<PAGE> 1
ANNUAL REPORT / MARCH 31 2000
AIM TAX-EXEMPT BOND FUND
OF CONNECTICUT
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
--Registered Trademark--
<PAGE> 2
[COVER IMAGE]
-------------------------------------
CONNECTICUT LANDSCAPE BY HORACE WOLCOTT ROBBINS
ROBBINS CAPTURES THE PICTURESQUE BEAUTY OF THE CONNECTICUT
LANDSCAPE IN THIS ELEGANT PAINTING. CONNECTICUT MUNICIPAL
BONDS, IN WHICH THE FUND INVESTS, PROVIDE CAPITAL FOR THE
STATE'S CONTINUING IMPROVEMENT.
-------------------------------------
AIM Tax-Exempt Bond Fund of Connecticut is for shareholders who seek to earn a
high level of income that is free of both federal and Connecticut taxes.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Tax-Exempt Bond Fund of Connecticut performance figures are historical,
and they reflect the reinvestment of all distributions and changes in net
asset value.
o Had fees and expenses not been waived in the past, fund returns would have
been lower.
o When sales charges are included in performance figures, those figures
reflect the maximum 4.75% sales charge.
o The 30-day yield is calculated on the basis of a formula defined by the SEC.
The formula is based on the portfolio's potential earnings from dividends,
interest, yield-to-maturity or yield-to-call of the bonds in the portfolio,
net of all expenses and 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 During the fiscal year ended 3/31/00, the fund paid distributions of $0.5145
per share.
o Government securities, such as U.S. Treasury bills, notes and bonds, offer a
high degree of safety and are guaranteed as to the timely payment of
principal and interest if held to maturity. Fund shares are not insured, and
their value and yield will vary with market conditions.
o Revenue bonds are bonds issued to finance public works projects and
supported directly by the revenues of the project. General obligation bonds
are bonds backed by the full faith and credit (including the taxing and
further borrowing power) of a state or municipality. Revenue bonds often are
considered more attractive, since many public-works projects (water and
sewer improvements, for example) are necessities, and demand for them
remains constant regardless of economic conditions. Escrowed and
pre-refunded bonds are bonds whose repayment is guaranteed by the funds from
a second bond issue, usually U.S. Treasury bonds.
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 represents an approximation of the
performance of investment-grade municipal bonds.
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 TAX-EXEMPT BOND FUND OF CONNECTICUT
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
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 comparable to those of U.S. Treasury securities, which are
the Board of subject to federal income taxes. On the other hand, newly
THE FUND issued high-yield municipal bonds were offering yields well
APPEARS HERE] 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 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.
-------------------------------------
THUS, WE EXPECT
MUNICIPAL BONDS TO REMAIN A VIABLE
AND ATTRACTIVE INVESTMENT OPTION
-------------------------------------
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
MUNICIPAL BOND MARKET RECOVERS
FOLLOWING A DIFFICULT 1999
HOW DID THE FUND PERFORM DURING THIS PAST YEAR?
For the fiscal year ended March 31, 2000, AIM Tax-Exempt Bond Fund of
Connecticut returned 0.28% at net asset value, that is, without sales charges.
By comparison, the Lehman Municipal Bond Index--an index of approximately 40,000
investment-grade tax-exempt bonds--fell by 0.08% during the same period, while
the average Connecticut municipal debt fund tracked by Lipper, Inc., an
independent mutual fund performance monitor, returned-1.80%.
During the year, the fund's 30-day distribution rate, at net asset value,
rose from 4.69% to 4.85%. The fund's year-end distribution rate of 4.85%
represented a taxable equivalent yield of 8.41%. The fund's SEC 30-day yield was
4.15% at maximum offering price, for a taxable equivalent yield of 7.19%. That
tax-equivalent yield represented 123% of the yield on a 30-year Treasury bond,
which stood at 5.84% on March 31.
Net asset value per share remained within a narrow range of $10.33 to $11.02
during the fiscal year.
WHAT WERE THE MAJOR TRENDS IN THE BOND MARKET DURING THE YEAR? The past year was
disappointing for many bond investors, as the Fed hiked interest rates three
times in 1999 and twice in early 2000 in a preemptive effort to contain
inflation--inflation that to date has remained low. As oil prices tripled from
early 1999 to early 2000, and as the stock market's rise caused many Americans
to spend more freely, inflation fears were rekindled and the Fed felt obliged to
remain vigilant. During the period, the Treasury announced plans to begin buying
back long-term federal debt. This buyback caused some investors to worry about
scarcity in the years ahead, and prompted increased demand for 30-year Treasury
bonds, causing their yields to decline.
WHAT WERE THE MAJOR TRENDS IN THE MUNICIPAL-BOND MARKET DURING THE YEAR?
Despite a difficult year in which bond prices declined due to a series of
interest- rate increases, the yields on municipal bonds relative to Treasuries
are some of the most attractive we've seen in years. Indeed, as the reporting
period drew to a close, many new investment-grade municipal bonds offered
investors yields that approached, and sometimes exceeded, comparable Treasury
bond yields. As a result, many municipal bond investors enjoyed tax-free income
close to or in excess of that provided by taxable securities.
Issuance of municipal bonds declined by 18% from 1998 to 1999, from $321.0
billion to $263.3 billion, and issuance during the first quarter of 2000 was
down 39%
FUND PERFORMANCE
As of 3/31/00
FUND PROVIDES SOLID INCOME
================================================================================
30-Day Distribution Rate at NAV 4.85%
Taxable-Equivalent Distribution Rate 8.41%*
30-Day SEC Yield at Maximum Offering Price 4.15%
Taxable-Equivalent 30-Day SEC Yield 7.19%*
30-Year U.S. Treasury Bond Yield 5.84%
*Assumes highest marginal federal income tax rate of 39.6% and Connecticut state
income tax rate of 4.5%.
Sources: Bloomberg, Lehman Brothers.
================================================================================
================================================================================
FUND VS. 30-YEAR U.S. TREASURY BOND
(Bar Chart)
8.41% 7.19% 5.84%
TAXABLE TAXABLE 30-YEAR
EQUIVALENT EQUIVALENT U.S. TREASURY
DISTRIBUTION 30-DAY BOND
RATE* SEC YIELD
YIELD*
================================================================================
HISTORY OF NET ASSET VALUE STABILITY
10/3/89-3/31/00 (Line Chart)
================================================================================
10.00 10/3/89 10.66 9/92 10.86 9/95 11.13 9/98
10.05 10/89 10.65 12/92 11.01 12/95 11.07 12/98
9.99 3/90 10.88 3/93 10.81 3/96 11.00 3/99
10.02 6/90 11.08 6/93 10.76 6/96 10.77 6/99
9.77 9/90 11.33 9/93 10.8 9/96 10.61 9/99
10.07 12/90 11.29 12/93 10.88 12/96 10.43 12/99
10.11 3/91 10.51 3/94 10.77 3/97 10.51 3/00
10.19 6/91 10.63 6/94 10.9 6/97
10.4 9/91 10.58 9/94 11.01 9/97
10.52 12/91 10.34 12/94 11.09 12/97
10.31 3/92 10.71 3/95 11.04 3/98
10.55 6/92 10.77 6/95 11.04 6/98
================================================================================
There is no guarantee that the fund will maintain a constant NAV. Investment
return will vary, so you may have a gain or a loss when you sell shares. Past
performance cannot guarantee comparable future results.
-------------------------------------
INVESTORS IN MUNICIPAL BONDS
FARED BETTER BECAUSE
YIELD SPREADS BETWEEN
MUNICIPALS AND TREASURIES
WERE THE BEST IN YEARS.
-------------------------------------
See important fund and index disclosures inside front cover.
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
from year-earlier levels. States and municipalities benefited from the nation's
robust economy, collecting more income- and property-tax revenues and reducing
their need to issue debt. This decline in issuance resulted in greater demand
for, and better performance by, municipal bonds--particularly during the first
quarter of 2000.
HOW DID CONNECTICUT'S ECONOMY FARE DURING THE REPORTING PERIOD?
Connecticut continued its impressive economic growth during the fiscal year.
Jobs in the state have increased for 18 straight quarters, and in January the
state's unemployment rate stood at just 2.2%. Connecticut now has regained all
the jobs lost during the state's protracted recession of the early 1990s.
Connecticut is participating fully in the so-called new economy. Throughout
the state, 4,500 information-technology businesses employ 74,000 workers who
earn, on average, $50,000. Information technology has been the fastest-growing
industry segment in the state during the past decade.
30-YEAR AAA GENERAL OBLIGATION MUNICIPAL BOND YIELDS AS A PERCENTAGE OF
30-YEAR U.S. TREASURY BOND YIELDS
3/97-3/00
(Line Chart)
================================================================================
30-YEAR AAA
GENERAL OBLIGATION
MUNIS
--------------------------------------------------------------------------------
3/97 79.5
9/97 80.5
3/98 85
9/98 95
3/99 87.5
9/99 90.8
3/00 94
================================================================================
Over the last three years, yields on high-quality municipal bonds as a
percentage of Treasury bond yields have risen dramatically. In the fall of 1998,
following the Russian debt crisis, investors flocked to the safety of U.S.
Treasury securities, pushing down their yields. Recently, the expectation of a
scarcity of Treasury bonds has driven down their yields to such a degree that
tax-free munis now represent a bargin. Source: Bloomberg
GIVEN CURRENT ECONOMIC CONDITIONS, HOW HAVE YOU MANAGED THE PORTFOLIO?
As yields rose, we purchased longer-maturity municipal bonds to lock in higher
yields. Given our belief that we're approaching the end of the Fed's current
tightening cycle, we've begun to increase the fund's weighted average
maturity--from 12.1 years at the beginning of the fiscal year to 14.36 years at
the close of the fiscal year. As interest rates begin to turn downward, these
longer maturities will benefit the fund's shareholders. Duration of the fund's
portfolio increased from 4 years to 6.11 years during the reporting period.
WHAT DID THE FUND'S PORTFOLIO LOOK LIKE AT THE CLOSE OF THE FISCAL YEAR? The
quality of the portfolio changed little over the reporting period, consisting
exclusively of investment-grade bonds. Bonds rated AAA or AA composed 82.20% of
the fund's holdings at the close of the reporting period. Overall, at the
reporting period's end, the average credit quality of the fund's portfolio was
AA as rated by Standard & Poor's, Moody's and Fitch IBCA--widely known
credit-rating agencies. The historical ratings are based on analysis of the
bonds' investment quality.
At the close of the reporting period, credit-enhanced securities--those
backed by insurance or escrowed with U.S. Treasury securities--composed 39% of
the portfolio, up from 25% a year earlier.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
We remain generally optimistic about the direction of the Connecticut economy.
Employment, income, housing permits, retail sales, tax collections, business
starts and business confidence all ended 1999 on a strong note.
We also remain optimistic about bond markets in general, and tax-exempt
municipal bonds in particular. While bonds performed poorly in 1999,
historically it is rare that bond markets suffer bad years back-to-back.
Demographic trends also favor bonds. With 80 million "boomers" approaching
retirement, it's likely they are preparing to shift some of their assets from
equity to fixed-income markets.
================================================================================
PORTFOLIO COMPOSITION
As of 3/31/00, based on total net assets
================================================================================
TOP FIVE BOND HOLDINGS
% OF
COUPON MATURITY PORTFOLIO
--------------------------------------------------------------------------------
Connecticut 5.85% 11/15/28 5.38%
State Housing
Mortgage
Finance Program
Connecticut 3.81% 10/01/09 4.62%
State Special
Tax Obligation
Connecticut 6.50% 10/01/12 4.54%
State Special
Tax Obligation
Connecticut 5.50% 11/15/35 4.44%
State Housing
Mortgage
Finance Program
Connecticut 5.95% 05/15/17 4.09%
State Housing
Mortgage
Finance Program
================================================================================
BOND-TYPE DIVERSIFICATION
(Pie Chart)
GENERAL OBLIGATION 18%
REVENUE 82%
AVERAGE QUALITY RATING AA
NUMBER OF HOLDINGS 60
AVERAGE MATURITY 14.36 YEARS
DURATION 6.11 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 TAX-EXEMPT BOND FUND OF CONNECTICUT
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT VS. BENCHMARK INDEX
3/31/90-3/31/00
(Hypo Chart)
in thousands
================================================================================
AIM TAX-EXEMPT LEHMAN
BOND FUND MUNICIPAL BOND
OF CONNECTICUT INDEX
--------------------------------------------------------------------------------
3/31/90 9,523 10,000
3/31/91 10,325 10,922.5
3/31/92 11,307 12,013.9
3/31/93 12,727 13,518
3/31/94 12,971 13,831.6
3/31/95 13,956 14,859.3
3/31/96 14,826 16,104.8
3/31/97 15,543 16,982
3/31/98 16,752 18,801.7
3/31/99 17,529 19,967.4
3/31/00 17,579 19,951.5
Past performance cannot guarantee comparable future results.
Source: Lipper, Inc.
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
The chart compares your fund to a benchmark index. It is intended to give you a
general idea of how your fund performed compared to the bond market over the
period 3/31/90-3/31/00. It is important to understand the difference between
your fund and an index. Your fund's total return is shown with a sales charge,
and it includes fund expenses and management fees. An index measures the
performance of a hypothetical portfolio. Unlike your fund, the index is not
managed; therefore, there are no sales charges, expenses, or fees. You cannot
invest in an index. But if you could buy all the securities that make up a
particular index, you would incur expenses that would affect the return of your
investment.
AVERAGE ANNUAL TOTAL RETURNS
As of 3/31/00, including sales charges
================================================================================
10 years 5.80%
5 years 3.72
1 year -4.49*
*0.28% excluding sales charges
Your fund's total return includes sales charges, expenses and management fees.
For fund performance calculations and descriptions of the indexes cited on this
page, please see the inside front cover.
================================================================================
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
March 31, 2000
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MUNICIPAL
OBLIGATIONS-100.66%
EDUCATION-6.60%
Connecticut Area
Cooperative Educational
Services (Staff
Development/Administration
Facilities); Unlimited
Tax Series GO
5.625%, 07/15/19(b) A -- $1,060 $ 1,037,337
----------------------------------------------------------------
Connecticut Regional
School District No. 5;
Unlimited Tax Series
1992 GO
6.00%, 03/01/02(c)(d) AAA Aaa 335 349,717
----------------------------------------------------------------
Connecticut State Higher
Education Supplemental
Loan Authority (Family
Education Loan Program);
Series 1990 A RB
7.50%, 11/15/10(e) -- A1 1,060 1,072,794
----------------------------------------------------------------
2,459,848
----------------------------------------------------------------
GENERAL OBLIGATION-14.34%
Bridgeport (Town of),
Connecticut; Unlimited
Tax Series A GO
6.00%, 09/01/06(b) AAA Aaa 875 926,826
----------------------------------------------------------------
Brooklyn (City of),
Connecticut; Unlimited
Tax Series GO
5.50%, 05/01/06(b) AAA Aaa 250 258,980
----------------------------------------------------------------
5.70%, 05/01/08(b) AAA Aaa 250 261,367
----------------------------------------------------------------
Chester (Town of),
Connecticut; Unlimited
Tax Series 1989 GO
7.00%, 10/01/05 -- A 190 194,239
----------------------------------------------------------------
Connecticut (State of)
(General Purpose Public
Improvement); Unlimited
Tax Series 1991 A GO
6.75%, 03/01/01(c)(d) NRR NRR 680 708,621
----------------------------------------------------------------
Unlimited Tax Series
1992 A GO
6.50%, 03/15/02(c)(d) NRR NRR 300 315,795
----------------------------------------------------------------
Guam (Government of);
Unlimited Tax Series
1995 A GO
5.375%, 09/01/00 BBB- -- 250 250,798
----------------------------------------------------------------
Mansfield (City of),
Connecticut; Unlimited
Tax Series 1990 GO
6.00%, 06/15/07 -- A1 100 106,282
----------------------------------------------------------------
6.00%, 06/15/08 -- A1 100 106,786
----------------------------------------------------------------
6.00%, 06/15/09 -- A1 100 107,367
----------------------------------------------------------------
New Britain (City of),
Connecticut; Unlimited
Tax Series 1992 Various
Purpose GO
6.00%, 02/01/11(b) AAA Aaa 400 429,968
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GENERAL OBLIGATION-(CONTINUED)
North Canaan (City of),
Connecticut; Unlimited
Tax Series 1991 GO
6.50%, 01/15/08 -- A3 $ 125 $ 136,780
----------------------------------------------------------------
6.50%, 01/15/09 -- A3 125 137,619
----------------------------------------------------------------
6.50%, 01/15/10 -- A3 125 138,534
----------------------------------------------------------------
6.50%, 01/15/11 -- A3 125 139,141
----------------------------------------------------------------
Puerto Rico Commonwealth
(Public Improvement
Project); Unlimited Tax
Series 2000 GO
6.00%, 07/01/29 A Baa1 500 503,560
----------------------------------------------------------------
Somers (City of),
Connecticut; Unlimited
Tax Series 1990 Various
Purpose GO
6.00%, 12/01/10 -- A1 190 205,044
----------------------------------------------------------------
Westbrook (City of),
Connecticut; Unlimited
Tax Series 1992 GO
6.40%, 03/15/10(b) AAA Aaa 380 420,333
----------------------------------------------------------------
5,348,040
----------------------------------------------------------------
HEALTH CARE-17.89%
Connecticut Development
Authority (Elim Park
Baptist Home); Refunding
Series A RB
5.375%, 12/01/18 BBB+ -- 500 414,425
----------------------------------------------------------------
Connecticut Development
Authority (Life Care
Facility-Seabury);
Refunding Series RB
5.00%, 09/01/15(b) AA -- 500 463,470
----------------------------------------------------------------
Connecticut (State of),
Development Authority
(Pfizer Inc. Project);
Series 1992 PCR
6.55%, 02/15/13 AAA Aaa 250 264,132
----------------------------------------------------------------
Connecticut (State of),
Development Authority
(Weekly- Corporate
Independent Living
Project); Hospital VRD
Series RB (LOC-Chase
Manhattan Bank)
3.75%, 07/01/15(f) -- VMIG-1 2 2,000
----------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (Bridgeport
Hospital); Series 1992 A
RB
6.625%, 07/01/18(b) AAA Aaa 500 519,810
----------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (Danbury
Hospital);
Series 1991 E RB
6.50%, 07/01/14(b) AAA Aaa 750 774,540
----------------------------------------------------------------
Series G RB
5.625%, 07/01/25(b) AAA Aaa 250 243,890
----------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
HEALTH CARE-(CONTINUED)
Connecticut Health and
Education Facilities
Authority (Middlesex
Hospital); Series 1992 G
RB
6.25%, 07/01/02(c)(d) NRR NRR $1,100 $ 1,158,454
----------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (New Britain
Memorial Hospital);
Series 1991 A RB
7.75%, 07/01/02(c)(d) NRR -- 500 542,345
----------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (Stamford
Hospital); Series F RB
5.40%, 07/01/09(b) AAA Aaa 1,000 1,017,200
----------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (Veteran
Memorial Medical
Center); Series 1996 A
RB
5.50%, 07/01/26(b) AAA Aaa 500 477,915
----------------------------------------------------------------
Connecticut Health and
Education Facilities
Authority (Yale-New
Haven Hospital); Series
1990 F RB
7.10%, 07/01/00(c)(d) NRR NRR 775 795,995
----------------------------------------------------------------
6,674,176
----------------------------------------------------------------
HOUSING-30.06%
Connecticut Housing
Development Authority
(Housing Mortgage
Finance Program); RB
Series 1991 C,
Sub-Series C-3,
6.55%, 11/15/13 AA Aa2 290 301,754
----------------------------------------------------------------
Series D-2,
5.45%, 11/15/24(e) AA Aa2 1,250 1,156,413
----------------------------------------------------------------
Connecticut (State of)
(Housing Mortgage
Finance Program); RB
Series A-1, 5.70%,
05/15/08 AA Aa 100 102,457
----------------------------------------------------------------
Sub-Series A-3, 5.95%,
05/15/17 AA Aa3 1,500 1,523,970
----------------------------------------------------------------
Series E-1, 5.95%,
05/15/17 AA Aa2 500 508,380
----------------------------------------------------------------
Series 1993 E-1, 6.00%,
05/15/17 AA Aa 675 682,303
----------------------------------------------------------------
Series C-1, 6.30%,
11/15/17 AA Aa 1,270 1,315,504
----------------------------------------------------------------
Series C-2, 6.25%,
11/15/18 AA Aa2 750 774,472
----------------------------------------------------------------
Series C-2, 6.70%,
11/15/22(e) AA Aa2 90 92,389
----------------------------------------------------------------
Series C-2, 5.85%,
11/15/28(e) AA Aa2 2,065 2,006,355
----------------------------------------------------------------
Series A-2, 5.20%,
11/15/29(e) AA Aa2 1,250 1,090,775
----------------------------------------------------------------
Series C, 5.50%,
11/15/35(e) AA Aa2 1,775 1,657,264
----------------------------------------------------------------
11,212,036
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
LEASE RENTAL-1.12%
Connecticut (State of)
(Middletown Courthouse
Facilities Project);
Series 1991 Lease-Rental
Revenue COP
6.25%, 12/15/01(c)(d) NRR NRR $ 400 $ 419,020
----------------------------------------------------------------
TRANSPORTATION-14.50%
Connecticut (State of),
Special Parking
Obligation (Bradley
International Airport);
Series 2000 A RB
6.60%, 07/01/24(b)(e) A -- 250 250,800
----------------------------------------------------------------
Connecticut State Special
Tax Obligation
(Transportation
Infrastructure);
Series 1991 B RB
6.25%, 10/01/01(c)(d) NRR NRR 1,000 1,044,380
----------------------------------------------------------------
Series A
6.80%, 06/01/03(c)(d) NRR NRR 1,250 1,324,925
----------------------------------------------------------------
Series 1991 B
6.50%, 10/01/10 AA- A1 530 590,611
----------------------------------------------------------------
Connecticut State Special
Tax Obligation
(Transportation
Infrastructure Sales and
Excise Tax); Series 1991
B RB
6.50%, 10/01/12 AA- A1 1,500 1,692,225
----------------------------------------------------------------
Puerto Rico Commonwealth
(Highway and
Transportation
Authority); Series X RB
5.20%, 07/01/03 A Baa1 500 505,895
----------------------------------------------------------------
5,408,836
----------------------------------------------------------------
UTILITIES-2.33%
Guam (Government of) Power
Authority (Electrical,
Light & Power
Improvements); Series A
RB
5.25%, 10/01/34 BBB Baa3 1,000 870,150
----------------------------------------------------------------
WATER & SEWER-6.48%
Connecticut Development
Authority Water Facility
(Bridgeport Hydraulic
Co. Project); Refunding
Series RB
7.25%, 06/01/20 AA- -- 800 818,384
----------------------------------------------------------------
Connecticut State Clean
Water Fund; Series 1991
RB
7.00%, 01/01/11 AAA Aaa 1,100 1,143,417
----------------------------------------------------------------
Manchester (City of)
Connecticut Eighth
Utilities Fire District;
Unlimited Tax Series
1991 GO
6.75%, 08/15/06 -- Aa3 180 197,996
----------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WATER & SEWER-(CONTINUED)
South Central Connecticut
Regional Water
Authority; Eighth Series
1990 A Water System RB
6.60%, 08/01/00(c)(d) NRR NRR $ 250 $ 256,968
----------------------------------------------------------------
2,416,765
----------------------------------------------------------------
MISCELLANEOUS-7.34%
Connecticut Development
Authority (Economic
Development Projects);
Refunding Series 1992 A
RB
6.00%, 11/15/08 AA- Aa 500 510,660
----------------------------------------------------------------
Connecticut (State of),
Special Tax Obligation
(JP Morgan PUTTERS
Receipt); VRD Series 114
1999 A RB
3.81%, 10/01/09(f)(g) -- VMIG-1 1,725 1,725,000
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MISCELLANEOUS-(CONTINUED)
Virgin Islands Public
Financial Authority
(Gross Receipts Taxes);
Series 1999 A RB
6.125%, 10/01/29(b) A -- $ 500 $ 503,890
----------------------------------------------------------------
2,739,550
----------------------------------------------------------------
TOTAL INVESTMENTS-100.66% (Cost $36,750,721) 37,548,421
----------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS-(0.66)% (245,961)
----------------------------------------------------------------
NET ASSETS-100.00% $37,302,460
================================================================
</TABLE>
Investment Abbreviations:
COP -- Certificates of Participation
GO -- General Obligation Bonds
LOC -- Letter of Credit
PCR -- Pollution Control Revenue Bonds
PUTTERS -- Putable Tax Exempt Receipts
RB -- Revenue Bonds
VRD -- Variable Rate Demand
Notes to Schedule of Investments:
(a) Ratings assigned by Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P"). NRR indicates a security that is not re-rated
subsequent to funding of an escrow fund (consisting of U.S. Treasury
obligations); this funding is pursuant to an advance refunding of the
security. Ratings are not covered by Independent Auditors' Report.
(b) Secured by bond insurance provided by one of the following companies: AMBAC,
FGIC, FSA or MBIA.
(c) Security has an irrevocable call or mandatory put by the issuer. Market
value and maturity date reflect such call or put.
(d) Secured by an escrow fund of U.S. Treasury obligations.
(e) Security subject to the alternative minimum tax.
(f) Demand security; payable upon demand by the Fund at specified time intervals
no greater than thirteen months. Interest rate is redetermined periodically.
Rate shown is the rate in effect on 03/31/00.
(g) 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.
See Notes to Financial Statements.
7
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $36,750,721) $ 37,548,421
---------------------------------------------------------
Receivables for:
Capital stock sold 46,415
---------------------------------------------------------
Interest 688,609
---------------------------------------------------------
Investment for deferred compensation plan 28,833
---------------------------------------------------------
Other assets 2,107
---------------------------------------------------------
Total assets 38,314,385
---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 748,484
---------------------------------------------------------
Capital stock reacquired 106,877
---------------------------------------------------------
Dividends 61,409
---------------------------------------------------------
Deferred compensation 28,833
---------------------------------------------------------
Accrued advisory fees 16,983
---------------------------------------------------------
Accrued administrative services fees 4,235
---------------------------------------------------------
Accrued transfer agent fees 2,203
---------------------------------------------------------
Accrued distribution fees 23,053
---------------------------------------------------------
Accrued operating expenses 19,848
---------------------------------------------------------
Total liabilities 1,011,925
---------------------------------------------------------
Net assets applicable to shares
outstanding $ 37,302,460
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Authorized 1,000,000,000
---------------------------------------------------------
Outstanding 3,550,418
=========================================================
Net asset value and redemption price per
share $ 10.51
=========================================================
Offering price per share:
(Net asset value of $10.51 / 95.25%) $ 11.03
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended March 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $ 2,342,851
---------------------------------------------------------
EXPENSES:
Advisory fees 199,285
---------------------------------------------------------
Administrative services fees 49,944
---------------------------------------------------------
Custodian fees 2,101
---------------------------------------------------------
Transfer agent fees 22,866
---------------------------------------------------------
Professional fees 26,546
---------------------------------------------------------
Distribution fees 99,643
---------------------------------------------------------
Other 38,026
---------------------------------------------------------
Total expenses 438,411
---------------------------------------------------------
Less: Fees waived by advisor (5,871)
---------------------------------------------------------
Expenses paid indirectly (433)
---------------------------------------------------------
Net expenses 432,107
---------------------------------------------------------
Net investment income 1,910,744
---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Net realized gain (loss) on sales of
investment securities (308,420)
---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (1,602,460)
---------------------------------------------------------
Net gain (loss) on investment securities (1,910,880)
---------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ (136)
=========================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 11
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 $ 1,910,744 $ 1,969,711
-----------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities (308,420) 8,698
-----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (1,602,460) (113,211)
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (136) 1,865,198
-----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (1,927,885) (2,022,076)
-----------------------------------------------------------------------------------------
Net increase (decrease) from capital stock transactions (2,209,321) 1,030,126
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets (4,137,342) 873,248
-----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 41,439,802 40,566,554
-----------------------------------------------------------------------------------------
End of period $37,302,460 $41,439,802
-----------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $37,046,987 $39,259,242
-----------------------------------------------------------------------------------------
Undistributed net investment income (30,043) (17,677)
-----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (512,184) (201,923)
-----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 797,700 2,400,160
-----------------------------------------------------------------------------------------
$37,302,460 $41,439,802
=========================================================================================
</TABLE>
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 are
voted on exclusively by the shareholders of such portfolio. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to AIM
Tax-Exempt Bond Fund of Connecticut (the "Fund"). The investment objective of
the Fund is to earn a high level of current income exempt from federal taxes and
Connecticut taxes by investing at least 80% of its net assets in municipal
securities.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations--Portfolio securities are valued based on market
quotations or at fair value determined by a pricing service approved by the
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.
B. Securities Transactions and Investment Income--Securities transactions are
recorded on a trade date basis. Realized gains and losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income, adjusted for amortization of premiums and original issue
discounts, is recorded as earned from settlement date and is recorded on the
accrual basis. On March 31, 2000, undistributed net investment income was
increased by $4,775, undistributed net realized gain (loss) was decreased by
$1,841 and paid-in capital decreased by $2,934 as a result of differing
book/tax reclassifications. 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.
9
<PAGE> 12
D. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward (which may be carried forward to offset future taxable gains,
if any) of $209,019, which expires, if not previously utilized, through the
year 2008. The Fund cannot distribute capital gains to shareholders until
the tax loss carryforwards have been utilized. In addition, the Fund intends
to invest in such municipal securities to allow it to qualify to pay to
shareholders "exempt interest dividends," as defined in the Internal Revenue
Code.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.50% of
the Fund's average daily net assets. During the year ended March 31, 2000, AIM
waived advisory fees of $5,871.
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
$49,944 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 $16,463 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") pursuant to which AIM Distributors
serves as the distributor for the Fund. The Company has also adopted a plan
pursuant to Rule 12b-1 under the 1940 Act (the "Plan") with respect to the Fund,
whereby the Fund pays to AIM Distributors compensation at an annual rate of
0.25% of the Fund's average daily net assets. The Plan is designed to compensate
AIM Distributors for certain promotional and other sales related costs and
provides for periodic payments to selected dealers and financial institutions
who furnish continuing personal shareholder services to their customers who
purchase and own shares of the Fund. Any amounts not paid as a service fee under
such plan would constitute an asset-based sales charge. The Plan also imposes a
cap on the total sales charges, including asset-based sales charges, that may be
paid by the Fund. For the year ended March 31, 2000, the Fund paid AIM
Distributors $99,643 as compensation under the Plan.
AIM Distributors received commissions of $25,420 from sales of shares of the
Fund's capital stock 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 capital stock.
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 $5,036 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-INDIRECT EXPENSES
During the year ended March 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $433 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of the
Fund's total expenses of $433 during the year ended March 31, 2000.
NOTE 4-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 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.
10
<PAGE> 13
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 were $10,747,463 and
$12,752,238, 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 $1,244,839
------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (447,139)
------------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 797,700
========================================================================
Investments have the same cost for tax and financial statement purposes.
</TABLE>
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 615,888 $ 6,621,410 634,272 $ 7,019,083
---------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends 111,105 1,180,598 118,804 1,314,072
---------------------------------------------------------------------------------------------------------------
Reacquired (942,707) (10,011,329) (660,290) (7,303,029)
---------------------------------------------------------------------------------------------------------------
(215,714) $ (2,209,321) 92,786 $ 1,030,126
===============================================================================================================
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during each of the years in the five-year period ended March 31,
2000.
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.00 $ 11.04 $ 10.77 $ 10.81 $ 10.71
------------------------------------------------------------ ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.51 0.53 0.55 0.56 0.56
------------------------------------------------------------ ------- ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) (0.49) (0.03) 0.27 (0.05) 0.10
------------------------------------------------------------ ------- ------- ------- ------- -------
Total from investment operations 0.02 0.50 0.82 0.51 0.66
------------------------------------------------------------ ------- ------- ------- ------- -------
Less distributions from net investment income (0.51) (0.54) (0.55) (0.55) (0.56)
------------------------------------------------------------ ------- ------- ------- ------- -------
Net asset value, end of period $ 10.51 $ 11.00 $ 11.04 $ 10.77 $ 10.81
============================================================ ======= ======= ======= ======= =======
Total return(a) 0.28% 4.64% 7.78% 4.84% 6.24%
============================================================ ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $37,302 $41,440 $40,567 $38,118 $39,355
============================================================ ======= ======= ======= ======= =======
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.09%(b) 0.99% 0.88% 0.72% 0.66%
============================================================ ======= ======= ======= ======= =======
Without fee waivers and/or expense reimbursements 1.10%(b) 1.11% 1.11% 1.09% 1.16%
============================================================ ======= ======= ======= ======= =======
Ratio of net investment income to average net assets 4.79%(b) 4.78% 5.02% 5.18% 5.16%
============================================================ ======= ======= ======= ======= =======
Portfolio turnover rate 28% 7% 5% 17% 17%
============================================================ ======= ======= ======= ======= =======
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $39,857,079.
11
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Tax-Exempt Bond Fund of Connecticut:
We have audited the accompanying statement of assets and
liabilities of AIM Tax-Exempt Bond Fund of Connecticut (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 in the five-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
Tax-Exempt Bond Fund of Connecticut 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 in the five-year period
then ended, in conformity with accounting principles
generally accepted in the United States of America.
KPMG
May 1, 2000
Houston, Texas
12
<PAGE> 15
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; 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 its fiscal year ended March 31, 2000.
AIM Tax-Exempt Bond Fund of Connecticut paid ordinary dividends in the amount of
$0.5145 per share to shareholders during the Fund's tax 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.
<PAGE> 16
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 AIM Money Market Fund leadership in the mutual-fund industry
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund since 1976 and managed approximately $176
AIM Capital Development Fund billion in assets for more than 7.4
AIM Constellation Fund(1) 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 March 31, 2000.
AIM Mid Cap Growth Fund AIM Euroland Growth Fund(5) The AIM Family of Funds--Registered
AIM Mid Cap Opportunities Fund(2) AIM European Development Fund Trademark-- is distributed nationwide,
AIM Select Growth Fund AIM International Equity Fund and AIM today is the eighth-largest mutual
AIM Small Cap Growth Fund(3) AIM Japan Growth Fund fund complex in the United States in
AIM Small Cap Opportunities Fund(4) AIM Latin American Growth Fund assets under management, according to
AIM Value Fund AIM New Pacific Growth Fund(8) Strategic Insight, an independent mutual
AIM Weingarten Fund 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(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.
[MFS DALBAR AWARD LOGO] [AIM LOGO APPEARS HERE]
--Registered Trademark--
Invest with DISCIPLINE
--Registered Trademark--
A I M Distributors, Inc. TCT-AR-1
