<PAGE> 1
SEMIANNUAL REPORT / SEPTEMBER 30 1999
AIM HIGH INCOME MUNICIPAL FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 2
[COVER IMAGE]
-------------------------------
OASIS IN THE URBAN JUNGLE BY JANE WOOSTER SCOTT
(1939-, AMERICAN)
ZOOS, AMUSEMENT PARKS AND SIMILAR ATTRACTIONS CAN BE A
STIMULUS TO OTHER PROJECTS IN THE IMMEDIATE AREA. IN SELECTING
SECURITIES FOR AIM HIGH INCOME MUNICIPAL FUND, WE LOOK FOR
BONDS THAT ARE SUPPORTED WITH REVENUE GENERATED BY WELL-
MANAGED PROJECTS THAT MAKE GOOD ECONOMIC SENSE.
-------------------------------
AIM High Income Municipal Fund is for shareholders who seek a high level of
current income exempt from federal taxes.
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.
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 the 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 The fund's average annual total returns, including sales charges, for the
periods ended 9/30/99 were as follows. For Class A shares, one year, -7.14%
(-2.50% excluding sales charges); since inception (1/2/98), -0.95%. For
Class B shares, one year, -7.94 (-3.33% excluding sales charges); since
inception (1/2/98), -1.15%. For Class C shares, one year, -4.26% (-3.33%
excluding sales charges); since inception (1/2/98), 1.00%.
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 U.S. government
securities, such as U.S. Treasury bonds and bills, which offer a government
guarantee 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 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 will vary with market conditions.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF
YOUR MONEY.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the fund.
AIM HIGH INCOME MUNICIPAL FUND
<PAGE> 3
SEMIANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
With only a short time remaining in 1999, the question on
[PHOTO OF many of your minds may be, "How will the year 2000 computer
Charles T. issue affect AIM and my investments?" We would like you to
Bauer, feel comfortable. We are pleased to be able to report to
Chairman of you that as of June 1999 we achieved a major milestone
the Board of toward year 2000 compliance status: we have successfully
THE FUND completed the testing of all of our mission-critical
APPEARS HERE] systems.
Earlier this year, AIM participated in an industrywide
test that gave us a chance to see how our technology
systems might be affected by the changeover to the year
2000 (Y2K). Everything went as well as we had hoped; in
general, the industry sailed through the testing process
with flying colors. The financial industry has been seen as
a leader in planning for year 2000 concerns. Thus, it was
no surprise to most participants that the test was an
overwhelming success.
The general purpose of the process was to test electronic interfaces among
financial industry members in the United States and to follow transactions
through a typical trading cycle--from order entry to the settlement process.
Investment banks, broker-dealers, custodian banks and mutual fund companies all
worked together to make this possible. Approximately 400 firms were involved in
the testing; AIM was one of 70 asset managers.
During the testing process, thousands of transactions were submitted and
approximately 260,000 steps were tested. Of those, only a handful experienced
minor glitches--just 0.02% of the total number of transactions. All problems
were worked through quickly before the hypothetical trades were settled. Of
course, AIM will keep testing and planning throughout 1999 as a precaution.
AIM'S INTERNAL EFFORTS CONTINUE
As you know from our previous communications to you, AIM has been addressing the
year 2000 issue for several years. Now that we have finished adjusting our
applications and systems, our focus for the rest of 1999 is to continue
monitoring the year 2000 readiness status of outside sources we're linked to
electronically. On the investment side, our portfolio management staff is
continually evaluating the Y2K preparedness of the domestic and foreign
companies in which we invest.
We feel that our preparations for 2000 are very comprehensive, and the
industrywide testing showed that our colleagues in the financial industry are
also working hard to be ready for the new year. We do not think shareholders
need to take any extraordinary measures with their investments to prepare for
2000. However, if you have any lingering concerns, it may reassure you to know
that AIM is finalizing contingency plans that will be ready if necessary. Our
plans will give AIM employees guidelines to follow for a wide variety of
situations.
For a more comprehensive discussion of our Y2K efforts and for periodic
updates, please visit our Web site, www.aimfunds.com.
We are pleased to send you this report covering your fund's performance over
the reporting period. If you have any questions or comments, please contact our
Client Services department at 800-959-4246, or e-mail your inquiry to us at
[email protected]. You can access information about your account through our
automated AIM Investor Line at 800-246-5463 or at our Web site.
Thank you for your continued participation in The AIM Family of Funds
- --Registered Trademark--. We appreciate your business.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
A I M Advisors, Inc.
-------------------------------------
THE FINANCIAL
INDUSTRY HAS BEEN SEEN
AS A LEADER IN
PLANNING FOR
YEAR 2000 CONCERNS.
-------------------------------------
PLEASE NOTE THAT THE INFORMATION ABOUT THE YEAR 2000 IN THIS LETTER IS DEEMED
AIM'S YEAR 2000 READINESS DISCLOSURE.
AIM HIGH INCOME MUNICIPAL FUND
<PAGE> 4
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
DESPITE DIFFICULT BOND MARKET, FUND
PROVIDES ATTRACTIVE INCOME
BOND PERFORMANCE WAS DREARY DURING THE REPORTING PERIOD. HOW DID THE FUND
PERFORM?
In a challenging market environment, municipal bonds, including high-yield
issues, remained a compelling investment alternative. As the price of municipal
bonds fell, their yields rose to their highest levels in two years. By the end
of the reporting period, municipal-bond yields were comparable to those of U.S.
Treasury issues, which are subject to federal income taxes. In line with this
trend, the fund continued to provide solid current income, exempt from federal
taxes, as illustrated on the chart below.
The weakness in bond prices, caused by rising interest rates, hurt the
fund's total returns. Excluding sales charges, cumulative total returns for the
six-month period ended September 30, 1999, were -3.59% for Class A shares and
- -4.06% for Class B and C shares. Please keep in mind, the fund is managed more
for income than total return.
WHAT WERE SOME OF THE MAJOR DEVELOPMENTS IN THE BOND MARKET?
1999 has been the worst year for bonds since 1994, and this trend persisted
during the reporting period. Investors were concerned that continued strong
economic growth would prompt the Federal Reserve Board (the Fed) to raise
interest rates to keep inflation in check, and this had an unsettling effect on
the bond market. Ultimately, in two separate moves, the Fed raised the key
federal funds rate from 4.75% to 5.25%. At the end of the reporting period, the
Fed was maintaining a tightening bias, but it was uncertain whether the central
bank raise rates further.
The bond market was also rattled by the potential impact of the Y2K
problem-the need to reprogram older computers to recognize the year 2000-and the
decline in value of the U.S. dollar against the Japanese yen.
Most sectors of the bond market posted relatively small losses or gains for
the reporting period. Emerging markets debt was one of the few exceptions to
this trend, registering impressive gains. Further, lower-rated bonds
outperformed higher-rated issues while bonds with shorter maturities outpaced
those with longer maturities.
HOW DID MUNICIPAL BONDS FARE?
At the outset of the reporting period, municipal bond prices and yields were
relatively stable. However, beginning in April, the price of municipal bonds
(munis) began to drop, sending their yields higher. Treasury yields also rose,
but not as significantly as muni yields. Consequently, the gap between Treasury
and muni yields narrowed. By the end of the reporting, muni yields were about
95% of those Treasuries, well above the historical average of roughly 85%.
Muni bond prices fell in the face of weak demand and rising interest rates.
This weak demand, combined with rising interest rates, contributed to a decline
in new-issue volume. During the first three quarters of 1999, about $172 billion
in new municipal bonds entered the market, nearly a 21% decline from the
comparable period in 1998, according to The Bond Buyer, a newspaper that tracks
the muni bond market. State and local governments cut back on their issuance of
new bonds as the cost of borrowing money increased.
HOW DID YOU MANAGE THE FUND?
We took advantage of the market weakness to buy attractive bonds at reduced
prices. We sold lower-yielding bonds and bought higher-yielding bonds. To keep
the fund's distribution rate and yield attractive, we increased the fund's
duration from 10.29 years at the outset of the reporting period to 11.09 years
at its conclusion. Duration is an indicator of the sensitivity of a bond's
coupon to changes in interest rates. Because longer-duration bonds tend to be
more sensitive to price fluctuations, they detracted from the fund's short-term
performance. However, we believe that interest rates will level off and the fund
should benefit from its longer duration.
-------------------------------------
WE TOOK ADVANTAGE OF THE MARKET
WEAKNESS TO BUY ATTRACTIVE BONDS AT
REDUCED PRICES.
-------------------------------------
ATTRACTIVE INCOME
As of 9/30/99
================================================================================
30-DAY TAXABLE 30-DAY TAXABLE
DISTRIBUTION EQUIVALENT SEC YIELD EQUIVALENT
RATE DISTRIBUTION AT MAXIMUM 30-DAY SEC
CLASS AT NAV RATE* OFFERING PRICE YIELD*
- --------------------------------------------------------------------------------
A 5.87% 9.72% 5.81% 9.62%
B 5.07 8.39 5.34 8.84
C 5.07 8.39 5.34 8.84
*Assumes highest marginal federal tax rate of 39.6%
================================================================================
See important fund and index disclosures inside front cover.
AIM HIGH INCOME MUNICIPAL FUND
<PAGE> 5
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
HOW WAS THE FUND'S PORTFOLIO STRUCTURED AT THE END OF THE REPORTING PERIOD?
The fund had 117 holdings-99% were revenue bonds, supported by income from
various projects. The fund was diversified across several sectors. Hospital
bonds composed 22.46% of the portfolio followed by
continuing-care-retirement-community bonds, 15.83%, and nursing-home bonds,
15.60%. Since our last report six months ago, we have increased our holdings in
these three sectors. Hospitals, continuing-care retirement communities and
nursing homes are meeting the needs of an aging population and we expect demand
for their services to grow.
WHAT WAS THE CREDIT QUALITY OF THE PORTFOLIO?
As of September 30, 1999, the fund had an average portfolio quality rating
equivalent to BB. Non-rated securities, with an equivalent rating of BB based on
an internal analysis by fund management, 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.
Bonds rated BB or better as measured by Standard & Poor's (S&P), a widely
known credit-rating agency, constituted approximately 10% of the portfolio. S&P
ratings are historical and are based on analysis of the credit quality of the
individual municipal securities in the portfolio.
WHAT IS YOUR OUTLOOK?
Despite the recent market downturn, we remain optimistic about bonds,
particularly high-yield municipal issues. With after-tax yields significantly
greater than those of Treasuries, high-yield municipal bonds remain a compelling
investment option. Additionally, the economic climate is generally favorable for
bonds. While the economy continues to grow at a healthy pace, inflation remains
relatively mild.
Moreover, the Fed is committed to a policy of keeping inflation contained.
At the same time, if the Fed does decide on a further tightening of monetary
policy, it appears that it will be modest in scope. That's different from 1994,
when the Fed aggressively raised interest rates.
As the population ages and the baby-boom generation nears retirement, we
expect more money to be shifted into fixed-income investments. Additionally, as
more Americans become subject to the higher federal income-tax brackets as their
incomes rise, we believe municipal bonds could become a more attractive
investment option.
PORTFOLIO COMPOSITION
As of 9/30/99, based on total net assets
================================================================================
TOP FIVE BOND HOLDINGS
- -----------------------------------------------------------------------------
COUPON MATURITY %
- --------------------------------------------------------------------------------
1. Sacramento 6.25% 01/01/30 2.63
(City of)
Financing
Authority
2. Ohio (State of) 8.50% 08/01/22 2.57
3. Boulder 5.85% 01/01/22 2.52
(City of)
4. Orange 7.00% 11/01/30 2.52
(County of)
Industrial
Development
Agency
5. New Jersey 6.40% 09/15/23 2.06
(State of)
Economic
Development
Authority
================================================================================
CREDIT RATING OF HOLDINGS
As of 9/30/99, based on total investments
================================================================================
NOT RATED 90.14%
BB 4.46%
BBB 2.09%
A 2.4%
AA 0.89%
AAA 0.02%
================================================================================
================================================================================
REVENUE BONDS 99%
NUMBER OF HOLDINGS 117
AVERAGE MATURITY 24.41 Years
DURATION 11.09 Years
================================================================================
The fund's portfolio is subject to change, and there is no assurance the fund
will continue to hold any particular security.
-------------------------------------
WITH AFTER-TAX YIELDS SIGNIFICANTLY
GREATER THAN THOSE OF TREASURIES,
HIGH-YIELD BONDS REMAIN A COMPELLING
INVESTMENT OPTION.
-------------------------------------
See important fund and index disclosures inside front cover.
AIM HIGH INCOME MUNICIPAL FUND
<PAGE> 6
SCHEDULE OF INVESTMENTS
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
LONG-TERM MUNICIPAL OBLIGATIONS-95.07%
ALABAMA-1.15%
West Jefferson Amusement & Public Parks
Authority (Visionland Project); First
Mortgage RB
6.375%, 02/01/29 $1,000 $ 833,470
- -------------------------------------------------------------
CALIFORNIA-2.63%
Sacramento (City of) Financing
Authority (Convention Center Hotel);
Series A Senior RB
6.25%, 01/01/30 2,000 1,906,800
- -------------------------------------------------------------
COLORADO-3.14%
Colorado (District of) (St. Vincent
General Hospital); Series RB
6.00%, 12/01/19 885 828,502
- -------------------------------------------------------------
Colorado Health Facilities Authority
(Volunteers of America); Health and
Residential Care Facilities Series A
RB
6.00%, 07/01/29 850 764,558
- -------------------------------------------------------------
Colorado Health Facilities Authority
(Volunteers of America); Refunding
and Improvement Series A RB
5.875%, 07/01/28 750 680,707
- -------------------------------------------------------------
2,273,767
- -------------------------------------------------------------
CONNECTICUT-1.70%
Connecticut (State of) Development
Authority (Lutheran Home Southbury);
First Mortgage Refunding Health Care
Series A RB
6.00%, 12/01/15 750 704,250
- -------------------------------------------------------------
Connecticut (State of) Development
Authority (Watson Foods Co., Inc.
Project); IDR
5.90%, 06/01/28(a) 555 524,814
- -------------------------------------------------------------
1,229,064
- -------------------------------------------------------------
FLORIDA-4.76%
Orange (County of) Housing Finance
Authority (Brentwood Park
Apartments); Multifamily Housing
Series G RB
6.40%, 07/01/32 1,500 1,436,565
- -------------------------------------------------------------
Orange (County of) Housing Finance
Authority (Palm West Apartments);
Multifamily Housing Series B RB
6.50%, 03/01/34 1,000 942,580
- -------------------------------------------------------------
Sumter (County of) Industrial
Development Authority (Wecare Nursing
Center Project); Health Care
Facilities Series A RB
6.75%, 04/01/29 1,165 1,072,324
- -------------------------------------------------------------
3,451,469
- -------------------------------------------------------------
GEORGIA-4.36%
Forsyth (County of) Hospital Authority
(Georgia Baptist Health Care System
Project); Anticipation Certificates
6.375%, 10/01/28 1,000 914,800
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
GEORGIA-(CONTINUED)
Fulton (County of) Housing Authority
(Azalea Manor Project); Multifamily
Housing RB
6.50%, 02/01/28 $ 780 $ 752,567
- -------------------------------------------------------------
Fulton (County of) Housing Authority
(Washington Court Project);
Multifamily Housing RB
6.40%, 02/01/19 775 753,998
- -------------------------------------------------------------
6.50%, 02/01/28 225 217,087
- -------------------------------------------------------------
Rockdale (County of) Development
Authority (Visy Paper, Inc. Project);
Solid Waste Disposal RB
7.50%, 01/01/26(a) 500 515,385
- -------------------------------------------------------------
3,153,837
- -------------------------------------------------------------
HAWAII-0.61%
Hawaii (State of) Department of
Transportation (Continental Airlines,
Inc.); Special Facilities RB
5.625%, 11/15/27(a) 500 442,050
- -------------------------------------------------------------
ILLINOIS-5.54%
Clay (County of); Hospital RB
5.70%, 12/01/18 500 458,000
- -------------------------------------------------------------
Crestwood (City of); Tax Increment
Revenue Refunding Non-Qualified Bonds
7.25%, 12/01/08 100 104,468
- -------------------------------------------------------------
Godfrey (City of) (United Methodist
Village); Series A RB
5.875%, 11/15/29 1,000 885,500
- -------------------------------------------------------------
Hoopeston (City of) Hospital Capital
Improvement (Hoopeston Community
Memorial Hospital); Refunding RB
6.55%, 11/15/29 700 670,299
- -------------------------------------------------------------
Illinois Health Facilities Authority
(Bohemian-Tabor Hills); Refunding
Series A RB
5.90%, 11/15/24 775 711,473
- -------------------------------------------------------------
Illinois Health Facilities Authority
(Lifelink Corp. Obligation Group);
Refunding RB
5.85%, 02/15/20 350 322,441
- -------------------------------------------------------------
5.70%, 02/15/24 850 760,657
- -------------------------------------------------------------
Saint Charles (City of) (Tri-city
Center Associates Limited Project);
IDR
7.50%, 11/01/13 100 102,014
- -------------------------------------------------------------
4,014,852
- -------------------------------------------------------------
INDIANA-1.37%
Goshen (Greencroft Obligation Group);
RB
5.75%, 08/15/28 350 313,044
- -------------------------------------------------------------
Indiana Health Facilities Financing
Authority (Franciscan Eldercare
Community Services); RB
5.875%, 05/15/29 750 677,790
- -------------------------------------------------------------
990,834
- -------------------------------------------------------------
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
IOWA-1.95%
Harlan (City of) (American Baptist
Homes Project); RB
5.75%, 05/15/28 $ 750 $ 670,598
- -------------------------------------------------------------
Iowa Finance Authority Community
Rehabilitation Providers (Lutheran
Children's Home Society-Bremwood
Project); RB
5.80%, 12/01/24 700 640,339
- -------------------------------------------------------------
Iowa Finance Authority (Park West
Housing Project); Multifamily
Refunding RB
8.00%, 10/01/23 100 101,667
- -------------------------------------------------------------
1,412,604
- -------------------------------------------------------------
KANSAS-1.71%
Atchison (City of) (Atchison Hospital
Association); Hospital RB
5.70%, 11/15/18 525 487,473
- -------------------------------------------------------------
Hutchinson (City of) Health Care
Facilities (Wesley Towers Inc.);
Refunding & Improvement Series A RB
6.25%, 11/15/19 750 707,955
- -------------------------------------------------------------
Lawrence (City of) (Holiday Inn
Project); Commercial Development
Senior Refunding Series A RB
8.00%, 07/01/16 40 42,538
- -------------------------------------------------------------
1,237,966
- -------------------------------------------------------------
KENTUCKY-0.91%
Jefferson (County of) Health Facilities
(Beverly Enterprises Inc. Project);
Refunding RB
5.875%, 08/01/07 675 657,808
- -------------------------------------------------------------
MASSACHUSETTS-1.65%
Boston (City of) Industrial Development
Financing Authority (Springhouse Inc.
Project); First Mortgage Refunding RB
6.00%, 07/01/28 500 463,320
- -------------------------------------------------------------
Massachusetts (State of) Health &
Educational Facilities Authority
(Christopher House); Refunding Series
A RB
6.875%, 01/01/29 750 731,010
- -------------------------------------------------------------
1,194,330
- -------------------------------------------------------------
MICHIGAN-4.23%
Garden City Hospital Finance Authority
(Garden City Hospital OB Group);
Hospital Refunding Series A RB
5.75%, 09/01/17 1,500 1,361,220
- -------------------------------------------------------------
Gogebic (County of) Hospital Finance
Authority (Grand View Health System
Inc.); Refunding RB
5.875%, 10/01/16 920 855,103
- -------------------------------------------------------------
Mecosta (County of) General Hospital;
Refunding Unlimited GO
6.00%, 05/15/18 500 475,245
- -------------------------------------------------------------
Michigan (State of) Strategic Fund
Limited Obligation (Holland Home
Project); RB
5.75%, 11/15/28 415 372,529
- -------------------------------------------------------------
3,064,097
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
MINNESOTA-8.88%
Bloomington (City of) Housing and
Redevelopment Authority (Summerhouse
Bloomington Project); Senior Housing
RB
6.00%, 11/01/16 $ 790 $ 742,426
- -------------------------------------------------------------
Columbia Heights (City of) Multifamily
and Health Care Facility (Crest View
Corp. Project); RB
6.00%, 03/01/33 500 466,685
- -------------------------------------------------------------
Duluth (City of) Economic Development
Authority (BSM Properties Inc.
Project); Health Care Facilities
Series A RB
5.875%, 12/01/28 500 455,380
- -------------------------------------------------------------
Minneapolis (City of) Health Care
Facility (Ebenezer Society Project);
Series A RB
7.00%, 07/01/12 100 100,877
- -------------------------------------------------------------
Minneapolis (City of) Health Care
Facility (Shelter Care Foundation);
Series A RB
6.00%, 04/01/10 1,120 1,074,562
- -------------------------------------------------------------
Minneapolis (City of) (Walker Methodist
Senior Services); Series A RB
6.00%, 11/15/28 1,000 926,720
- -------------------------------------------------------------
Moorhead (City of) Economic Development
Authority (Eventide Housing
Development Project); Multifamily
Refunding RB
Series A, 6.00%, 06/01/18 500 482,025
- -------------------------------------------------------------
Senior Series B, 6.00%, 06/01/29 500 462,940
- -------------------------------------------------------------
New Hope Housing & Health Care
Facilities (Minnesota Masonic Home
North Ridge); Health Care Facilities
RB
5.875%, 03/01/29 1,040 946,223
- -------------------------------------------------------------
Northfield (City of) Health Care
Facilities (Retirement Center);
Refunding and Improvement Series A RB
5.75%, 05/01/16 335 310,183
- -------------------------------------------------------------
6.00%, 05/01/28 500 462,215
- -------------------------------------------------------------
6,430,236
- -------------------------------------------------------------
MISSISSIPPI-0.36%
Ridgeland Urban Renewal (The Orchard
Limited Project); Refunding Series A
RB
7.75%, 12/01/15 250 262,760
- -------------------------------------------------------------
MISSOURI-3.15%
Good Shepherd Nursing Home District;
Nursing Home Facilities Refunding RB
5.90%, 08/15/23 500 461,270
- -------------------------------------------------------------
Madison (County of); Hospital Refunding
RB
5.875%, 10/01/26 500 456,925
- -------------------------------------------------------------
Springfield (City of) Industrial
Development Authority (Bethesda
Living Centers); Refunding Series A
RB
5.625%, 08/15/18 200 182,426
- -------------------------------------------------------------
5.70%, 08/15/28 800 713,200
- -------------------------------------------------------------
Valley Park Industrial Development
Authority (Cape Albeon Project);
Senior Housing RB
6.15%, 12/01/33 500 464,475
- -------------------------------------------------------------
2,278,296
- -------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
NEVADA-3.17%
Boulder (City of) (Boulder City
Hospital Inc. Project); Refunding
Hospital Series RB
5.85%, 01/01/22 $2,000 $ 1,823,260
- -------------------------------------------------------------
Clark (County of) (Nevada Power Co.
Project); Refunding Series B IDR
5.90%, 10/01/30(a) 500 472,765
- -------------------------------------------------------------
2,296,025
- -------------------------------------------------------------
NEW HAMPSHIRE-0.52%
New Hampshire Higher Educational and
Health Facilities Authority (Daniel
Webster College); RB
7.625%, 07/01/04(b)(c) 100 113,716
- -------------------------------------------------------------
New Hampshire Higher Educational and
Health Facilities Authority (Franklin
Pierce College); RB
6.00%, 10/01/18 30 27,853
- -------------------------------------------------------------
New Hampshire Higher Educational and
Health Facilities Authority
(Monadnock Community Hospital);
Hospital RB
5.70%, 10/01/20 250 231,843
- -------------------------------------------------------------
373,412
- -------------------------------------------------------------
NEW JERSEY-4.45%
New Jersey Economic Development
Authority (Continental Airlines, Inc.
Project); Special Facilities Series
RB
6.40%, 09/15/23(a) 1,500 1,489,035
- -------------------------------------------------------------
6.25%, 09/15/29(a) 500 484,860
- -------------------------------------------------------------
New Jersey Health Care Facilities
Financing Authority (Raritan Bay
Medical Center); RB
7.25%, 07/01/14 750 749,880
- -------------------------------------------------------------
7.25%, 07/01/27 500 496,960
- -------------------------------------------------------------
3,220,735
- -------------------------------------------------------------
NEW MEXICO-0.61%
Sante Fe (County of) (El Castillo
Retirement Project); Series A RB
5.625%, 05/15/25 500 442,605
- -------------------------------------------------------------
NEW YORK-4.06%
New York Industrial Development Agency
(Field Hotel Associates LP);
Refunding IDR
5.80%, 11/01/13 475 455,055
- -------------------------------------------------------------
6.00%, 11/01/28 500 472,840
- -------------------------------------------------------------
New York Industrial Development Agency
(Marymount Manhattan College
Project); Civic Facility RB
7.00%, 07/01/23 150 156,043
- -------------------------------------------------------------
Onondaga (County of) Industrial
Development Agency (Solvay Paperboard
LLC Project); Solid Waste Disposal
Facility Refunding Series RB
7.00%, 11/01/30(a) 1,500 1,523,550
- -------------------------------------------------------------
Suffolk (County of) Industrial
Development Agency (Spellman High
Voltage Facility); Series A IDR
6.375%, 12/01/17(a) 350 331,471
- -------------------------------------------------------------
2,938,959
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
NORTH CAROLINA-0.30%
Charlotte (City of) (Charlotte/Douglas
International Airport); Refunding
Special Facilities RB
5.60%, 07/01/27(a) $ 255 $ 215,475
- -------------------------------------------------------------
NORTH DAKOTA-0.67%
Grand Forks Senior Housing (4000 Valley
Square Project); Special Term Series
RB
6.375%, 12/01/34 500 486,630
- -------------------------------------------------------------
OHIO-6.35%
Belmont (County of) Health Systems
(East Ohio Regional Hospital);
Refunding and Improvement RB
5.80%, 01/01/18 800 727,848
- -------------------------------------------------------------
Fairfield (City of) Economic
Development (Beverly Enterprises
Project); Refunding Series RB
8.50%, 01/01/03 150 156,345
- -------------------------------------------------------------
Madison (County of) (Madison County
Hospital Project); Hospital
Improvement Refunding Series RB
6.25%, 08/01/18 1,000 933,920
- -------------------------------------------------------------
6.40%, 08/01/28 1,000 922,480
- -------------------------------------------------------------
Ohio (State of) (CSC Limited Project);
Solid Waste RB
8.50%, 08/01/22(a) 1,860 1,860,856
- -------------------------------------------------------------
4,601,449
- -------------------------------------------------------------
PENNSYLVANIA-12.33%
Allegheny (County of) Hospital
Development Authority (Villa St.
Joseph of Baden); Health Care
Facilities RB
6.00%, 08/15/28 1,000 906,310
- -------------------------------------------------------------
Berks (County of) Municipal Authority
(Phoebe-Devitt Homes Project);
Refunding Series A1 RB
5.50%, 05/15/11 250 234,433
- -------------------------------------------------------------
Chartiers Valley Industrial &
Commercial Development Authority
(Asbury Health Center); First
Mortgage Refunding Series RB
6.375%, 12/01/19 1,000 963,150
- -------------------------------------------------------------
Columbia (County of) Hospital Authority
(Bloomsburg Hospital Project); Health
Care RB
5.85%, 06/01/24 1,000 922,860
- -------------------------------------------------------------
5.90%, 06/01/29 350 321,219
- -------------------------------------------------------------
Crawford (County of) Hospital Authority
(Wesbury United Methodist Community);
Senior Living Facilities RB
6.25%, 08/15/29 750 729,195
- -------------------------------------------------------------
Cumberland (County of) Industrial
Development Authority (Woods Cedar
Run); First Mortgage Refunding Series
A RB
6.50%, 11/01/18 1,000 930,830
- -------------------------------------------------------------
Lancaster (County of) Hospital
Authority (Saint Anne's Home Health
Center); RB
6.625%, 04/01/28 1,000 950,430
- -------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
PENNSYLVANIA-(CONTINUED)
Montgomery (County of) Higher Education
& Health Authority (Temple Continuing
Care Center); RB
6.625%, 07/01/19 $1,250 $ 1,182,213
- -------------------------------------------------------------
6.75%, 07/01/29 460 433,614
- -------------------------------------------------------------
Philadelphia (City of) Authority for
Industrial Development (Paul's Run
Retirement Community); Health Care
Facilities Series A RB
5.875%, 05/15/28 500 445,405
- -------------------------------------------------------------
Philadelphia (City of) Hospital &
Higher Education Facilities Authority
(Chestnut Hill College); RB
6.00%, 10/01/29 500 463,165
- -------------------------------------------------------------
Somerset (County of) Hospital Authority
(Allegheny Christian Ministries);
Senior Mortgage RB
5.70%, 11/15/22 500 448,050
- -------------------------------------------------------------
8,930,874
- -------------------------------------------------------------
TENNESSEE-0.45%
Nashville and Davidson (County of)
Health and Educational Facilities
Board of Metro Government (Blakeford
at Green Hills); Refunding RB
5.65%, 07/01/16 355 324,097
- -------------------------------------------------------------
TEXAS-6.46%
Abilene (City of) Health Facilities
Development (Sears Methodist
Retirement); Corporate Retirement
Facilities Series A RB
5.875%, 11/15/18 1,000 928,960
- -------------------------------------------------------------
Abilene (City of) Health Facilities
Development (Sears Methodist
Retirement); Corporate Retirement
Facilities RB
5.875%, 11/15/18 450 417,568
- -------------------------------------------------------------
6.00%, 11/15/29 550 507,694
- -------------------------------------------------------------
Atlanta (City of) Hospital Authority
(Hospital Facility); RB
6.70%, 08/01/19 500 483,980
- -------------------------------------------------------------
Austin (City of) (Bergstrom Landhost
Enterprises Inc., Airport Hotel);
Series A Senior RB
6.75%, 04/01/27 1,000 956,890
- -------------------------------------------------------------
Bexar (County of) Housing Finance Corp.
(Villa Madrid/Cumberland Apartments);
Multifamily Housing Series A RB
7.25%, 05/01/16 200 203,378
- -------------------------------------------------------------
Guadalupe-Blanco River Texas Sewer &
Solid Waste Disposal Facilities
Authority (E.I. du Pont de Nemours &
Company Project); RB
5.50%, 05/01/29(a) 250 232,130
- -------------------------------------------------------------
Meadow Parc Development Inc. (Meadow
Parc Apartments Project); Multifamily
Housing RB
6.50%, 12/01/30 1,000 947,680
- -------------------------------------------------------------
4,678,280
- -------------------------------------------------------------
VERMONT-1.28%
Vermont Education & Health Buildings
Financing Agency (Copley Manor
Project); Health Care Facilities
Series RB
6.25%, 04/01/29 1,000 929,170
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
VIRGINIA-0.66%
Hampton (City of) Redevelopment and
Housing Authority (Olde Hampton Hotel
Association); First Mortgage
Refunding Series A RB
6.50%, 07/01/16 $ 500 $ 481,400
- -------------------------------------------------------------
WEST VIRGINIA-0.63%
Braxton (County of) (Weyerhaeuser Co.
Project); Solid Waste Disposal
Refunding RB
5.40%, 05/01/25(a) 500 456,565
- -------------------------------------------------------------
WISCONSIN-5.03%
Wisconsin (State of) Health and
Educational Facilities Authority
(Attic Angel Community Inc.); RB
5.75%, 11/15/27 1,000 883,770
- -------------------------------------------------------------
Wisconsin (State of) Health and
Educational Facilities Authority
(Beaver Dam Community Hospitals
Inc.); RB
5.80%, 08/15/28 1,000 900,840
- -------------------------------------------------------------
Wisconsin (State of) Health and
Educational Facilities Authority
(Clement Manor, Inc.); Refunding RB
5.75%, 08/15/24 250 222,790
- -------------------------------------------------------------
Wisconsin (State of) Health and
Educational Facilities Authority (FH
Healthcare Development, Inc.); RB
6.25%, 11/15/20 750 718,612
- -------------------------------------------------------------
Wisconsin (State of) Health and
Educational Facilities Authority (St.
Camillus Health Center); RB
5.75%, 07/01/28 500 447,265
- -------------------------------------------------------------
Wisconsin (State of) Health and
Educational Facilities Authority
(United Lutheran Home); RB
5.70%, 03/01/28 525 468,982
- -------------------------------------------------------------
3,642,259
- -------------------------------------------------------------
Long-Term Municipal Obligations
(Cost $73,054,193) 68,852,175
- -------------------------------------------------------------
SHORT-TERM MUNICIPAL OBLIGATIONS-2.29%(D)
CONNECTICUT-1.08%
Connecticut (State of) (Infrastructure
Purpose S-1); Special Tax Obligation
Variable Rate Demand RB
3.75%, 12/01/10 776 776,000
- -------------------------------------------------------------
Connecticut (State of) Health and
Educational Facilities Authority
(Yale University); Variable Rate
Demand Series T-2 RB
3.70%, 07/01/29 6 6,000
- -------------------------------------------------------------
782,000
- -------------------------------------------------------------
DELAWARE-0.55%
University of Delaware; Variable Rate
Demand RB
3.75%, 11/01/23 398 398,000
- -------------------------------------------------------------
FLORIDA-0.02%
Lee (County of) Housing Finance
Authority (Forestwood Apartments
Project); Multifamily Housing
Variable Rate Demand Series A RB
3.20%, 06/15/25(e) 14 14,000
- -------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
ILLINOIS-0.36%
Illinois Development Finance Authority
(American College of Surgeons);
Variable Rate Demand Tax Exempt
Series RB (LOC-Northern Trust
Company) 3.85%, 08/01/26 $ 111 $ 111,000
- -------------------------------------------------------------
Illinois Health Facilities Authority;
Revolving Fund Pooled Variable Rate
Demand Series D RB
(LOC-First National Bank)
3.80%, 08/01/15 147 147,000
- -------------------------------------------------------------
258,000
- -------------------------------------------------------------
PENNSYLVANIA-0.06%
York (City of) General Authority;
Pooled Financing Variable Rate Demand
RB
(LOC-First Union National Bank)
3.85%, 09/01/26 41 41,000
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
TEXAS-0.22%
Bexar (County of) Housing Finance
Authority (Fountainhead Apartments);
Multifamily Refunding Variable Rate
Demand Series RB
3.75%, 09/15/26(e) $ 162 $ 162,000
- -------------------------------------------------------------
Short-Term Municipal Obligations
(Cost $1,655,000) 1,655,000
- -------------------------------------------------------------
TOTAL INVESTMENTS-97.36% (Cost
$74,709,193) 70,507,175
- -------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.64% 1,911,038
- -------------------------------------------------------------
NET ASSETS-100.00% $72,418,213
=============================================================
</TABLE>
Investment Abbreviations:
IDR - Industrial Development Revenue Bond
GO - General Obligation Bond
LOC - Letter of Credit
RB - Revenue Bond
Notes to Schedule of Investments:
(a) Security subject to the alternative minimum tax.
(b) Secured by an escrow fund of U.S. Treasury obligations.
(c) Security has an irrevocable call or mandatory put by the issuer. Maturity
date reflects such call or put.
(d) Demand securities; 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 09/30/99.
(e) Secured by bond insurance.
See Notes to Financial Statements.
8
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$74,709,193) $ 70,507,175
- ---------------------------------------------------------
Receivables for:
Investments sold 185,940
- ---------------------------------------------------------
Capital stock sold 678,562
- ---------------------------------------------------------
Interest 1,310,871
- ---------------------------------------------------------
Investment for deferred compensation
plan 6,428
- ---------------------------------------------------------
Other assets 82,762
- ---------------------------------------------------------
Total assets 72,771,738
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 145,157
- ---------------------------------------------------------
Dividends 140,948
- ---------------------------------------------------------
Deferred compensation plan 6,428
- ---------------------------------------------------------
Accrued administrative services fees 4,372
- ---------------------------------------------------------
Accrued directors' fees 2,775
- ---------------------------------------------------------
Accrued distribution fees 52,746
- ---------------------------------------------------------
Accrued operating expenses 1,099
- ---------------------------------------------------------
Total liabilities 353,525
- ---------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $ 72,418,213
=========================================================
NET ASSETS:
Class A $ 49,849,391
- ---------------------------------------------------------
Class B $ 18,015,619
- ---------------------------------------------------------
Class C $ 4,553,203
- ---------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Class A:
Authorized 1,000,000,000
- ---------------------------------------------------------
Outstanding 5,297,766
- ---------------------------------------------------------
Class B:
Authorized 1,000,000,000
- ---------------------------------------------------------
Outstanding 1,915,907
- ---------------------------------------------------------
Class C:
Authorized 1,000,000,000
- ---------------------------------------------------------
Outstanding 484,190
- ---------------------------------------------------------
Class A:
Net asset value and redemption price per
share $ 9.41
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $9.41 divided by
95.25%) $ 9.88
- ---------------------------------------------------------
Class B:
Net asset value and offering price per
share $ 9.40
- ---------------------------------------------------------
Class C:
Net asset value and offering price per
share $ 9.40
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $ 2,167,859
- --------------------------------------------------------
EXPENSES:
Advisory fees 211,891
- --------------------------------------------------------
Administrative services fees 31,865
- --------------------------------------------------------
Distribution fees -- Class A 63,165
- --------------------------------------------------------
Distribution fees -- Class B 80,535
- --------------------------------------------------------
Distribution fees -- Class C 19,957
- --------------------------------------------------------
Transfer agent fees 15,188
- --------------------------------------------------------
Registration and filing fees 48,971
- --------------------------------------------------------
Other 38,389
- --------------------------------------------------------
Total expenses 509,961
- --------------------------------------------------------
Less: Fee waivers and expense
reimbursements (270,395)
- --------------------------------------------------------
Expenses paid indirectly (355)
- --------------------------------------------------------
Net expenses 239,211
- --------------------------------------------------------
Net investment income 1,928,648
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Net realized gain (loss) on sales of
investment securities (430,246)
- --------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (4,252,081)
- --------------------------------------------------------
Net gain (loss) on investment
securities (4,682,327)
- --------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(2,753,679)
========================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND THE YEAR ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1999 1999
------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,928,648 $ 2,386,340
- -----------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities (430,246) 634
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (4,252,081) 27,086
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (2,753,679) 2,414,060
- -----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (1,418,412) (1,942,603)
- -----------------------------------------------------------------------------------------
Class B (389,452) (343,532)
- -----------------------------------------------------------------------------------------
Class C (96,530) (78,427)
- -----------------------------------------------------------------------------------------
Net increase from capital stock transactions:
Class A 3,568,234 31,696,998
- -----------------------------------------------------------------------------------------
Class B 5,255,893 11,184,663
- -----------------------------------------------------------------------------------------
Class C 1,815,496 2,281,041
- -----------------------------------------------------------------------------------------
Net increase in net assets 5,981,550 45,212,200
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 66,436,663 21,224,463
- -----------------------------------------------------------------------------------------
End of period $72,418,213 $66,436,663
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $76,994,868 $66,355,245
- -----------------------------------------------------------------------------------------
Undistributed net investment income 67,004 42,750
- -----------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of investment
securities (441,641) (11,395)
- -----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (4,202,018) 50,063
- -----------------------------------------------------------------------------------------
$72,418,213 $66,436,663
=========================================================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(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 that 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 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 94.60% 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. The Fund has a
capital loss carryforward of $11,395 (which may be carried forward to offset
future taxable capital gains, if any) which expires, if not previously
utilized, through the year 2007.
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 contractually agreed
to limit the Fund's
11
<PAGE> 14
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expense) to the maximum annual rate of 0.60%, 1.35% and 1.35% of the average
daily net assets of the Fund's Class A, Class B and Class C, shares,
respectively. During the six months ended September 30, 1999, AIM waived
advisory fees and reimbursed expenses of $270,395.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended September 30, 1999,
AIM was paid $31,865 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,
1999, AFS was paid $9,195 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, 1999, the Class A shares,
Class B shares and Class C shares paid AIM Distributors $63,165, $80,535 and
$19,957, 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 $46,902 from the sales of Class A
shares of the Fund during the six months ended September 30, 1999. 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, 1999, AIM Distributors received $50,358 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, 1999, the Fund paid legal fees of
$2,006 for services rendered by Kramer, Levin, Naftalis & Frankel LLP 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 directors who are 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-INDIRECT EXPENSES
During the six months ended September 30, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) of $355 under an expense
offset arrangement. The effect of the above arrangement resulted in a reduction
of the Fund's total expenses of $355 during the six months ended September 30,
1999.
12
<PAGE> 15
NOTE 5-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. During the six
months ended September 30, 1999, 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 0.09% 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. Prior to May 28, 1999, the commitment fee rate was
0.05%.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the six months ended September 30, 1999 was
$23,608,344 and $13,970,245, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of September 30, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 31,720
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (4,233,738)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities $(4,202,018)
- ---------------------------------------------------------
Investments have the same cost for tax and financial
statement purposes.
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the six months ended September 30,
1999 and the year ended March 31, 1999 were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1999 1999
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 1,512,953 $ 14,953,936 4,375,932 $ 44,035,445
- ------------------------------------------------------------------------------------------------------------------------
Class B 727,558 7,135,389 1,198,092 12,077,378
- ------------------------------------------------------------------------------------------------------------------------
Class C 224,115 2,208,786 299,455 3,014,253
- ------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 84,241 822,077 111,621 1,125,789
- ------------------------------------------------------------------------------------------------------------------------
Class B 22,320 217,460 18,956 191,064
- ------------------------------------------------------------------------------------------------------------------------
Class C 6,111 59,404 4,580 46,173
- ------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (1,234,607) (12,207,779) (1,332,330) (13,464,236)
- ------------------------------------------------------------------------------------------------------------------------
Class B (213,806) (2,096,956) (107,492) (1,083,779)
- ------------------------------------------------------------------------------------------------------------------------
Class C (46,588) (452,694) (77,415) (779,385)
- ------------------------------------------------------------------------------------------------------------------------
1,082,297 $ 10,639,623 4,491,399 $ 45,162,702
========================================================================================================================
</TABLE>
13
<PAGE> 16
NOTE 8- 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,
1999, the year ended March 31, 1999 and the period January 2, 1998 (date
operations commenced) through March 31, 1998.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------
SEPTEMBER 30, MARCH 31, MARCH 31,
1999 1999 1998
------------- --------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.04 $ 9.99 $ 10.00
- ------------------------------------------------------------ ------- ------- -------
Income from investment operations:
Net investment income 0.28 0.54 0.11
- ------------------------------------------------------------ ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) (0.63) 0.05 (0.01)
- ------------------------------------------------------------ ------- ------- -------
Total from investment operations (0.35) 0.59 0.10
- ------------------------------------------------------------ ------- ------- -------
Less distributions:
Dividends from net investment income (0.28) (0.54) (0.11)
- ------------------------------------------------------------ ------- ------- -------
Net asset value, end of period $ 9.41 $ 10.04 $ 9.99
============================================================ ======= ======= =======
Total return(a) (3.59)% 6.01% 1.04%
============================================================ ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $49,849 $49,570 $17,787
============================================================ ======= ======= =======
Ratio of expenses to average net assets(b) 0.47%(c) 0.29% 0.25%(d)
============================================================ ======= ======= =======
Ratio of net investment income to average net assets(e) 5.69%(c) 5.41% 4.80%(d)
============================================================ ======= ======= =======
Portfolio turnover rate 21% 30% 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
1.24% (annualized), 1.29% and 1.65% (annualized) for the periods 1999-1998.
(c) Ratios are annualized and based on average net assets of $50,393,555.
(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 4.92% (annualized), 4.41% and 3.40% (annualized) for the
periods 1999-1998.
14
<PAGE> 17
NOTE 8- FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------- ---------------------------------------
SEPTEMBER 30, MARCH 31, MARCH 31, SEPTEMBER 30, MARCH 31, MARCH 31,
1999 1999 1998 1999 1999 1998
------------- --------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.04 $ 9.99 $ 10.00 $10.04 $ 9.99 $10.00
- --------------------------------------------- ------- ------- ------- ------ ------ ------
Income from investment operations:
Net investment income 0.24 0.47 0.09 0.24 0.47 0.09
- --------------------------------------------- ------- ------- ------- ------ ------ ------
Net gains (losses) on securities (both
realized and unrealized) (0.64) 0.04 (0.01) (0.64) 0.04 (0.01)
- --------------------------------------------- ------- ------- ------- ------ ------ ------
Total from investment operations (0.40) 0.51 0.08 (0.40) 0.51 0.08
- --------------------------------------------- ------- ------- ------- ------ ------ ------
Less distributions:
Dividends from net investment income (0.24) (0.46) (0.09) (0.24) (0.46) (0.09)
============================================= ======= ======= ======= ====== ====== ======
Net asset value, end of period $ 9.40 $ 10.04 $ 9.99 $ 9.40 $10.04 $ 9.99
============================================= ======= ======= ======= ====== ====== ======
Total return(a) (4.06)% 5.23% 0.81% (4.06)% 5.23% 0.79%
============================================= ======= ======= ======= ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $18,016 $13,850 $ 2,699 $4,553 $3,017 738
============================================= ======= ======= ======= ====== ====== ======
Ratio of expenses to average net assets(b) 1.22%(c) 1.04% 1.00%(d) 1.22%(c) 1.04% 1.00%(d)
============================================= ======= ======= ======= ====== ====== ======
Ratio of net investment income to average net
assets(e) 4.94%(c) 4.66% 4.05%(d) 4.94%(c) 4.66% 4.05%(d)
============================================= ======= ======= ======= ====== ====== ======
Portfolio turnover rate 21% 30% 21% 21% 30% 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
1.99% (annualized), 2.04% and 2.44% (annualized) for Class B and Class C for
the periods 1999-1998.
(c) Ratios are annualized and based on average net assets of $16,063,089 and
$3,980,558 for Classes 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 4.17% (annualized), 3.66% and 2.61% (annualized) for
Class B and Class C for the periods 1999-1998.
15
<PAGE> 18
<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; Carol F. Relihan A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Secretary 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II TRANSFER AGENT
Director Dana R. Sutton
Cortland Trust Inc. Vice President and Treasurer A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn, Jr. Stuart W. Coco Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Melville B. Cox
President, Mercantile Bankshares Vice President The Bank of New York
90 Washington Street
Jack Fields Karen Dunn Kelley 11th Floor
Chief Executive Officer Vice President New York, NY 10286
Texana Global, Inc.;
Formerly Member Mary J. Benson COUNSEL TO THE FUND
of the U.S. House of Representatives Assistant Vice President
and Assistant Treasurer Ballard Spahr
Carl Frischling Andrews & Ingersoll, LLP
Partner Sheri Morris 1735 Market Street
Kramer, Levin, Naftalis & Frankel LLP Assistant Vice President Philadelphia, PA 19103
and Assistant Treasurer
Robert H. Graham COUNSEL TO THE DIRECTORS
President and Chief Executive Officer Renee A. Friedli
A I M Management Group Inc. Assistant Secretary Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue
Prema Mathai-Davis P. Michelle Grace New York, NY 10022
Chief Executive Officer, YWCA of the U.S.A.; Assistant Secretary
Commissioner, New York City Dept. for the DISTRIBUTOR
Aging; and member of the Board of Directors, Jeffrey H. Kupor
Metropolitan Transportation Authority of Assistant Secretary A I M Distributors, Inc.
New York State 11 Greenway Plaza
Nancy L. Martin Suite 100
Lewis F. Pennock Assistant Secretary Houston, TX 77046
Attorney
Ofelia M. Mayo
Louis S. Sklar Assistant Secretary
Executive Vice President
Hines Interests Lisa A. Moss
Limited Partnership Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
16
<PAGE> 19
AIM FUNDS(SM) KEEPS YOU
POSTED ON YOUR INVESTMENT
We inform our shareholders about their investments with regular mailings
throughout the year. Here is a description of the documents you will receive
concerning your account and fund.
o DAILY CONFIRMATION STATEMENTS. A record of the transactions you initiate.
For example, if you transfer part or all of your investment from one AIM
fund to another, you will receive a statement confirming that the
transaction took place.
o QUARTERLY STATEMENTS. These show you how your account has performed over the
fiscal quarter and provide information on any applicable dividend payments.
Statement inserts that sometimes accompany these mailings may give specific
information about your fund or may contain educational information of
general interest.
o PROXY. As a shareholder of an AIM fund, you have the right to vote on any
change to a fund's published bylaws or objectives. If the fund's board of
directors proposes such a change, AIM will send a proxy to the shareholders.
The proxy allows you to direct an authorized person to cast your vote
according to your instructions. You can vote your proxy by mail, phone or
e-mail.
o PROSPECTUS. AIM sends you an updated version of your fund's prospectus every
year. Your prospectus contains valuable information about your fund's
objectives, risks, management and fees. Because this information is
important, you should keep your prospectus with your other fund records.
o ANNUAL AND SEMIANNUAL REPORTS. AIM fund reports are sent to you twice a
year, the semiannual covering the first six months of the fiscal year for a
fund and the annual covering the entire fiscal year. These reports give you
an idea of how your fund performed compared to the market in general. The
reports also give you information about the holdings in your fund's
portfolio and how market conditions and management decisions have affected
your fund.
o YEAR-END TAX INFORMATION. This includes your year-end account statement,
cost-basis statement and any tax forms pertinent to your AIM account. The
tax forms report distributions you have received from your AIM funds,
redemptions or exchanges you have made and any contributions you have made
to tax-advantaged retirement accounts. It is important to retain the latter,
IRS Form 5498, if you need to track deductible vs. nondeductible IRA
contributions. The cost-basis statements are also important to retain
because they can be very useful for calculating capital gains or losses if
you use the "average basis single category" method of calculating cost
basis. Year-end tax information will be accompanied by tax communications
from AIM to help you fill out your tax forms. Your tax advisor can assist
you in sorting through your year-end statements and other tax
communications.
-------------------------------------
WE INFORM
OUR SHAREHOLDERS ABOUT
THEIR INVESTMENTS
WITH REGULAR MAILINGS
THROUGHOUT THE YEAR.
-------------------------------------
<PAGE> 20
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund(1) AIM Money Market Fund leadership in the mutual fund industry
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund since 1976 and managed approximately $120
AIM Capital Development Fund billion in assets for more than 6.4
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS million shareholders, including
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund individual investors, corporate clients
AIM Large Cap Growth Fund AIM Asian Growth Fund and financial institutions, as of
AIM Mid Cap Equity Fund AIM Developing Markets Fund September 30, 1999.
AIM Mid Cap Growth Fund AIM Euroland Growth Fund(2) The AIM Family of Funds--Registered
AIM Mid Cap Opportunities Fund AIM European Development Fund Trademark-- is distributed nationwide, and
AIM Select Growth Fund AIM International Equity Fund AIM today is the 10th-largest mutual fund
AIM Small Cap Growth Fund(6) AIM Japan Growth Fund complex in the United States in assets
AIM Small Cap Opportunities Fund(5) AIM Latin American Growth Fund under management, according to Strategic
AIM Value Fund AIM New Pacific Growth Fund Insight, an independent mutual fund
AIM Weingarten Fund monitor.
GLOBAL GROWTH FUNDS
GROWTH & INCOME FUNDS AIM Global Aggressive Growth Fund
AIM Advisor Flex Fund AIM Global Growth Fund
AIM Advisor Large Cap Value Fund
AIM Advisor Real Estate Fund GLOBAL GROWTH & INCOME FUNDS
AIM Balanced Fund AIM Global Growth & Income Fund
AIM Basic Value Fund AIM Global Utilities Fund
AIM Charter Fund
GLOBAL INCOME FUNDS
INCOME FUNDS AIM Emerging Markets Debt Fund
AIM Floating Rate Fund AIM Global Government Income Fund
AIM High Yield Fund AIM Global Income Fund
AIM High Yield Fund II AIM Strategic Income Fund
AIM Income Fund
AIM Intermediate Government Fund THEME FUNDS
AIM Limited Maturity Treasury Fund AIM Global Consumer Products and Services Fund
AIM Global Financial Services Fund
TAX-FREE INCOME FUNDS AIM Global Health Care Fund
AIM High Income Municipal Fund AIM Global Infrastructure Fund
AIM Municipal Bond Fund AIM Global Resources Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Telecommunications and Technology Fund(3)
AIM Tax-Free Intermediate Fund AIM Global Trends Fund(4)
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (2)
On September 1, 1999, AIM Europe Growth Fund was renamed AIM Euroland Growth
Fund. (3) On June 1, 1999, AIM Global Telecommunications Fund was renamed AIM
Global Telecommunications and Technology Fund. (4) Effective August 27, 1999,
AIM Global Trends Fund was restructured to operate as a traditional mutual fund.
Prior to August 27, 1999, the fund operated as a fund of funds. (5) AIM Small
Cap Opportunities Fund closed to new investors on November 4, 1999. (6) AIM
Small Cap Growth Fund closed to new investors on November 8, 1999. 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. If used as sales material after January 20, 2000, this report must
be accompanied by a current Quarterly Review of Performance for AIM Funds.
[AIM LOGO APPEARS HERE]
INVEST WITH DISCIPLINE
--Registered Trademark--
HIM-SAR-1
