<PAGE> 1
ANNUAL REPORT / MARCH 31 2000
AIM HIGH INCOME MUNICIPAL FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
--Registered Trademark--
<PAGE> 2
[ COVER IMAGE ]
-------------------------------------
OASIS IN THE URBAN JUNGLE BY JANE WOOSTER SCOTT
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 SUP-
PORTED WITH REVENUE GENERATED BY WELL-MANAGED PROJECTS THAT MAKE
GOOD ECONOMIC SENSE.
-------------------------------------
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
they reflect reinvestment of 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 (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 sales-charge structure and expenses.
o Had fees and expenses not been waived during the fiscal year, fund returns
would have been lower.
o During the fiscal year, the fund paid distributions for Class A, Class B,
and Class C shares of $0.56, $0.48, and $0.48 per share, respectively.
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 annualized.
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 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 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 an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Lehman Municipal Bond Index, which represents the performance
of investment-grade municipal bonds, is compiled by Lehman Brothers, a
well-known global investment bank.
o An investment cannot be made in an index. 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
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholders:
The reasons for investing in municipal bonds, which are
[PHOTO OF generally exempt from federal income taxes, were compelling
Charles T. at the close of the fiscal year ending March 31, 2000. Newly
Bauer, issued investment-grade municipal bonds were offering yields
Chairman of that were comparable to those of U.S. Treasury securities,
the Board of which are subject to federal income taxes. On the other
THE FUND hand, newly issued high-yield municipal bonds were offering
APPEARS HERE] yields well above those of Treasuries. Taking into account
the tax-exempt status of municipal bonds, their yields were
even more attractive.
1999 was a very difficult year for bonds, including
municipal issues. However, the first quarter of 2000
witnessed an upturn in the performance of municipal bonds.
The changeable nature of the markets reinforces our
confidence in the wisdom of investing through a financial
advisor. In addition to helping you select investments
appropriate to your time horizon and risk tolerance, a financial advisor can
keep you informed about how shifting market conditions affect you and your
portfolio--and help assure that when you do alter your investments, there's a
logical reason for doing so. AIM believes every investor should be guided by a
financial professional.
TAX PLANS AND MUNICIPAL BONDS
Because 2000 is an election year, talk of replacing the current federal income
tax system with a flat tax or a national sales tax could resurface. However, we
believe the prospects are remote that either plan will be adopted. For one, a
flat tax could mean higher taxes for most Americans. Secondly, no flat-tax or
national-sales-tax bills have been formally proposed. Moreover, both plans would
eliminate most tax write offs--a move that would likely generate strong
opposition. Finally, we don't believe the federal government would eliminate the
tax-advantaged status of municipal debt at a time when more public spending
responsibilities are being shifted to the state and local level. Thus, we expect
municipal bonds to remain a viable and attractive investment option.
FUND MANAGERS COMMENT
In the pages that follow, your fund's portfolio managers discuss how they
managed your fund during the fiscal year ended March 31, how the markets behaved
and what they foresee for the near future. We trust you will find their
discussion informative.
If you have any questions or comments, we invite you to contact us, either
at our Web site, www.aimfunds.com, or through our Client Services department at
800-959-4246. Information about your account is also available through 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, A I M Advisors, Inc.
-------------------------------------
...THE FIRST QUARTER
OF 2000 WITNESSED
AN UPTURN IN THE
PERFORMANCE OF
MUNICIPAL BONDS.
-------------------------------------
AIM HIGH INCOME MUNICIPAL FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
AFTER DIFFICULT 1999, MUNICIPAL BONDS
SHOW SIGNS OF RECOVERY
MUNICIPAL-BOND PERFORMANCE IMPROVED AS THE FISCAL YEAR DREW TO A CLOSE. HOW DID
AIM HIGH INCOME MUNICIPAL FUND FARE? After enduring one of their worst years
ever in 1999, municipal bonds, including high-yield issues, bounced back during
the first quarter of 2000. Investors were drawn to municipal bonds, which are
generally exempt from federal income taxes, largely because of their compelling
yields. In many instances, newly issued high-yield municipal bonds offered
yields exceeding those of U.S. Treasury securities. In conjunction with this
trend, your fund continued to provide solid current income, exempt from federal
taxes, as shown on the accompanying table.
The earlier weakness in the municipal-bond market--primarily the product of
rising interest rates--affected thE fund's total returns. Excluding sales
charges, total returns for the fiscal year ended March 31, 2000, were -7.79% for
Class A shares and -8.54% for Class B and Class C shares. The fund's performance
improved noticeably during the final month of the fiscal year. Excluding sales
charges, cumulative total returns for March were 1.58% for Class A shares and
1.51% for Class B and Class C shares. Please keep in mind, the fund is managed
more for income than for total return.
WHAT WERE THE MAJOR TRENDS IN THE BOND MARKET?
Among the major themes dominating the bond market during the fiscal year were
the monetary tightening policy of the Federal Reserve Board (the Fed) and the
U.S. Treasury Department's buyback of some of its debt. In five moves between
June 1999 and March 2000, the Fed raised the key federal funds rate--the rate
banks charge each other for overnight loans--from 4.75% to 6.0%. The Fed's moves
were designed to slow robust economic growth and forestall inflation.
In 1999, rising interest rates negatively affected nearly every bond
sector. The year was the worst for bonds since 1994. Treasury issues, which are
particularly sensitive to interest-rate hikes, were especially hard hit,
underperforming nearly every other sector of the bond market.
However, in the first quarter of 2000, Treasuries, particularly
longer-maturity issues, emerged as market leaders. The primary catalyst for this
turnaround was the Treasury Department's launch of a planned $32 billion buyback
of its debt, made possible by a federal government surplus. Because the initial
buyback mainly affected longer-term Treasuries, it drove their prices higher,
sending their yields lower. As a result, the yield of the 30-year Treasury bond
actually dropped below that of the 10-year Treasury note, creating an unusual
phenomenon known as an inverted yield curve. Normally, bonds with longer
maturities have higher yields than those with shorter maturities, and the shape
of the yield curve generally reflects this tendency.
HOW DID MUNICIPAL BONDS PERFORM?
Trends in the municipal-bond market were similar to those in the Treasury
market. In 1999, municipal bonds (munis), hurt by rising interest rates and an
overabundance of supply, posted losses for the year. But as borrowing costs rose
and state and local governments took in more revenue, they cut back on their
issuance of new municipal bonds. In the first quarter of 2000, new-issue volume
was down nearly 40% from the comparable period in 1999.
The diminished new-issue supply, combined with attractive yields, sparked a
rally in the municipal-bond market. However, muni bonds did not appreciate as
dramatically in price as Treasuries. Consequently, muni yields did not drop as
significantly as Treasury yields. Many higher-yielding muni bonds thus enjoyed a
fairly significant yield advantage over Treasuries.
Both general obligation and revenue bonds participated in the muni bond
rally. General obligation bonds are supported by tax dollars, while revenue
bonds are funded with revenue generated by various projects. Similar to
Treasuries, longer-term
ATTRACTIVE INCOME
As of 3/31/00
30-DAY
30-DAY SEC YIELD
DISTRIBUTION RATE TAXABLE EQUIVALENT AT MAXIMUM TAXABLE EQUIVALENT
AT NAV DISTRIBUTION RATE* OFFERING PRICE 30-DAY SEC YIELD*
--------------------------------------------------------------------------------
Class A 6.40% 10.60% 6.14% 10.17%
Class B 5.53 9.16 5.70 9.44
Class C 5.53 9.16 5.70 9.44
*Assumes highest marginal federal tax rate of 39.6%
================================================================================
See important fund and index disclosures inside front cover.
AIM HIGH INCOME MUNICIPAL FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
muni bonds outperformed shorter-term issues. Within the revenue bond sector,
hospital bonds, hard hit in 1999, bounced back in the first quarter of 2000.
HOW DID YOU MANAGE THE FUND?
We took advantage of the market downturn in 1999 to buy higher-coupon bonds at
attractive prices. During the fiscal year, we lowered the fund's duration from
10.29 years to 9.96 years. Duration is an indicator of the sensitivity of a
bond's coupon to changes in interest rates. Funds with shorter duration tend to
be less sensitive to price fluctuations. The fund's relatively long duration has
hurt its performance, but we believe it will be a positive factor in a stable
interest-rate environment.
HOW WAS THE FUND'S PORTFOLIO STRUCTURED AT THE END OF THE FISCAL YEAR?
The fund had 94 longer-maturity holdings--99% were revenue bonds and 1% general
obligation bonds. The fund was diversified across several sectors. Hospital
bonds composed 21.2% of the portfolio, followed by nursing home bonds, 17.8%,
and multi-family housing bonds, 12.5%. As the population ages, we anticipate
that the need will grow for the services of hospitals and nursing homes in
particular.
WHAT WAS THE CREDIT QUALITY OF THE PORTFOLIO?
As of March 31, 2000, 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 83% of the fund's holdings.
Bonds rated BB or better as measured by Standard & Poor's (S&P), a widely known
credit-rating agency, constituted approximately 17% 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?
The near-term outlook for bonds could depend to a large extent on the Fed's
ability to bring the economy to a "soft landing." It appears that the Fed's
tightening cycle may be winding down, although the central bank is expected to
approve one or two more rate increases in the months ahead. If the Fed is
successful in slowing economic growth to a more sustainable rate and keeping
inflation subdued, it could prolong the current record economic expansion. Such
an environment could prove favorable for bonds. Moreover, while past performance
cannot guarantee comparable future results, the bond market has seldom had two
dismal years in a row.
We remain optimistic about municipal bonds, including high-yield issues.
More Americans are becoming subject to higher federal-income tax brackets. Also,
as baby-boomers get closer to retirement, they may shift more of their assets
into fixed-income investments. These two trends could benefit municipal bonds
and the fund. Additionally, municipal-bond yields remain highly attractive.
PORTFOLIO COMPOSITION
As of 3/31/00, based on total net assets
TOP FIVE BOND HOLDINGS
================================================================================
Coupon Maturity %
--------------------------------------------------------------------------------
Onondaga 7.00% 11/01/30 3.14%
(County of)
Industrial
Development
Agency
Ohio 8.50% 08/01/22 2.80%
(State of)
(CSC Limited
Project)
Boulder 5.85% 01/01/22 2.64%
(City of)
(Boulder City
Hospital Inc.)
Orange (County of) 6.40% 07/01/32 2.21%
Housing Finance
Authority
Montgomery 7.38% 12/01/30 2.02%
(County of)
Higher Education
& Health Authority
================================================================================
CREDIT RATING OF HOLDINGS
================================================================================
PIE CHART
--------------------------------------------------------------------------------
BB 6.0%
AAA 6.0%
BBB 5.0%
Non-Rated 83.0%
================================================================================
================================================================================
REVENUE BONDS 99%
GENERAL OBLIGATION BONDS 1%
NUMBER OF BOND HOLDINGS 94
AVERAGE MATURITY 22.49 Years
DURATION 9.96 Years
================================================================================
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
See important fund and index disclosures inside front cover.
AIM HIGH INCOME MUNICIPAL FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM HIGH INCOME MUNICIPAL FUND VS. BENCHMARK INDEX
1/2/98-3/31/00
in thousands
===============================================================================
AIM High Income AIM High Income AIM High Income
Municipal Fund, Municipal Fund, Municipal Fund, Lehman Municipal
Class A Shares Class B Shares Class C Shares Bond Index
-------------------------------------------------------------------------------
1/2/98 9524 10000 10000 10000
3/31/98 9623 10081 10079 10115
6/30/98 9818 10256 10254 10269
9/30/98 10086 10528 10526 10584
12/31/98 10123 10536 10534 10647
3/31/99 10201 10608 10606 10742
6/30/99 10117 10490 10488 10552
9/30/99 9835 10177 10175 10510
12/31/99 9352 9656 9665 10428
3/31/00 9348 9366 9634 10734
Past performance cannot guarantee comparable future results.
Source: Lipper, Inc., Towers Hypo
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
================================================================================
ABOUT THIS CHART
This chart compares your fund to a benchmark index. It is intended to give you
an idea of how your fund performed compared to this index over the period
1/2/98-3/31/00. It is important to understand differences between your fund and
an index. An index measures performance of a hypothetical portfolio. A market
index such as the Lehman Municipal Bond Index is not managed, incurring no sales
charges, expenses or fees. If you could buy all the securities that make up a
market index, you would incur expenses that would affect your investment's
return.
AVERAGE ANNUAL TOTAL RETURNS
As of 3/31/00, including sales charges
================================================================================
Class A Shares
--------------------------------------------------------------------------------
Inception (1/2/98) -2.70%
1 year -12.17*
*-7.79% excluding sales charges
Class B Shares
--------------------------------------------------------------------------------
Inception (1/2/98) -2.54%
1 year -12.88**
**-8.54% excluding CDSC
Class C Shares
--------------------------------------------------------------------------------
Inception (1/2/98) -1.35%
1 year -9.41***
***-8.54% excluding CDSC
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
For fund performance calculations and descriptions of the index cited on this
page, please see the inside front cover.
AIM HIGH INCOME MUNICIPAL FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
MARCH 31, 2000
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
LONG-TERM MUNICIPAL OBLIGATIONS-92.95%
CALIFORNIA-3.10%
California (State of) Educational
Facilities Authority (Fresno Pacific
University); Series A RB
6.75%, 03/01/19 $1,000 $ 1,033,830
-------------------------------------------------------------
Sacramento (City of) Financing
Authority (Convention Center Hotel);
Series A Senior RB
6.25%, 01/01/30 1,000 920,540
-------------------------------------------------------------
1,954,370
-------------------------------------------------------------
COLORADO-3.36%
Colorado Health Facilities Authority
(Volunteers of America); Health and
Residential Care Facilities Series A
RB
6.00%, 07/01/29 850 706,095
-------------------------------------------------------------
Saddle Rock (City of) South
Metropolitan District No. 2 (Mill
Levy Obligation); Limited Tax Series
GO
7.20%, 12/01/19 650 650,429
-------------------------------------------------------------
St. Vincent General Hospital District
of Colorado; Series RB
6.00%, 12/01/19 885 758,790
-------------------------------------------------------------
2,115,314
-------------------------------------------------------------
CONNECTICUT-0.78%
Connecticut (State of) Development
Authority (Watson Foods Co., Inc.);
Series IDR
5.90%, 06/01/28(a) 555 494,805
-------------------------------------------------------------
FLORIDA-6.35%
Lexington Oaks (District of); Community
Development Special Assessment Series
B RB
6.70%, 05/01/07 500 502,755
-------------------------------------------------------------
Orange (County of) Housing Finance
Authority (Brentwood Park
Apartments); Multifamily Housing
Series G RB
6.40%, 07/01/32 1,500 1,394,205
-------------------------------------------------------------
Orange (County of) Housing Finance
Authority (Palm West Apartments);
Multifamily Housing Series B RB
6.50%, 03/01/34 1,000 903,400
-------------------------------------------------------------
Sumter (County of) Industrial
Development Authority (Wecare Nursing
Center Project); Health Care
Facilities Series A RB
6.75%, 04/01/29 1,405 1,202,497
-------------------------------------------------------------
4,002,857
-------------------------------------------------------------
GEORGIA-4.27%
Fulton (County of) Housing Authority
(Azalea Manor Project); Multifamily
Housing RB
6.50%, 02/01/28 780 731,492
-------------------------------------------------------------
Fulton (County of) Housing Authority
(Washington Court Project);
Multifamily Housing RB
6.40%, 02/01/19 775 728,965
-------------------------------------------------------------
6.50%, 02/01/28 225 209,455
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
GEORGIA-(CONTINUED)
Rockdale (County of) Development
Authority (Visy Paper, Inc.); Solid
Waste Disposal RB
7.50%, 01/01/26(a) $1,000 $ 1,023,180
-------------------------------------------------------------
2,693,092
-------------------------------------------------------------
ILLINOIS-4.64%
Crestwood (City of); Tax Increment
Revenue Refunding Non-Qualified Bonds
7.25%, 12/01/08 100 103,131
-------------------------------------------------------------
Hoopeston (City of) Hospital Capital
Improvement (Hoopeston Community
Memorial Hospital); Refunding RB
6.55%, 11/15/29 700 626,185
-------------------------------------------------------------
Illinois Health Facilities Authority
(Bethesda Home & Retirement); Series
A RB
6.25%, 09/01/14 500 473,455
-------------------------------------------------------------
Illinois Health Facilities Authority
(Bohemian-Tabor Hills); Refunding
Series A RB
5.90%, 11/15/24 775 642,948
-------------------------------------------------------------
Illinois Health Facilities Authority
(Lifelink Corp. Obligation Group);
Refunding RB
5.85%, 02/15/20 350 293,475
-------------------------------------------------------------
5.70%, 02/15/24 850 683,884
-------------------------------------------------------------
Saint Charles (City of) (Tri-city
Center Associates Limited Project);
IDR
7.50%, 11/01/13 100 100,963
-------------------------------------------------------------
2,924,041
-------------------------------------------------------------
INDIANA-0.97%
Indiana Health Facilities Financing
Authority (Franciscan Eldercare
Community Services); RB
5.88%, 05/15/29 750 613,612
-------------------------------------------------------------
IOWA-0.16%
Iowa Finance Authority (Park West
Housing Project); Multifamily
Refunding RB
8.00%, 10/01/23 100 100,754
-------------------------------------------------------------
KANSAS-1.96%
Hutchinson (City of) Health Care
Facilities (Wesley Towers Inc.);
Refunding & Improvement Series A RB
6.25%, 11/15/19 750 662,220
-------------------------------------------------------------
Lawrence (City of) (Holiday Inn
Project); Commercial Development
Senior Refunding Series A RB
8.00%, 07/01/16 40 41,324
-------------------------------------------------------------
Olathe (City of) Senior Living
Facilities (Aberdeen Village Inc.);
Series A RB
7.00%, 05/15/20 200 197,854
-------------------------------------------------------------
7.50%, 05/15/24 330 332,666
-------------------------------------------------------------
1,234,064
-------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
KENTUCKY-1.82%
Jefferson (County of) Health Facilities
(Beverly Enterprises Inc. Project);
Refunding RB
5.88%, 08/01/07 $ 675 $ 638,334
-------------------------------------------------------------
Newport (City of) Public Properties
Corporation (Public Parking & Plaza);
First Mortgage Series A-1 RB
8.50%, 01/01/27 500 508,000
-------------------------------------------------------------
1,146,334
-------------------------------------------------------------
MASSACHUSETTS-1.10%
Massachusetts (State of) Health &
Educational Facilities Authority
(Christopher House); Refunding Series
A RB
6.88%, 01/01/29 750 690,787
-------------------------------------------------------------
MICHIGAN-3.87%
Garden City Hospital Finance Authority
(Garden City Hospital Osteo Group);
Hospital Refunding Series A RB
5.75%, 09/01/17 1,500 1,221,915
-------------------------------------------------------------
Gogebic (County of) Hospital Finance
Authority (Grand View Health System
Inc.); Refunding RB
5.88%, 10/01/16 920 785,625
-------------------------------------------------------------
Mecosta (County of) General Hospital;
Refunding Unlimited GO
6.00%, 05/15/18 500 431,375
-------------------------------------------------------------
2,438,915
-------------------------------------------------------------
MINNESOTA-6.42%
Columbia Heights (City of) Multifamily
and Health Care Facility (Crest View
Corp. Project); RB
6.00%, 03/01/33 500 412,710
-------------------------------------------------------------
Minneapolis (City of) Health Care
Facility (Ebenezer Society Project);
Series A RB
7.00%, 07/01/12 100 97,740
-------------------------------------------------------------
Minneapolis (City of) Health Care
Facility (Shelter Care Foundation);
Series A RB
6.00%, 04/01/10 1,060 979,652
-------------------------------------------------------------
Moorhead (City of) Economic Development
Authority (Eventide Housing
Development Project); Multifamily
Refunding Series A RB
6.00%, 06/01/18 500 429,945
-------------------------------------------------------------
Northfield (City of) Health Care
Facilities (Retirement Center);
Refunding and Improvement Series A RB
5.75%, 05/01/16 335 283,075
-------------------------------------------------------------
6.00%, 05/01/28 500 416,895
-------------------------------------------------------------
Richfield (City of) Senior Housing;
Series A RB
6.75%, 02/01/14 300 298,101
-------------------------------------------------------------
7.38%, 02/01/19 400 401,660
-------------------------------------------------------------
St. Paul (City of) Port Authority and
Hotel Facilities (Radisson Kellogg
Project); Series 2 RB
7.38%, 08/01/29 750 730,088
-------------------------------------------------------------
4,049,866
-------------------------------------------------------------
MISSISSIPPI-0.40%
Ridgeland Urban Renewal (The Orchard
Limited Project); Refunding Series A
RB
7.75%, 12/01/15 250 255,950
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
MISSOURI-2.02%
Good Shepherd Nursing Home District;
Nursing Home Facilities Refunding RB
5.90%, 08/15/23 $ 500 $ 417,145
-------------------------------------------------------------
Madison (County of); Hospital Refunding
RB
5.88%, 10/01/26 500 411,240
-------------------------------------------------------------
Valley Park Industrial Development
Authority (Cape Albeon Project);
Senior Housing RB
6.15%, 12/01/33 500 447,565
-------------------------------------------------------------
1,275,950
-------------------------------------------------------------
NEVADA-2.64%
Boulder (City of) (Boulder City
Hospital Inc.); Refunding Hospital
Series RB
5.85%, 01/01/22 2,000 1,667,060
-------------------------------------------------------------
NEW HAMPSHIRE-1.34%
New Hampshire Business Financial
Authority (Alice Peck Day Health
System); Series A RB
6.88%, 10/01/19 750 705,285
-------------------------------------------------------------
New Hampshire Higher Educational and
Health Facilities Authority: RB
Daniel Webster College;
7.63%, 07/01/04(b)(c) 100 112,139
-------------------------------------------------------------
Franklin Pierce College;
6.00%, 10/01/18 30 28,108
-------------------------------------------------------------
845,532
-------------------------------------------------------------
NEW JERSEY-5.05%
New Jersey Economic Development
Authority (Continental Airlines,
Inc.); Special Facilities Series RB
6.40%, 09/15/23(a) 1,160 1,100,736
-------------------------------------------------------------
6.25%, 09/15/29(a) 750 685,395
-------------------------------------------------------------
New Jersey Health Care Facilities
Financing Authority (Raritan Bay
Medical Center); RB
7.25%, 07/01/14 750 708,008
-------------------------------------------------------------
7.25%, 07/01/27 750 687,075
-------------------------------------------------------------
3,181,214
-------------------------------------------------------------
NEW MEXICO-0.63%
Sante Fe (County of) (El Castillo
Retirement Project); Series A RB
5.63%, 05/15/25 500 396,260
-------------------------------------------------------------
NEW YORK-5.28%
New York Industrial Development Agency
(Field Hotel Associates LP);
Refunding IDR
5.80%, 11/01/13 475 432,692
-------------------------------------------------------------
6.00%, 11/01/28 500 432,230
-------------------------------------------------------------
New York Industrial Development Agency
(Marymount Manhattan College
Project); Civic Facility RB
7.00%, 07/01/23(b) 150 159,029
-------------------------------------------------------------
Onondaga (County of) Industrial
Development Agency (Solvay Paperboard
LLC Project); Solid Waste Disposal
Facility Refunding Series RB
7.00%, 11/01/30(a) 2,000 1,979,920
-------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
NEW YORK-(CONTINUED)
Suffolk (County of) Industrial
Development Agency (Spellman High
Voltage Facility); Series A IDR
6.38%, 12/01/17(a) $ 350 $ 325,003
-------------------------------------------------------------
3,328,874
-------------------------------------------------------------
NORTH DAKOTA-0.69%
Grand Forks Senior Housing (4000 Valley
Square Project); Special Term Series
RB
6.38%, 12/01/34 500 435,425
-------------------------------------------------------------
OHIO-6.78%
Belmont (County of) Health Systems
(East Ohio Regional Hospital);
Refunding and Improvement RB
5.80%, 01/01/18 800 645,536
-------------------------------------------------------------
Fairfield (City of) Economic
Development (Beverly Enterprises
Inc.); Refunding Series RB
8.50%, 01/01/03 110 112,971
-------------------------------------------------------------
Madison (County of) (Madison County
Hospital Project); Hospital
Improvement Refunding Series RB
6.25%, 08/01/18 1,000 880,930
-------------------------------------------------------------
6.40%, 08/01/28 1,000 868,280
-------------------------------------------------------------
Ohio (State of) (CSC Limited Project);
Solid Waste RB
8.50%, 08/01/22(a) 1,860 1,763,931
-------------------------------------------------------------
4,271,648
-------------------------------------------------------------
PENNSYLVANIA-13.86%
Allegheny (County of) Hospital
Development Authority (Villa St.
Joseph of Baden); Health Care
Facilities RB
6.00%, 08/15/28 1,000 833,250
-------------------------------------------------------------
Berks (County of) Municipal Authority
(Phoebe-Devitt Homes Project);
Refunding Series A1 RB
5.50%, 05/15/11 250 222,092
-------------------------------------------------------------
Chartiers Valley Industrial &
Commercial Development Authority
(Asbury Health Center); First
Mortgage Refunding Series RB
6.38%, 12/01/19 1,000 894,540
-------------------------------------------------------------
Columbia (County of) Hospital Authority
(Bloomsburg Hospital Project); Health
Care RB
5.85%, 06/01/24 1,000 807,610
-------------------------------------------------------------
5.90%, 06/01/29 350 278,866
-------------------------------------------------------------
Crawford (County of) Hospital Authority
(Wesbury United Methodist Community);
Senior Living Facilities RB
6.25%, 08/15/29 750 658,837
-------------------------------------------------------------
Cumberland (County of) Industrial
Development Authority (Woods Cedar
Run); First Mortgage Refunding Series
A RB
6.50%, 11/01/18 1,000 885,040
-------------------------------------------------------------
Lancaster (County of) Hospital
Authority (Saint Anne's Home Health
Center); RB
6.63%, 04/01/28 1,000 898,180
-------------------------------------------------------------
Montgomery (County of) Higher Education
& Health Authority (Philadelphia
Geriatric Center); Series A RB
7.38%, 12/01/30 1,340 1,274,809
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
PENNSYLVANIA-(CONTINUED)
Montgomery (County of) Higher Education
& Health Authority (Temple Continuing
Care Center); RB
6.63%, 07/01/19 $1,250 $ 1,125,275
-------------------------------------------------------------
6.75%, 07/01/29 460 409,400
-------------------------------------------------------------
Philadelphia (City of) Hospital &
Higher Education Facilities Authority
(Chestnut Hill College); RB
6.00%, 10/01/29 500 450,815
-------------------------------------------------------------
8,738,714
-------------------------------------------------------------
SOUTH CAROLINA-0.79%
South Carolina (State of) Jobs and
Economic Development Authority
(Palmetto Health Alliance); Hospital
Facilities Improvement Series A RB
7.38%, 12/15/21 500 496,445
-------------------------------------------------------------
TEXAS-8.92%
Abilene (City of) Health Facilities
Development (Sears Methodist
Retirement); Corporate Retirement
Facilities:
Series 1998 A RB
5.88%, 11/15/18 1,000 848,410
-------------------------------------------------------------
Series 1999 RB
5.88%, 11/15/18 450 381,384
-------------------------------------------------------------
6.00%, 11/15/29 550 457,132
-------------------------------------------------------------
Atlanta (City of) Hospital Authority
(Hospital Facility); RB
6.70%, 08/01/19 500 460,875
-------------------------------------------------------------
Austin (City of) (Bergstrom Landhost
Enterprises Inc.); Airport Hotel
Series A Senior RB
6.75%, 04/01/27 1,000 918,650
-------------------------------------------------------------
Bexar (County of) Housing Finance Corp.
(Villa Madrid/Cumberland Apartments);
Multifamily Housing Series A RB
7.25%, 05/01/16 200 199,794
-------------------------------------------------------------
Matagorda (County of) NAV District #1
(Reliant Energy Project); Refunding
Series B RB
5.95%, 05/01/30(a) 500 446,460
-------------------------------------------------------------
Meadow Parc Development Inc. (Meadow
Parc Apartments Project); Multifamily
Housing RB
6.50%, 12/01/30 1,000 919,510
-------------------------------------------------------------
Woodhill Public Facilities Corp.
(Woodhill Apartments Project);
Housing Series RB
7.50%, 12/01/29 1,000 992,790
-------------------------------------------------------------
5,625,005
-------------------------------------------------------------
VERMONT-1.37%
Vermont Education & Health Buildings
Financing Agency (Copley Manor
Project); Health Care Facilities
Series RB
6.25%, 04/01/29 1,000 861,910
-------------------------------------------------------------
VIRGINIA-0.74%
Hampton (City of) Redevelopment and
Housing Authority (Olde Hampton Hotel
Association); First Mortgage
Refunding Series A RB
6.50%, 07/01/16 500 465,770
-------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
WISCONSIN-3.64%
Wisconsin (State of) Health and
Educational Facilities Authority RB:
Attic Angel Community Inc.;
5.75%, 11/15/27 $1,000 $ 806,400
-------------------------------------------------------------
FH Healthcare Development Inc.;
6.25%, 11/15/20 750 669,923
-------------------------------------------------------------
St. Camillus Health Center;
5.75%, 07/01/28 500 402,015
-------------------------------------------------------------
United Lutheran Home;
5.70%, 03/01/28 525 418,929
-------------------------------------------------------------
2,297,267
-------------------------------------------------------------
Total Long-Term Municipal
Obligations (Cost $64,508,301) 58,601,835
-------------------------------------------------------------
SHORT-TERM MUNICIPAL
OBLIGATIONS-5.86%(d)
CONNECTICUT-2.51%
Connecticut (State of) Development
Authority (Weekly-Corporate
Independent Living Project); Health
Care VRD Series RB (LOC-Chase
Manhattan)
3.75%, 07/01/15 714 714,000
-------------------------------------------------------------
Connecticut (State of) Special Tax
Obligation (JP Morgan PUTTERS); VRD
Series 114 1999 A RB
3.81%, 10/01/09(e) 870 870,000
-------------------------------------------------------------
1,584,000
-------------------------------------------------------------
DELAWARE-0.63%
University of Delaware, VRD Series RB
3.90%, 11/01/23 400 400,000
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR MARKET
(000) VALUE
<S> <C> <C>
FLORIDA-0.54%
Capital Trust Agency (Community Loan
Program); Multifamily Housing VRD
Series 1999 B RB
4.00%, 12/01/32(f) $ 337 $ 337,000
-------------------------------------------------------------
GEORGIA-0.86%
Dekalb Private Hospital Authority
(Egleston Children's Hospital at
Emory University); VRD Series 1994 A
RAN (LOC-Suntrust Bank)
3.85%, 03/01/24 540 540,000
-------------------------------------------------------------
ILLINOIS-0.77%
Illinois Health Facilities Authority
(Resurrection Health Care); VRD
Series 1999 B RB
3.95%, 05/15/29 485 485,000
-------------------------------------------------------------
PENNSYLVANIA-0.13%
York (City of) General Authority;
Pooled Financing Sub. VRD Series 96 B
RB
3.95%, 09/01/26(f) 84 84,000
-------------------------------------------------------------
TEXAS-0.42%
Bexar (County of) Housing Finance
Authority (Fountainhead Apartments);
Multifamily Refunding VRD Series RB
3.90%, 09/15/26(f) 262 262,000
-------------------------------------------------------------
Total Short-Term Municipal
Obligations (Cost $3,692,000) 3,692,000
-------------------------------------------------------------
TOTAL INVESTMENTS-98.81% (Cost
$68,200,301) 62,293,835
-------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.19% 749,494
-------------------------------------------------------------
NET ASSETS-100.00% $63,043,329
=============================================================
</TABLE>
Investment Abbreviations:
IDR - Industrial Development Revenue Bonds
GO - General Obligation Bonds
LOC - Letter of Credit
PUTTERS - Putable Tax Exempt Receipts
RAN - Revenue Anticipation Notes
RB - Revenue Bonds
Sub. - Subordinated
VRD - Variable Rate Demand
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. Market
value and maturity date reflect such call or put.
(d) Demand security; payable upon demand by the Fund at specified time intervals
no greater than seven calendar days' notice. Interest rate is redetermined
periodically. Rate shown is the rate in effect on 03/31/00.
(e) The fund may invest in synthetic municipal instruments the value of and
return on which are derived from underlying securities. The types of
synthetic municipal instruments in which the Fund may invest include
variable rate instruments. These instruments involve the deposit into a
trust of one or more long-term tax-exempt bonds or notes ("Underlying
Bonds"), and the sale of certificates evidencing interests in the trust to
investors such as the Fund. The trustee receives the long-term fixed rate
interest payments on the Underlying Bonds, and pays certificate holders
short-term floating or variable interest rates which are reset periodically.
A "variable rate trust certificate" evidences an interest in a trust
entitling the certificate holder to receive variable rate interest based on
prevailing short-term interest rates and also typically providing the
certificate holder with the conditional right to put its certificate at par
value plus accrued interest. Because synthetic municipal instruments involve
a trust and a third party conditional put feature, they involve complexities
and potential risks that may not be present where a municipal security is
owned directly.
(f) Secured by bond insurance provided by one of the following companies: AMBAC,
FGIC, FSA or MBIA.
See Notes to Financial Statements.
8
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$68,200,301) $ 62,293,835
---------------------------------------------------------
Cash 1,626
---------------------------------------------------------
Receivables for:
Investments sold 111,185
---------------------------------------------------------
Capital stock sold 503,957
---------------------------------------------------------
Interest 1,215,594
---------------------------------------------------------
Amount due from advisor 19,456
---------------------------------------------------------
Investment for deferred compensation plan 9,783
---------------------------------------------------------
Other assets 30,937
---------------------------------------------------------
Total assets 64,186,373
---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 853,586
---------------------------------------------------------
Capital stock reacquired 57,097
---------------------------------------------------------
Dividends 147,217
---------------------------------------------------------
Deferred compensation plan 9,783
---------------------------------------------------------
Accrued administrative services fees 4,235
---------------------------------------------------------
Accrued transfer agent fees 3,455
---------------------------------------------------------
Accrued distribution fees 48,943
---------------------------------------------------------
Accrued operating expenses 18,728
---------------------------------------------------------
Total liabilities 1,143,044
---------------------------------------------------------
Net assets applicable to shares
outstanding $ 63,043,329
=========================================================
NET ASSETS:
Class A $ 38,645,407
=========================================================
Class B $ 20,298,218
=========================================================
Class C $ 4,099,704
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Class A:
Authorized 1,000,000,000
---------------------------------------------------------
Outstanding 4,430,151
=========================================================
Class B:
Authorized 1,000,000,000
---------------------------------------------------------
Outstanding 2,327,269
=========================================================
Class C:
Authorized 1,000,000,000
---------------------------------------------------------
Outstanding 469,964
=========================================================
Class A:
Net asset value and redemption price
per share $ 8.72
---------------------------------------------------------
Offering price per share:
(Net asset value of $8.72 divided
by 95.25%) $ 9.15
=========================================================
Class B:
Net asset value and offering price per
share $ 8.72
=========================================================
Class C:
Net asset value and offering price per
share $ 8.72
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended March 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $ 4,312,230
--------------------------------------------------------
EXPENSES:
Advisory fees 400,884
--------------------------------------------------------
Administrative services fees 56,591
--------------------------------------------------------
Custodian fees 4,405
--------------------------------------------------------
Directors fees 6,460
--------------------------------------------------------
Distribution fees -- Class A 111,983
--------------------------------------------------------
Distribution fees -- Class B 178,459
--------------------------------------------------------
Distribution fees -- Class C 41,746
--------------------------------------------------------
Transfer agent fees 35,049
--------------------------------------------------------
Registration and filing fees 112,221
--------------------------------------------------------
Other 76,605
--------------------------------------------------------
Total expenses 1,024,403
--------------------------------------------------------
Less: Fee waivers and expense
reimbursements (519,765)
--------------------------------------------------------
Expenses paid indirectly (727)
--------------------------------------------------------
Net expenses 503,911
--------------------------------------------------------
Net investment income 3,808,319
--------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Net realized gain (loss) on sales of
investment securities (3,732,037)
--------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (5,956,529)
--------------------------------------------------------
Net gain (loss) on investment securities (9,688,566)
--------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(5,880,247)
========================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
For the years ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,808,319 $ 2,386,340
---------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities (3,732,037) 634
---------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (5,956,529) 27,086
---------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (5,880,247) 2,414,060
---------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (2,644,268) (1,942,603)
---------------------------------------------------------------------------------------
Class B (924,064) (343,532)
---------------------------------------------------------------------------------------
Class C (215,599) (78,427)
---------------------------------------------------------------------------------------
NET CAPITAL STOCK TRANSACTIONS:
Class A (4,438,767) 31,696,998
---------------------------------------------------------------------------------------
Class B 8,998,851 11,184,663
---------------------------------------------------------------------------------------
Class C 1,710,760 2,281,041
---------------------------------------------------------------------------------------
Net increase (decrease) in net assets (3,393,334) 45,212,200
---------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 66,436,663 21,224,463
---------------------------------------------------------------------------------------
End of period $63,043,329 $66,436,663
=======================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $72,624,428 $66,355,245
---------------------------------------------------------------------------------------
Undistributed net investment income 68,799 42,750
---------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of investment
securities (3,743,432) (11,395)
---------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (5,906,466) 50,063
---------------------------------------------------------------------------------------
$63,043,329 $66,436,663
=======================================================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
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. 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 89% 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. On
March 31, 2000, undistributed net investment income was increased by $1,661
and paid-in capital was decreased by $1,661 as a result of differing
book/tax adjustments and a reclassification of nondeductible organizational
expenses. Net assets of the Fund were unaffected by the reclassifications.
C. Distributions -- It is the policy of the Fund to declare daily dividends
from net investment income. Such distributions are paid monthly.
Distributions from net realized capital gains, if any, are generally paid
annually and recorded on ex-dividend date. The Fund may elect to use a
portion of the proceeds of fund share redemptions as distributions for
federal income tax purposes.
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 $1,007,290 (which may be
carried forward to offset future taxable capital gains, if any) which
expires, if not previously utilized, through the year 2008.
E. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.60% of
the first $500 million of the Fund's average daily net assets, plus 0.55% of the
Fund's average daily net assets of the next $500 million, plus 0.50% of the next
$500 million of the Fund's average daily net assets, plus 0.45% of the Fund's
average daily net assets in excess of $1.5 billion. AIM has agreed to limit the
Fund's expenses
11
<PAGE> 14
(exclusive of brokerage commissions, taxes, interest, extraordinary items and
increases for indirect credits (if any)) to the annual rate of 0.55%, 1.30% and
1.30% of the average daily net assets of the Fund's Class A, Class B and Class
C, shares, respectively. During the year ended March 31, 2000, AIM waived
advisory fees and reimbursed expenses of $519,765.
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. For the year ended March 31, 2000, AIM was paid
$56,591 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. For the year ended March 31, 2000, AFS was
paid $19,405 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 plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at an annual rate of
0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C 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 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. For the year ended March 31, 2000,
the Class A shares, Class B shares and Class C shares paid AIM Distributors
$111,983, $178,459 and $41,746, respectively, as compensation under the Plans.
AIM Distributors received commissions of $73,191 from the sales of Class A
shares of the Fund during the year ended March 31, 2000. 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 year ended March 31, 2000, AIM
Distributors received $77,143 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 year ended March 31, 2000, the Fund paid legal fees of $3,771 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 year ended March 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $727 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of the
Fund's total expenses of $727 during the year ended March 31, 2000.
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 year
ended March 31, 2000, 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.
12
<PAGE> 15
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the year ended March 31, 2000 was $36,846,568 and
$32,445,378, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of March 31, 2000 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 116,757
-------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (6,023,223)
-------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities $(5,906,466)
=========================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended March 31, 2000 and
1999 were as follows:
<TABLE>
<CAPTION>
2000 1999
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 2,912,871 $ 27,305,711 4,375,932 $ 44,035,445
------------------------------------------------------------------------------------------------------------------------
Class B 1,583,616 14,795,377 1,198,092 12,077,378
------------------------------------------------------------------------------------------------------------------------
Class C 349,542 3,330,532 299,455 3,014,253
------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 161,117 1,500,788 111,621 1,125,789
------------------------------------------------------------------------------------------------------------------------
Class B 53,062 488,068 18,956 191,064
------------------------------------------------------------------------------------------------------------------------
Class C 14,157 130,348 4,580 46,173
------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (3,579,016) (33,245,266) (1,332,330) (13,464,236)
------------------------------------------------------------------------------------------------------------------------
Class B (689,244) (6,284,594) (107,492) (1,083,779)
------------------------------------------------------------------------------------------------------------------------
Class C (194,287) (1,750,120) (77,415) (779,385)
------------------------------------------------------------------------------------------------------------------------
611,818 $ 6,270,844 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 each of the years in the two-year
period ended March 31, 2000 and the period January 2, 1998 (date operations
commenced) through March 31, 1998.
<TABLE>
<CAPTION>
CLASS A
-----------------------------
2000 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 0.56 0.54 0.11
------------------------------------------------------------ ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) (1.32) 0.05 (0.01)
------------------------------------------------------------ ------- ------- -------
Total from investment operations (0.76) 0.59 0.10
------------------------------------------------------------ ------- ------- -------
Less distributions from net investment income (0.56) (0.54) (0.11)
============================================================ ======= ======= =======
Net asset value, end of period $ 8.72 $ 10.04 $ 9.99
============================================================ ======= ======= =======
Total return(a) (7.79)% 6.01% 1.04%
============================================================ ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $38,645 $49,570 $17,787
============================================================ ======= ======= =======
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.50%(b) 0.29% 0.25%(c)
------------------------------------------------------------ ------- ------- -------
Without fee waivers and/or expense reimbursements 1.28%(b) 1.29% 1.65%(c)
============================================================ ======= ======= =======
Ratio of net investment income to average net assets 5.95%(b) 5.41% 4.80%(c)
============================================================ ======= ======= =======
Portfolio turnover rate 51% 30% 21%
============================================================ ======= ======= =======
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) Ratios are based on average net assets of $44,793,328.
(c) Annualized.
14
<PAGE> 17
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------- --------------------------
2000 1999 1998 2000 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 0.48 0.47 0.09 0.48 0.47 0.09
------------------------------------------------------------ ------- ------- ------- ------ ------ ------
Net gains (losses) on securities (both realized and
unrealized) (1.32) 0.04 (0.01) (1.32) 0.04 (0.01)
------------------------------------------------------------ ------- ------- ------- ------ ------ ------
Total from investment operations (0.84) 0.51 0.08 (0.84) 0.51 0.08
------------------------------------------------------------ ------- ------- ------- ------ ------ ------
Less distributions from net investment income (0.48) (0.46) (0.09) (0.48) (0.46) (0.09)
============================================================ ======= ======= ======= ====== ====== ======
Net asset value, end of period $ 8.72 $ 10.04 $ 9.99 $ 8.72 $10.04 $ 9.99
============================================================ ======= ======= ======= ====== ====== ======
Total return(a) (8.54)% 5.23% 0.81% (8.54)% 5.23% 0.79%
============================================================ ======= ======= ======= ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $20,298 $13,850 $ 2,699 $4,100 $3,017 $ 738
============================================================ ======= ======= ======= ====== ====== ======
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.26%(b) 1.04% 1.00%(c) 1.26%(b) 1.04% 1.00%(c)
------------------------------------------------------------ ------- ------- ------- ------ ------ ------
Without fee waivers and/or expense reimbursements 2.04%(b) 2.04% 2.44%(c) 2.04%(b) 2.04% 2.44%(c)
============================================================ ======= ======= ======= ====== ====== ======
Ratio of net investment income to average net assets 5.19%(b) 4.66% 4.05%(c) 5.19%(b) 4.66% 4.05%(c)
============================================================ ======= ======= ======= ====== ====== ======
Portfolio turnover rate 51% 30% 21% 51% 30% 21%
============================================================ ======= ======= ======= ====== ====== ======
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) Ratios are based on average net assets of $17,845,864 and $4,174,621 for
Classes B and C, respectively.
(c) Annualized.
15
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM High Income Municipal Bond Fund:
We have audited the accompanying statement of assets and
liabilities of AIM High Income Municipal Bond Fund (a
portfolio of AIM Tax-Exempt Funds, Inc.), including the
schedule of investments, as of March 31, 2000, the
related statement of operations for the year then ended,
the statement of changes in net assets for each of the
years in the two-year period then ended and the financial
highlights for each of the years or periods in the three-
year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of
America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as
of March 31, 2000, by correspondence with the custodian
and brokers. An audit also includes assessing the
accounting principles used and significant estimates made
by management, as well as evaluating the overall
financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM High
Income Municipal Bond Fund as of March 31, 2000, the
results of its operations for the year then ended, the
changes in its net assets for each of the years in the
two-year period then ended and the financial highlights
for each of the years or periods in the three-year period
then ended, in conformity with accounting principles
generally accepted in the United States of America.
KMPG LLP
May 1, 2000
Houston, Texas
16
<PAGE> 19
<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
DISTRIBUTOR
Lewis F. Pennock Nancy L. Martin
Attorney Assistant Secretary A I M Distributors, Inc.
11 Greenway Plaza
Louis S. Sklar Ofelia M. Mayo Suite 100
Executive Vice President Assistant Secretary Houston, TX 77046
Hines Interests
Limited Partnership Lisa A. Moss AUDITORS
Assistant Secretary
KPMG LLP
Kathleen J. Pflueger 700 Louisiana
Assistant Secretary Houston, TX 77002
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
(UNAUDITED)
REQUIRED FEDERAL INCOME TAX INFORMATION
We are required by Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end as to the federal tax status of dividends paid by the
Fund during the period ended March 31, 2000.
AIM High Income Municipal Fund Class A, Class B and Class C shares paid ordinary
dividends in the amount of $0.5550, $0.4794 and $0.4794 per share, respectively,
to shareholders during the Fund's year ended March 31, 2000. Of this amount,
100% qualified as tax-exempt interest dividends for federal income tax purposes.
For the purpose of preparing your annual federal income tax returns, however,
you should report the amounts as reflected on the appropriate Form 1099-DIV.
17
<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 leadership
AIM Aggressive Growth Fund AIM Money Market Fund in the mutual fund industry since 1976 and managed
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund approximately $176 billion in assets for more than
AIM Capital Development Fund 7.4 million shareholders, including individual
AIM Constellation Fund(1) INTERNATIONAL GROWTH FUNDS investors, corporate clients and financial
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund institutions, as of March 31, 2000.
AIM Large Cap Growth Fund AIM Asian Growth Fund The AIM Family of Funds--Registered Trademark--
AIM Mid Cap Equity Fund AIM Developing Markets Fund is distributed nationwide, and AIM today is the
AIM Mid Cap Growth Fund AIM Euroland Growth Fund(5) eighth-largest mutual fund complex in the United
AIM Mid Cap Opportunities Fund(2) AIM European Development Fund States in assets under management, according to
AIM Select Growth Fund AIM International Equity Fund Strategic Insight, an independent mutual fund
AIM Small Cap Growth Fund(3) AIM Japan Growth Fund monitor.
AIM Small Cap Opportunities Fund(4) AIM Latin American Growth Fund
AIM Value Fund AIM New Pacific Growth Fund(8)
AIM Weingarten Fund
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(8) AIM Global Trends Fund(7)
AIM Advisor Real Estate Fund
AIM Balanced Fund GLOBAL GROWTH & INCOME FUNDS
AIM Basic Value Fund AIM Global Growth & Income Fund(8)
AIM Charter Fund AIM Global Utilities Fund
INCOME FUNDS GLOBAL INCOME FUNDS
AIM Floating Rate Fund AIM Emerging Markets Debt Fund(8)
AIM High Yield Fund AIM Global Government Income Fund(8)
AIM High Yield Fund II AIM Global Income Fund
AIM Income Fund AIM Strategic Income Fund
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund THEME FUNDS
AIM Global Consumer Products and Services Fund
TAX-FREE INCOME FUNDS AIM Global Financial Services Fund
AIM High Income Municipal Fund AIM Global Health Care Fund
AIM Municipal Bond Fund AIM Global Infrastructure Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Resources Fund
AIM Tax-Free Intermediate Fund AIM Global Telecommunications and Technology Fund(6)
</TABLE>
(1) Effective December 1, 1999, AIM Constellation Fund's investment strategy
broadened to allow investments across all market capitalizations. (2) AIM Mid
Cap Opportunities Fund closed to new investors on March 21, 2000. (3) AIM Small
Cap Growth Fund closed to new investors on November 8, 1999. (4) AIM Small Cap
Opportunities Fund closed to new investors on November 4, 1999. (5) On September
1, 1999, AIM Europe Growth Fund was renamed AIM Euroland Growth Fund. Previously
the fund invested in all size companies in most areas of Europe. The fund now
seeks to invest at least 65%of its assets in large-cap companies within
countries using the euro as their currency (EMU-member countries). (6) On June
1, 1999, AIM Global Telecommunications Fund was renamed AIM Global
Telecommunications and Technology Fund. (7) Effective August 27, 1999, AIM
Global Trends Fund was restructured to operate as a traditional mutual fund.
Before that date, the fund operated as a fund of funds. (8) AIM Advisor Large
Cap Value Fund, AIM Emerging Markets Debt Fund, AIM Global Government Income
Fund, AIM Global Growth & Income Fund and AIM New Pacific Growth Fund closed to
new investors on April 28, 2000. For more complete information about any AIM
fund(s), including sales charges and expenses, ask your financial advisor 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 July
20, 2000, this report must be accompanied by a current Quarterly Review of
Performance for AIM Funds.
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