);
Series 1992 G RB
6.25%, 07/01/02(b)(c) AAA Aaa 1,100 1,200,034
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority
(New Britain Memorial
Hospital); Series 1991 A
RB
7.75%, 07/01/02(b)(c) NRR NRR 500 577,830
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (Stamford
Hospital); Series F RB
5.40%, 07/01/09(d) AAA Aaa 1,000 1,093,710
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (Veteran
Memorial Medical
Center); Series 1996 A
RB
5.50%, 07/01/26(d) AAA Aaa 500 524,160
- ------------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (Yale-New
Haven Hospital); Series
1990 F RB
7.10%, 07/01/00(b)(c) AAA Aaa 775 834,830
- ------------------------------------------------------------------
7,334,231
- ------------------------------------------------------------------
HOUSING-17.94%
Connecticut Housing
Development Authority
(Housing Mortgage
Finance Program); RB
7.00%, Series C,
11/15/99(e) AA Aa 320 328,310
- ------------------------------------------------------------------
Series 1991 A-1,
7.00%, 11/15/09 AA Aa2 450 482,917
- ------------------------------------------------------------------
Series 1991 C,
Sub-Series C-3,
6.55%, 11/15/13 AA Aa2 310 333,898
- ------------------------------------------------------------------
Series D-2,
5.45%, 11/15/24(e) AA Aa2 1,250 1,279,100
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
HOUSING-(CONTINUED)
Connecticut (State of)
(Housing
Mortgage Finance Program); RB
5.95%, Series E-1,
05/15/17 AA Aa2 $ 500 $ 540,195
- ------------------------------------------------------------------
6.00%, Series 1993 E-1,
05/15/17 AA Aa 675 717,012
- ------------------------------------------------------------------
6.30%, Series C-1,
11/15/17 AA Aa 1,270 1,393,355
- ------------------------------------------------------------------
6.25%, Series C-2,
11/15/18 AA Aa2 750 822,502
- ------------------------------------------------------------------
6.70%, Series C-2,
11/15/22(e) AA Aa2 325 350,711
- ------------------------------------------------------------------
5.85%, Series C-2,
11/15/28(e) AA Aa3 760 799,938
- ------------------------------------------------------------------
Waterburg (City of)
Connecticut Housing
Authority; Refunding
Series A RB
5.45%, 07/01/23(d) AAA Aaa 365 367,642
- ------------------------------------------------------------------
7,415,580
- ------------------------------------------------------------------
LEASE RENTAL-1.06%
Connecticut (State of)
(Middletown Courthouse
Facilities Project);
1991 Issue Lease-Rental
Revenue Certificates of
Participation
6.25%, 12/15/01(b)(c) AAA Aaa 400 437,556
- ------------------------------------------------------------------
RESOURCE RECOVERY-5.39%
Connecticut State Resource
Recovery Authority
(American Ref-Fuel
Co.-Southeastern
Connecticut Project);
Series 1988 A RB
8.00%, 11/16/98(b)(c)(e) NRR NRR 500 517,460
- ------------------------------------------------------------------
Connecticut State Resource
Recovery Authority
(Bridgeport Resco
Corp.-Ltd. Partners);
1985 Issue RB
Project B, 8.625%,
01/01/04 A A3 670 684,653
- ------------------------------------------------------------------
Project A, 7.625%,
01/01/09 A A 1,000 1,027,280
- ------------------------------------------------------------------
2,229,393
- ------------------------------------------------------------------
TRANSPORTATION-18.17%
Connecticut State Special
Tax Obligation
(Transportation
Infrastructure); RB
Series 1992 B,
5.10%, 09/01/99 AA- A1 1,000 1,016,350
- ------------------------------------------------------------------
Series 1991 B,
6.25%, 10/01/01(b)(c) NRR Aaa 1,000 1,089,450
- ------------------------------------------------------------------
Series A,
6.80%, 06/01/03(b)(c) NRR NRR 1,250 1,405,713
- ------------------------------------------------------------------
Series 1991 B,
6.50%, 10/01/10 AA- A1 530 639,445
- ------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TRANSPORTATION-(CONTINUED)
Connecticut State Special
Tax Obligation
(Transportation
Infrastructure Sales and
Excise Tax); RB
Series 1991 B, 5.90%,
10/01/99(b) NRR Aaa $ 1,000 $ 1,026,070
- ------------------------------------------------------------------
Series 1989 C, 6.80%,
12/01/99(b)(c) AAA NRR 500 529,575
- ------------------------------------------------------------------
Series 1991 B, 6.50%,
10/01/12 AA- A1 1,500 1,805,445
- ------------------------------------------------------------------
7,512,048
- ------------------------------------------------------------------
WATER & SEWER-7.46%
Connecticut Development
Authority (Pfizer Inc.);
Series 1982 Refunding
PCR
6.55%, 02/15/13 AAA Aaa 250 275,910
- ------------------------------------------------------------------
Connecticut Development
Authority Water Facility
(Bridgeport Hydraulic
Co. Project); Series
1990, Refunding RB
7.25%, 06/01/20 A+ - 800 855,104
- ------------------------------------------------------------------
6.15%, 04/01/35(e) A+ - 250 276,215
- ------------------------------------------------------------------
Connecticut State Clean
Water Fund; Series 1991
Clean Water RB
7.00%, 01/01/11 AAA Aaa 1,100 1,195,007
- ------------------------------------------------------------------
Manchester (City of)
Connecticut Eighth
Utilities Fire District;
Series 1991 GO
6.75%, 08/15/06 - Aa3 180 212,297
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WATER & SEWER-(CONTINUED)
South Central Connecticut
Regional Water
Authority; Eighth Series
1990 A Water System RB
6.60%, 08/01/00(b)(c) NRR NRR $ 250 $ 267,552
- ------------------------------------------------------------------
3,082,085
- ------------------------------------------------------------------
MISCELLANEOUS-3.75%
Connecticut Development
Authority (Economic
Development Projects);
Series 1992 Refunding RB
6.00%, 11/15/08 AA- Aa 500 521,370
- ------------------------------------------------------------------
Guam (Government of);
Series 1995 A GO
5.25%, 09/01/99 BBB - 250 251,388
- ------------------------------------------------------------------
5.375%, 09/01/00 BBB - 250 251,300
- ------------------------------------------------------------------
Puerto Rico Commonwealth
(Highway and
Transportation
Authority); Series X RB
5.20%, 07/01/03 A Baa1 500 528,510
- ------------------------------------------------------------------
1,552,568
- ------------------------------------------------------------------
TOTAL INVESTMENTS-98.20%
(Cost $37,737,099) 40,595,733
- ------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.80% 743,135
- ------------------------------------------------------------------
NET ASSETS-100.00% $41,338,868
- ------------------------------------------------------------------
</TABLE>
ABBREVIATIONS:
GO -General Obligation Bonds
NRR -Not re-rated
PCR -Pollution Control Revenue Bonds
RB -Revenue Bonds
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Ratings assigned by Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's") . NRR indicates a security that
is not re-rated subsequent to funding of an escrow fund (consisting
of U.S. Treasury obligations); this funding is pursuant to an advance
refunding of the security.
(b) Secured by an escrow fund of U.S. Treasury obligations.
(c) Subject to an irrevocable call or mandatory put by the issuer. Market
value and maturity date reflect such call or put.
(d) Secured by bond insurance.
(e) Security subject to alternative minimum tax.
(f) Demand security; payable upon demand by the Fund at specified time
intervals no greater than thirteen months. Interest rate is
redetermined periodically. Rate shown is the rate in effect on
09/30/98.
(g) Secured by a letter of credit.
See Notes to Financial Statements.
7
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $37,737,099) $ 40,595,733
- ---------------------------------------------------------
Cash 408
- ---------------------------------------------------------
Receivables for:
Capital stock sold 137,179
- ---------------------------------------------------------
Interest 735,354
- ---------------------------------------------------------
Investment for deferred compensation plan 19,787
- ---------------------------------------------------------
Other assets 5,600
- ---------------------------------------------------------
Total assets 41,494,061
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Dividends 69,894
- ---------------------------------------------------------
Deferred compensation 19,787
- ---------------------------------------------------------
Accrued advisory fees 13,533
- ---------------------------------------------------------
Accrued administrative services fees 3,858
- ---------------------------------------------------------
Accrued transfer agent fees 3,330
- ---------------------------------------------------------
Accrued distribution fees 25,778
- ---------------------------------------------------------
Accrued operating expenses 19,013
- ---------------------------------------------------------
Total liabilities 155,193
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $ 41,338,868
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Authorized 1,000,000,000
- ---------------------------------------------------------
Outstanding 3,712,963
=========================================================
Net asset value and redemption price per
share $ 11.13
=========================================================
Offering price per share:
(Net asset value of $11.13 divided by
95.25%) $ 11.69
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $1,181,685
- --------------------------------------------------------
EXPENSES:
Advisory fees 101,662
- --------------------------------------------------------
Administrative services fees 23,475
- --------------------------------------------------------
Custodian fees 2,782
- --------------------------------------------------------
Transfer agent fees 13,171
- --------------------------------------------------------
Directors' fees 4,397
- --------------------------------------------------------
Distribution fees 50,831
- --------------------------------------------------------
Other 27,683
- --------------------------------------------------------
Total expenses 224,001
- --------------------------------------------------------
Less: Fees waived by advisor (27,068)
- --------------------------------------------------------
Net expenses 196,933
- --------------------------------------------------------
Net investment income 984,752
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
SECURITIES:
Net realized gain on sales of investment
securities 17,781
- --------------------------------------------------------
Net unrealized appreciation of investment
securities 345,263
- --------------------------------------------------------
Net gain on investment securities 363,044
- --------------------------------------------------------
Net increase in net assets resulting from
operations $1,347,796
========================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
FOR SIX MONTHS ENDED SEPTEMBER 30, 1998 AND THE YEAR ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
<S> <C> <C>
OPERATIONS:
Net investment income $ 984,752 $ 1,938,733
- --------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 17,781 42,016
- --------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 345,263 921,449
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,347,796 2,902,198
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (1,012,957) (1,940,749)
- --------------------------------------------------------------------------------------------
Net increase from capital stock transactions 437,475 1,486,630
- --------------------------------------------------------------------------------------------
Net increase in net assets 772,314 2,448,079
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 40,566,554 38,118,475
- --------------------------------------------------------------------------------------------
End of period $41,338,868 $40,566,554
============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $38,666,591 $38,229,116
- --------------------------------------------------------------------------------------------
Undistributed net investment income 6,483 34,688
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (192,840) (210,621)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 2,858,634 2,513,371
- --------------------------------------------------------------------------------------------
$41,338,868 $40,566,554
============================================================================================
</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 Tax-Exempt Bond Fund of Connecticut,
AIM High Income Municipal Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free
Intermediate Fund. Matters affecting each portfolio are voted on exclusively by
the shareholders of such portfolio. The assets, liabilities and operations of
each portfolio are accounted for separately. Information presented in these
financial statements pertains only to AIM Tax-Exempt Bond Fund of Connecticut
(the "Fund"). The investment objective of the Fund is to earn a high level of
income free from federal taxes and Connecticut taxes by investing at least 80%
of its net assets in municipal bonds and other municipal securities.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations--Portfolio securities are valued based on market
quotations or at fair value determined by a pricing service approved by the
Board of Directors, provided that securities with a demand feature
exercisable within one to seven days are valued at par. Prices provided by
the pricing service represent valuations of the mean between current bid and
asked market prices which may be determined without exclusive reliance on
quoted prices and may reflect appropriate factors such as institution-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, individual trading characteristics and other market
data. Portfolio securities for which prices are not provided by the pricing
service are valued at the mean between the last available bid and asked
prices, unless the Board of Directors or its designees determines that the
mean between the last available bid and asked prices does not accurately
reflect the current market value of the security. Securities for which market
quotations either are not readily available or are questionable are valued at
fair value as determined in good faith by or under the supervision of the
Company's officers in accordance with methods which are specifically
authorized by the Board of Directors. Notwithstanding the above, short-term
obligations with maturities of sixty days or less are valued at amortized
cost.
B. Securities Transactions and Investment Income--Securities transactions are
recorded on a trade date basis. Realized gains and losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income, adjusted for amortization of premiums and original issue
discounts, is recorded as earned from settlement date and is recorded on the
accrual basis.
9
<PAGE> 12
C. Dividends and Distributions to Shareholders--It is the policy of the Fund to
declare daily dividends from net investment income. Such dividends are paid
monthly. Net realized capital gains (including net short-term capital gains
and market discounts), if any, are distributed annually.
D. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements. The Fund has a capital loss carryforward (which may
be carried forward to offset future taxable gains, if any) of $211,744, which
expires, if not previously utilized, through the year 2004. The Fund cannot
distribute capital gains to shareholders until the tax loss carryforwards
have been utilized. In addition, the Fund intends to invest in such municipal
securities to allow it to qualify to pay to shareholders "exempt interest
dividends," as defined in the Internal Revenue Code.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.50% of
the Fund's average daily net assets. During the six months ended September 30,
1998, AIM voluntarily waived advisory fees of $27,068.
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 $23,475 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 $9,394 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") pursuant to which AIM Distributors
serves as the distributor for the Fund. The Company has also adopted a plan
pursuant to Rule 12b-1 under the 1940 Act (the "Plan") with respect to the Fund,
whereby the Fund pays to AIM Distributors compensation at an annual rate of
0.25% of the Fund's average daily net assets. The Plan is designed to compensate
AIM Distributors for certain promotional and other sales related costs and
provides for periodic payments to selected dealers and financial institutions
who furnish continuing personal shareholder services to their customers who
purchase and own shares of the Fund. Any amounts not paid as a service fee under
such plan would constitute an asset-based sales charge. The Plan also imposes a
cap on the total sales charges, including asset-based sales charges, that may be
paid by the Fund. During the six months ended September 30, 1998, the Fund paid
AIM Distributors $50,831 as compensation under the Plan.
AIM Distributors received commissions of $11,081 from sales of shares of the
Fund's capital stock 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 capital stock. 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
$2,251 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of i) $500,000,000 or ii) the limits set by its
prospectus for borrowings. During the six months ended September 30, 1998, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.05% on the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the six months ended September 30, 1998 were
$3,382,090 and $1,923,404, 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 $2,858,634
- --------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities --
- --------------------------------------------------------
Net unrealized appreciation of investment
securities $2,858,634
========================================================
Investments have the same cost for tax and financial
statement purposes.
</TABLE>
NOTE 6-CAPITAL STOCK
Changes in capital stock outstanding during the six months ended September 30,
1998 and the year ended March 31, 1998 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold 251,300 $ 2,776,477 542,798 $ 5,974,834
- ------------------ -------- ----------- -------- -----------
Issued as
reinvestment of
dividends 58,869 650,623 111,509 1,225,791
- ------------------ -------- ----------- -------- -----------
Reacquired (270,552) (2,989,625) (520,818) (5,713,995)
- ------------------ -------- ----------- -------- -----------
39,617 $ 437,475 133,489 $ 1,486,630
================== ======== =========== ======== ===========
</TABLE>
10
<PAGE> 13
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during the six months ended September 30, 1998 and each of the years
in the four-year period ended March 31, 1998, the three months ended March 31,
1994 and the year ended December 31, 1993.
<TABLE>
<CAPTION>
MARCH 31,
SEPTEMBER 30, -------------------------------------------------------- DECEMBER 31,
1998 1998 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.04 $ 10.77 $ 10.81 $ 10.71 $ 10.69 $ 11.29 $ 10.65
- ------------------------------------------ ------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.28 0.55 0.56 0.56 0.56 0.15 0.60
- ------------------------------------------ ------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) 0.09 0.27 (0.05) 0.10 0.04 (0.61) 0.65
- ------------------------------------------ ------- -------- -------- -------- -------- -------- --------
Total from investment
operations 0.37 0.82 0.51 0.66 0.60 (0.46) 1.25
- ------------------------------------------ ------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.28) (0.55) (0.55) (0.56) (0.57) (0.14) (0.60)
- ------------------------------------------ ------- -------- -------- -------- -------- -------- --------
Distributions from net realized
gains -- -- -- -- -- -- (0.01)
- ------------------------------------------ ------- -------- -------- -------- -------- -------- --------
Returns of capital -- -- -- -- (0.01) -- --
- ------------------------------------------ ------- -------- -------- -------- -------- -------- --------
Total distributions (0.28) (0.55) (0.55) (0.56) (0.58) (0.14) (0.61)
- ------------------------------------------ ------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 11.13 $ 11.04 $ 10.77 $ 10.81 $ 10.71 $ 10.69 $ 11.29
========================================== ======= ======== ======== ======== ======== ======== ========
Total return(a) 3.36% 7.78% 4.84% 6.24% 5.78% (4.06)% 11.99%
========================================== ======= ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $41,339 $ 40,567 $ 38,118 $ 39,355 $ 38,289 $ 42,361 $ 46,224
========================================== ======= ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets(b) 0.97%(c) 0.88% 0.72% 0.66% 0.55% 0.50%(d) 0.34%
========================================== ======= ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets(e) 4.84%(c) 5.02% 5.18% 5.16% 5.37% 5.32%(d) 5.42%
========================================== ======= ======== ======== ======== ======== ======== ========
Portfolio turnover rate 5% 5% 17% 17% 7% 2% 5%
========================================== ======= ======== ======== ======== ======== ======== ========
</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 are
1.10% (annualized), 1.11%, 1.09%, 1.16%, 1.13%, 1.23% (annualized) and
1.30%, for the periods 1998-93, respectively.
(c) Ratios are annualized and based on average daily net assets of $40,553,700.
(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 are 4.71% (annualized), 4.79%, 4.81%, 4.66%, 4.79%, 4.59%
(annualized) and 4.45%, for the periods 1998-93, respectively.
11
<PAGE> 14
Directors & Officers
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II TRANSFER AGENT
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn, Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
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
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
Hines Interests
Limited Partnership
</TABLE>
12
<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(R). 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.
---------------
<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)
AIM Constellation Fund AIM Emerging Markets Fund(1)
AIM Mid Cap Equity Fund(1,A) AIM Europe Growth Fund(1)
AIM Select Growth Fund(2) AIM European Development Fund
[PHOTO OF AIM Small Cap Growth Fund(1,B) AIM International Equity Fund
11 GREENWAY PLAZA AIM Small Cap Opportunities Fund AIM International Growth Fund(1)
APPEARS HERE] AIM Value Fund AIM Japan Growth Fund(1)
AIM Weingarten Fund AIM Latin American Growth Fund(1)
GROWTH & INCOME FUNDS AIM New Pacific Growth Fund(1)
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Balanced Fund AIM Worldwide Growth Fund(1)
AIM Basic Value Fund(1,C)
AIM Charter Fund GLOBAL GROWTH & INCOME FUNDS
A I M Management Group Inc. has INCOME FUNDS AIM Global Growth & Income Fund(1)
provided leadership in the mutual fund AIM Global Utilities Fund
industry since 1976 and managed AIM Floating Rate Fund(1)
approximately $91 billion in assets AIM High Yield Fund GLOBAL INCOME FUNDS
for more than 5.5 million AIM High Yield Fund II AIM Emerging Markets Debt Fund(1,D)
shareholders, including individual AIM Income Fund AIM Global Government Income Fund(1)
investors, corporate clients, and AIM Intermediate Government Fund AIM Global Income Fund
financial institutions, as of AIM Limited Maturity Treasury Fund AIM Strategic Income Fund(1)
September 30, 1998. The AIM Family of TAX-FREE INCOME FUNDS
Funds--Registered Trademark-- is THEME FUNDS
distributed nationwide, and AIM today AIM High Income Municipal Fund
is the 11th-largest mutual fund AIM Municipal Bond Fund AIM Global Consumer Products and Services Fund(1)
complex in the U.S. in assets under AIM Tax-Exempt Bond Fund of Connecticut AIM Global Financial Services Fund(1)
management, according to Strategic AIM Tax-Free Intermediate Fund AIM Global Health Care Fund(1)
Insight, an independent mutual fund AIM Global Infrastructure Fund(1)
monitor. MONEY MARKET FUNDS AIM Global Resources Fund(1)
AIM Global Telecommunications Fund(1)
INVEST WITH DISCIPLINE AIM Dollar Fund(1) AIM Global Trends Fund(1,E)
--REGISTERED TRADEMARK-- 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 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.
