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AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
CLASS A SHARES
Supplement dated February 4, 2000
to the Prospectus dated July 29, 1999
At a meeting held on February 3, 2000, the Board of Directors of AIM
Tax-Exempt Funds, Inc. (the company), on behalf of AIM Tax-Exempt Bond Fund
of Connecticut (the fund), voted to request shareholders to approve the
following items that will affect the fund:
- - An Agreement and Plan of Reorganization which provides for the
reorganization of the company, which is currently a Maryland
corporation, as a Delaware business trust;
- - A new advisory agreement between the company and A I M Advisors, Inc.
(AIM). The principal changes to the advisory agreement are (i) the
deletion of references to the provision of administrative services and
certain expense limitations that are no longer applicable, and (ii)
the clarification of provisions relating to delegations of
responsibilities and the non-exclusive nature of AIM's services. The
revised advisory agreement does not change the fees paid by the fund
(except that the agreement permits the fund to pay a fee to AIM in
connection with any new securities lending program implemented in
the future);
- - Changing the fund's fundamental investment restrictions. The
proposed revisions to the fund's fundamental investment
restrictions are described in a supplement to the fund's statement
of additional information; and
- - Changing the fund's investment objective and making it
non-fundamental. The investment objective of the fund would be
changed by deleting references to the types of securities that the
fund will purchase to achieve its objective. If the investment
objective of the fund becomes non-fundamental, it can be changed in
the future by the Board of Directors of the company without further
approval by shareholders. Pursuant to this proposal, the fund's
investment objective would read: "The fund's investment objective is
to earn a high level of current income exempt from federal taxes and
Connecticut taxes."
The Board of Directors of the company has called a meeting of the fund's
shareholders to be held on or about May 3, 2000 to vote on these and other
proposals. Only shareholders of record as of February 18, 2000 will be
entitled to vote at the meeting. Proposals that are approved are expected
to become effective on or about May 24, 2000.
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AIM TAX-EXEMPT CASH FUND
CLASS A SHARES
Supplement dated February 4, 2000
to the Prospectus dated July 29, 1999,
as revised September 23, 1999
At a meeting held on February 3, 2000, the Board of Directors of AIM
Tax-Exempt Funds, Inc. (the company), on behalf of AIM Tax-Exempt Cash Fund
(the fund), voted to request shareholders to approve the following items
that will affect the fund:
- - An Agreement and Plan of Reorganization which provides for the
reorganization of the company, which is currently a Maryland
corporation, as a Delaware business trust;
- - A new advisory agreement between the company and A I M Advisors, Inc.
(AIM). The principal changes to the advisory agreement are (i) the
deletion of references to the provision of administrative services
and certain expense limitations that are no longer applicable, and
(ii) the clarification of provisions relating to delegations of
responsibilities and the non-exclusive nature of AIM's services. The
revised advisory agreement does not change the fees paid by the fund
(except that the agreement permits the fund to pay a fee to AIM in
connection with any new securities lending program implemented in
the future);
- - Changing the fund's fundamental investment restrictions. The
proposed revisions to the fund's fundamental investment
restrictions are described in a supplement to the fund's statement
of additional information; and
- - Changing the fund's investment objective so that it is
non-fundamental. If the investment objective of the fund becomes
non-fundamental, it can be changed in the future by the Board of
Directors of the company without further approval by shareholders.
The Board of Directors of the company has called a meeting of the fund's
shareholders to be held on or about May 3, 2000 to vote on these and other
proposals. Only shareholders of record as of February 18, 2000 will be
entitled to vote at the meeting. Proposals that are approved are expected
to become effective on or about May 24, 2000.
<PAGE> 3
AIM TAX-FREE INTERMEDIATE FUND
CLASS A SHARES
Supplement dated February 4, 2000
to the Prospectus dated July 29,1999
At a meeting held on February 3, 2000, the Board of Directors of AIM
Tax-Exempt Funds, Inc. (the company), on behalf of AIM Tax-Free
Intermediate Fund (the fund), voted to request shareholders to approve the
following items that will affect the fund:
- - An Agreement and Plan of Reorganization which provides for the
reorganization of the company, which is currently a Maryland
corporation, as a Delaware business trust;
- - A new advisory agreement between the company and A I M Advisors,
Inc. (AIM). The principal changes to the advisory agreement are
(i) the deletion of references to the provision of administrative
services and certain expense limitations that are no longer
applicable, and (ii) the clarification of provisions relating to
delegations of responsibilities and the non-exclusive nature of
AIM's services. The revised advisory agreement does not change the
fees paid by the fund (except that the agreement permits the fund
to pay a fee to AIM in connection with any new securities lending
program implemented in the future);
- - Changing the fund's fundamental investment restrictions. The
proposed revisions to the fund's fundamental investment
restrictions are described in a supplement to the fund's statement
of additional information; and
- - Changing the fund's investment objective and making it
non-fundamental. The investment objective of the fund would be
changed by deleting references to the types of securities that the
fund will purchase to achieve its objective. If the investment
objective of the fund becomes non-fundamental, it can be changed
in the future by the Board of Directors of the company without
further approval by shareholders. Pursuant to this proposal, the
fund's investment objective would read: "The fund's investment
objective is to generate as high a level of tax-exempt income as is
consistent with preservation of capital."
The Board of Directors of the company has called a meeting of the fund's
shareholders to be held on or about May 3, 2000 to vote on these and other
proposals. Only shareholders of record as of February 18, 2000 will be
entitled to vote at the meeting. Proposals that are approved are expected
to become effective on or about May 24, 2000.
<PAGE> 4
AIM HIGH INCOME MUNICIPAL FUND
CLASS A, CLASS B AND CLASS C SHARES
Supplement dated February 4, 2000
to the Prospectus dated July 29, 1999,
as revised September 23, 1999
At a meeting held on February 3, 2000, the Board of Directors of AIM
Tax-Exempt Funds, Inc. (the company), on behalf of AIM High Income
Municipal Fund (the fund), voted to request shareholders to approve the
following items that will affect the fund:
- - An Agreement and Plan of Reorganization which provides for the
reorganization of the company, which is currently a Maryland
corporation, as a Delaware business trust;
- - A new advisory agreement between the company and A I M Advisors, Inc.
(AIM). The principal changes to the advisory agreement are (i) the
deletion of references to the provision of administrative services
and certain expense limitations that are no longer applicable, and
(ii) the clarification of provisions relating to delegations of
responsibilities and the non-exclusive nature of AIM's services. The
revised advisory agreement does not change the fees paid by the fund
(except that the agreement permits the fund to pay a fee to AIM in
connection with any new securities lending program implemented in
the future);
- - Changing the fund's fundamental investment restrictions. The
proposed revisions to the fund's fundamental investment
restrictions are described in a supplement to the fund's statement
of additional information; and
- - Changing the fund's investment objective so that it is
non-fundamental. If the investment objective of the fund becomes
non-fundamental, it can be changed in the future by the Board of
Directors of the company without further approval by shareholders.
The Board of Directors of the company has called a meeting of the fund's
shareholders to be held on or about May 3, 2000 to vote on these and other
proposals. Only shareholders of record as of February 18, 2000 will be
entitled to vote at the meeting. Proposals that are approved are expected
to become effective on or about May 24, 2000.
<PAGE> 5
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM TAX-EXEMPT CASH FUND
AIM TAX-FREE INTERMEDIATE FUND
AIM HIGH INCOME MUNICIPAL FUND
(SERIES PORTFOLIOS OF AIM TAX-EXEMPT FUNDS, INC.)
Supplement dated February 4, 2000
to the Statement of Additional Information dated July 29, 1999,
as supplemented October 1, 1999
This supplement supersedes and replaces in its entirety the supplement dated
October 1, 1999.
At a meeting held on February 3, 2000, the Board of Directors of AIM Tax-Exempt
Funds, Inc. (the "Company"), on behalf of its series portfolios (the "Funds"),
voted to request shareholder approval to amend the Funds' fundamental
investment restrictions. The Board of Directors has called a meeting of the
Funds' shareholders to be held on or about May 3, 2000. Only shareholders of
record as of February 18, 2000 are entitled to vote at the meeting. Proposals
that are approved are expected to become effective on or about May 24, 2000.
If shareholders approve the proposal to amend the Funds' fundamental investment
restrictions, each of AIM Tax-Exempt Bond Fund of Connecticut, AIM Tax-Exempt
Cash Fund, AIM Tax-Free Intermediate Fund and AIM High Income Municipal Fund
will operate under the following fundamental investment restrictions:
Each Fund is subject to the following investment restrictions, which may be
changed only by a vote of a majority of such fund's outstanding shares, except
that AIM Tax-Exempt Bond Fund of Conneticut is not subject to restriction (a):
(a) the Fund is a "diversified company" as defined in the 1940 Act.
The Fund will not purchase the securities of any issuer if, as a result,
the Fund would fail to be a diversified company within the meaning of the
1940 Act, and the rules and regulations promulgated thereunder, as such
statute, rules and regulations are amended from time to time or are
interpreted from time to time by the SEC staff (collectively, the 1940
Act laws and interpretations) or except to the extent that the Fund may
be permitted to do so by exemptive order or similar relief (collectively,
with the 1940 Act laws and interpretations, the 1940 Act laws,
interpretations and exemptions). In complying with this restriction,
however, the Fund may purchase securities of other investment companies
to the extent permitted by the 1940 Act laws, interpretations and
exemptions.
(b) the Fund may not borrow money or issue senior securities, except
as permitted by the 1940 Act laws, interpretations and exemptions.
(c) the Fund may not underwrite the securities of other issuers.
This restriction does not prevent the Fund from engaging in transactions
involving the acquisition, disposition or resale of its portfolio
securities, regardless of whether the fund may be considered to be an
underwriter under the Securities Act of 1933.
(d) the Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act
laws, interpretations and exemptions) of its investments in the
securities of issuers primarily engaged in the same industry. This
restriction does not limit the Fund's investments in (i) obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, (ii) tax-exempt obligations issued by governments or
political subdivisions of governments, or (iii) with respect to AIM
Tax-Exempt Cash Fund, bank instruments. In complying with this
restriction, the Fund will not consider a bank-issued guaranty or
financial guaranty insurance as a separate security.
(e) the Fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments.
This restriction does not prevent the Fund from investing in issuers that
invest,
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<PAGE> 6
deal, or otherwise engage in transactions in real estate or interests
therein, or investing in securities that are secured by real estate or
interests therein.
(f) the Fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or
other instruments. This restriction does not prevent the Fund from
engaging in transactions involving futures contracts and options thereon
or investing in securities that are secured by physical commodities.
(g) the Fund may not make personal loans or loans of its assets to
persons who control or are under common control with the Fund, except to
the extent permitted by 1940 Act laws, interpretations and exemptions.
This restriction does not prevent the Fund from, among other things,
purchasing debt obligations, entering into repurchase agreements, loaning
its assets to broker-dealers or institutional investors, or investing in
loans, including assignments and participation interests.
(h) the Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objectives, policies and restrictions as the Fund.
The investment restrictions set forth above provide the Funds with the ability
to operate under new interpretations of the 1940 Act or pursuant to exemptive
relief from the SEC without receiving prior shareholder approval of the change.
Even though the Funds have this flexibility, the Board of Directors has adopted
internal guidelines for the Funds relating to certain of these restrictions
which the adviser must follow in managing the Funds. Any changes to these
guidelines, which are set forth below, require the approval of the Board of
Directors.
1. In complying with the fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total
assets (and for AIM Tax-Exempt Cash Fund, with respect to 100% of its
total assets), purchase securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities), if, as a result, (i) more than 5% of the Fund's
total assets would be invested in the securities of that issuer, except
as permitted by Rule 2a-7 under the 1940 Act, or (ii) the Fund would
hold more than 10% of the outstanding voting securities of that issuer.
The Fund may (i) purchase securities of other investment companies as
permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its
assets in securities of other money market funds and lend money to
other investment companies and their series portfolios that have AIM as
an investment adviser, subject to the terms and conditions of any
exemptive orders issued by the SEC. (This restriction does not apply to
AIM Tax-Exempt Bond Fund of Connecticut.)
2. In complying with the fundamental restriction regarding borrowing
money and issuing senior securities, the Fund may borrow money in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). The Fund may borrow
from banks, broker/dealers or other investment companies or their
series portfolios that have AIM or an affiliate of AIM as an investment
advisor (an AIM fund). The Fund may not borrow for leveraging, but may
borrow for temporary or emergency purposes, in anticipation of or in
response to adverse market conditions, or for cash management purposes.
The Fund may not purchase additional securities when any borrowings
from banks exceed 5% of the fund's total assets.
3. In complying with the fundamental restriction regarding industry
concentration, the Fund may invest up to 25% of its total assets in the
securities of issuers whose principal business activities are in the
same industry.
4. In complying with the fundamental restriction with regard to making
loans, the Fund may lend up to 33 1/3% of its total assets and may lend
money to another AIM fund, on such terms and conditions as the SEC may
require in an exemptive order.
5. Notwithstanding the fundamental restriction with regard to investing
all assets in an open-end fund, the Fund may not invest all of its
assets in the securities of a single open-end management investment
company with the same fundamental investment objectives, policies and
limitations as the Fund.
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If a percentage restriction is adhered to at the time of investment, a later
change in percentage resulting from changes in values of assets will not be
considered a violation of the restriction.
Effective immediately, the following new sections are added after the paragraph
appearing under the heading "INVESTMENT PROGRAM AND RESTRICTIONS - INVESTMENT
IN SECURITIES OWNED BY OFFICERS AND DIRECTORS" on page 20 of the Statement of
Additional Information:
"INVESTMENT IN OTHER INVESTMENT COMPANIES
Each of the Funds may invest in other investment companies to the
extent permitted by the 1940 Act, and rules and regulations thereunder,
and if applicable, exemptive orders granted by the SEC. The following
restrictions apply to investments in other investment companies other
than Affiliated Money Market Funds (defined below): (i) a Fund may not
purchase more than 3% of the total outstanding voting stock of another
investment company; (ii) a Fund may not invest more than 5% of its total
assets in securities issued by another investment company; and (iii) a
Fund may not invest more than 10% of its total assets in securities
issued by other investment companies other than Affiliated Money Market
Funds. With respect to a Fund's purchase of shares of another investment
company, including Affiliated Money Market Funds, the Fund will
indirectly bear its proportionate share of the advisory fees and other
operating expenses of such investment company. The Funds have obtained an
exemptive order from the SEC allowing them to invest in money market
funds that have AIM or an affiliate of AIM as an investment adviser (the
"Affiliated Money Market Funds"), provided that investments in Affiliated
Money Market Funds do not exceed 25% of the total assets of such Fund.
With respect to a Fund's purchase of shares of the Affiliated Money
Market Funds, the Fund will indirectly pay the advisory fees and other
operating expenses of the Affiliated Money Market Funds.
TEMPORARY DEFENSIVE INVESTMENTS
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, each of the Funds
may temporarily hold all or a portion of its assets in cash, money market
instruments, bonds, or other debt securities. Each of the Funds may also
invest up to 25% of its total assets in Affiliated Money Market Funds for
these purposes. For a description of the various rating categories of
corporate bonds and commercial paper in which the Funds may invest, see
"Ratings of Securities" in this Statement of Additional Information."
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