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As filed with the Securities and Exchange Commission on May 3, 1996
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-effective Amendment No. Post-effective Amendment No.
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(Check appropriate box or boxes)
AIM FUNDS GROUP
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(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza
Suite 1919
Houston, TX 77046
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(Address of Principal Executive Offices)
Registrant's Telephone Number: (713) 626-1919
Name and Address of Agent for Service: Copy to:
CAROL F. RELIHAN, ESQUIRE MARTHA J. HAYS, ESQUIRE
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll
11 Greenway Plaza 1735 Market Street, 51st Floor
Suite 1919 Philadelphia, PA 19103
Houston, TX 77046
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective under the Securities Act of
1933.
No filing fee is required because Registrant has registered an indefinite
number of shares under the Securities Act of 1933 pursuant to Rule 24f-2 under
the Investment Company Act of 1940. Registrant filed its notice pursuant to
Rule 24f-2 for the fiscal year ending December 31, 1995 on February 26, 1996.
Registrant is filing a copy of its notice under Rule 24f-2 as an exhibit to
this Registration Statement. Pursuant to Rule 429 under the Securities Act of
1933, this Registration Statement relates to shares previously registered on
Form N-1A (Registration No. 2-27334).
It is proposed that this filing will become effective on June 3, 1996
pursuant to Rule 488.
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AIM FUNDS GROUP
Cross Reference Sheet
Pursuant to Rule 481(a) under the Securities Act of 1933
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LOCATION IN COMBINED PROXY
FORM N-14 ITEM NO. STATEMENT AND PROSPECTUS
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PART A
Item 1. Beginning of Registration Statement Cover page of Registration Statement; Front
and Outside Front Cover Page of Cover Page of Prospectus
Prospectus
Item 2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
Item 3. Fee Table, Synopsis Information and Synopsis; Risk Factors
Risk Factors
Item 4. Information About the Transaction Reasons for the Transaction; Synopsis; Additional
Information About the Agreement; Rights of
Shareholders; Capitalization
Item 5. Information About the Registrant Front Cover Page of Prospectus; Synopsis; Risk
Factors; Comparison of Investment Objectives and
Policies; Financial Information; Additional Information
About AIM High Yield; Comparison of Closed-End and
Open-End Investment Companies; Information Filed
with the Securities and Exchange Commission
Item 6. Information About the Company Being Front Cover Page of Prospectus; Comparison of
Acquired Investment Objectives and Policies; Financial
Information; Additional Information About ASIF;
Comparison of Closed-End and Open-End Investment
Companies; Information Filed with the Securities and
Exchange Commission
Item 7. Voting Information Prospectus Cover Page; Notice of Annual Meeting of
Shareholders; Introduction; Ownership of AIM
High Yield and ASIF Shares
Item 8. Interest of Certain Persons and Experts Not Applicable
Item 9. Additional Information Required for Not Applicable
Reoffering by Persons Deemed to be
Underwriters
PART B
Item 10. Cover Page Cover Page of Statement of Additional Information
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Item 11. Table of Contents Cover Page of Statement of Additional Information
Item 12. Additional Information about the Additional Information About AFG and AIM High Yield;
Registrant Incorporation of Documents by Reference in the
Statement of Additional Information
Item 13. Additional Information about the Not Applicable
Company Being Acquired
Item 14. Financial Statements Financial Information; Incorporation of Documents
by Reference in the Statement of Additional
Information; Incorporation of Documents
by Reference in Part C
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PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this document.
<PAGE> 4
AIM STRATEGIC INCOME FUND, INC.
11 GREENWAY PLAZA, SUITE 1919
HOUSTON, TEXAS 77046
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 19, 1996
TO THE SHAREHOLDERS OF AIM STRATEGIC INCOME FUND, INC.
NOTICE IS HEREBY GIVEN that an Annual Meeting of Shareholders of AIM
Strategic Income Fund, Inc. ("ASIF") will be held at 11 Greenway Plaza, Suite
1919, Houston, Texas, 77046 on July 19, 1996, at 3:00 p.m. Central time, for
the following purposes:
1. To approve an Agreement and Plan of Reorganization (the "Agreement")
between ASIF and AIM Funds Group ("AFG") and the consummation of the
transactions contemplated therein (the "Transaction"). Pursuant to the
Agreement, ASIF will transfer substantially all of its assets to AIM High
Yield Fund ("AIM High Yield"), a portfolio of AFG. Upon such transfer, AIM
High Yield will assume substantially all the liabilities of ASIF and AFG will
issue Class A shares of AIM High Yield directly to the shareholders of ASIF.
Each shareholder of ASIF will receive a number of AIM High Yield shares with
an aggregate net asset value equal to the aggregate net asset value of his or
her shares of ASIF. The Transaction has been structured as a tax-free
reorganization. No sales charge will be imposed in connection with the
Transaction.
2. To elect two directors, each to serve until the expiration of a
three-year term, or until a successor is duly elected or qualified.
3. To ratify or reject the selection of KPMG Peat Marwick LLP as
independent auditors for ASIF for its fiscal year ending December 31, 1996.
4. To transact any other business, not currently contemplated, that may
properly come before the Annual Meeting, in the discretion of the proxies or
their substitutes.
The Transaction is described in the attached Combined Proxy Statement and
Prospectus.
Shareholders of record as of the close of business on May 29, 1996, are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY WHICH IS BEING SOLICITED BY THE MANAGEMENT OF
ASIF. THIS IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE ANNUAL
MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE
SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN
NOTICE OF REVOCATION TO ASIF AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY
VOTING IN PERSON AT THE ANNUAL MEETING.
By Order of the Board of Directors,
Carol F. Relihan
Secretary
June 7, 1996
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AIM STRATEGIC INCOME FUND, INC. AIM HIGH YIELD FUND
(A PORTFOLIO OF AIM FUNDS GROUP)
COMBINED PROXY STATEMENT AND PROSPECTUS
DATED: JUNE 7, 1996
This document is being furnished in connection with an Annual Meeting of
Shareholders of AIM Strategic Income Fund, Inc. ("ASIF"), to be held on July
19, 1996 at 3:00 p.m. Central time (such meeting and any adjournment thereof
are referred to as the "Annual Meeting").
At the Annual Meeting, the shareholders of ASIF are being asked to
consider and approve a proposed Agreement and Plan of Reorganization (the
"Agreement") between ASIF and AIM Funds Group ("AFG") and the consummation of
the transactions contemplated therein (the "Transaction"). THE BOARD OF
DIRECTORS OF ASIF HAS UNANIMOUSLY APPROVED THE AGREEMENT AND TRANSACTION AS
BEING FAIR TO, AND IN THE BEST INTERESTS OF, ASIF SHAREHOLDERS.
Pursuant to the Agreement, ASIF will transfer substantially all of its
assets to AIM High Yield Fund ("AIM High Yield"), a portfolio of AFG, AIM High
Yield will assume substantially all of the liabilities of ASIF and AFG will
issue Class A shares of AIM High Yield directly to shareholders of ASIF. Each
shareholder of ASIF will receive a number of AIM High Yield shares with an
aggregate net asset value equal to the aggregate net asset value of his or her
shares of ASIF. As soon as reasonably practicable after the closing of the
Transaction, ASIF will pay or make provision for payment of all of its
liabilities not assumed by AIM High Yield, and will pay a dividend to ASIF's
shareholders consisting of all undistributed income and net capital gains, if
any, recognized prior to closing of the Transaction. ASIF shall then
deregister as an investment company and dissolve its existence as a corporation
under Maryland law. The Transaction has been structured as a tax-free
reorganization. No sales charge will be imposed in connection with the
Transaction.
AIM HIGH YIELD IS A SERIES PORTFOLIO OF AFG, AN OPEN-END, SERIES,
MANAGEMENT INVESTMENT COMPANY. THE INVESTMENT OBJECTIVE OF AIM HIGH YIELD IS
TO ACHIEVE A HIGH LEVEL OF CURRENT INCOME BY INVESTING PRIMARILY IN PUBLICLY
TRADED DEBT SECURITIES OF LESS THAN INVESTMENT GRADE. THE INVESTMENT OBJECTIVE
OF ASIF IS TO SEEK HIGH CURRENT INCOME CONSISTENT WITH STABILITY OF PRINCIPAL.
AIM HIGH YIELD'S INVESTMENT OBJECTIVE IS SIMILAR TO THAT OF ASIF, ALTHOUGH THE
TYPES OF SECURITIES THE TWO FUNDS PURCHASE TO ACHIEVE THEIR OBJECTIVES DIFFER.
ASIF SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING IN CONVERTIBLE
SECURITIES, WHICH MAY BE RATED AS LESS THAN INVESTMENT GRADE, AND BY EMPLOYING
SHORT SELLING TO ENHANCE INCOME AND HEDGE AGAINST MARKET RISK. AIM HIGH YIELD
MAY INVEST UP TO 100% OF ITS NET ASSETS IN NON-INVESTMENT GRADE DEBT
SECURITIES, COMMONLY REFERRED TO AS "JUNK BONDS." JUNK BONDS ARE CONSIDERED TO
BE SPECULATIVE, AND ENTAIL GREATER RISKS, INCLUDING DEFAULT RISKS, THAN THOSE
FOUND IN HIGHER RATED DEBT SECURITIES. SEE "COMPARISON OF INVESTMENT
OBJECTIVES AND POLICIES" AND "RISK FACTORS."
At the Annual Meeting, ASIF shareholders will also be asked to elect two
directors to serve a term of three years, to ratify the selection of ASIF's
independent auditors for the fiscal year ending December 31, 1996, and to
transact such other business as may properly come before the Annual Meeting.
The election of directors and the proposal to ratify independent auditors are
matters ordinarily brought before the shareholders at ASIF's annual meetings,
and are necessary actions in the event that, for any reason, the Transaction
and the subsequent dissolution of ASIF are not approved or effected.
The principal executive offices of ASIF and AFG are located at 11 Greenway
Plaza, Suite 1919, Houston, Texas 77046 (telephone: (800) 347-4246).
This Combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus") sets forth concisely the information that a shareholder
of ASIF should know before voting on the Agreement. It should be read and
retained for future reference.
THE MOST RECENT ANNUAL REPORT FOR ASIF IS AVAILABLE AT NO COST TO ASIF
SHAREHOLDERS UPON WRITTEN OR ORAL REQUEST BY CONTACTING ASIF AT 11 GREENWAY
PLAZA, SUITE 1919, HOUSTON, TEXAS 77210-4739 OR BY CALLING (800) 347-4246, AND
IS INCORPORATED BY REFERENCE HEREIN. THE PROSPECTUS OF AIM HIGH YIELD DATED
MAY 1, 1996 (THE "AFG PROSPECTUS"), AND STATEMENT OF ADDITIONAL INFORMATION FOR
AIM HIGH YIELD DATED MAY 1, 1996 HAVE BEEN FILED WITH THE SEC AND ARE
INCORPORATED BY REFERENCE HEREIN. SUCH DOCUMENTS ARE AVAILABLE WITHOUT CHARGE
BY WRITING TO A I M DISTRIBUTORS, INC., P.O. BOX 4739, HOUSTON, TEXAS
77210-4739 OR BY CALLING (800) 347-4246.
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THE SHARES OF AIM HIGH YIELD ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND AIM HIGH YIELD'S SHARES ARE NOT
FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. SHARES
OF AIM HIGH YIELD INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 7
TABLE OF CONTENTS
PAGE
INTRODUCTION ........................................................ 1
PROPOSAL 1 - THE TRANSACTION............................................ 2
REASONS FOR THE TRANSACTION.......................................... 2
SYNOPSIS............................................................. 4
The Transaction................................................... 4
Comparison of AIM High Yield and ASIF............................. 4
RISK FACTORS......................................................... 10
Investment Objectives and Policies................................ 10
Risks Regarding Non-Investment Grade Debt Securities.............. 10
Investment in Foreign Securities.................................. 10
Foreign Exchange Transactions..................................... 11
Risk Factors Regarding Foreign Securities......................... 11
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES..................... 12
Investment Objectives............................................. 12
Investment Policies............................................... 12
Investment Restrictions........................................... 13
Additional Investment Policies of ASIF............................ 18
Portfolio Managers................................................ 23
FINANCIAL INFORMATION................................................ 24
Management Discussion and Analysis of Performance................. 26
ADDITIONAL INFORMATION ABOUT THE AGREEMENT........................... 26
Terms of the Transaction.......................................... 26
Transfer of Assets and Liabilities................................ 26
Other Terms....................................................... 26
Federal Tax Consequences.......................................... 27
Accounting Treatment.............................................. 28
ADDITIONAL INFORMATION ABOUT AIM HIGH YIELD.......................... 28
ADDITIONAL INFORMATION ABOUT ASIF.................................... 28
Investment Advisor................................................ 28
Share Price Data ................................................. 29
Valuation of Portfolio Securities................................. 30
Brokerage and Portfolio Transactions.............................. 30
Distributions..................................................... 30
Dividend Reinvestment Plan........................................ 31
Share Repurchases and Tenders, Possible Conversion to Open-End
Investment Company............................................. 32
Description of Common Stock....................................... 32
Certain Anti-Takeover Provisions of the Articles of Incorporation
and By-Laws.................................................... 33
COMPARISON OF CLOSED-END AND OPEN-END INVESTMENT COMPANIES........... 34
General........................................................... 34
Portfolio Management.............................................. 34
Senior Securities................................................. 34
Principal Underwriter............................................. 35
(i)
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PAGE
RIGHTS OF SHAREHOLDERS............................................... 35
Liability of Shareholders......................................... 35
Election of Directors/Trustees; Annual Shareholder Meetings....... 35
Terms of Directors/Trustees....................................... 36
Removal of Directors/Trustees..................................... 36
Special Meetings of Shareholders.................................. 36
Liability of Directors/Trustees and Officers...................... 36
Termination....................................................... 36
Voting Rights of Shareholders..................................... 37
Dissenters' Rights................................................ 37
Amendments to Organization Documents.............................. 37
OWNERSHIP OF AIM HIGH YIELD AND ASIF SHARES.......................... 38
Control Persons................................................... 38
Ownership of Officers and Trustees/Directors...................... 39
CAPITALIZATION....................................................... 39
LEGAL MATTERS........................................................ 39
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION........ 39
PROPOSAL 2 - ELECTION OF DIRECTORS...................................... 40
Remuneration of Directors......................................... 42
AIM Funds Retirement Plan for Eligible Directors/Trustees......... 43
Deferred Compensation Agreements.................................. 44
Required Vote..................................................... 44
PROPOSAL 3 - RATIFICATION OR REJECTION OF INDEPENDENT AUDITORS.......... 44
Required Vote and Directors' Recommendation....................... 45
GENERAL INFORMATION.................................................. 45
Executive Officers of ASIF........................................ 45
The Advisor and its Affiliates.................................... 46
Shareholder Proposals............................................. 47
Other Matters..................................................... 47
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos is a service mark of A I M
Management Group Inc.
(ii)
<PAGE> 9
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by ASIF's Board of Directors from the shareholders of
ASIF, for use at the Annual Meeting to be held at 11 Greenway Plaza, Suite
1919, Houston, Texas 77046.
ASIF has engaged the services of Shareholder Communications Corporation
("SCC") to assist it in the solicitation of proxies for the Annual Meeting.
ASIF expects to solicit proxies principally by mail, but ASIF or SCC may also
solicit proxies by telephone, facsimile, telegraph or personal interview.
ASIF's officers will not receive any additional or special compensation for any
such solicitation. ASIF and AIM High Yield will bear their respective costs
and expenses incurred in connection with the Transaction.
All properly executed and unrevoked proxies received in time for the
Annual Meeting will be voted in accordance with the instructions contained
therein; if no instructions are given, shares represented by proxies will be
voted FOR the proposal to approve the Agreement, FOR the election of directors
as set forth below and FOR the ratification of KPMG Peat Marwick LLP as
independent auditors for ASIF. The presence in person or by proxy of a
majority of outstanding shares of ASIF at the Annual Meeting will constitute a
quorum ("Quorum"). Approval of the Agreement requires the affirmative vote of
a majority of the outstanding shares of ASIF. Assuming the presence of a
Quorum, the affirmative vote of a majority of the shares represented at the
Annual Meeting is required for the election of directors and the ratification
of KPMG Peat Marwick LLP as independent auditors for ASIF. Abstentions and
broker non-votes will be counted as shares present at the Annual Meeting for
Quorum purposes and will have the effect of counting as a vote against approval
of the Agreement, but will not be counted as votes cast and will have no effect
on the results of the vote for the election of directors or the approval of
KPMG Peat Marwick LLP as independent auditors for ASIF. Any person giving a
proxy has the power to revoke it at any time prior to its exercise by executing
a superseding proxy or by submitting a notice of revocation to the Secretary of
ASIF. In addition, although mere attendance at the Annual Meeting will not
revoke a proxy, a shareholder present at the Annual Meeting may withdraw his
proxy and vote in person. Shareholders may also transact any other business
not currently contemplated that may properly come before the Annual Meeting in
the discretion of the proxies or their substitutes.
If a Quorum is not present by the time scheduled for the Annual Meeting,
or if a Quorum is present but sufficient votes in favor of any of the proposals
described in this Proxy Statement/Prospectus are not received, the persons
named as proxies may propose one or more adjournments of the Annual Meeting to
permit further solicitations of proxies. No adjournment will be for a period
ending later than August 23, 1996. Any such adjournment will require the
affirmative vote of a majority of the shares present in person or by proxy at
the session of the Annual Meeting to be adjourned. The persons named as
proxies will vote in favor of any such adjournment those proxies which instruct
them to vote in favor of any of the proposals to be considered at the adjourned
Annual Meeting, and will vote against any such adjournment those proxies which
instruct them to vote against or to abstain from voting on all of the proposals
to be considered at the adjourned Annual Meeting. Dissenting shareholders have
no rights of appraisal or similar rights with respect to the proposals herein.
Shareholders of record as of the close of business on May 29, 1996 (the
"Record Date"), are entitled to vote at the Annual Meeting. On the Record
Date, there were outstanding ___________ shares of ASIF. Each share is
entitled to one vote for each full share held, and a fractional vote for a
fractional share held.
ASIF intends to mail this Proxy Statement/Prospectus and the accompanying
proxy on or about June 7, 1996.
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PROPOSAL 1 - THE TRANSACTION
REASONS FOR THE TRANSACTION
ASIF is a closed-end, diversified management investment company that is
organized as a Maryland corporation. ASIF's Articles of Incorporation provide
that, commencing with the calendar year beginning on January 1, 1994, if
certain conditions have been met, ASIF must submit to its shareholders a
proposal that it convert from a closed-end investment company to an open-end
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"). ASIF is required to submit such a proposal if (i)
shares of its common stock have traded at an average discount from net asset
value of more than 10% determined on the basis of the discount as of the close
of trading on the last trading day in each week during the period of 12
calendar weeks preceding December 31 of each year and (ii) during such year
ASIF receives written requests from the holders of 10% or more of its
outstanding shares of common stock that such a proposal be submitted to
shareholders. Shares of ASIF's common stock have traded at a discount from net
asset value of more than 10%, but ASIF has not received the requests from
shareholders sufficient to trigger the requirement that a proposal to convert
ASIF from a closed-end to an open-end investment company be submitted to its
shareholders.
At the regular meeting of the Board of Directors of ASIF held on March 12,
1996, A I M Advisors, Inc. ("AIM"), ASIF's investment advisor, recommended that
ASIF be reorganized through the Transaction. In making its recommendation, AIM
concluded that a reorganization involving the transfer of substantially all of
ASIF's assets to AIM High Yield in return for the assumption of substantially
all of ASIF's liabilities and issuance of AIM High Yield Class A shares to
ASIF's shareholders would be in the best interests of ASIF's shareholders.
ASIF's Board of Directors considered a number of factors in evaluating the
Transaction, including:
1. The effect on shareholders' liquidity of their
shareholdings;
2. The compatibility of the investment objectives, policies
and restrictions of ASIF and AIM High Yield;
3. The effect of the Transaction on expected investment
performance;
4. The effect of the Transaction on the effective advisory
fee rate and expense ratio of ASIF relative to the current
advisory fee rate and expense ratio of AIM High Yield;
5. The costs to be incurred by each of ASIF and AIM High
Yield as a result of the Transaction;
6. The tax consequences of the Transaction;
7. Realized and unrealized losses and gains and capital loss
carryforward information for ASIF and AIM High Yield;
8. ASIF's ability, under current law, to achieve its
investment objective of high income by pursuing its current
investment policies while at the same time implementing procedures
designed to eliminate the market discount of its shares, such as
periodic tender offers for shares or converting ASIF to an open-end
investment company.
9. Possible alternatives to the Transaction, including the
possibility that ASIF convert to open-end investment company
status without being reorganized into an existing fund;
10. The possible potential benefits of the Transaction to
other persons, including AIM and its affiliates; and
11. Whether the Transaction would result in any dilution of
shareholders' interests.
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In recommending the Transaction, AIM noted that ASIF and AIM High Yield
have similar investment objectives, although the strategy employed to achieve
those objectives differ. AIM supplied the directors with historical
performance summaries for ASIF and AIM High Yield. AIM also supplied the
directors with historical expense ratio summaries and noted that the effective
advisory fee rate of AIM High Yield was 0.27% less than the effective advisory
fee rate for ASIF for the fiscal year ended December 31, 1995. AIM also noted
that the total expense ratio of AIM High Yield is projected to be less than the
historical expense ratio of ASIF. AIM also indicated to the Board that it
would not be reasonable to expect that ASIF could comply with requirements of
the Internal Revenue Code of 1986, as amended (the "Code") applicable to
regulated investment companies if it converted to open-end status and continued
to employ an investment strategy of short sales of its portfolio securities.
The Board of Directors of ASIF has concluded that the Agreement and the
Transaction are fair to, and in the best interests of, ASIF shareholders and
would not result in dilution of shareholders' interests. The Board of
Directors, including all of the directors who are not interested persons of
AIM, unanimously approved the Agreement and the Transaction, and recommends to
the shareholders of ASIF that they vote FOR the Agreement and the Transaction.
3
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SYNOPSIS
THE TRANSACTION
The Agreement and the Transaction will result in the combination of ASIF
and AIM High Yield. ASIF is a Maryland corporation. AIM High Yield is a
portfolio of AFG, a Delaware business trust. In the event shareholders approve
the Agreement and other closing conditions are satisfied, ASIF will transfer
all of its portfolio securities and substantially all of its other assets to
AIM High Yield. In exchange, AIM High Yield will assume substantially all of
ASIF's liabilities and AFG will issue directly to the shareholders of ASIF
Class A shares of AIM High Yield with an aggregate value equal to the net value
of the assets of ASIF transferred in connection with the reorganization, as
determined by using AIM High Yield's valuation methodology. Promptly
thereafter ASIF will take steps to pay any outstanding liabilities not assumed
by AIM High Yield, and will pay a dividend to ASIF's shareholders consisting of
all undistributed income and net capital gains, if any, recognized prior to
closing of the Transaction. ASIF shall then deregister as an investment
company and dissolve its corporate existence. A copy of the Agreement is
attached as Appendix I to this Proxy Statement/Prospectus. See "Additional
Information About the Agreement - Transfer of Assets and Liabilities" below.
ASIF is to receive an opinion of Ballard Spahr Andrews & Ingersoll to the
effect that the Transaction will constitute a tax-free reorganization for
Federal income tax purposes. Thus, shareholders will not have to pay Federal
income taxes as a result of the Transaction. See "Additional Information about
the Agreement - Federal Tax Consequences" below.
Shareholders will not pay any sales charge in connection with the
Transaction.
AIM High Yield is a diversified investment portfolio of AFG, an open-end,
series, management investment company registered under the Investment Company
Act. The principal offices of AFG are located at 11 Greenway Plaza, Suite
1919, Houston, Texas 77046 (telephone: (800) 347-4246).
COMPARISON OF AIM HIGH YIELD AND ASIF
Form of Organization
AFG is an open-end, series, management investment company that is
organized as a Delaware business trust. AIM High Yield is a series of AFG.
AIM High Yield has Class A shares, which are offered for sale to the public at
net asset value plus any applicable initial sales charge, and Class B shares,
which are offered for sale to the public at net asset value, without an initial
sales charge, subject to a maximum contingent deferred sales charge of 5% on
certain redemptions made within six years of purchase. ASIF shareholders will
receive AIM High Yield Class A shares, without payment of any sales charge, as
part of the Transaction.
ASIF is a closed-end, diversified management investment company that is
organized as a Maryland corporation. ASIF's shares of common stock are listed
on the American Stock Exchange ("AMEX") under the symbol "AST."
Investment Objective and Policies
The investment objectives of AIM High Yield and ASIF are similar, although
the types of securities the two funds purchase to achieve their objectives
differ in important respects. The investment objective of AIM High Yield is to
achieve a high level of current income by investing primarily in publicly
traded debt securities of less than investment grade. The investment objective
of ASIF is to seek high current income consistent with stability of principal.
ASIF seeks to achieve its investment objective primarily by pursuing a strategy
of investing in convertible securities and by employing short selling to
enhance income and hedge against market risk. See "Comparison of Investment
Objectives and Policies" below.
AIM High Yield currently invests its assets primarily in debt securities,
such as bonds and notes, while ASIF invests primarily in convertible
securities. Both AIM High Yield and ASIF may invest in securities rated below
BBB/Baa by Standard & Poor's Corporation ("S&P") and Moody's Investors Service,
Inc ("Moody's"), respectively, or if unrated, of comparable quality as
determined by AIM. Debt securities so rated are commonly known as "junk
bonds." AIM High Yield
4
<PAGE> 13
may make such investments without restriction, whereas ASIF may not invest
more than 5% of its assets in securities rated lower than B or if unrated, of
comparable quality as determined by AIM. ASIF regularly engages in short sales
of securities to enhance income and hedge against market risk. Although AIM
High Yield is permitted to engage in short sale transactions, in practice it
does not do so. For a more detailed discussion of the investment practices of
AIM High Yield and ASIF, see "Comparison of Investment Objectives and Policies"
below.
Risk Factors
The investment practices of AIM High Yield may result in risks which are
different than those currently associated with the investment practices of
ASIF. AIM High Yield seeks to meet its investment objective by investing in
non-investment grade debt securities, commonly known as "junk bonds."
Investments in junk bonds, while generally providing greater income and
opportunity for gain, may be subject to greater risks than higher rated
securities. Such risks may include: greater market fluctuations and risk of
loss of income and principal, limited liquidity and secondary market support,
greater sensitivity to economic and business downturns and certain other risks.
See "Risk Factors" and "Comparison of Investment Objectives and Policies."
Performance
Set forth below are average annual total returns for the periods indicated
for each of AIM High Yield and ASIF. Average annual total return figures for
AIM High Yield do not take into account sales charges paid by an investor.
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AIM High Yield ASIF
-------------- ------
<S> <C> <C>
1 Year Ended December 31, 1995 16.86% 13.51%
3 Years Ended December 31, 1995 10.81% 8.33%
</TABLE>
Advisory and Administrative Services
AIM High Yield
AIM serves as the investment advisor to AIM High Yield pursuant to a
Master Investment Advisory Agreement dated October 18, 1993, as amended (the
"Master Advisory Agreement"). AIM, organized in 1976, together with its
affiliates, advises or manages 43 investment company portfolios (including AIM
High Yield), including 23 portfolios which comprise "The AIM Family of Funds"
as listed in the Investor's Guide to The AIM Family of Funds(R) ("The AIM
Family of Funds") in the AFG Prospectus, a copy of which is attached as
Appendix II hereto. As of April 1, 1996, the total assets of the investment
company portfolios advised or managed by AIM and its affiliates were
approximately $48.2 billion. AIM is a wholly-owned subsidiary of A I M
Management Group Inc. ("AIM Management").
Under the terms of the Master Advisory Agreement, AIM supervises all
aspects of AIM High Yield's operations and provides investment advisory
services to AIM High Yield. AIM obtains and evaluates economic, statistical
and financial information to formulate and implement investment programs for
AIM High Yield. AIM will not be liable to AIM High Yield or its shareholders
except in the case of AIM's willful misfeasance, bad faith, gross negligence or
reckless disregard of duty; provided, however, that AIM may be liable for
certain breaches of duty under the Investment Company Act.
Pursuant to the Master Advisory Agreement and as compensation for its
services to AIM High Yield, AIM is paid an investment advisory fee calculated
at an annual rate of 0.625% of the first $200 million of AIM High Yield's
average daily net assets, plus 0.55% for the next $300 million of AIM High
Yield's average daily net assets, plus 0.50% for the next $500 million of AIM
High Yield's average daily net assets, plus 0.45% of AIM High Yield's average
daily net assets for amounts in excess of $1 billion. AFG pays or causes to be
paid all expenses of AIM High Yield which are not borne by AIM. For AIM High
Yield's fiscal year ended December 31, 1995, AIM High Yield's advisory fee for
the Class A shares as a percentage of its average daily net assets was 0.53%.
5
<PAGE> 14
AFG has entered into a Master Administrative Services Agreement dated as
of October 18, 1993, as amended, with AIM, pursuant to which AIM has agreed to
provide or arrange for the provision of certain accounting and other
administrative services to AFG, including the services of a principal financial
officer and related staff. In consideration of AIM's services under the Master
Administrative Services Agreements, AIM High Yield will reimburse AIM for
expenses incurred by AIM or its affiliates in connection with such services.
Under a Transfer Agency and Service Agreement, as amended, A I M Fund Services,
Inc. ("AIM Fund Services"), AIM's wholly-owned subsidiary and a registered
transfer agent, receives a fee for its provision of transfer agency, dividend
distribution and disbursement, and shareholder services to AFG.
In order to increase the return to investors, AIM may from time to time
voluntarily agree to waive or reduce its advisory fee and/or assume certain
expenses of AIM High Yield, but will retain its ability to be reimbursed prior
to the end of the fiscal year. Such waivers and reimbursements, other than
those set forth in the Master Advisory Agreement, may be rescinded at any time.
ASIF
AIM also serves as investment advisor to ASIF pursuant to an Investment
Advisory Agreement dated March 22, 1989, as amended (the "ASIF Advisory
Agreement").
Pursuant to the ASIF Advisory Agreement, AIM manages the investments of
ASIF and supervises the other business affairs of ASIF. AIM obtains and
evaluates economic, statistical and financial information to formulate and
implement investment programs for ASIF. The ASIF Advisory Agreement provides
that, upon the request of the Board of Directors, AIM may perform certain
accounting and other administrative services for ASIF which are not otherwise
required to be performed by AIM under the ASIF Advisory Agreement. AIM
currently provides accounting services to ASIF pursuant to the ASIF Advisory
Agreement. The ASIF Advisory Agreement provides that AIM will not be liable to
ASIF or its shareholders except in the case of AIM's willful misfeasance, bad
faith, gross negligence or reckless disregard of duty or in the case of certain
breaches of duty under the Investment Company Act.
As compensation for its investment advisory services, AIM receives a fee,
calculated and paid monthly, in an amount equal to an annualized rate of 0.80%
of ASIF's average weekly net assets. For certain accounting services performed
by AIM, AIM receives from ASIF reimbursement of its costs as approved by the
Board of Directors based on a finding that the provision of such services by
AIM is in the best interests of ASIF and its shareholders.
Distribution
AIM High Yield
AIM High Yield's shares are distributed through AIM's nationwide
distribution network which consists of more than 2,300 broker-dealers and
institutions located throughout the United States. A I M Distributors, Inc.
("AIM Distributors"), a registered broker-dealer and a wholly owned subsidiary
of AIM, acts as the distributor of the Class A shares of AIM High Yield. AFG
has adopted a plan pursuant to Rule 12b-1 under the Investment Company Act
under which AFG may compensate AIM Distributors an aggregate amount of 0.25% of
the average daily net assets of AIM High Yield on an annualized basis for the
purpose of financing any activity that is intended to result in the sale of
Class A shares of AIM High Yield.
ASIF
ASIF is a closed-end investment company that does not continuously offer
its shares for sale to the public. Accordingly, ASIF is not party to a
distribution agreement and does not have a Rule 12b-1 plan. ASIF's shares of
common stock are traded on the AMEX under the symbol "AST."
Expense Levels
Set forth below are the expenses a shareholder would incur in purchasing
shares of AIM High Yield:
6
<PAGE> 15
<TABLE>
<CAPTION>
AIM
High Yield
----------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load
imposed on purchase
of shares (as a % of the
offering price) . . . . . . . . . . . . . . 4.75%
</TABLE>
The rules of the United States Securities and Exchange Commission (the
"SEC") require that the maximum sales charge be reflected in the table even
though certain investors may qualify for reduced sales charges. See the
Investor's Guide to The AIM Family of Funds(R) in the attached AFG Prospectus
for more information about applicable sales charges for AIM High Yield. AIM
High Yield does not charge redemption fees or exchange fees; however, a $5
service fee may be charged for exchanges of AIM High Yield by accounts of
market timers. Broker-dealers may charge a service fee for redemptions or
repurchases of AIM High Yield effected through them. Purchases of $1 million
or more of AIM High Yield are at net asset value. See the discussion "Sales
Charges" below and the Investors Guide to The AIM Family of Funds(R) in the
attached AFG Prospectus for more information about the deferred sales charge
applicable to certain redemptions of such purchases of AIM High Yield shares.
Reinvestment of dividends of AIM High Yield are exempt from sales loads.
ASIF's shares currently are traded on the AMEX, and shareholders of ASIF
pay brokerage commissions in connection with purchases and sales of ASIF's
shares. ASIF has a Dividend Reinvestment Plan that is described below under
"Additional Information about ASIF - Dividend Reinvestment Plan."
Set forth below is a comparison of annual operating expenses as a
percentage of net assets ("Expense Ratio") for the Class A shares of AIM High
Yield and for ASIF. Expense Ratios are shown after any voluntary fee waivers
and expense reimbursements.
<TABLE>
<CAPTION>
AIM
High Yield(1) ASIF(1)
------------- -------
<S> <C> <C>
ANNUAL OPERATING EXPENSES (AS A % OF
NET ASSETS) (AFTER FEE WAIVERS OR
EXPENSE REIMBURSEMENTS, IF ANY)
Management fees ......................... 0.53% 0.80%
Administration, accounting fees ......... 0.01% 0.08%
Rule 12b-1 distribution plan payments ... 0.25% 0.00%
All other expenses ...................... 0.17% 0.24%
Total fund operating expenses ........... 0.96% 1.12%
===== =====
</TABLE>
- ---------------
(1) Information presented is for the fiscal year ended 12/31/95.
As a result of 12b-1 distribution plan payments, a long-term shareholder
of AIM High Yield may pay more than the economic equivalent of the maximum
front-end sales charges permitted by rules of the National Association of
Securities Dealers, Inc. ("NASD"), although AFG estimates that it would require
a substantial number of years to exceed such maximum front-end sales charges.
Sales Charges
7
<PAGE> 16
No sales charges are applicable to the Transaction.
AIM High Yield
Shares of AIM High Yield may be purchased at their net asset value plus an
initial sales charge. The sales charge represents a percentage of the offering
price, and ranges from 4.75% to 2.00% of the offering price on purchases of
under $1,000,000. Certain categories of AIM High Yield shareholders may
purchase Class A shares of AIM High Yield at net asset value without the
imposition of a sales charge. In addition, purchases of Class A shares of AIM
High Yield of $1 million or more may be made at net asset value, subject to a
contingent deferred sales charge ("CDSC") of 1% of the lesser of the value of
the shares redeemed (excluding reinvested dividends and capital gain
distributions) or the total original cost of such shares if the shares are
redeemed prior to 18 months from the date of purchase. For more information,
see the Investor's Guide to The AIM Family of Funds(R) in the attached AFG
Prospectus.
ASIF
ASIF's shares currently are traded on the AMEX. ASIF shareholders pay
brokerage commissions in connection with purchases and sales of ASIF's shares
on the AMEX.
Minimum Purchases; Exchanges
AIM High Yield
The minimum initial investment in AIM High Yield is $500. Lower minimums
apply to investments made by certain retirement plans and accounts. There are
no such minimum investment requirements for investment of dividends and
distributions into an existing account of any of The AIM Family of Funds. See
the Investor's Guide to The AIM Family of Funds(R) in the attached AFG
Prospectus.
AIM High Yield is a part of The AIM Family of Funds which consists of 23
portfolios, including a variety of debt and equity portfolios, taxable and
tax-free portfolios, domestic and international portfolios, and money market
funds. AIM High Yield shareholders may exchange their shares for Class A
shares of any of the other funds in The AIM Family of Funds. Exchanges may be
made by mail or, subject to certain conditions, by telephone.
AIM High Yield shareholders may exchange their shares for shares of other
funds in The AIM Family of Funds at net asset value (without payment of a sales
charge). There is no fee for exchanges among funds in The AIM Family of Funds.
A service fee of $5 per transaction may, however, be charged by AIM
Distributors on accounts of market timing investment firms to help to defray
the costs of maintaining an automated exchange service. This service fee will
be charged against the market timing account from which shares are being
exchanged. For more information, consult the Investor's Guide to The AIM
Family of Funds(R) in the attached AFG Prospectus.
ASIF
Since ASIF is not continuously engaged in the issuance of new shares of
its common stock it does not have minimum share purchase or exchange procedures
like those of AIM High Yield.
Redemption Procedures
AIM High Yield
Shares of AIM High Yield may be redeemed directly through AIM Distributors
or through any dealer who has entered into an agreement with AIM Distributors.
AIM Distributors also repurchases shares. There is no redemption fee imposed
when shares of AIM High Yield are redeemed or repurchased; however, dealers may
charge service fees for
8
<PAGE> 17
handling repurchase transactions. Upon receipt of a redemption request in
proper form, payment will be made as soon as practicable, but in any event
within seven days after receipt.
Class A shares of AIM High Yield will be issued at the time of the
Transaction to shareholders of ASIF. Such AIM High Yield shares will be issued
in book entry form, and will accrue dividends and confer all other shareholder
rights. However, AIM High Yield shareholders who held their corresponding ASIF
shares in certificated form may not redeem or exchange their AIM High Yield
shares and may not receive AIM High Yield certificates (if they so requested),
until such ASIF certificates are physically surrendered to AFG.
Shares of AIM High Yield are redeemed at their net asset value next
computed after a request for redemption in proper form is received by AIM Fund
Services, except that AIM High Yield shares subject to the contingent deferred
sales charge program applicable to purchases of $1,000,000 or more may be
subject to the application of deferred sales charges that will be deducted from
the redemption proceeds. For more information on redemption procedures, see
the Investor's Guide to The AIM Family of Funds(R) in the attached AFG
Prospectus.
ASIF
ASIF does not have any procedures for the redemption of its shares.
Shares of ASIF have normally traded at a discount to their net asset value
since March 1990, and the Board of Directors of ASIF has considered from time
to time whether it would be in the best interests of the shareholders for ASIF
to either repurchase its own shares of common stock in the open market or to
make a tender offer for such shares. No such purchases have been made to date.
ASIF's Articles of Incorporation also provide that if certain conditions are
met, the Board of Directors must submit to ASIF's shareholders for approval a
proposal to convert ASIF to an open-end investment company that would issue
redeemable shares. To date, the requisite conditions have not occurred. See
"Additional Information About ASIF - Share Repurchases and Tenders; Possible
Conversion to Open-End Investment Company."
9
<PAGE> 18
RISK FACTORS
INVESTMENT OBJECTIVES AND POLICIES
Although AIM High Yield and ASIF have similar investment objectives, the
investment policies they follow to achieve their objectives differ. AIM High
Yield seeks to achieve its investment objective by investing in debt
securities, while ASIF invests primarily in convertible securities. While AIM
High Yield and ASIF are both permitted to invest in non-investment grade
securities, AIM High Yield may do so without restriction, but ASIF may only
invest 5% of its total assets in securities rated lower than B or if unrated,
having comparable quality as determined by AIM. A description of the risks
associated with such investments is presented below. As a result of its
differing investment policies, an investment in shares of AIM High Yield may
present different risks than an investment in shares of ASIF. For a complete
description of the investment policies and restrictions of AIM High Yield, see
"Comparison of Investment Objectives and Policies" below and "Investment
Programs" and "Certain Investment Strategies and Policies" in the Prospectus of
AFG that is attached to this Proxy Statement/Prospectus as Appendix II.
RISKS REGARDING NON-INVESTMENT GRADE DEBT SECURITIES
AIM High Yield seeks to meet its investment objectives by investing in
non-investment grade debt securities, commonly known as "junk bonds." While
generally providing greater income and opportunity for gain, non-investment
grade debt securities may be subject to greater risks than higher-rated
securities. Economic downturns tend to disrupt the market for junk bonds and
adversely affect their values. Such economic downturns may be expected to
result in increased price volatility for junk bonds and for the value of shares
of AIM High Yield, and increased issuer defaults on junk bonds.
In addition, many issuers of junk bonds are substantially leveraged, which
may impair their ability to meet their obligations. In some cases, junk bonds
are subordinated to the prior payment of senior indebtedness, which potentially
limits AIM High Yield's ability to fully recover principal or to receive
payments when senior securities are subject to a default.
The credit rating of a junk bond does not necessarily address its market
value risk, and ratings may from time to time change to reflect developments
regarding the issuer's financial condition. Junk bonds have speculative
characteristics which are likely to increase in number and significance with
each successive lower rating category.
When the secondary market for junk bonds becomes more illiquid, or in the
absence of readily available market quotations for such securities, the
relative lack of reliable objective data makes it more difficult for AFG's
Board of Trustees to value AIM High Yield's securities, and judgment plays a
more important role in determining such valuations. Increased illiquidity in
the junk bond market also may affect AIM High Yield's ability to dispose of
such securities at desirable prices.
In the event AIM High Yield experiences an unexpected level of net
redemptions, its could be forced to sell its junk bonds without regard to their
investment merits, thereby decreasing the asset base upon which its expenses
can be spread and possibly reducing its rate of return. Prices of junk bonds
have been found to be less sensitive to fluctuations in interest rates, and
more sensitive to adverse economic changes and individual corporate
developments than those of higher-rated debt securities.
INVESTMENT IN FOREIGN SECURITIES
AIM High Yield may invest up to 25% of its total assets in foreign
securities. To the extent it invests in securities denominated in foreign
currencies, AIM High Yield bears the risks of changes in the exchange rates
between U.S. currency and foreign currency, as well as the availability and
status of foreign securities markets. AIM High Yield may invest in securities
of foreign issuers which are in the form of American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs"), or other securities
representing underlying securities of foreign issuers, and such investments are
treated
10
<PAGE> 19
as foreign securities for purposes of percentage limitations on investments in
foreign securities. For a discussion of the risks pertaining to investments in
foreign securities, see "Risk Factors Regarding Foreign Securities" below.
FOREIGN EXCHANGE TRANSACTIONS
AIM High Yield has authority to deal in foreign exchange between
currencies of the different countries in which it will invest as a hedge
against possible variations in the foreign exchange rates between those
countries. This may be accomplished through direct purchases or sales of
foreign currency, purchases of options on futures contracts with respect to
foreign currency, and contractual agreements to purchase or sell a specified
currency at a specified future date (up to one year) at a price set at the time
of the contract. Such contractual commitments may be forward contracts entered
into directly with another party or exchange traded futures contracts.
AIM High Yield may purchase and sell options on futures contracts, forward
contracts or futures contracts which are denominated in a particular foreign
currency to hedge the risk of fluctuations in the value of another currency.
AIM High Yield's dealings in foreign exchange will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of foreign currency with respect to specific
receivables or payables of AIM High Yield accruing in connection with the
purchase or sale of its portfolio securities, the sale and redemption of shares
of AIM High Yield or the payment of dividends and distributions by AIM High
Yield. Position hedging is the purchase or sale of foreign currency with
respect to portfolio security positions denominated or quoted in a foreign
currency. AIM High Yield will not speculate in foreign exchange. AIM High
Yield will not commit a larger percentage of its total assets to foreign
exchange hedges than the percentage of its total assets which it could invest
in foreign securities.
RISK FACTORS REGARDING FOREIGN SECURITIES
Investments by AIM High Yield in foreign securities, whether denominated
in U.S. dollars or foreign currencies, may entail all of the risks set forth
below. Investments by AIM High Yield in ADRs, EDRs or similar securities also
may entail some or all of the risks described below.
Currency Risk. The value of AIM High Yield's foreign investments will be
affected by changes in currency exchange rates. The U.S. dollar value of a
foreign security decreases when the value of the U.S. dollar rises against the
foreign currency in which the security is denominated, and increases when the
value of the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in
which AIM High Yield may invest may not be as developed as the United States'
economy and may be subject to significantly different forces. Political or
social instability, expropriation or confiscatory taxation and limitations on
the removal of funds or other assets could also adversely affect the value of
AIM High Yield investments.
Regulatory Risk. Foreign companies are not registered with the SEC and
are generally not subject to the regulatory controls imposed on United States
issuers and, as a consequence, there is generally less publicly available
information about foreign securities than is available about domestic
securities. Foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to domestic companies. Income from foreign securities owned
by AIM High Yield may be reduced by a withholding tax at the source, which tax
would reduce dividend income payable to AIM High Yield's shareholders.
Market Risk. The securities markets in many of the countries in which AIM
High Yield invests will have substantially less trading volume than the major
United States markets. As a result, the securities of some foreign companies
may be less liquid and experience more price volatility than comparable
domestic securities. Increased custodian costs as well as administrative costs
(such as the need to use foreign custodians) may be associated with the
maintenance of assets in foreign jurisdictions. There is generally less
government regulation and supervision of foreign stock exchanges, brokers and
issuers which may make it difficult to enforce contractual obligations. In
addition, transaction costs in foreign securities markets are likely to be
higher, since brokerage commission rates in foreign countries are likely to be
higher than in the United States.
11
<PAGE> 20
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
AIM High Yield
The investment objective of AIM High Yield is to achieve a high level of
current income by investing primarily in publicly traded non-investment grade
debt securities. Debt securities of less than investment grade are considered
"high risk" securities (commonly referred to as junk bonds). The investment
objective of AIM High Yield is not a fundamental policy. Accordingly, the
Board of Trustees of AFG is permitted to change that investment objective
without shareholder approval.
ASIF
ASIF's investment objective is to seek high current income consistent with
stability of principal. This objective is fundamental and may not be changed
by ASIF's Board of Directors without shareholder approval.
INVESTMENT POLICIES
AIM High Yield
AIM High Yield seeks high income principally by purchasing securities that
are rated Baa, Ba or B by Moody's or BBB, BB or B by S&P, or securities of
comparable quality in the opinion of AIM that are either unrated or rated by
other nationally recognized statistical rating organizations (NRSROs). AIM
High Yield may also hold, from time to time, securities rated Caa by Moody's or
CCC by S&P, or, if unrated or rated by other NRSROs securities of comparable
quality as determined by AIM. It should be noted, however, that achieving AIM
High Yield's investment objective may be more dependent on the credit analysis
of AIM, and less on that of credit rating agencies, than may be the case for
funds that invest in more highly rated bonds. At least 80% of the value of AIM
High Yield's total assets will be invested in debt securities, including
convertible debt securities, and/or cash and cash equivalents. AIM High Yield
may also invest in preferred stocks. For a discussion of the ratings assigned
by Moody's and S&P to certain debt securities, see "Investors Guide to The AIM
Family of Funds(R) - Descriptions of Rating Categories" in the AFG Prospectus
attached to this Proxy Statement/Prospectus as Appendix II.
While the securities held by AIM High Yield are expected to provide
greater income and, possibly, opportunity for greater gain than investments in
more highly rated securities, they may be subject to greater risk of loss of
income and principal and are more speculative in nature. AIM High Yield's
yield and the net asset value of its shares may be expected to fluctuate over
time. Therefore, an investment in AIM High Yield may not be appropriate for
some investors and should not constitute a complete investment program for
others. See "Risk Factors - Risk Factors Regarding Non-Investment Grade Debt
Securities."
12
<PAGE> 21
During 1995, the percentage of average annual assets of AIM High Yield,
calculated on a dollar weighted average basis, invested in securities within
the various rating categories (based upon the higher of S&P's or Moody's
ratings), and in unrated securities determined to be of comparable quality by
AIM, was as follows:
<TABLE>
<S> <C>
AAA/Aaa ........................ 0.00%
AA/Aa .......................... 0.00%
A/A ............................ 0.00%
BBB/Baa ........................ 0.00%
BB/Ba .......................... 11.52%
B/B ............................ 75.82%
CCC/Caa ........................ 7.60%
CC/Ca........................... 0.00%
C/C ............................ 0.00%
Unrated ........................ 5.06%
-----
Total Average Annual Assets .... 100%
</TABLE>
AIM High Yield may invest in both illiquid securities and securities which
are subject to restrictions on resale because they have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"). See
"Certain Investment Strategies and Policies - Illiquid Securities" in the AFG
Prospectus attached as Appendix II for further information regarding such
investments.
ASIF
ASIF seeks to achieve its objective primarily by pursuing a strategy of
investing in convertible securities and by employing short selling to enhance
income and hedge against market risk. In normal market conditions, between 65%
and 100% of ASIF's assets will be invested in income-producing securities or
pursuant to ASIF's strategy to produce income, i.e., in convertible securities,
common stock received upon conversion or exchange of such securities, and short
sales with respect to portfolio securities (which are measured by the net value
of the short position). This percentage limitation is a fundamental policy of
ASIF and may be changed only by shareholders. In furtherance of its objective,
ASIF may also, to a limited extent, write covered call options and purchase put
options and invest in other types of securities.
ASIF's short selling strategy involves selling short the common stock
underlying a convertible security in ASIF's portfolio and arranging with the
broker-dealer through which the short sale is executed to receive income with
respect to the proceeds of the short sale during the period ASIF's short
position remains open. This strategy is designed to generate income for ASIF
both from interest and dividends on convertible securities and with respect to
the short sale proceeds held by the broker-dealer pending the delivery by ASIF
of the securities sold short. The ability of ASIF to earn income with
respect to short sale proceeds is dependent on its ability to negotiate the
necessary arrangements with broker-dealers. While ASIF has been able to enter
into such an arrangement with a broker-dealer, there is no assurance that ASIF
will be able to enter into such arrangements to the desired degree in the
future. The inability of ASIF to enter into such arrangements to the desired
degree could adversely impact its ability to achieve its investment objective
of high current income.
INVESTMENT RESTRICTIONS
Set forth below are certain investment restrictions of AIM High Yield and
ASIF. Several of the investment limitations of AIM High Yield and ASIF are
substantially the same. Unless otherwise noted, the following investment
restrictions are fundamental policies. Fundamental policies may not be changed
without the approval of a majority of such fund's outstanding shares, as
defined in the Investment Company Act. In addition, unless otherwise noted,
AIM High Yield may, from time to time in order to qualify its shares for sale
in a particular state, agree to investment restrictions in addition to or more
stringent than those set forth below. Such restrictions are not fundamental
and may be changed without the approval of shareholders.
13
<PAGE> 22
restrictions in addition to or more stringent than those set forth below. Such
restrictions are not fundamental and may be changed without the approval of
shareholders.
The following chart summarizes the differences between the investment
limitations of AIM High Yield and ASIF:
<TABLE>
<CAPTION>
Investment Restriction AIM High Yield ASIF
- ---------------------- -------------- ----
<S> <C> <C>
Futures AIM High Yield may invest in financial futures No corresponding restriction.
contracts and may purchase and sell options on
financial futures contracts. AIM High Yield will
comply with California Rule 260.140.85(b) by
purchasing and selling only financial futures
contracts, options on financial futures contracts
and municipal bond index futures contracts which are
listed on national securities or commodities
exchanges, by limiting the aggregate premiums paid
on all such options held at any one time to less
than 20% of AIM High Yield's net assets and by
limiting the aggregate margin deposits required on
all such futures contracts or options thereon to
less than 5% of AIM High Yield's total assets.
This is not a fundamental policy.
Short sales and AIM High Yield may not make short sales of ASIF may not make short sales of
purchases of securities securities or maintain short positions, unless at securities or maintain a short
on margin all times when a short position is open, AIM High position, unless at all times when a
Yield owns at least an equal amount of the securities short position is open it owns an
sold short or owns securities convertible into or equal amount of such securities or
exchangeable for at least an equal amount of such securities convertible into or
securities sold short, without the payment of further exchangeable for, without the
consideration. AIM High Yield may not purchase payment of further consideration,
securities on margin, but it may obtain such securities of the same issue as, and equal
short-term credits as are necessary for the clearance in amount to, the securities sold
of purchases and sales of securities and may make short. ASIF will not purchase
margin payments in connection with transactions in securities on margin, except for
financial futures contracts and options thereon. such short term credits as are
necessary for the clearance of
portfolio transactions.
Illiquid securities AIM High Yield may not invest more that 15% of its ASIF may invest up to 33-1/3% of its total
net assets at the time of purchase in assets, taken at market value, in illiquid
investments which are not readily marketable. securities.
This is not a fundamental policy.
</TABLE>
14
<PAGE> 23
<TABLE>
<CAPTION>
Investment Restriction AIM High Yield ASIF
- ---------------------- -------------- ----
<S> <C> <C>
Securities of one issuer With respect to 75% of the value of its ASIF may not purchase the
total assets, AIM High Yield may not purchase the securities of any issuer if such purchase
securities of any issuer if such purchase would would cause more than 5% of the value of
cause more than 5% of the value of its total its total assets (taken at current value)
assets to be invested in the securities of such to be invested in the securities
issuer (except obligations of or guaranteed by U.S. of any one issuer, provided that this
Government or its agencies and instrumentalities). limitation does not apply to securities
of the U.S. Government and up to 25%
of the total assets of ASIF (taken at
current value) may be invested
without regard to this limitation.
Loans AIM High Yield may not make loans, except that it ASIF will not make loans except through
may (a) lend its portfolio securities, provided the purchase of debt obligations in
that the value of the securities loaned does accordance with its investment
not exceed 33-1/3% of AIM High Yield's total objective and policies, the lending of
assets, and (b) enter into repurchase agreements. portfolio securities up to 10% of its total
As a nonfundamental matter, AIM High Yield will assets or the use of repurchase
comply with Texas Rule 123.2(6), and follow SEC agreements.
guidelines, that provide that loans of its
securities will be fully collateralized.
Industry concentration AIM High Yield may not concentrate 25% ASIF will not concentrate 25% or more of
or more of its investments in a the value of its total assets, in securities
particular industry. issued by companies conducting their principal
business activities in the same industry,
provided that this limitation does not apply
with respect to investments in U.S.
Government securities.
Underwriting AIM High Yield may not act as a ASIF will not act as a underwriter
securities underwriter. or distributor of securities except to the
extent that ASIF may be deemed an
underwriter under the Securities Act by
virtue of disposing of portfolio
securities.
Oil, gas or other In accordance with the requirements of the Texas ASIF will not purchase any interest in any
mineral exploration or State Securities Board, AIM High Yield will not oil, gas or any other mineral
development invest in interests in oil, gas or other mineral exploration or development program.
exploration or development programs. This is
not a fundamental policy.
</TABLE>
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<TABLE>
<CAPTION>
Investment Restriction AIM High Yield ASIF
- ---------------------- -------------- ----
<S> <C> <C>
Real Estate In accordance with the requirements of the Texas State ASIF will not purchase or sell real
Securities Board, AIM High Yield will not invest in real estate, but ASIF may purchase and
estate or interests therein, although AIM High Yield may sell securities that are issued by
purchase securities secured by real estate or interests companies that invest or deal in real
therein or issued by issuers which invest in real estate or interests therein.
estate or interests therein, including real estate
investment trusts.
Borrowing; Senior AIM High Yield may not issue senior securities or ASIF will not borrow money or issue
Securities borrow money or mortgage, pledge or senior securities,except for temporary
hypothecate its assets, except that AIM High Yield may bank borrowings not in excess of 5% of the
enter into financial futures contracts and that value of its total assets for emergency or
right is reserved to borrow from banks to pay for temporary purposes, and ASIF may borrow to
redemptions and for temporary purposes, provided that finance purchases of its shares in the
no borrowing may exceed one-third of the value of its market or through tender offers,
total assets (including the amount of such borrowings) provided that no such borrowing is
less its liabilities (excluding the amount of such permissible unless, after such
borrowings) and may secure such borrowings by pledging borrowing, there would be "asset
up to one-third of the value of its total assets. coverage" of at least 300% as defined
For the purposes of this restriction, collateral in the Investment Company Act, of
arrangements with respect to margin for a financial the aggregate of such borrowings.
futures contract are not deemed to be a pledge of assets. ASIF will not pledge any of its assets
Secured temporary borrowings may take the form except to secure permitted borrowings
of reverse repurchase agreements, pursuant to which and except to the extent that its short
AIM High Yield would sell portfolio securities for cash sale activities could be deemed
and simultaneously agree to repurchase them at a specified to involve a pledge of assets.
date for the same amount of cash plus an interest
component. AIM High Yield will not purchase securities
while borrowings from banks in an amount in excess of
5% of its total assets are outstanding.
Commodities AIM High Yield may not buy or sell commodities or ASIF will not purchase or
commodity contracts, although AIM sell commodities or commodities contracts.
High Yield may purchase and sell financial futures
contracts and options thereon.
</TABLE>
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<TABLE>
<CAPTION>
INVESTMENT RESTRICTION AIM HIGH YIELD ASIF
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<S> <C> <C>
Puts and calls AIM High Yield may not invest in puts, ASIF may seek to enhance its income by writing
calls, or any combination thereof, except, (selling) covered call options on the common
however, that AIM High Yield may stocks underlying the convertible securities
invest in financial futures contracts, which it owns and may seek to engage in
purchase and sell options on financial futures hedging transactions by purchasing put options
contracts, may acquire and hold puts which on such common stocks.
relate to equity securities acquired by AIM
High Yield when such puts are attached to or
included in a unit with such equity securities,
and may sell covered call options.
Investment companies AIM High Yield may not acquire for value the No corresponding restriction
securities of any other investment company,
except in connection with a merger,
consolidation, reorganization or acquisition of
assets and except for the investment in such
securities of funds representing compensation
otherwise payable to its trustees pursuant to
any deferred compensation plan existing at any
time between AFG and its trustees.
Investing for control AIM High Yield may not invest for the purpose No corresponding restriction.
of influencing management or exercising
control. This is not a fundamental policy.
Unseasoned issuers AIM High Yield may not invest in securities of No corresponding restriction.
companies which have a record of less than
three years of continuous operation (including
that of predecessors) if such purchase at
the time thereof would cause AIM High Yield's
investment in all such companies
taken at cost to exceed 5% of its total assets
taken at market value. This is not a
fundamental policy.
Purchase of securities AIM High Yield may not purchase or retain the No corresponding restriction.
of issuers owned by securities of any issuer, if the officers and
officers or directors its advisors who own beneficially more than
of advisors or 1/2 of 1% of the securities of such issuer,
distributors together own more than 5% of the securities
of such issuer. This is not a fundamental
policy.
</TABLE>
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ADDITIONAL INVESTMENT POLICIES OF ASIF
Convertible Securities
Convertible securities are fixed income securities (such as bonds,
debentures, notes and preferred stock) that may, at the holder's option, be
converted into or exchanged for a prescribed amount of common stock of the same
or a different issuer within a particular period of time at a specified price
or in accordance with a prescribed formula. A convertible security entitles
the holder to receive interest paid or accrued on convertible debt, or the
dividend paid on convertible preferred stock, until the convertible security
matures or is redeemed, converted or exchanged. Convertible securities, until
converted, have the same general characteristics as other non-convertible,
fixed income securities, insofar as they generally provide a stable stream of
income with generally higher yields than those of common equity securities of
the same or similar issuers. By permitting the holder to exchange its
investment for common stock, convertible securities may also enable the
investor to benefit from appreciation in the market price of the underlying
common stock. Therefore, convertible securities generally offer lower interest
or dividend yields than non-convertible securities of similar quality.
Convertible securities rank senior to common stock in a corporation's capital
structure and, therefore, generally entail less risk than the corporation's
common stock, although the extent to which such risk is reduced depends in a
large measure upon the degree to which the convertible security sells based on
its value as a fixed income security rather than that of the underlying common
stock.
As with other fixed income securities, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends
to increase as interest rates decline. The credit standing of the issuer and
other factors may also have an effect on the value of a convertible security.
The unique feature of the convertible security is that, as the market price of
the underlying common stock declines, a convertible security tends to trade
increasingly in a manner similar to a fixed income security, and may not
experience market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock approaches or
exceeds the conversion price, the price of a convertible security increasingly
reflects the value of the underlying common stock and may rise accordingly,
although gains may be less for the convertible security than for the underlying
common stock to the extent of any "conversion premium." A convertible security
generally will sell at a premium over its conversion value (i.e., the
security's worth, at market value, if converted into the underlying common
stock) determined by the extent to which investors place value on the right to
acquire the underlying common stock while holding the fixed income security.
Thus, appreciation of the underlying common stock will result in substantial
appreciation of the convertible security only after the conversion premium has
been eliminated.
Holders of fixed income securities (including convertible securities) have
a claim on the assets of the issuer prior to the holders of common stock in
case of liquidation. However, convertible securities are typically
subordinated to non-convertible, fixed income securities of the same issuer.
AIM believes that the characteristics of convertible securities make them
particularly appropriate vehicles to achieve ASIF's investment objective.
Convertible securities have unique investment characteristics because (i) they
have relatively high yields as compared to common stocks, (ii) they have
defensive characteristics since they provide a fixed return even if the market
price of the underlying common stock declines and (iii) they provide the
potential for capital appreciation if the market price of the underlying common
stock increases.
A convertible security may be subject to redemption at the option of the
issuer at a price established in the charter provision or indenture pursuant to
which the convertible security is issued. If a convertible security held by
ASIF is called for redemption, ASIF will be required to surrender the security
for redemption, convert it into the underlying common stock or sell it to a
third party. Any of these actions could have an adverse effect on ASIF's
ability to achieve its investment objective. If ASIF surrenders the security
for redemption, it will receive the face amount of the security, and possibly a
redemption premium. However, the amount received may be less than the value of
the security before the redemption. Moreover, since a call for redemption is
most likely to occur in a declining interest rate environment, ASIF may not be
able to earn as high a rate of return when it reinvests the proceeds. Selling
or converting the security might be more advantageous than surrendering for
redemption, but the reinvestment risk would remain. Before ASIF purchases a
convertible security, it will review carefully the redemption provisions of the
security.
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Convertible securities are generally not investment grade, that is, not
rated within the four highest categories by S&P and Moody's. To the extent
that convertible securities acquired by ASIF are rated lower than investment
grade or are not rated, there is a greater risk as to the timely repayment of
the principal of, and timely payment of interest or dividends on, such
securities. ASIF invests primarily in convertible securities that are rated at
least B by S&P or Moody's or, if unrated, are of comparable quality as
determined by AIM pursuant to guidelines adopted by ASIF's Board of Directors.
Many convertible securities which ASIF purchases are rated BB or lower by S&P
or Ba or lower by Moody's. Securities rated BB or B by S&P generally are
considered to be predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal and to involve major risk
exposures to adverse conditions that outweigh any quality and protective
characteristics. Bonds rated Ba by Moody's are judged to have speculative
characteristics; their future cannot be considered well assured. Bonds rated B
by Moody's generally lack characteristics of a desirable investment. Not more
than 5% of ASIF's assets is invested in securities that are rated lower than B
or, if unrated, are of comparable quality (as determined by AIM) to securities
that are rated lower than B. Descriptions of S&P and Moody's ratings are set
forth in the Investors Guide to The AIM Family of Funds(R) in the attached AFG
Prospectus.
In selecting convertible securities for ASIF, AIM considers the following
factors, among others: (1) AIM's own evaluation of the creditworthiness of the
issuers of the securities; (2) the interest or dividend income generated by the
securities; (3) the potential for capital appreciation of the securities and
the underlying common stock; (4) the prices of the securities relative to the
underlying common stock; (5) the prices of the securities relative to other
comparable securities; (6) whether the securities have unfavorable redemption
provisions or are entitled to the benefits of sinking funds or other protective
conditions; (7) diversification of ASIF's portfolio as to issuers and
industries; (8) whether the securities are rated by Moody's and/or S&P and, if
so, the ratings assigned; and (9) whether the underlying common stock can be
sold short, although ASIF is not limited to buying convertible securities the
underlying common stock of which may be sold short.
ASIF has adopted a fundamental investment policy that, under normal market
conditions, it will invest between 65% and 100% of its net assets in
income-producing securities or pursuant to ASIF's strategy to produce income,
i.e., in convertible securities, common stock received upon conversion or
exchange of such securities and short sales with respect to portfolio
securities (which are measured by the net value of the short position).
Short Sales
ASIF attempts to hedge against market risk and to enhance income by: (1)
entering into short sales of securities that it currently has the right to
acquire through the conversion or exchange of other securities that it owns, or
to a lesser extent, entering into short sales of securities that it currently
owns; and (2) entering into arrangements with the broker-dealers through which
such securities are sold short to receive income with respect to the proceeds
of short sales during the period ASIF's short positions remain open. In normal
circumstances a substantial portion of ASIF's portfolio of convertible
securities is hedged in this manner. ASIF may make short sales of securities
only if at all times when a short position is open it owns an equal amount of
such securities or securities convertible into or exchangeable for, without
payment of any further consideration, securities of the same issue as, and
equal in amount to, the securities sold short.
In a short sale, ASIF does not deliver from its portfolio the securities
sold and does not receive immediately the proceeds from the short sale.
Instead, ASIF borrows the securities sold short from a broker-dealer through
which the short sale is executed, and the broker-dealer delivers such
securities, on behalf of ASIF, to the purchaser of such securities. Such
broker-dealer is entitled to retain the proceeds from the short sale until ASIF
delivers to such broker-dealer the securities sold short. In addition, ASIF is
required to pay to the broker-dealer the amount of any dividends paid on shares
sold short. Finally, to secure its obligation to deliver to such broker-dealer
the securities sold short, ASIF must deposit and continuously maintain in a
separate account with ASIF's custodian an equivalent amount of the securities
sold short or securities convertible into or exchangeable for such securities
without the payment of additional consideration. ASIF is said to have a short
position in the securities sold until it delivers to the broker-dealer the
securities sold, at which time ASIF receives the proceeds of the sale. Because
ASIF ordinarily wants to continue to hold securities in its portfolio that are
sold short, it normally closes out a short position by purchasing on the open
market and delivering to the broker-dealer an amount of the securities sold
short, rather than by delivering portfolio securities.
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Such short sales may protect ASIF against the risk of losses in the value
of its portfolio securities because any unrealized losses with respect to such
portfolio securities should be wholly or partially offset by a corresponding
gain in the short position. However, any potential gains in such portfolio
securities should be wholly or partially offset by a corresponding loss in the
short position. The extent to which such gains or losses are offset depends
upon the amount of securities sold short relative to the amount ASIF owns,
either directly or indirectly, and, in the case where ASIF owns convertible
securities, changes in the conversion premium. Short sale transactions of ASIF
involve certain risks. In particular, the variable degree of correlation
between the price movements of the convertible securities and the price
movements of the underlying common stock being sold short creates the
possibility that losses on the short sale hedge position may be greater than
gains in the value of the portfolio securities being hedged. In addition, to
the extent that ASIF pays a conversion premium for a convertible security, ASIF
is generally unable to protect against a loss of such premium pursuant to a
short sale hedge. In determining the number of shares to be sold short against
ASIF's position in the convertible securities, the anticipated fluctuation in
the conversion premiums is considered. ASIF also incurs transaction costs in
connection with short sales.
In addition to enabling ASIF to hedge against market risk, short sales
affords ASIF an opportunity to earn additional current income to the extent
ASIF is able to enter into arrangements with broker-dealers through which the
short sales are executed to receive income with respect to the proceeds of the
short sales during the period ASIF's short positions remain open. ASIF has
been able to enter into such arrangements with broker-dealers, but there is no
assurance that ASIF will be able to enter into such arrangements to the desired
degree in the future. The inability of ASIF to enter into such arrangements to
the desired degree could impair ASIF's ability to achieve its investment
objective of high current income.
Certain Other Investment Strategies and Restrictions
Other Securities. Any of ASIF's total assets not invested in convertible
securities, common stock received upon conversion or exchange of convertible
securities or in short sales with respect to portfolio securities may be
invested in other securities, including non-convertible equity and debt
securities, options, warrants, securities of the U.S. Government, its agencies
and instrumentalities, repurchase agreements, or money market instruments. For
this purpose, "money market instruments" include certificates of deposit,
bankers' acceptances and interest-bearing savings deposits of banks having
total assets of more than $1 billion and which are members of the Federal
Deposit Insurance Corporation, commercial paper rated Prime 1 or higher by
Moody's or A-1 or higher by S&P or, if not rated, issued by companies which
have an outstanding debt issue rated Aa or higher by Moody's or AA or higher by
S&P, and other debt securities rated Baa or higher by Moody's or BBB or higher
by S&P with deemed maturities of one year or less. For temporary defensive
purposes, ASIF may invest without limitation in money market instruments as
described above.
In selecting non-convertible equity and debt securities, AIM considers the
same general factors set forth above that it uses in selecting convertible
securities. However, non-convertible debt securities purchased by ASIF are
investment grade, that is, if rated, within one of the four highest grades
assigned by S&P or Moody's or, if unrated, judged to be of comparable quality
by AIM pursuant to guidelines adopted by ASIF's Board of Directors.
As noted above, ASIF may invest in U.S. Government securities, which are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Certain of these obligations, such as U.S. Treasury notes
and bonds and Federal Housing Administration debentures, are supported by the
full faith and credit of the United States. Certain other U.S. Government
securities, issued or guaranteed by Federal agencies or government-sponsored
enterprises, are not supported by the full faith and credit of the United
States. These latter securities include, but are not limited to, obligations
supported by the right of the issuer to borrow from the U.S. Treasury, such as
obligations of Federal Home Loan Banks, and obligations supported only by the
credit of the instrumentality, such as Federal National Mortgage Association
bonds.
Option Transactions. ASIF may seek to enhance its income by writing
(selling) covered call options on the common stocks underlying the convertible
securities which it owns and may seek to engage in hedging transactions by
purchasing put options on such common stocks.
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A call option gives the purchaser the right, but not the obligation, to
buy, and imposes on the writer the obligation to sell, the common stock
underlying the option at the exercise price during the option period (generally
from three to nine months). ASIF may write only "covered" call options, that
is, options on securities which ASIF holds in its portfolio or has an immediate
right to acquire, without additional consideration, upon conversion or exchange
of securities held in ASIF's portfolio. ASIF, however, is not limited to
purchasing securities convertible into common stock against which options may
be written.
ASIF may write covered call options for hedging purposes in order to
provide limited protection against possible declines in the market values of
the stock or convertible securities held in its portfolio and in order to
receive additional income in the form of premiums which it is paid for writing
the options. If, for example, the market price of a common stock underlying a
convertible security held by ASIF declines and the convertible security also
declines in value, such decline will be offset in part (or wholly) by the
receipt of the premium for writing the call option on such stock. However, if
the market price of the underlying common stock increases and the convertible
security held by ASIF also increases in value, such increase will be offset in
part (or wholly) by a loss resulting from the cancellation of ASIF's position
through closing purchase transactions on the covered call options written by
ASIF or through the lost opportunity for additional capital appreciation if the
option is exercised.
ASIF will write only call options listed on national securities exchanges.
Currently, options on individual securities are traded on the Chicago Board
Options Exchange, the New York Stock Exchange, the AMEX, the Philadelphia Stock
Exchange and the Pacific Stock Exchange.
In addition to writing covered call options, ASIF may purchase put options
on common stock which it owns or which it may acquire through the conversion or
exchange of convertible securities which it owns. A put option gives the
holder the right, but not the obligation, to sell the common stock underlying
the option at the exercise price at any time during the option period. Any
losses realized by ASIF in connection with its purchase of put options will be
limited to the premiums paid by ASIF for the purchase of such options plus any
transaction costs.
ASIF may purchase put options on particular common stock in order to
protect against a decline in the market value of such stock below the exercise
price less the premium paid for the option. The ability to purchase put
options will allow ASIF to protect the unrealized gain in an appreciated
security in its portfolio without actually selling the security. In addition,
ASIF will continue to receive interest or dividend income on the security.
ASIF may sell a put option which it has previously purchased prior to the sale
of the securities underlying such option. Such sales will result in a net gain
or loss depending on whether the amount received on the sale is more or less
than the premium and other transaction costs paid for the put option which is
sold.
Eurodollar Securities. ASIF may invest in U.S. dollar-denominated
securities principally traded in securities markets outside the United States
("Eurodollar Securities"). Most of ASIF's investments in Eurodollar Securities
result from the purchase of Eurodollar convertible securities. Eurodollar
convertible securities may be issued by a United States corporation or by a
domestic or foreign subsidiary of such corporation, or by a foreign corporation
or its subsidiary. If issued by a subsidiary, the security is generally
guaranteed by the parent corporation and is not registered under the Securities
Act and may not be sold to U.S. investors except in reliance upon an available
exemption from the Securities Act. Such securities are restricted securities
and may be subject to limitations on resale in the United States. There exists
a liquid international institutional market for some Eurodollars Securities,
however, and one or more U.S. broker-dealers may make a market for such
securities. To the extent that a liquid international institutional market
exists for Eurodollar Securities held by ASIF, ASIF does not treat such
Eurodollar Securities as illiquid for purposes of its percentage restriction on
investment in illiquid securities.
Less publicly available information may exist about a foreign company than
about a U.S. company, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to those
applicable to U.S. companies. Securities of some foreign companies may be less
liquid or more volatile than securities of U.S. companies, and brokerage
commissions and custodian fees are generally higher in foreign countries than
in the United States. Investments in Eurodollar Securities issued by foreign
corporations may also be subject to other risks
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different from those affecting U.S. investments, including local political or
economic developments, expropriation or nationalization of assets and
imposition of withholding taxes on dividend or interest payments.
"When Issued" and Delayed Delivery Securities. ASIF may, from time to
time, purchase "when issued" securities or delayed delivery securities. "When
issued" securities are securities which have not been issued at the time they
are purchased and thus the delivery of and payment for these securities may be
delayed for several weeks or more, as compared to the timing of a normal
settlement. Delayed delivery securities are outstanding securities the
settlement for which is delayed beyond a normal settlement date. ASIF
segregates with its custodian an amount of high grade liquid assets equal to
the aggregate purchase price of any "when issued" or delayed delivery
securities which it has purchased. As of the trade date, ASIF records the
"when issued" or delayed delivery security as an asset and its purchase price
as an offsetting liability. Because subsequent changes in the market price
will affect the value of the security to be delivered, the purchase of "when
issued" or delayed delivery securities creates the potential for profit or loss
to ASIF without any investment by ASIF. However, ASIF will not engage in the
purchase of "when issued" or delayed delivery securities for speculative
purposes. While ASIF may sell a "when issued" or delayed delivery security
prior to its delivery, it will not enter into any purchase with that intention.
Lending of Portfolio Securities. In order to enhance income, ASIF may
lend securities representing up to 10% of its total assets, taken at market
value, to securities firms and financial institutions such as banks and trust
companies and receive therefor collateral in cash or U.S. Government securities
which are maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The purpose of such loans,
generally, is to permit the borrower to use such securities for delivery to
purchasers when such borrower has sold such securities short. If cash
collateral is received by ASIF, it will be invested in short-term money market
instruments. Alternatively, if securities are delivered to ASIF as collateral,
ASIF and the borrower will negotiate a rate for the loan premium to be received
by ASIF for lending its portfolio securities. In either event, the total yield
on ASIF's portfolio will be increased by loans of its portfolio securities.
ASIF will retain record ownership of loaned securities in order to exercise
beneficial rights such as voting rights, subscription rights and rights to
dividends, interest or other distributions. Such loans will be terminable at
any time. ASIF may pay reasonable finder's, administrative and custodial fees
in connection with such loans. The risks in lending portfolio securities, as
with other extensions of credit, consist of possible delay in recovery of the
securities or possible loss of rights in the collateral should the borrower
fail financially. In determining whether ASIF will lend securities to a
particular borrower, ASIF considers all relevant facts and circumstances,
including the creditworthiness of the borrower. AIM monitors the continuing
creditworthiness of the borrower to determine whether ASIF should continue to
lend portfolio securities to such borrower.
Illiquid Securities. ASIF may invest up to 33-1/3% of its total assets,
taken at market value, in illiquid securities. Restricted securities are
securities which have not been registered under the Securities Act and are thus
subject to restrictions on resale. A position in restricted securities might
adversely affect the liquidity and marketability of a portion of ASIF's
portfolio, and ASIF might not be able to dispose of its holdings in such
securities promptly or at reasonable prices. In those instances where ASIF is
required to have restricted securities held by it registered prior to sale by
ASIF and ASIF does not have a contractual commitment from the issuer or seller
to pay the costs of such registration, the gross proceeds from the sale of
securities would be reduced by the registration costs and underwriting
discounts. Any such registration costs are not included in the 33-1/3%
limitation on ASIF's investment in illiquid securities.
ASIF may purchase restricted securities that may be resold to "qualified
institutional buyers" under Rule 144A under the Securities Act without regard
to the limitation on investments in illiquid securities, provided that a
determination is made that such securities have a readily available trading
market. AIM will determine the liquidity of Rule 144A securities under the
supervision of ASIF's Board of Directors, and will consider whether securities
purchased under Rule 144A are illiquid and thus subject to ASIF's restriction
of investing no more than 33-1/3% of its assets in illiquid securities.
Determination of whether a Rule 144A security is liquid or not is a question of
fact. In making this determination AIM will consider the (i) frequency of
trades and quotes, (ii) number of dealers and potential purchasers, (iii)
dealer undertakings to make a market, and (iv) nature of the security and/or
market place trades (for example, the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer). The liquidity
of Rule 144A securities will also be monitored by AIM and if it is determined
that a Rule 144A security is no longer liquid as a result of changed
conditions, ASIF's holdings of illiquid securities will be reviewed to
determine what, if any, action is required to assure ASIF
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does not invest more than 33-1/3% of its assets in illiquid securities.
Investing in Rule 144A securities could have the effect of increasing the
amount of ASIF's investments in illiquid securities if qualified
institutional buyers are unwilling to purchase such securities.
Repurchase Agreements. As part of its strategy for the temporary
investment of cash, ASIF may enter into "repurchase agreements" pertaining to
U.S. Government securities with member banks of the Federal Reserve System or
primary dealers (as designated by the Federal Reserve Bank of New York) in such
securities. A repurchase agreement arises when ASIF purchases a security and
simultaneously agrees to resell it to the vendor at an agreed upon future date.
The resale price is greater than the purchase price, reflecting an agreed upon
market rate of return which is effective for the period of time ASIF holds the
security and which is not related to the coupon rate on the purchased security.
Such agreements will have maturities of no more than seven days and will be
used to permit ASIF to earn interest on assets awaiting long term investment.
ASIF requires continuous maintenance by its custodian for its account in the
Federal Reserve/Treasury Book Entry System of collateral in an amount equal to,
or in excess of, the market value of the securities which are the subject of a
repurchase agreement. Under the Investment Company Act, repurchase agreements
are considered to be collateralized loans to the vendor. In the event a vendor
defaults on its repurchase obligation, ASIF could suffer delays, collection
expenses and losses to the extent that the proceeds from the sale of the
collateral are less than the repurchase price. ASIF considers all relevant
facts and circumstances, including the creditworthiness of the vendor, in
determining whether to enter into a repurchase agreement. AIM monitors the
continuing creditworthiness of the vendor to determine whether ASIF should
continue to enter into repurchase agreements with such vendor.
PORTFOLIO MANAGERS
AIM uses a team approach and a disciplined investment process in providing
investment advisory services to all of its accounts, including AIM High Yield
and ASIF. AIM's investment staff consists of 85 individuals. While individual
members of AIM's investment staff are assigned primary responsibility for the
day-to-day management of each of AIM's accounts, all accounts are reviewed on a
regular basis by AIM's Investment Policy Committee to ensure that they are
being invested in accordance with the account's and AIM's investment policies.
The individuals who are primarily responsible for the day-to-day management of
AIM High Yield and ASIF and their titles, if any, with AIM or its affiliates
and AIM High Yield or ASIF, the length of time they have been responsible for
the management, and their years of investment experience and prior experience
(if they have been with AIM for less than five years) are shown below.
AIM High Yield. John L. Pessarra is Vice President of A I M Capital
Management, Inc. ("AIM Capital"), a wholly-owned subsidiary of AIM, and has
been responsible for AIM High Yield since 1992. Mr. Pessarra has been
associated with AIM since 1990 and has a total of 12 years of experience as an
investment professional. Kevin E. Rogers is Vice President of AIM Capital and
has been responsible for AIM High Yield since 1995. Mr. Rogers has been
associated with AIM since 1991 and has over nine years of experience as an
investment professional. Messrs. Pessarra and Rogers will be responsible for
the day-to-day management of the assets transferred by ASIF to AIM High Yield
as part of the Transaction.
ASIF. David P. Barnard is Vice President of AIM Capital and has been
responsible for ASIF since 1989. Mr. Barnard has been associated with AIM
since 1982 and has over 22 years of experience as an investment professional.
Craig A. Smith is Assistant Vice President of AIM Capital, and has been
responsible for ASIF since 1992. Mr. Smith has been associated with AIM since
1989 and has over 6 years of experience as an investment professional.
23
<PAGE> 32
FINANCIAL INFORMATION
AIM High Yield
Shown below are the condensed financial highlights for a Class A share
outstanding for each of the years in the ten-year period ended December 31,
1995.
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994 1993 1992(a) 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07
Income from investment
operations: Net
investment income 0.93 0.96 0.97 1.04 1.02
Net gains (losses) on
securities (both
realized and unrealized) 0.52 (1.12) 0.69 0.55 1.81
-------- -------- -------- -------- --------
Total from investment
operations 1.45 (0.16) 1.66 1.59 2.83
-------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.95) (0.96) (1.01) (1.05) (1.04)
-------- -------- -------- -------- --------
Net asset value, end of
period $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86
======== ======== ======== ======= =======
Total return(b) 16.86% (1.67)% 18.40% 18.60% 42.18%
======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of
period (000s omitted) $886,106 $578,959 $550,760 $324,518 $259,677
======== ======== ======== ======== ========
Ratio of expenses to
average net assets 0.96%(c) 1.00% 1.12% 1.15% 1.22%
======== ======== ======== ======== ========
Ratio of net investment
income to average net
assets 9.95%(c) 10.07% 9.82% 11.00% 12.67%
======== ======== ======== ======== ========
Portfolio turnover rate 61% 53% 53% 56% 61%
======== ======== ======== ======== ========
<CAPTION>
DECEMBER 31,
1990 1989 1988 1987 1986
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 8.94 $ 10.01 $ 9.67 $ 10.54 $ 10.21
Income from investment
operations: Net
investment income 1.09 1.21 1.18 1.16 1.26
Net gains (losses) on
securities (both
realized and unrealized) (1.84) (1.07) 0.34 (0.83) 0.31
-------- -------- -------- -------- --------
Total from investment
operations (0.75) 0.14 1.52 0.33 1.57
-------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (1.12) (1.21) (1.18) (1.20) (1.24)
-------- -------- -------- -------- --------
Net asset value, end of
period $ 7.07 $ 8.94 $ 10.01 $ 9.67 $ 10.54
======== ======== ======== ======== ========
Total return(b) (9.03)% 1.18% 16.41% 3.07% 15.97%
======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of
period (000s omitted) $204,932 $261,920 $274,631 $242,858 $246,865
======== ======== ======== ======== ========
Ratio of expenses to
average net assets 1.21%(d) 0.99% 0.96%(d) 0.92% 0.92%
======== ======== ======== ======== ========
Ratio of net investment
income to average net
assets 13.59%(e) 12.40% 11.84%(e) 11.21% 11.84%
======== ======== ======== ======== ========
Portfolio turnover rate 27% 36% 76% 81% 86%
======== ======== ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges.
(c) Ratios are annualized and are based on average net assets of
$722,145,319.
(d) Ratios of expenses to average net assets prior to waiver of advisory fees
were 1.22% and 1.00% for 1990 and 1988, respectively.
(e) Ratios of net investment income to average net assets prior to reduction
of advisory fees were 13.58% and 11.80% for years 1990 and 1988,
respectively.
24
<PAGE> 33
ASIF
Shown below are the condensed financial highlights for a share of ASIF
outstanding during each of the years in the six-year period ended December 31,
1995 and the period March 23, 1989 (date operations commenced) through December
31, 1989.
<TABLE>
<CAPTION>
1995 1994 1993 1992
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 9.18 $ 9.76 $ 9.29 $ 9.15
Income from investment
operations:
Net investment income 0.57 0.51 0.50 0.60
Net gains (losses) on investment
securities (both realized and
unrealized) 0.55 (0.52) 0.51 0.32
------- ------- ------- -------
Total from investment operations 1.12 (0.01) 1.01 0.92
------- ------- ------- -------
Less distributions:
Dividends from net investment
income (0.60) (0.46) (0.50) (0.60)
Distributions from net realized
capital gains -- (0.11) (0.04) (0.18)
------- ------- ------- -------
Total distributions (0.60) (0.57) (0.54) (0.78)
------- ------- ------- -------
Net asset value, end of period $ 9.70 $ 9.18 $ 9.76 $ 9.29
======= ======= ======= =======
Per share market value, end of
period $ 8.38 $ 8.00 $ 9.00 $ 9.13
======= ======= ======= =======
Total investment return, based on
market value(a) 12.46% (4.94)% 4.47% 17.03%
======= ======= ======= =======
Total investment return, based on
net asset value(b) 13.51% 0.59% 11.34% 10.62%
======= ======= ======= =======
Net assets, end of period (000s
omitted) $67,661 $64,023 $68,066 $64,700
======= ======= ======= =======
Significant ratios for the period:
Investment income 7.30%(d) 6.80% 6.68% 8.16%
Operating expenses (1.12)(d) (1.15) (1.16) (1.15)
Dividends on short sales (0.20)(d) (0.27) (0.34) (0.51)
Tax expense -- -- (0.01) --
------- ------- ------- -------
Net investment income 5.98%(d) 5.38% 5.17% 6.50%
======= ======= ======= =======
Portfolio turnover rate 99.97% 89.96% 117.45% 89.70%
======= ======= ======= =======
<CAPTION>
1991 1990 1989
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of
period $ 8.64 $ 9.12 $ 9.23
Income from investment
operations:
Net investment income 0.80 0.98 0.77
Net gains (losses) on investment
securities (both realized and
unrealized) 0.56 (0.44) (0.11)
------- ------- -------
Total from investment operations 1.36 0.54 0.66
------- ------- -------
Less distributions:
Dividends from net investment
income
(0.80) (0.98) (0.77)
Distributions from net realized
capital gains (0.05) (0.04) --
------- ------- -------
Total distributions (0.85) (1.02) (0.77)
------- ------- -------
Net asset value, end of period $ 9.15 $ 8.64 $ 9.12
======= ======= =======
Per share market value, end of
period $ 8.50 $ 7.88 $ 9.75
======= ======= =======
Total investment return, based on
market value(a) 19.05% (9.04)% 5.78%
======= ======= =======
Total investment return, based on
net asset value(b) 16.89% 6.62% 7.20%
======= ======= =======
Net assets, end of period (000s
omitted) $63,068 $59,585 $62,141
======= ======= =======
Significant ratios for the period:
Investment income 10.64% 12.54% 12.26%(c)
Operating expenses (1.17) (1.16)(e) (0.97)(c)(e)
Dividends on short sales (0.40) (0.40) (0.43)(c)
Tax expense (0.03) (0.02) --
------- ------- -------
Net investment income 9.04% 10.96%(e) 10.86%(c)(e)
======= ======= =======
Portfolio turnover rate 89.40% 91.73% 161.82%
======= ======= =======
</TABLE>
(a) Assumes shares purchased at market value at the beginning of the year,
dividends reinvested at market value on payable date, and all shares sold
at market value at the end of the period.
(b) Assumes shares purchased at net asset value at the beginning of the year,
dividends reinvested at market value and all shares sold at net asset
value at end of the period.
(c) Annualized.
(d) Based on average weekly net assets of $66,176,041.
(e) After partial waiver of advisory and administrative fees.
25
<PAGE> 34
MANAGEMENT DISCUSSION AND ANALYSIS OF PERFORMANCE
A discussion of the performance of AIM High Yield for the fiscal year ended
December 31, 1995 is set forth in Appendix III to this Proxy
Statement/Prospectus. A discussion of the performance of ASIF for its fiscal
year ended December 31, 1995 is set forth in Appendix IV to this Proxy
Statement/Prospectus.
ADDITIONAL INFORMATION ABOUT THE AGREEMENT
TERMS OF THE TRANSACTION
The terms and conditions under which the Transaction may be consummated
are set forth in the Agreement. Significant provisions of the Agreement are
summarized below; however, this summary is qualified in its entirety by
reference to the Agreement, a copy of which is attached as Appendix I to this
Proxy Statement/Prospectus.
TRANSFER OF ASSETS AND LIABILITIES
AIM High Yield will acquire substantially all of the assets of ASIF in
exchange for its assumption of substantially all of the liabilities of ASIF and
the issuance by AFG of Class A shares of AIM High Yield to ASIF shareholders.
The actual transfer of such assets (the "Closing") is expected to occur on July
29, 1996, at 2:00 p.m. Central Time (the "Effective Time") on the basis of
values calculated as of the close of business on the preceding business day.
The Closing may be delayed without approval of ASIF shareholders by mutual
agreement of ASIF and AFG.
At the Closing, AFG will issue directly to the shareholders of ASIF that
number of Class A shares of AIM High Yield equal in aggregate net asset value
to the aggregate net value of ASIF's assets then transferred. The value
calculations will be made pursuant to procedures customarily used by AIM High
Yield. Securities for which there is no readily ascertainable market value
will be valued by mutual agreement of ASIF and AFG, provided such value is
consistent with AFG's pricing procedures. Promptly after the Closing, ASIF
will take steps to pay any outstanding liabilities not assumed by AIM High
Yield and will pay a dividend to its shareholders consisting of all
undistributed taxable income or net capital gains, if any, recognized prior to
Closing. Such dividend will be paid out of a segregated account at ASIF's
custodian set aside solely for the purpose of its payment. ASIF shall
thereafter be deregistered as an investment company and will dissolve its
corporate existence.
OTHER TERMS
The Agreement may be amended without shareholder approval by mutual
agreement of ASIF and AFG. If any amendment is made to the Agreement which
effects a material change to the Agreement and the Transaction, such change
will be submitted to the shareholders for their approval.
Each of ASIF and AFG have made representations and warranties in the
Agreement that are customary in matters such as the Transaction. The
obligations of ASIF and AFG pursuant to the Agreement are subject to various
conditions, including the following: (a) the assets of ASIF to be acquired by
AIM High Yield shall constitute at least 90% of the fair market value of the
net assets and at least 70% of the fair market value of the gross assets held
by ASIF immediately prior to the Transaction; (b) AFG's Registration Statement
on Form N-14 under the Securities Act and the Investment Company Act shall have
been filed with the SEC and such Registration Statement shall have become
effective, and no stop-order suspending the effectiveness of the Registration
Statement shall have been issued, and no proceeding for that purpose shall have
been initiated or threatened by the SEC (and not withdrawn or terminated); (c)
the shareholders of ASIF shall have approved the Agreement; (d) upon written
request of AFG, ASIF shall, prior to the Closing, have disposed of equity
securities held by it that AIM High Yield determines it does not desire to
hold, provided that ASIF shall not be required to dispose of assets to the
extent that such disposition would cause fifty percent or more of its historic
business assets to be transferred prior to the Closing; (e) no temporary
restraining order, preliminary or permanent injunction or other order issued by
any governmental authority preventing consummation of the Transaction shall be
in effect; (f) each of AFG
26
<PAGE> 35
and ASIF shall qualify as a regulated investment company under the
Code; and (g) the receipt of an opinion from Ballard Spahr Andrews & Ingersoll,
that the Transaction will not result in the recognition of gain or loss for
Federal income tax purposes for ASIF, AIM High Yield or their shareholders.
AIM High Yield and ASIF have each agreed to bear their respective expenses
in connection with the Transaction.
The Board of Directors of ASIF may waive without shareholder approval any
default by AFG or any failure by AFG to satisfy any of the conditions to ASIF's
obligations as long as such a waiver will not have a material adverse effect on
the benefits intended under the Agreement for the shareholders of ASIF. The
Closing may be delayed by mutual agreement of AFG and ASIF. The Agreement may
be terminated and the Transaction may be abandoned at any time by mutual
agreement of ASIF and AFG, or by either party in the event that ASIF
shareholders do not approve the Agreement or if the Closing does not occur on
or before December 31, 1996.
ASIF may elect to close certain of its short sale transactions prior to
the Closing by delivering portfolio securities to the broker-dealer through
which the short sale was executed. This could result in ASIF recognizing
short-term profits in excess of those permitted to a regulated investment
company under the Code, which could cause ASIF to fail to qualify as a
regulated investment company under the Code in breach of ASIF's representations
and warranties contained in the Agreement. AFG may agree with ASIF to extend
the Closing to allow ASIF additional time to generate other profits that would
allow it to maintain its status as a regulated investment company under the
Code. Alternatively, ASIF may elect to manage the closing of its short sale
transactions in a manner that would allow it to avoid having to recognize
short-term profits that would cause it to fail to qualify as a regulated
investment company.
If the Agreement is approved, an account will be established for each
shareholder of ASIF containing that shareholder's shares of AIM High Yield.
Such accounts will contain certain information about the shareholder that is
identical to the account currently maintained for each shareholder of ASIF.
FEDERAL TAX CONSEQUENCES
The principal Federal income tax consequences that will result from the
Transaction, under currently applicable law, are as follows: (i) the
Transaction will qualify as a "reorganization" within the meaning of Section
368(a) of the Code; (ii) in accordance with Sections 361(a) and 361(c)(1) of
the Code, no gain or loss will be recognized by ASIF upon the transfer of its
assets to AIM High Yield; (iii) in accordance with Section 354(a)(1) of the
Code, no gain or loss will be recognized by any shareholder of ASIF upon the
exchange of shares of ASIF solely for shares of AIM High Yield; (iv) in
accordance with Section 358(a) of the Code, the tax basis of the shares of AIM
High Yield to be received by a shareholder of ASIF will be the same as the tax
basis of the shares of ASIF surrendered in exchange therefor; (v) in accordance
with Section 1223(1) of the Code, the holding period of the shares of AIM High
Yield to be received by a shareholder of ASIF will include the holding period
for which such shareholder held the shares of ASIF exchanged therefor provided
that such shares of ASIF are capital assets in the hands of such shareholder as
of the Closing; (vi) in accordance with Section 1032 of the Code, no gain or
loss will be recognized by AIM High Yield on the receipt of assets of ASIF in
exchange for shares of AIM High Yield; (vii) in accordance with Section 362(b)
of the Code, the tax basis of the assets of ASIF in the hands of AIM High Yield
will be the same as the tax basis of such assets in the hands of ASIF
immediately prior to the Transaction; (viii) in accordance with Section 1223(2)
of the Code, the holding period of the assets of ASIF to be received by AIM
High Yield will include the holding period of such assets in the hands of ASIF
immediately prior to the Transaction; and (ix) AIM High Yield will succeed to
and take into account the items of ASIF described in Section 381(c) of the
Code, subject to the conditions and limitations specified in Sections 381
through 384 of the Code and the Treasury regulations thereunder.
As a condition to the Closing, Ballard Spahr Andrews & Ingersoll will
render a favorable opinion as to the foregoing Federal tax consequences of the
Transaction, which opinion will be conditioned upon the accuracy, as of the
date of the Agreement and as of the Closing, of certain representations upon
which Ballard Spahr Andrews & Ingersoll will rely, including but not limited
to, the following (taking into account for purposes thereof any events that are
part of the plan of reorganization): (A) there is no plan or intention by the
shareholders of ASIF to sell, exchange or otherwise dispose of a number of
shares of AIM High Yield received in the Transaction that would reduce the ASIF
Shareholders' ownership of
27
<PAGE> 36
AIM High Yield shares to a number of shares having a value, as of the Closing
Date, of less than 50% of the value of all of the formerly outstanding shares
of ASIF as of the Closing Date; (B) AIM High Yield will acquire at least ninety
percent (90%) of the fair market value of the net assets and at least seventy
percent (70%) of the fair market value of the gross assets held by ASIF
immediately prior to the Transaction, excluding any assets held by ASIF that
are to be distributed (pursuant to the Investment Company Act and not in excess
of the requirements of Section 852 of the Code) as regular, normal dividends in
the ordinary course of ASIF's business; (C) following the Transaction, AIM High
Yield will continue the historic business of ASIF (for this purpose "historic
business" shall mean the business most recently conducted by ASIF which was not
entered into in connection with the Transaction) or use a significant portion
of ASIF's historic business assets in its business; (D) at the direction of
ASIF, AIM High Yield will issue directly to ASIF's shareholders pro rata the
shares of AIM High Yield that ASIF constructively receives in the Transaction
and ASIF will distribute its other properties (if any) to its shareholders on,
or as promptly as practicable after, the Closing; (E) AIM High Yield has no
plan or intention to reacquire any of its shares issued in the Transaction,
except to the extent that AIM High Yield is required by the Investment Company
Act to redeem any of its shares presented for redemption; (F) AIM High Yield
does not plan or intend to sell or otherwise dispose of any of the assets of
ASIF acquired in the Transaction, except for dispositions made in the ordinary
course of its business or dispositions necessary to maintain its status as a
"regulated investment company" under the Code; and (G) AIM High Yield, ASIF and
the shareholders of ASIF will pay their respective expenses, if any, incurred
in connection with the Transaction.
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
TRANSACTION IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF
ANY SHAREHOLDER OF ASIF. ASIF SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF THE TRANSACTION, INCLUDING
THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Transaction will be accounted for on a continuing entity (pooling of
interests) basis. Accordingly, the book cost basis to AIM High Yield of the
assets of ASIF will be the same as the book cost basis of such assets to ASIF.
ADDITIONAL INFORMATION ABOUT AIM HIGH YIELD
For more information with respect to AFG and AIM High Yield concerning the
following topics, please refer to the AFG Prospectus as indicated: (i) see the
discussion "Investment Objectives," "Summary," "About the Funds," "Investment
Programs," "Management" and "General Information" for further information
regarding AFG and AIM High Yield; (ii) see the discussion "Summary,"
"Investment Programs," "Management" and "General Information" for further
information regarding management of AIM High Yield; (iii) see the discussion
"Summary," "Management," "Organization of the Trust," "Dividends, Distributions
and Tax Matters" and "General Information" for further information regarding
shares of beneficial interest of AIM High Yield; (iv) see the discussion
"Management," "How to Purchase Shares," "Terms and Conditions of Purchase of
the AIM Funds," "Special Plans," "Exchange Privilege," "Determination of Net
Asset Value" and "How to Redeem Shares" for further information regarding the
purchase, redemption and repurchase of AIM High Yield shares.
ADDITIONAL INFORMATION ABOUT ASIF
INVESTMENT ADVISOR
AIM serves as investment advisor to ASIF pursuant to the ASIF Advisory
Agreement.
In addition to the payments to AIM under the ASIF Advisory Agreement
described above, ASIF pays certain other costs including (a) brokerage and
commission expenses or other expenses of transactions and expenses of tendering
for shares and of repurchasing shares, (b) Federal, state, local and foreign
taxes, including issue and transfer taxes, incurred by or levied on ASIF, (c)
interest charges on borrowings, (d) fees and expenses of listing and
maintaining the listing
28
<PAGE> 37
of ASIF's shares on any national securities exchange and expenses of the
National Association of Securities Dealers, Inc., (e) expenses of printing
and distributing reports to shareholders, holding shareholder meetings and
making regulatory filings, (f) costs of proxy solicitation, (g) charges and
expenses of ASIF's custodian and registrar, transfer agent and dividend
disbursing agent, (h) compensation of any of ASIF's officers, directors and
employees who do not devote any part of their time to the affairs of AIM or its
affiliates other than ASIF, (i) legal and auditing expenses, (j) the cost of
stock certificates representing shares of ASIF's Common Stock, (k) costs of
stationery and supplies, (l) expenses of membership in investment company
associations, (m) costs of fidelity bonding and other insurance, and (n)
extraordinary expenses, including costs of litigation and indemnification.
The ASIF Advisory Agreement may be renewed annually if approved by a
majority vote of the shareholders or by a majority vote of the directors who
neither are interested persons of ASIF nor have any direct or indirect
financial interest in the ASIF Advisory Agreement cast in person at a meeting
called for the purpose of voting on such approval. The ASIF Advisory Agreement
was last renewed on May __, 1996. The ASIF Advisory Agreement may be
terminated on 60 days' notice by a majority vote of the directors or
shareholders or by AIM and terminates automatically in case of its assignment.
Under the terms of the ASIF Advisory Agreement, ASIF will discontinue the
use of the term "AIM" in ASIF's name or the use of any marks or symbols owned
by AIM if AIM ceases to act as ASIF's investment advisor or if AIM so requests.
SHARE PRICE DATA
ASIF's shares of common stock are traded on the AMEX. Provided below are
high and low sales prices for an ASIF share for each full quarterly period
within ASIF's two most recent fiscal years and for its fiscal quarter ended
March 31, 1996, as reported on the AMEX, along with information as to the net
asset value of an ASIF share and the discount or premium to net asset value
(expressed as a percentage) represented by each price quotation.
<TABLE>
<CAPTION>
MARKET PRICE, NET ASSET VALUE AND DISCOUNT OF ASIF SHARES
ASIF HIGHS ASIF LOWS
----------------------------- ---------------------------------
Market Price Market Price
High NAV Discount Low NAV Discount
------------ --- -------- ------------ ---- --------
<S> <C> <C> <C> <C> <C> <C>
1st Qtr 1994 $9.0000 $9.83 (8.44%) $8.5000 $9.85 (13.71%)
2nd Qtr 1994 8.7500 9.60 (8.85%) 8.0000 9.36 (14.53%)
3rd Qtr 1994 8.5000 9.44 (9.96%) 7.8750 9.36 (15.87%)
4th Qtr 1994 8.6250 9.48 (9.02%) 7.8750 9.18 (14.22%)
1st Qtr 1995 8.2500 9.18 (10.13%) 7.7500 9.13 (15.12%)
2nd Qtr 1995 8.3750 9.57 (12.49%) 8.0000 9.38 (14.71%)
3rd Qtr 1995 8.6250 9.83 (12.26%) 8.1250 9.75 (16.67%)
4th Qtr 1995 8.6250 9.82 (12.17%) 8.1250 9.65 (15.80%)
1st Qtr 1996 9.4375 9.90 (4.67%) 8.2500 9.70 (14.95%)
</TABLE>
On April 10, 1996, the price of an ASIF share was $9.3750, its net asset
value was $9.92 and the discount of the share price to net asset value was
(5.49)%.
29
<PAGE> 38
VALUATION OF PORTFOLIO SECURITIES
ASIF calculates and makes available for weekly publication the net asset
value of its shares. Net asset value per share is determined as of the close
of trading on the AMEX by dividing the value of ASIF's assets, less its
liabilities (including accrued expenses), by the number of ASIF's outstanding
shares.
For purposes of this computation, portfolio securities, except convertible
bonds, that are traded on a national securities exchange, and securities
reported on the NASDAQ National Market System, are valued at market using the
last reported sales price. Securities traded in the over-the-counter market,
convertible bonds and listed securities for which no sales were reported are
valued at the mean of the most recently quoted bid and asked prices. Short
sales are valued at the difference between the amount of the accounts
receivable from broker-dealers with respect to the proceeds from the sale of
securities that were sold short and then current market value of the securities
sold short. When market quotations are not readily available for ASIF's
securities, such securities are valued at their fair value following procedures
approved by the Board of Directors. These procedures include determining fair
value on the basis of valuations furnished by pricing services approved by the
Board of Directors, which include market transactions for comparable securities
and various relationships between securities which are generally recognized by
institutional traders, as well as on the basis of appraisals received from a
pricing service using a computerized matrix system, or appraisals derived from
information concerning the securities or similar securities received from
recognized dealers in those securities. Short-term obligations with maturities
of 60 days or less are valued at amortized cost as reflecting fair value.
BROKERAGE AND PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Directors of ASIF, AIM
is responsible for the investment decisions and the placing of the orders for
portfolio transactions for ASIF. AIM's primary consideration in effecting a
security transaction is to obtain the best net price and the most favorable
execution of the order. While AIM generally seeks reasonably competitive
commission rates, ASIF does not necessarily pay the lowest commission or spread
available.
A portion of the securities in which ASIF invests are traded in
over-the-counter markets, and in such transactions, ASIF deals directly with
the dealers who make markets in the securities involved, except in those
circumstances where better prices and executions are available elsewhere. Such
transactions are normally on a net basis which does not involve payment of
brokerage commissions. Premiums are paid with respect to options purchased by
ASIF. The cost of securities purchased from an underwriter usually includes a
spread between the price paid by ASIF and the proceeds received by the
underwriter; transactions with dealers normally reflect the spread between bid
and asked prices.
ASIF has no obligation to enter into transactions in portfolio securities
with any dealer, issuer, underwriter or other entity. ASIF does not and will
not purchase securities from, or sell securities to, AIM or its affiliates
acting as principal. AIM may, in its discretion, purchase and sell securities
through dealers who provide research, statistical and other information to AIM.
Such services may be used by AIM for all of its investment advisory accounts
and, accordingly, not all such services may be used by AIM in connection with
ASIF. The investment information provided to AIM is of the type described in
Section 28(e)(3) of the Securities Exchange Act of 1934, as amended, and is
designed to augment AIM's own internal research and investment strategy
capabilities. The expenses of AIM will not necessarily be reduced as a result
of the receipt of such information.
For the fiscal year ended December 31, 1995, ASIF paid brokerage
commissions of $108,640.82. AIM allocated certain of ASIF's brokerage
transactions during the fiscal year ended December 31, 1995 to certain
broker-dealers that provided AIM with certain research, statistical and other
information. Such transactions amounted to $875,059 and the related brokerage
commissions were $1,204.
DISTRIBUTIONS
ASIF distributes monthly its net investment income, including all or a
portion of net short-term capital gains. Net long-term capital gains, if any,
normally are distributed annually.
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DIVIDEND REINVESTMENT PLAN
Pursuant to ASIF's Dividend Reinvestment Plan (the "Plan"), shareholders
whose shares are registered in their own names will have their dividends and
capital gain distributions reinvested in additional shares of ASIF unless they
elect to receive such distributions in cash. State Street Bank and Trust
Company (the "Plan Agent") acts as agent for participants under the Plan.
Shareholders who elect not to participate in the Plan receive all
distributions in cash paid by check mailed directly to the shareholder of
record (or, if the shares are held in street or other nominee name, then to the
nominee) by State Bank and Trust Company as dividend disbursing agent. Such
election must be made by written notification to State Street Bank and Trust
Company.
A shareholder may withdraw from the Plan at any time. There is no penalty
for withdrawal from the Plan, and shareholders who have previously withdrawn
from the Plan may rejoin it at any time. An election to withdraw from the Plan
will, until such election is changed, be deemed to be an election by a
shareholder to take all subsequent distributions in cash. An election will be
effective only for a distribution declared and having a record date of at least
10 days after the date on which the election is received by the Plan Agent.
If the Board of Directors of ASIF declares an income dividend or capital
gain distribution payable to shareholders either in ASIF's shares or in cash
(as such shareholders may have elected), nonparticipants in the Plan will
receive cash and participants in the Plan will receive the equivalent in shares
valued on the valuation date at the lower of the market price or the net asset
value of such shares, as specified below. The valuation date will generally be
the dividend or distribution payment date, or, if that date is not a trading
day on the AMEX, the next preceding trading day. If the market price per share
on the valuation date equals or exceeds the net asset value per share on that
date (i.e., the shares are trading at a premium to net asset value), ASIF will
issue new shares to participants valued at the higher of net asset value or 95%
of their market price on the valuation date. If net asset value per share on
the valuation date exceeds the market price per share on that date (i.e., the
shares are trading at a discount from net asset value), or if the Board of
Directors should declare a dividend or capital gain distribution payable to
shareholders only in cash, participants in the Plan will be deemed to have
elected to receive shares of ASIF valued at the market price on that date,
ASIF will not issue shares under the Plan below net asset value. Accordingly,
in this circumstance, the Plan Agent, as agent for the participants, will use
the amount of the distribution to buy ASIF's shares in the open market, on the
AMEX or elsewhere, for the participant's accounts on or shortly after the
payment date. If, before the Plan Agent has completed its purchases, the
market price exceeds the net asset value per share, the average per share
purchase price paid by the Plan Agent may exceed the net asset value per share,
resulting in the acquisition of fewer shares than if the dividend or
distribution has been paid in shares issued by ASIF.
The Plan Agent maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the account, including
information needed by shareholders for tax records. Shares in the account of
each Plan participant are held by the Plan Agent in non-certificated form in
the name of the participant, and each shareholder's proxy includes those shares
purchased or received pursuant to the Plan.
In the case of shareholders such as banks, broker-dealers or nominees
which hold shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of shares certified from time to
time by the record shareholders as representing the total amount registered in
the record shareholder's name and held for the account of beneficial owners who
are participating in the Plan. Beneficial owners of shares who participate in
the Plan and who change brokers should have their new broker instruct the Plan
Agent to transfer shares held by the Plan Agent to the name of the new broker.
There are no brokerage charges with respect to shares issued directly by
ASIF to satisfy the dividend reinvestment requirements of the Plan. However,
each participant pays a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases of shares. In each case, the
cost per share of shares purchased for each shareholder's account is the
average cost, including brokerage commission, of any shares purchased in the
open market plus the cost of any shares issued by ASIF. Shares will be
purchased through various broker-dealers.
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<PAGE> 40
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
In the case of foreign participants whose dividends are subject to U.S.
income tax withholding and in the case of any participants subject to 20%
federal backup withholding, the Plan Agent will reinvest dividends after
deduction of the amount required to be withheld.
In anticipation of consummation of the Transaction, ASIF has terminated
the Plan effective as of July 25, 1996.
SHARE REPURCHASES AND TENDERS, POSSIBLE CONVERSION TO OPEN-END INVESTMENT
COMPANY
ASIF's shares have normally traded at a discount to their net asset value
since March, 1990. The Board of Directors of ASIF has from time to time
considered whether it would be in the best interests of shareholders for ASIF
to undertake repurchases of or tender offers for shares of its common stock to
attempt to reduce or eliminate the market value discount from the net asset
value of those shares. To date, the Board of Directors has not determined that
such actions would be in the best interests of shareholders.
Although the Board of Directors believes that share repurchases and
tenders generally would have a favorable impact on the price of ASIF's shares,
there can be no assurance that repurchases or tenders would result in ASIF
shares trading at a price which is equal to their net asset value. An
acquisition of shares by ASIF would decrease ASIF's total assets and would have
the effect of increasing ASIF's expense ratio. ASIF would also be required to
liquidate portfolio securities to enable it to consummate share repurchases or
tender offers, which might have an adverse effect on ASIF's investment
performance and on AIM's flexibility in managing remaining portfolio
investments.
The Board of Directors or ASIF's shareholders may propose at any time that
ASIF convert to an open-end investment company. In addition, ASIF's Articles
of Incorporation provide that, commencing with the fiscal year beginning on
January 1, 1994, and in each fiscal year thereafter, if (i) shares of ASIF's
common stock have traded on the principal securities exchange where they are
listed at an average discount from net asset value of more than 10%, determined
on the basis of the discount as of the end of the last trading day in each week
during the period of 12 calendar weeks preceding December 31 in such year, and
(ii) on or prior to December 31 of such year ASIF receives requests in writing,
addressed to ASIF and containing the shareholders names and addresses as they
appear on ASIF's records maintained by the transfer agent, from the holders of
10% or more of ASIF's shares of common stock outstanding on December 31 that
such a proposal be submitted to ASIF's shareholders, ASIF will submit to its
shareholders at the next succeeding annual meeting of shareholders a proposal,
to the extent consistent with the Investment Company Act, to amend ASIF's
Articles of Incorporation to convert ASIF to an open-end investment company,
unless the Board of Directors determines that such conversion could impair the
ability of ASIF to seek its investment objective while maintaining its status
as a regulated investment company under the Code. Such amendment would provide
that, upon its adoption by the holders of 66-2/3% of ASIF's outstanding shares
of common stock, ASIF will convert from a closed-end to an open-end investment
company.
If ASIF converted to an open-end investment company, it would be able to
offer continuously for sale shares of its common stock and each share of ASIF's
common stock could be presented to ASIF at the option of the holder thereof for
redemption at net asset value per share. In such event, ASIF could be required
to liquidate portfolio securities to meet requests for redemption, and its
shares would no longer be listed on the AMEX. In this respect, consummation of
the Transaction will have the same effect as a conversion of ASIF to an
open-end investment company.
DESCRIPTION OF COMMON STOCK
ASIF is authorized to issue 200,000,000 shares of common stock, $.001 par
value. ASIF's shares have no preemptive, conversion, exchange or redemption
rights. Each share has equal voting, dividend, distribution and liquidation
rights. The shares outstanding are fully paid and nonassessable. Shareholders
are entitled to one vote per share. All voting rights for the election of
Directors are noncumulative, which means that the holders of more than 50% of
the shares can elect 100% of the Directors then nominated for election if they
choose to do so and, in such event, the holders
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<PAGE> 41
of the remaining shares will not be able to elect any Directors. Under the
rules of the AMEX applicable to listed companies, ASIF is required to hold an
annual meeting of shareholders in each year. The foregoing description and the
description under "Certain Anti-Takeover Provisions of the Articles of
Incorporation and By-Laws" are subject to the provisions contained in ASIF's
Articles of Incorporation and By-Laws.
ASIF has no current intention of offering additional shares, except under
the Dividend Reinvestment Plan. See "Dividend Reinvestment Plan." Other
offerings of ASIF's shares, if made, will require approval of its Board of
Directors. Any additional offering will be subject to the requirements of the
Investment Company Act that shares may not be sold at a price below the then
current net asset value, exclusive of underwriting discounts and commissions,
except in connection with an offering to existing shareholders or with the
consent of the holders of a majority of ASIF's outstanding voting securities.
CERTAIN ANTI-TAKEOVER PROVISIONS OF THE ARTICLES OF INCORPORATION AND BY-LAWS
ASIF has provisions in its Articles of Incorporation and By-Laws
(together, the "Charter Documents") which are intended to have the effect of
limiting (i) the ability of other entities or persons to acquire control of
ASIF, (ii) ASIF's freedom to engage in certain transactions, or (iii) the
ability of ASIF's Directors or shareholders to amend the Charter Documents or
effect changes in ASIF's management. These provisions of the Charter Documents
may be regarded as "anti-takeover" provisions. The Board of Directors is
divided into three classes. At the annual meeting of shareholders in each
year, Directors are elected to succeed those Directors whose terms expired, and
each newly elected Director serves for a three-year term. Accordingly, only
those Directors in one class may be changed in any one year, and it would
require two years to change a majority of the Board of Directors. (Under
Maryland law procedures are available for the removal of Directors even if they
are not then standing for re-election, although the affirmative vote of
two-thirds of the votes entitled to be cast is required for removal of
Directors, and under SEC regulations procedures are available for including
shareholder proposals in management's annual proxy statement). Such system of
electing Directors may have the effect of maintaining the continuity of
management and, thus, make it more difficult for ASIF's shareholders to change
a majority of Directors.
Under Maryland law and ASIF's Articles of Incorporation, the affirmative
vote of the holders of a majority of the votes entitled to be cast is required
for the consolidation of ASIF with another corporation, a merger of ASIF with
or into another corporation (except for certain mergers in which ASIF is the
successor), a statutory share exchange in which ASIF is not the successor, a
sale or transfer of all or substantially all of ASIF's assets, the dissolution
of ASIF and most amendments to ASIF's Articles of Incorporation. The
affirmative vote of 66-2/3% (which is higher than that required under the
Investment Company Act and higher than could be permitted by ASIF's Articles of
Incorporation under Maryland law) of the outstanding shares is required to
authorize a change in the classification of ASIF from a closed-end investment
company to an open-end investment company, and to amend the Articles of
Incorporation to effect such change.
In addition, the affirmative vote of 66-2/3% (which is higher than that
required under the Investment Company Act and higher than could be permitted by
ASIF's Articles of Incorporation under Maryland law) of the outstanding shares
of common stock of ASIF is required generally to authorize any of the following
transactions or to amend the provisions of the Articles of Incorporation
relating to such transactions: (i) the merger, consolidation or statutory
share exchange of ASIF with or into any other corporation; (ii) the issuance of
any securities of ASIF to any person or entity for cash; (iii) the sale, lease
or exchange of all or any substantial part of the assets of ASIF to any entity
or person (except assets having an aggregate market value of less than
$1,000,000); or (iv) the sale, lease or exchange to ASIF, in exchange for
securities of ASIF, of any assets of any entity or person (except assets having
an aggregate fair market value of less than $1,000,000), if such corporation,
person or entity is directly, or indirectly through affiliates, the beneficial
owner of more than 5% of the outstanding shares of ASIF. The affirmative vote
of 66-2/3% (which is higher than that required under the Investment Company Act
and higher than could be permitted by ASIF's Articles of Incorporation under
Maryland law) of the outstanding shares of ASIF is also required to liquidate
or dissolve ASIF. However, such vote would not be required when, under certain
conditions, the Board of Directors approves any of the transactions described
above in this paragraph, although in certain cases involving merger,
consolidation or statutory share exchange or sale of all or substantially all
of ASIF's assets or the liquidation or dissolution of ASIF, the affirmative
vote of a majority of the outstanding shares of ASIF would nevertheless be
required. Reference is made to the Charter Documents of ASIF, on file with the
SEC, for the full text of these provisions.
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<PAGE> 42
The provisions of the Charter Documents described above and ASIF's right
to repurchase or make a tender offer for its common stock could have the effect
of depriving the owners of shares of opportunities to sell their shares at a
premium over prevailing market prices, by discouraging a third party from
seeking to obtain control of ASIF in a tender offer or similar transaction.
The overall effect of these provisions is to render more difficult the
accomplishment of a merger or the assumption of control by a principal
shareholder. However, they provide the advantage of potentially requiring
persons seeking control of ASIF to negotiate with its management regarding the
price to be paid and facilitating the continuity of ASIF's management,
objective and policies. The Board of Directors of ASIF has considered the
foregoing anti-takeover provisions and concluded that they are in the best
interests of ASIF and its shareholders.
COMPARISON OF CLOSED-END AND OPEN-END INVESTMENT COMPANIES
GENERAL
ASIF is registered as a closed-end, diversified management investment
company under the Investment Company Act. Closed-end investment companies
generally do not redeem their outstanding shares or engage in the continuous
sale of new securities, and thus operate with a relatively fixed
capitalization. The shares of closed-end investment companies are frequently
bought and sold in securities markets at prices that may exceed or be less than
the underlying net asset value of the shares. ASIF shares currently are traded
on the AMEX and have normally traded at a discount to their net asset value
since March, 1990.
In contrast, open-end investment companies such as AIM High Yield,
commonly referred to as mutual funds, issue redeemable securities. The holders
of redeemable securities have the right to surrender those securities to the
mutual fund and obtain in return an amount based on their proportionate share
of the value of the mutual fund's net assets. Most mutual funds also
continuously issue new shares to investors at a price based on the fund's net
asset value at the time of such issuance. The net asset value of AIM High
Yield's Class A shares is determined by deducting the amount of the liabilities
attributable to the Class A shares from the value of the assets attributable to
the Class A shares and dividing the difference by the number of AIM High Yield
Class A shares outstanding. AIM High Yield's shares do not trade on any
exchange.
PORTFOLIO MANAGEMENT
Most open-end investment companies maintain reserves of cash or cash
equivalents in order to meet net redemptions as they may arise. Because
closed-end investment companies generally do not redeem their shares, their
cash reserves can be substantial or minimal, depending primarily on the
investment adviser's perception of market conditions. The maintenance of
larger reserves of cash or cash equivalents may, at times of rising markets,
adversely affect a fund's performance. Furthermore, unlike mutual funds,
unless a closed-end investment company engages in a tender offer for its
shares, it is not subject to pressures to sell portfolio securities at
disadvantageous times in order to meet net redemptions. However, the
management of AIM High Yield has not been seriously impeded by the need to meet
net redemptions to date.
SENIOR SECURITIES
The Investment Company Act prohibits open-end investment companies from
issuing "senior securities" representing indebtedness (i.e., bonds, debentures,
notes, preferred stock and other similar securities), other than indebtedness
to banks when there is asset coverage of at least 300% for all borrowings.
Closed-end investment companies, on the other hand, are permitted by the
Investment Company Act to issue senior securities representing both
indebtedness (subject to various limitations) and equity. The ability to issue
senior securities may give closed-end investment companies more flexibility in
"leveraging" their shareholders' investments. Neither ASIF nor AIM High Yield
has any outstanding indebtedness to banks or other lenders, nor does ASIF have
any outstanding authorized class of senior securities.
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PRINCIPAL UNDERWRITER
Mutual fund shares are normally purchased and redeemed through a principal
underwriter. As the principal underwriter of the shares of AIM High Yield, AIM
Distributors receives, and retains a portion of, the proceeds of any applicable
sales charge and the distribution fee payable under the Rule 12b-1 plan of AIM
High Yield. For more information concerning AIM Distributors and the services
it provides to AIM High Yield, see "Management - Distributor" and
"-Distribution Plans" in the attached AFG Prospectus.
ASIF has no principal underwriter.
RIGHTS OF SHAREHOLDERS
ASIF is organized as a Maryland corporation and AFG is a Delaware business
trust. There is much that is similar between the two forms of organization.
For example, the responsibilities, powers and fiduciary duties of the trustees
of AFG are substantially the same as those of the directors of ASIF.
There are, however, certain differences between the two forms of
organization. The operations of ASIF, as a Maryland corporation, are governed
by its Articles of Incorporation and applicable Maryland law. The operations
of AFG, as a Delaware business trust, are governed by its Agreement and
Declaration of Trust, as amended (the "Declaration of Trust") and Delaware law.
LIABILITY OF SHAREHOLDERS
The Delaware Business Trust Act provides that shareholders of a Delaware
business trust shall be entitled to the same limitations of liability extended
to shareholders of private for-profit corporations. There is, however, a
remote possibility that, under certain circumstances, shareholders of a
Delaware business trust may be held personally liable for that trust's
obligations to the extent the courts of another state which does not recognize
such limited liability were to apply the laws of such state to a controversy
involving such obligations. The Declaration of Trust provides that
shareholders of AFG shall not be subject to any personal liability for acts or
obligations of AFG and that every written agreement, obligation or other
undertaking made or issued by AFG shall contain a provision to the effect that
shareholders are not personally liable thereunder. In addition, the
Declaration of Trust provides for indemnification out of AFG property for any
shareholder held personally liable solely by reason of his or her being or
having been a shareholder. Therefore, the risk of any shareholder incurring
financial loss beyond his investment due to shareholder liability is limited to
circumstances in which AFG itself is unable to meet its obligations and the
express disclaimer of shareholder liabilities is determined not to be
effective. Given the nature of the AFG's assets and operations, the
possibility of AFG's being unable to meet its obligations is considered remote,
and given the nature of AFG's operations, even if a claim were brought against
AFG and a court determined that shareholders were personally liable, it would
likely not impose a material obligation on a shareholder.
Shareholders of a Maryland corporation generally do not have personal
liability for a corporation's obligations, except a shareholder may be liable
to the extent that he receives any distribution which exceeds the amount which
he could properly receive under Maryland law.
ELECTION OF DIRECTORS/TRUSTEES; ANNUAL SHAREHOLDER MEETINGS
The shareholders of AFG initially elected the trustees of AFG and are,
thereafter, entitled to vote for the election of trustees only to the extent
such vote may be required by the Investment Company Act, by the Declaration of
Trust or by AFG's By-Laws. AFG is not otherwise required to hold annual
shareholder meetings. The AMEX requires ASIF to hold annual shareholder
meetings to elect directors and to take action on other matters.
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TERMS OF DIRECTORS/TRUSTEES
The Declaration of Trust provides that the trustees of AFG shall hold
office during the lifetime of AFG except as follows: (a) any trustees may
resign or retire; (b) any trustee may be removed by the other trustees or the
shareholders of the trust (as discussed below); or (c) any trustee who has died
or become incapacitated and is unable to serve may be retired by a written
instrument signed by a majority of the trustees. ASIF has three classes of
directors with terms of three years each.
REMOVAL OF DIRECTORS/TRUSTEES
A trustee of AFG may be removed by a vote of two-thirds of the outstanding
shares at any meeting of the shareholders of AFG or at any time by written
instrument signed by at least two-thirds of the trustees and specifying when
such removal becomes effective. The Declaration of Trust provides that in the
case of refusal to serve, death, resignation, retirement or removal of a
trustee, the remaining trustees may either fill the vacancy or leave the
vacancy unfilled or reduce the number of trustees. Any appointment of a
trustee shall be evidenced by a written instrument signed by a majority of the
trustees in office. Under ASIF's Articles of Incorporation removal of a
director requires the affirmative vote of two-thirds of the votes entitled to
be cast for the election of directors.
SPECIAL MEETINGS OF SHAREHOLDERS
AFG's Declaration of Trust provides that trustees may call special
meetings of shareholders. In addition, AFG's By-Laws provide that holders of
10% of the outstanding shares of AFG may require that the trustees call a
special meeting for the removal of a trustee. ASIF's By-Laws provide that a
special meeting of shareholders may be called by the chairman, president or the
Board of Directors and shall be called by the secretary upon the written
request of the holders of at least 25% of all the votes entitled to be cast at
such meeting.
LIABILITY OF DIRECTORS/TRUSTEES AND OFFICERS
Under AFG's Declaration of Trust, the trustees of AFG shall not be liable
for any act or omission or any conduct whatsoever in their capacity as
trustees, except for liability to the trust or shareholders due to willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of trustee. While AFG's Declaration of
Trust does not contain any provision limiting the liability of officers, under
Delaware business trust law, the officers of AFG are not personally liable to
any person other than AFG or shareholders for any act, omission or obligation
of AFG or its trustees. AFG's Declaration of Trust and By-Laws allow for the
indemnification of trustees and officers to the fullest extent permitted by
Delaware law and AFG's By-Laws. Delaware law allows a business trust to
indemnify and hold harmless any trustee or other person from and against any
and all claims and demands whatsoever.
Under ASIF's Articles of Incorporation, a director or officer of ASIF
shall not be personally liable to ASIF or its shareholders for monetary damages
except for liability (i) to the extent that it is proved that the person
actually received an improper benefit or profit in money, property or services,
for the amount of the benefit or profit in money, property or services actually
received, or (ii) to the extent that a judgment or other final adjudication
adverse to the person is entered in a proceeding based on a finding in the
proceeding that the person's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceedings, provided that a director or officer is not
protected against any liability to ASIF or to its shareholders to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
TERMINATION
AFG's Declaration of Trust provides that AFG may be terminated at any time
(i) by the vote of shareholders holding a majority of shares outstanding
provided that the trustees have submitted the termination of AFG to the
shareholders for their approval or (ii) by the trustees by written notice to
shareholders provided that as of the date on which they have determined to so
terminate there are fewer than 100 holders of record of AFG. Any portfolio of
AFG may be terminated at any time (i) by a vote of the shareholders entitled to
vote and holding at least a majority of the shares of such
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<PAGE> 45
portfolio provided that the trustees have submitted the termination of such
portfolio to the shareholders for their approval or (ii) by the trustees by
written notice to such shareholders provided that, as of the date on which the
trustees have determined to terminate the portfolio, there are fewer that 100
holders of record of such portfolio.
Under ASIF's Articles of Incorporation, the liquidation or dissolution of
ASIF requires an affirmative vote of two-thirds of the outstanding shares of
ASIF's common stock. Nonetheless, if the liquidation or dissolution is
approved by a majority of directors who were on the Board at the time of the
initial public offering of ASIF's common stock (or where nomination or election
as director was approved by a majority of such directors), then such action
shall only require an affirmative vote of a majority of ASIF's outstanding
common stock.
VOTING RIGHTS OF SHAREHOLDERS
Currently, AFG's Declaration of Trust grants shareholders power to do the
following: (i) elect trustees, provided that a meeting of shareholders has been
called for that purpose; (ii) remove trustees, provided that a meeting of
shareholders has been called for that purpose; (iii) approve the termination of
AFG or any portfolio or class of shares of AFG, provided that a meeting of
shareholders has been called for that purpose, unless, as of the date on which
the trustees have determined to so terminate AFG or such portfolio or class,
there are fewer than 100 holders of record of AFG or such terminating portfolio
or class of shares of AFG; (iv) approve the sale of all or substantially all of
the assets of AFG or of any portfolio or class of shares of AFG, unless the
primary purpose of such sale is to change AFG's domicile or form of
organization or form of business trust; (v) approve the merger or consolidation
of AFG or any portfolio or class of shares of AFG with and into another company
unless (A) the primary purpose of such merger or consolidation is to change
AFG's domicile or form of organization or form of business trust, or (B) after
giving effect to such merger or consolidation, based on the number of shares
outstanding as of a date selected by the trustees, the shareholders of AFG or
such portfolio or class will have a majority of the outstanding shares of the
surviving company or portfolio or class, as the case may be; (vi) approve any
amendment to their voting rights; and (vii) approve such additional matters as
may be required by law or as the trustees, in their sole discretion, shall
determine.
Shareholders of a Maryland corporation such as ASIF are entitled to vote
on numerous matters affecting the corporation (such as mergers or sales of
substantially all of the assets of the corporation) as provided by Maryland
corporation law.
DISSENTERS' RIGHTS
Under Maryland law, an ASIF shareholder may not demand the fair value of
his shares from the successor company in a transaction involving the transfer
of ASIF's assets, and is bound by the terms of the transaction, because shares
of ASIF's common stock were listed on a national securities exchange as of the
record date. Neither Delaware law nor AFG's Declaration of Trust or By-Laws
provides AFG's shareholders with dissenters' rights.
AMENDMENTS TO ORGANIZATION DOCUMENTS
The trustees of AFG may, without shareholder approval, amend the
Declaration of Trust at any time, except that no amendment may be made to change
the voting power of the shareholders of AFG as set forth in the Declaration of
Trust. Consistent with Maryland law, ASIF's Articles of Incorporation provide
that ASIF reserves the right to amend, alter, change or repeal any provision
contained in the Articles of Incorporation in the manner now or hereafter
prescribed by statute, including any amendment that alters the contract rights,
as expressly set forth in the Articles of Incorporation, of any outstanding
stock, and all rights conferred on shareholders are granted subject to this
reservation. The Board of Directors of ASIF may approve amendments to the
Articles of Incorporation to classify or reclassify unissued shares of a class
of stock without shareholder approval. Other amendments to ASIF's Articles of
Incorporation will be adopted if approved by a majority of all the votes
entitled to be cast on the amendments, except that amendments to provisions
relating to the classification of directors or the possible conversion of ASIF
to an open-end investment company must be approved by the affirmative vote of
two-thirds of the outstanding shares of ASIF's stock.
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OWNERSHIP OF AIM HIGH YIELD AND ASIF SHARES
CONTROL PERSONS
Ownership of AIM High Yield
To the best of the knowledge of AFG, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of AIM High Yield
as of April 10, 1996, and the amount of the outstanding shares held by such
holders, are set forth below:
<TABLE>
<CAPTION>
Percent
Percent Owned of
Owned of Recorded and
Record Beneficially
-------- ------------
<S> <C> <C>
Class A shares 6.32% -0-
Merrill Lynch, Pierce, Fenner & Smith
Mutual Fund Operations
P.O. Box 45286
Jacksonville, FL 32232-5286
Class B shares 15.43% -0-
Merrill Lynch, Pierce, Fenner & Smith
Mutual Fund Operations
P.O. Box 45286
Jacksonville, FL 32232-5286
</TABLE>
Ownership of ASIF
To the best of the knowledge of ASIF, the name and address of the holders
of 5% or more of the outstanding shares of ASIF as of April 10, 1996, and the
amount of outstanding shares held by such holder, is as set forth below.
<TABLE>
<CAPTION>
Percent
Percent Owned of
Owned of Record and
Record Beneficially
-------- ------------
<S> <C> <C>
Depository Trust Company 94.4% -0-
(Cede & Co.)
P.O. Box 20
Bowling Green Station
New York, NY 10274
</TABLE>
OWNERSHIP OF OFFICERS AND TRUSTEES/DIRECTORS
To the best of the knowledge of AFG, the beneficial ownership of shares of
AIM High Yield by officers and trustees of AFG as a group constituted less than
1% of the outstanding shares of AIM High Yield as of April 10, 1996.
38
<PAGE> 47
To the best of the knowledge of ASIF, the beneficial ownership of shares of
ASIF by officers or directors of ASIF as a group constituted less than 1% of
the outstanding shares of ASIF as of April 10, 1996.
CAPITALIZATION
The following table sets forth as of December 31, 1995, (i) the
capitalization of AIM High Yield Class A shares, (ii) the capitalization of
ASIF, and (iii) the pro-forma capitalization of AIM High Yield Class A shares
as adjusted to give effect to the transactions contemplated by the Agreement.
<TABLE>
<CAPTION>
PRO FORMA
AIM HIGH YIELD
AIM HIGH YIELD(1) ASIF AS ADJUSTED(1)
--------------- ----------- --------------
<S> <C> <C> <C>
Net Assets $886,105,932 $67,660,964 $953,766,896
Shares Outstanding 94,012,039 6,976,644 101,188,438
Net Asset Value Per Share $9.43 $9.70 $9.43
</TABLE>
- -----------------
(1) Information provided is for AIM High Yield Class A shares.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of AIM High Yield
will be passed upon by Ballard Spahr Andrews & Ingersoll, 1735 Market Street,
51st Floor, Philadelphia, PA 19103-7599.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which ASIF and
AFG have filed with the SEC pursuant to the requirements of the Securities Act
and the Investment Company Act, to which reference is hereby made. The SEC
file number for annual reports relating to ASIF is Registration No. 33-26298.
Such annual reports are incorporated herein by reference. The SEC file number
for AFG's registration statement containing the Prospectus and Statement of
Additional Information relating to AIM High Yield is Registration No. 2-27334.
Such Prospectus and Statement of Additional Information are incorporated herein
by reference.
AFG and ASIF are subject to the informational requirements of the
Investment Company Act and in accordance therewith file reports and other
information with the SEC. Reports, proxy statements, registration statements
and other information filed by ASIF and AFG (including the Registration
Statement of AFG relating to AIM High Yield on Form N-14 of which this Proxy
Statement/Prospectus is a part and which is hereby incorporated by reference)
may be inspected without charge and copied at the public reference facilities
maintained by the SEC at Room 1014, Judiciary Plaza, 450 Fifth Street, NW,
Washington, DC 20549, and at the following regional offices of the SEC: 7
World Trade Center, New York, New York 10048; and 1801 California Street, Suite
4800, Denver, Colorado 80202. Copies of such material may also be obtained
from the Public Reference Section of the SEC at 450 Fifth Street, NW,
Washington, DC 20549 at the prescribed rates.
39
<PAGE> 48
PROPOSAL 2 - ELECTION OF DIRECTORS
Both of the nominees for director are presently directors of ASIF and also
serve as directors, trustees or officers of some or all of the open-end
investment companies managed or advised by AIM. Both of the nominees for
director have served as directors of ASIF since the inception of ASIF in March
of 1989.
Each director who is elected at the Annual Meeting will serve in such
capacity for a three-year term or until his successor is elected and qualified.
Each of the nominees has agreed to serve as a director if elected. If either
of the nominees is unable to serve for any reason, the persons named as proxies
will vote for such other nominee or nominees as the directors who are not
"interested persons" of ASIF, as defined in the Investment Company Act, may
recommend. It is the intention of the persons named in the enclosed form of
proxy, unless otherwise directed by shareholders executing proxies, to vote all
proxies "FOR" the election of the two nominees listed below.
The following schedule sets forth certain information concerning each of
the nominees.
<TABLE>
<CAPTION>
NOMINATED
FOR A TERM NUMBER OF
NAME, AGE, PRINCIPAL OCCUPATION TO EXPIRE AT ASIF
AND AFFILIATIONS DURING THE ANNUAL MEETING SHARES
PAST FIVE YEARS TO BE HELD IN: OWNED(1)
- ----------------------------------------------------- -------------- ---------
<S> <C> <C>
Robert H. Graham (49)
Director, President and Chief Operating Officer, AIM 1999
Management; Director and President, AIM;
Director and Senior Vice President,
AIM Capital, AIM Distributors, AIM Fund Services,
AIM Institutional Fund Services, Inc. ("AIM
Institutional Fund Services"), and Fund
Management Company (2)
Lewis F. Pennock (53)
Attorney in private practice in Houston, Texas. (3) 1999
</TABLE>
(1) Data indicate, to the best knowledge of ASIF, the number of ASIF shares
owned as of Record Date. As of Record Date, each director who
beneficially owned shares of ASIF and all directors and officers as a
group owned less than 1% of the outstanding shares of ASIF.
(2) Mr. Graham is an "interested person" of ASIF, as defined in the
Investment Company Act, primarily because of his positions with AIM and
its affiliated companies, as set forth above, and through his ownership of
stock of AIM Management which owns all of the outstanding stock of AIM.
(3) Mr. Pennock is a member of ASIF's Audit Committee, Investments Committee
and Nominating and Compensation Committee. Mr. Pennock serves as chairman
of the Nominating and Compensation Committee.
40
<PAGE> 49
The following schedule sets forth certain information about the other
directors of ASIF:
<TABLE>
<CAPTION>
ELECTED
FOR A TERM NUMBER OF
NAME, AGE, PRINCIPAL OCCUPATION TO EXPIRE AT ASIF
AND AFFILIATIONS DURING THE ANNUAL MEETING SHARES
PAST FIVE YEARS TO BE HELD IN: OWNED(1)
- ------------------------------------------------------------------- -------------- ---------
<S> <C> <C>
John F. Kroeger (71)
Director, Flag Investors International Fund, Inc., Alex. Brown 1997
Cash Reserve Fund, Inc., Flag Investors Emerging Growth Fund,
Inc., Flag Investors Intermediate Term Income Fund, Inc.,
Flag Investors Maryland Intermediate Tax-Free Income Fund, Inc.,
Flag Investors Telephone Income Fund, Inc., Flag Investors Total
Return U.S. Treasury Fund, Inc., Flag Investors Value Builder
Fund, Inc., Managed Municipal Fund, Inc., and North American
Government Bond Fund, Inc. (investment companies). Formerly,
Consultant, Wendell & Stockel Associates, Inc. (consulting
firm). (3)
Charles T. Bauer (77)
Director, Chairman and Chief Executive Officer, AIM Management and 1997
Chairman of the Board of Directors, AIM, AIM Capital, AIM
Distributors, AIM Fund Services, AIM Institutional Fund Services
and Fund Management Company. (2)(4)
Gary T. Crum (48)
Director and President, AIM Capital; Director and Senior Vice 1998
President, AIM Management and AIM; Director, AIM Distributors (2)
Owen Daly II (71)
Director, Cortland Trust, Inc. (investment company). Formerly, 1998
Director, CF & I Steel Corp., Monumental Life Insurance
Company and Monumental General Insurance Company; and Chairman
of the Board of Equitable Bancorporation. (3)
(1) Data indicate, to the best knowledge of ASIF, the number of ASIF shares
owned as of Record Date. As of Record Date, each director who
beneficially owned shares of ASIF and all directors and officers as a
group owned less than 1% of the outstanding shares of ASIF.
(2) Messrs. Crum and Bauer are "interested persons" of ASIF, as defined in
the Investment Company Act, primarily because of their positions with AIM,
and its affiliated companies, as set forth above, and through their
ownership of stock of AIM Management which owns all of the outstanding
stock of AIM.
(3) Mr. Kroeger is a member of ASIF's Audit Committee, Investments Committee
and Nominating and Compensation Committee. Mr. Kroeger serves as Chairman
of the Audit Committee. Mr. Daly is a member of the Audit Committee and
Nominating and Compensation Committee and is Chairman of the Investments
Committee.
(4) Mr. Bauer is a member of the Fund's Investments Committee.
</TABLE>
41
<PAGE> 50
Directors of ASIF are elected in three classes. At each annual meeting of
shareholders of ASIF, Directors are elected to succeed those Directors whose
terms expire, and each newly elected director is elected for a three-year term.
Accordingly, only directors in any one class may be changed in any one year,
and it would require two years to change a majority of the Board of Directors.
Such a system of electing Directors may have the effect of maintaining the
continuity of management and may make it more difficult for ASIF's shareholders
to change a majority of the Board of Directors. However, under Maryland law,
procedures are available for the removal of Directors even if they are not then
standing for election; these procedures require a two-thirds vote of
shareholders. The SEC has also promulgated regulations that provide for the
inclusion of shareholder proposals in management's proxy statements, which may
enable shareholders to change the composition of the Board of Directors.
Each Director of ASIF other than Mr. Gary T. Crum is also a director or a
trustee of AIM Equity Funds, Inc., AFG, AIM International Funds, Inc., AIM
Investment Securities Funds, AIM Summit Fund, Inc., AIM Tax-Exempt Funds, Inc.,
AIM Variable Insurance Funds, Inc., Short-Term Investments Co., Short-Term
Investments Trust, and Tax-Free Investments Co.
During the fiscal year ended December 31, 1995, ASIF's Board of Directors
met nine times, the Audit Committee met four times, the Investments Committee
met four times and the Nominating and Compensation Committee met three times.
During such fiscal year, all of ASIF's directors attended at least 75% of the
aggregate of the number of meetings of the Board of Directors and the number of
meetings held by all committees of the Board on which such director served.
The functions of the Audit Committee include (i) advising the Board of
Directors with regard to the appointment of ASIF's independent auditors, (ii)
reviewing and approving audit and non-audit services provided by ASIF's
independent auditors, (iii) meeting with the financial officers of ASIF to
review the conduct of accounting and internal controls, and (iv) meeting with
AIM's general counsel and ASIF's counsel to review legal issues that may impact
the financial reporting process. The Nominating and Compensation Committee
does not consider nominees for director recommended by shareholders. None of
the members of the Audit Committee are "interested persons" of ASIF as defined
by the Investment Company Act.
The functions of the Investments Committee include (i) assisting ASIF's
Board of Directors in carrying out its oversight responsibilities in specific
areas of investment management which require a continuous focus, (ii)
overseeing AIM's investment-related compliance systems and procedures with
respect to ASIF, and (iii) remaining apprised of regulatory developments
affecting AIM's investment activities with respect to ASIF.
The functions of the Nominating and Compensation Committee include (i)
nominating persons for election as directors who are not interested persons (as
defined by the Investment Company Act) (a) as additions to ASIF's Board of
Directors, (b) to fill vacancies which, from time to time, may occur on the
ASIF's Board of Directors, and (c) for election by shareholders of ASIF at
meetings called for the election of directors and (ii) reviewing from time to
time, the compensation payable to the directors who are not interested persons
and to make recommendations to ASIF's Board of Directors with respect thereto.
None of the members of the Nominating and Compensation Committee is an
interested person of ASIF.
REMUNERATION OF DIRECTORS
Each Director is reimbursed for expenses incurred in attending each
meeting of the Board of Directors or any committee thereof. Each Director who
is not also an officer of ASIF is compensated for his services according to a
fee schedule which recognizes the fact that such Director also serves as a
director or trustee of certain other investment companies advised or managed by
AIM. Each such Director receives a fee, allocated among such investment
companies, which consists of an annual retainer component and a meeting fee
component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended December 31, 1995 for each Director of ASIF:
42
<PAGE> 51
<TABLE>
<CAPTION>
RETIREMENT
BENEFITS TOTAL
AGGREGATE ACCRUED COMPENSATION
COMPENSATION BY ALL FROM ALL
DIRECTOR FROM ASIF AIM FUNDS(2) AIM FUNDS(3)
---------------- ------------ ------------ ------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
Gary T. Crum $ 0 $ 0 $ 0
Owen Daly II $978.00 $18,662.00 $58,125.00
Robert H. Graham $ 0 $ 0 $ 0
John F. Kroeger $931.00 $22,313.00 $58,125.00
Lewis F. Pennock $843.00 $ 5,067.00 $58,125.00
</TABLE>
(1) The total amount of compensation deferred by all Directors of ASIF during
the fiscal year ended December 31, 1994, including interest earned
thereon, was $1,488.00.
(2) During the fiscal year ended December 31, 1994, the total amount of
expenses allocated to ASIF in respect of such retirement benefits was
$166.00.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a
Director or Trustee of a total of 11 AIM Funds. Mr. Crum serves as
Director of only ASIF. Data reflect total compensation earned during the
calendar year ended December 31, 1995.
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Retirement Plan"), each director (who is not an
employee of any of the AIM Funds (as defined in the Retirement Plan), AIM
Management or any of their affiliates) ("Eligible Directors") may be entitled
to certain benefits upon retirement from the Board of Directors. Pursuant to
the Retirement Plan, the normal retirement date is the date on which the
Eligible Director has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates. Each Eligible
Director is entitled to receive an annual benefit from the AIM Funds commencing
on the first day of the calendar quarter coincident with or following his date
of retirement equal to 75% of the retainer paid or accrued by the AIM Funds for
such Eligible Director during the twelve-month period immediately preceding the
Eligible Director's retirement (including amounts deferred under a separate
agreement between the AIM Funds and the Eligible Director) for the number of
such Eligible Director's years of service (not in excess of 10 years of
service) completed with respect to any of the AIM Funds. Such benefit is
payable to each Eligible Director in quarterly installments. If an Eligible
Director dies after attaining the normal retirement date but before receipt of
any benefits under the Retirement Plan commences, the Eligible Director's
surviving spouse (if any) shall receive a quarterly survivor's benefit equal to
50% of the amount payable to the deceased Eligible Director, for no more than
five years beginning the first day of the calendar quarter following the date
of the Eligible Director's death. Payments under the Retirement Plan are not
secured or funded by any AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an Eligible Director upon retirement assuming various final annual
compensation and years of service classifications. The estimated credited
years of service for Messrs. Daly, Kroeger and Pennock are 9, 18 and 14,
respectively.
43
<PAGE> 52
<TABLE>
<CAPTION>
NUMBER OF
YEARS OF ANNUAL COMPENSATION PAID BY ALL AIM FUNDS
SERVICE WITH ----------------------------------------------
THE AIM FUNDS $55,000 $60,000 $65,000
------------- -------------- -------------- --------------
<S> <C> <C> <C>
10 $41,250 $45,000 $48,750
9 $37,125 $40,500 $43,875
8 $33,000 $36,000 $39,000
7 $28,875 $31,500 $34,125
6 $24,750 $27,000 $29,250
5 $20,625 $22,500 $24,375
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly and Kroeger (for purposes of this paragraph only, the
"Deferring Directors") have each executed a Deferred Compensation Agreement
(collectively, the "DC Agreements"). Pursuant to the DC Agreements, the
Deferring Directors may elect to defer receipt of up to 100% of their
compensation payable by ASIF, and such amounts are placed into a deferral
account. Currently, the Deferring Directors may select various AIM Funds in
which all or part of his deferral account shall be deemed to be invested.
Distributions from the Deferring Directors' deferral accounts will be paid in
cash, in generally equal quarterly installments over a period of ten years
beginning on the date the Deferring Director's retirement benefits commence
under the Retirement Plan. ASIF's Board of Directors, in its sole discretion,
may accelerate or extend the distribution of such deferral accounts after the
Deferring Director's termination of service as a director of ASIF. If a
Deferring Director dies prior to the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a single lump sum payment as soon as practicable
after such Deferring Director's death. The DC Agreements are not funded and,
with respect to the payments of amounts held in the deferral accounts, the
Deferring Directors have the status of unsecured creditors of ASIF and of each
other AIM Fund from which they are deferring compensation.
REQUIRED VOTE
Assuming a Quorum at the Annual Meeting is present or represented at
the Annual Meeting, the affirmative vote of a plurality of all votes cast is
required for the election of the directors.
PROPOSAL 3 - RATIFICATION OR REJECTION OF INDEPENDENT AUDITORS
The Board of Directors, including all of the directors who are not
interested persons of ASIF, has unanimously appointed KPMG Peat Marwick LLP as
independent auditors to examine and to report on the financial statements of
ASIF for the fiscal year ending December 31, 1996, and has voted to submit such
appointment to shareholders for ratification at the Annual Meeting. Such
appointment is expressly conditioned upon the right of ASIF, by a vote of a
"majority of the outstanding voting securities" of ASIF (as defined in the
Investment Company Act) at a meeting called for the purpose, to terminate such
appointment forthwith without penalty. KPMG Peat Marwick LLP has no direct or
indirect financial interest in ASIF.
ASIF has engaged KPMG Peat Marwick LLP to provide it with certain
non-audit services in addition to its services as independent auditors. These
additional services include the review of ASIF's federal income tax and federal
excise tax returns. At a meeting held on December 5, 1995, the Audit Committee
and the Board of Directors reviewed the non-audit services provided to ASIF,
and the fees for such services. The Board of Directors concluded that the
provision of such non-audit services would not impair the independence of KPMG
Peat Marwick LLP as auditors for ASIF.
Representatives of KPMG Peat Marwick LLP are expected to be present at
the Annual Meeting and will have the opportunity to make such statements as
they desire. Such representatives are expected to be available to respond to
appropriate questions from shareholders.
44
<PAGE> 53
REQUIRED VOTE AND DIRECTORS' RECOMMENDATION
Assuming a Quorum at the Annual Meeting is present or represented at the Annual
Meeting, the affirmative vote of a majority of the votes cast at the Annual
Meeting is required for the ratification of the appointment of KPMG Peat
Marwick LLP as auditors for ASIF's fiscal year ending December 31, 1996. The
Board of Directors recommends that shareholders vote FOR approval of Proposal
3.
GENERAL INFORMATION
EXECUTIVE OFFICERS OF ASIF
The executive officers of ASIF and their principal occupations are set forth
below. The term of office of each of such officers is one year and until his
successor shall have been elected and qualified. Each of these officers also
serves as director, trustee or officer of some or all of the open-end
management investment companies managed or advised by AIM or its affiliates.
Each such person has served as an officer of ASIF since its inception in March
of 1989, except Mr. Cox who has served as an officer of ASIF since March, 1992.
<TABLE>
<CAPTION>
NUMBER OF
EXECUTIVE OFFICE PRINCIPAL OCCUPATION ASIF SHARES
HELD IN ASIF FOR THE LAST FIVE YEARS OWNED(1)
- ------------ ---------------------------- --------------
<S> <C> <C>
Charles T. Bauer See "Election of Directors."
Chairman
Age: 77
Robert H. Graham See "Election of Directors."
President
Age: 49
Gary T. Crum See "Election of Directors."
Senior Vice President
Age: 48
John J. Arthur Senior Vice President and
Senior Vice Treasurer, AIM; Vice
President and President and Treasurer,
Treasurer (2) AIM Management, AIM
Age: 51 Distributors, AIM Capital,
AIM Fund Services, AIM
Institutional Fund Services
and Fund Management Company.
Carol F. Relihan Senior Vice President,
Senior Vice General Counsel and
President and Secretary, AIM; Vice
Secretary (2) President, General Counsel
Age: 41 and Secretary, AIM
Management; Vice President,
AIM Capital, AIM
Distributors, AIM Fund
Services and AIM
Institutional Fund
Services; Vice President
and General Counsel Fund
Management Company.
Dana R. Sutton Vice President and Fund
Vice President and Controller, AIM; Assistant
Assistant Treasurer Vice President and
Age: 37 Assistant Treasurer, Fund
Management Company.
</TABLE>
45
<PAGE> 54
<TABLE>
<CAPTION>
NUMBER OF
EXECUTIVE OFFICE PRINCIPAL OCCUPATION ASIF SHARES
HELD IN ASIF FOR THE LAST FIVE YEARS OWNED(1)
- ------------ ---------------------------- --------------
<S> <C> <C>
Melville B. Cox Vice President, AIM, AIM
Vice President Fund Services, AIM Capital,
Age: 52 and AIM Institutional Fund
Services, Inc.; Assistant
Vice President, AIM
Distributors and Fund
Management Company.
Formerly Vice President,
Charles Schwab & Co., Inc.;
Assistant Secretary,
Charles Schwab Family of
Funds and Schwab
Investments; Chief
Compliance Officer, Charles
Schwab Investment
Management, Inc.; and Vice
President, Integrated
Resources Life Insurance
Co. and Capitol Life
Insurance Co.
</TABLE>
(1) Data indicate, to the best knowledge of ASIF, the number of ASIF shares
owned as of Record Date. As of Record Date, each executive officer
of ASIF who beneficially owned shares of ASIF and all directors and
officers as a group owned less than 1% of outstanding shares of ASIF.
(2) Mr. Arthur and Ms. Relihan are married to each other.
All of ASIF's executive officers hold similar offices with some or all of
the open-end investment companies managed or advised by AIM. Officers of ASIF
receive no direct remuneration in such capacity from ASIF. The salaries and
other remuneration of the officers and directors of ASIF who are officers,
directors or employees of AIM Management are borne by AIM Management.
THE ADVISOR AND ITS AFFILIATES
AIM has served as investment advisor to ASIF since its inception on March
22, 1989 and is located at 11 Greenway Plaza, Suite 1919, Houston, TX 77046.
AIM is a wholly owned subsidiary of AIM Management, 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046. Three of the five directors and certain of
the officers of AIM are also executive officers of ASIF and their affiliations
are shown above under the caption "General Information--Executive Officers of
ASIF. "In addition, David L. Kite, Vice President, General Counsel and
Assistant Secretary of AIM Fund Services and AIM Institutional Fund Services
and Assistant General Counsel and Assistant Secretary of AIM, AIM Capital, AIM
Distributors and Fund Management Company; Nancy L. Martin, Vice President,
General Counsel and Assistant Secretary of AIM Capital, Assistant Vice
President, Assistant General Counsel and Assistant Secretary of AIM and
Assistant General Counsel and Assistant Secretary of AIM Management, AIM
Distributors, AIM Fund Services, and Fund Management Company; Ofelia M. Mayo,
Vice President, General Counsel and Assistant Secretary of AIM Distributors and
Assistant General Counsel and Assistant Secretary of AIM, AIM Capital, AIM Fund
Services, AIM Institutional Fund Services and Funds Management Company;
Kathleen J. Pflueger, Secretary of AIM Capital, AIM Distributors, AIM Fund
Services, AIM Institutional Fund Services and Fund Management Company and
Assistant Secretary of AIM Management and AIM; Samuel D. Sirko, Assistant Vice
President, Assistant General Counsel and Assistant Secretary of AIM and
Assistant General Counsel and Assistant Secretary of AIM Management, AIM
Capital, AIM Distributors, AIM Fund Services, and Fund Management Company; and
Stephen I. Winer, Vice President, Assistant General Counsel and Assistant
Secretary of Fund Management Company; Assistant Vice President, Assistant
General Counsel and Assistant Secretary of AIM Institutional Fund Services and
Assistant Secretary of AIM, AIM Capital, AIM Distributors, AIM Fund Services,
are Assistant Secretaries of ASIF. Mary J. Benson, Assistant Vice President of
AIM, serves as Assistant Treasurer of the Fund. AIM owns 100% of the
outstanding common stock of: AIM Capital, a registered investment adviser; AIM
Distributors, a registered broker-dealer; Fund Management Company, a mutual
fund administrator and registered broker-dealer; and AIM Fund Services and AIM
46
<PAGE> 55
Institutional Fund Services, registered transfer agents. The address of
each director and officer of AIM is 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046.
SHAREHOLDER PROPOSALS
Shareholders who wish to present a proposal for action at the next annual
meeting of shareholders of ASIF, to be held on or about April 30, 1997 (if the
Transaction is not approved or effected), should submit their proposal to the
Secretary of ASIF by December 31, 1996.
OTHER MATTERS
The directors do not know of any matters to be presented at the Annual
Meeting other than those set forth in this Proxy Statement. If any other
business should come before the Annual Meeting, the persons named in the
accompanying proxy will vote thereon in accordance with their best judgment and
in the best interests of shareholders.
By Order of the Board of Directors,
CAROL F. RELIHAN
Secretary
June 7, 1996
47
<PAGE> 56
APPENDIX I
AGREEMENT
and
PLAN OF REORGANIZATION
for
AIM STRATEGIC INCOME FUND, INC.
March 12, 1996
<PAGE> 57
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.1. Reorganization of ASIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.2. Computation of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.3. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4. Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.5. Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.6. Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.7. Issuance of AFG Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.8. Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ASIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.1. Incorporation: Qualification and Corporate Authority . . . . . . . . . . . . . . . . . . . 8
Section 3.2. Registration and Regulation of ASIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.3. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.4. No Material Adverse Changes; Contingent Liabilities . . . . . . . . . . . . . . . . . . . . 8
Section 3.5. ASIF Shares; Liabilities; Business Operations . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.6. Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.7. Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.8. No Breaches or Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.9. Authorizations or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.10. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.11. No Actions, Suits or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.12. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.13. Properties and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.14. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.15. Benefit and Employment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.16. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.17. Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.18. State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.19. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.20. Prospectus; Proxy Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.1. Organization; Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.2. Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.3. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.4. No Material Adverse Changes; Contingent Liabilities . . . . . . . . . . . . . . . . . . . 14
Section 4.5. No Breaches or Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.6. Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.7. Authorizations or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.8. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.9. No Actions, Suits or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.10. Ineligible Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.12. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.13. Registration and Regulation of Company . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.14. Registration of Portfolio Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.15. Representations Concerning the Reorganization . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.16. Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.1. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.2. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.4. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.5. Notice of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.6. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.7. Consents, Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.8. Submission of Agreement to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI
CONDITIONS PRECEDENT TO THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.1. Conditions Precedent of AFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.2. Mutual Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.3. Conditions Precedent of ASIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VII
TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.2. Survival After Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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<TABLE>
<S> <C> <C>
Section 8.1. Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.2. Law Governing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.3. Binding Effect, Persons Benefiting, No Assignment . . . . . . . . . . . . . . . . . . . . 25
Section 8.4. Obligations of AFG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.5. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.6. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.7. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.9. Entire Agreement; Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
Schedule 3.15 - Benefit and Employment Obligations
Schedule 6.1(d) - Opinion of Counsel to ASIF
Schedule 6.2(f) - Tax Opinions
Schedule 6.3(d) - Opinion of Counsel to AFG
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of March 12, 1996 (this
"Agreement"), by and between AIM Strategic Income Fund, Inc., a Maryland
corporation ("ASIF"), and AIM Funds Group, a Delaware business trust ("AFG"),
acting on behalf of AIM High Yield Fund (the "Portfolio").
WITNESSETH
WHEREAS, ASIF is a closed-end investment company registered with the
Securities and Exchange Commission (the "SEC") under the Investment Company Act
(as defined below) that conducted a public offering of its shares in 1989; and
WHEREAS, AFG is an open-end investment company registered with the SEC
under the Investment Company Act that offers separate series of its shares
representing interests in several investment portfolios, including the
Portfolio, for sale to the public; and
WHEREAS, ASIF, owns securities in which the Portfolio is permitted to
invest; and
WHEREAS, ASIF desires to provide for its reorganization through the
transfer of all of its assets and liabilities to the Portfolio in exchange for
Class A shares of the Portfolio issued in the manner set forth in this
Agreement; and
WHEREAS, this Agreement is intended to be and is adopted as a Plan of
Reorganization and Liquidation within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements and undertakings contained in this Agreement, AFG and ASIF agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. (a) For all purposes in this Agreement,
the following terms shall have the respective meanings set forth in this
Section 1.1 (such
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definitions to be equally applicable to both the singular and plural forms of
the terms herein defined):
"Advisers Act" means the Investment Advisers Act of 1940, as amended,
and all rules and regulations of the SEC adopted pursuant thereto.
"Affiliated Person" means an affiliated person as defined in Section
2(a)(3) of the Investment Company Act.
"AFG" means AIM Funds Group, a Delaware business trust.
"AFG Registration Statement" means the registration statement on Form
N-1A of AFG, as amended, Registration No. 2-27334, that is applicable to the
Portfolio.
"Agreement" means this Agreement and Plan of Reorganization, together
with all schedules and exhibits attached hereto and all amendments hereto and
thereof.
"ASIF" means AIM Strategic Income Fund, Inc., a Maryland corporation.
"ASIF Financial Statements" shall have the meaning set forth in
Section 3.3 of this Agreement.
"ASIF Shareholders" means the holders of record as of the Closing Date
of the issued and outstanding shares of the capital stock of ASIF.
"ASIF Shareholders Meeting" means a meeting of the shareholders of
ASIF convened in accordance with applicable law and the articles of
incorporation of ASIF to consider and vote upon the approval of this Agreement
and the transactions contemplated by this Agreement.
"ASIF Shares" means the issued and outstanding shares of the capital
stock of ASIF.
"Benefit Plan" means any material "employee benefit plan" (as defined
in Section 3(3) of ERISA) and any material bonus, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, vacation, retirement, profit sharing, welfare plans or other plan,
arrangement or understanding maintained or contributed to by ASIF, or otherwise
providing benefits to any current or former employee, officer or director of
ASIF.
"Closing" means the transfer of the assets of ASIF against the
assumption of liabilities of ASIF and the delivery of Portfolio Shares directly
to the shareholders of ASIF as described in Section 2.1 of this Agreement.
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"Closing Date" means July 26, 1996, or such other date as the parties
may mutually determine.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of ASIF and the Portfolio.
"Effective Time" shall mean 2:00 p.m. Central Time on the Closing
Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and all rules and regulations adopted by the SEC pursuant thereto.
"Excluded Assets" shall have the meaning set forth in Section 2.3 of
this Agreement.
"Governmental Authority" means any foreign, United States or state
government, government agency, department, board, commission (including the
SEC) or instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including the National Association of
Securities Dealers, Inc., the Commodities and Futures Trading Commission, the
National Futures Association, the Investment Management Regulatory Organization
Limited and the Office of Fair Trading).
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted by the SEC pursuant thereto.
"Lien" means any pledge, lien, security interest, charge, claim or
encumbrance of any kind.
"Material Adverse Effect" means an effect that would cause a change in
the condition (financial or otherwise), properties, assets or prospects of an
entity having an adverse monetary effect in an amount equal to or greater than
$50,000.
"Person" means an individual or a corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
"Portfolio" means AIM High Yield Fund, an investment portfolio of AFG.
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"Portfolio Financial Statements" shall have the meaning set forth in
Section 4.3 of this Agreement.
"Portfolio Shares" means Class A Shares of the Portfolio issued by
AFG, each representing an interest in the Portfolio.
"Reorganization" means the acquisition of the assets of ASIF by the
Portfolio (other than the Excluded Assets) in consideration of the assumption
the liabilities of ASIF by the Portfolio (other than those liabilities that
will be discharged through the use of the Excluded Assets) and the issuance of
Portfolio Shares directly to ASIF Shareholders as described in this Agreement.
"Required ASIF Shareholder Vote" shall have the meaning set forth in
Section 3.19 of this Agreement.
"Return" means any return, report or form or any attachment thereto
required to be filed with any taxing authority.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted by the SEC pursuant thereto.
"Tax" means any tax or similar governmental charge, impost or levy
(including, without limitation, income taxes (including, without limitation,
alternative minimum tax and estimated tax), franchise taxes, transfer taxes or
fees, sales taxes, use taxes, gross receipts taxes, value added taxes,
employment taxes, excise taxes, ad valorem taxes, property taxes, withholding
taxes, payroll taxes, minimum taxes, or windfall profit taxes), together with
any related penalties, fines, additions to tax or interest, imposed by the
United States or any state, county, local or foreign government or subdivision
or agency thereof.
"Valuation Date" shall have the meaning set forth in Section 2.4 of
this Agreement.
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ARTICLE II
TRANSFER OF ASSETS
Section 2.1. Reorganization of ASIF. At the Effective Time, all
of the assets of ASIF, except the Excluded Assets, shall be delivered to the
Custodian for the account of the Portfolio, in consideration of the assumption
by the Portfolio of all of the liabilities of ASIF, except for those
liabilities that are to be discharged through use of the Excluded Assets, and
the delivery by AFG directly to the ASIF Shareholders at the opening of
business on the Closing Date of a number of Portfolio Shares (including, if
applicable, fractional shares rounded to the nearest thousandth) having an
aggregate net asset value equal to the net value of the assets of ASIF so
transferred, assigned and delivered, all determined and adjusted as provided in
Section 2.2 below. Upon delivery of such assets, the Portfolio will receive
good and marketable title to such assets free and clear of all Liens.
Section 2.2. Computation of Net Asset Value.
(a) The net asset value of the Portfolio Shares and the net value of
the assets of ASIF subject to this Agreement shall, in each case, be determined
as of the close of business on the NYSE on the Valuation Date.
(b) The net asset value of the Portfolio Shares shall be computed in
the manner set forth in accordance with the policies and procedures of the
Portfolio as described in the AFG Registration Statement.
(c) The net value of the assets of ASIF subject to this Agreement
shall be computed by AFG and shall be subject to adjustment by the amount, if
any, agreed to by ASIF and AFG. The net value of the assets of ASIF shall be
the aggregate value of the assets of ASIF (other than the Excluded Assets) less
the aggregate value of the liabilities of ASIF (other than the liabilities of
ASIF that will be discharged through use of the Excluded Assets). In
determining the value of the securities transferred by ASIF to the Portfolio,
each security shall be priced in accordance with the policies and procedures of
the Portfolio as described in the AFG Registration Statement. For such
purposes, market quotes and the security characteristics relating to
establishing such quotes shall be determined by AFG, with the approval of ASIF.
Securities for which market quotes are not available shall be valued as
mutually agreed by AFG and ASIF, provided that such value is consistent with
the pricing procedures adopted by AFG. All computations shall be made by AFG
in cooperation with the auditors of AFG and the auditors of ASIF.
Section 2.3. Excluded Assets. There shall be deducted from the
assets of ASIF described in Section 2.1 all organizational expenses, any
prepaid expenses that would not have value to the Portfolio and cash in an
amount estimated by ASIF to
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be sufficient to pay any dividends declared but unpaid by ASIF at the Closing
Date (the "Unpaid Dividends"). The Unpaid Dividends will be paid out of a
segregated account at the Custodian set aside solely for the purpose of the
payment of the Unpaid Dividends.
Section 2.4. Valuation Date. The assets of ASIF and the net asset
value per share of the Portfolio Shares shall be valued as of the close of
business on the NYSE on the business day next preceding the Closing Date (the
"Valuation Date"). The stock transfer books of ASIF will be permanently closed
as of the close of business on the Valuation Date and only requests for the
redemption of shares of ASIF received in proper form prior to the close of
trading on the NYSE on the Valuation Date shall be accepted by ASIF. Transfer
requests thereafter received by ASIF shall be deemed to be transfer requests
for Portfolio Shares (assuming that the transactions contemplated by this
Agreement have been consummated) to be distributed to ASIF Shareholders under
this Agreement.
Section 2.5. Transfer of Assets.
(a) Assets held by ASIF shall be transferred to the account of the
Portfolio maintained by the Custodian on the Closing Date. ASIF shall instruct
the Custodian to make said transfer. ASIF shall further instruct the Custodian
that any trade made by ASIF during the three day period before the Closing Date
shall settle for the account of the Portfolio at the Custodian. The assets so
delivered shall be duly endorsed in proper form for transfer in such condition
as to constitute a good delivery thereof, in accordance with the custom of
brokers, and shall be accompanied by all necessary state stock transfer stamps,
if any, or a check for the appropriate purchase price thereof. Cash held by
ASIF (other than cash held as part of the Excluded Assets) shall be transferred
at the Effective Time to the account of the Portfolio at the Custodian.
(b) If, on the Closing Date, ASIF is unable to make delivery in the
manner contemplated by Section 2.5(a) of securities held by ASIF for the reason
that any of such securities purchased prior to the Closing Date have not yet
been delivered to ASIF, its broker or brokers, then, AFG shall waive the
delivery requirements of Section 2.5(a) with respect to said undelivered
securities, if ASIF has delivered to the Custodian by or on the Closing Date
and with respect to said undelivered securities, executed copies of an
agreement of assignment and escrow agreement and due bills executed on behalf
of said broker or brokers, together with such other documents as may be
required by AFG or the Custodian, including brokers' confirmation slips.
Section 2.6. Dissolution. As soon as reasonably practicable after
the Closing Date, ASIF shall pay or make provisions for all of its debts and
liabilities not assumed by the Portfolio and shall distribute all remaining
assets to the ASIF
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Shareholders, and ASIF shall be dissolved and deregistered as an investment
company under the Investment Company Act and under applicable state laws,
provided that, in the event that the transactions contemplated herein are not
consummated, ASIF shall not be obligated to so dissolve and deregister.
Section 2.7. Issuance of AFG Shares. At the Closing Date, ASIF
shall instruct AFG that the pro rata interest of each of the ASIF Shareholders
of record as of the close of business on the Valuation Date, as certified by
ASIF's transfer agent, in the Portfolio Shares be registered on the books of
AFG in full and fractional shares in the name of each ASIF Shareholder, and AFG
agrees promptly to comply with said instruction. All issued and outstanding
shares of ASIF's capital stock shall thereupon be canceled on the books of
ASIF. AFG shall have no obligation to inquire as to the validity, propriety or
correctness of any such instruction, but shall, in each case, assume that such
instruction is valid, proper and correct. AFG shall record on its books the
ownership of the Portfolio Shares by ASIF Shareholders and shall forward a
confirmation of such ownership to the ASIF Shareholders. No redemption or
repurchase of such shares credited to former ASIF Shareholders in respect of
ASIF shares represented by unsurrendered stock certificates shall be permitted
until such certificates have been surrendered to AFG for cancellation, or if
such certificates are lost or misplaced, until lost certificate affidavits have
been executed and delivered to AFG.
Section 2.8. Investment Securities.
(a) It is expressly understood that ASIF may hereafter sell any
securities owned by ASIF in the ordinary course of its business as a
diversified, closed-end, management investment company. Upon written request
by AFG, ASIF shall, prior to the Closing Date, dispose of equity securities
held by ASIF that the Portfolio determines, solely at its own discretion, that
the Portfolio does not desire to hold; provided, however, that ASIF shall not
be required to dispose of assets to the extent that such dispositions would, in
the aggregate, cause fifty percent (50%) or more of its historic business
assets to be transferred prior to the Closing Date.
(b) On or prior to the Valuation Date, ASIF shall deliver a list
setting forth the securities ASIF then owns together with the respective
Federal income tax bases thereof. ASIF shall provide to AFG on or before the
Valuation Date, detailed tax basis accounting records for each security to be
transferred to it pursuant to this Agreement. Such records shall be prepared
in accordance with the requirements for specific identification tax lot
accounting and clearly reflect the bases used for determination of gain and
loss realized on the partial sale of any security transferred to the Portfolio
hereunder. Such records shall be made available by ASIF prior to the Valuation
Date for inspection by the Treasurer (or his designee) or the auditors of AFG
upon reasonable request.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ASIF
ASIF represents and warrants to AFG that:
Section 3.1. Incorporation: Qualification and Corporate Authority.
ASIF has been duly incorporated and is validly existing under the laws of the
State of Maryland with all requisite corporate power and authority to conduct
its business as presently conducted.
Section 3.2. Registration and Regulation of ASIF. ASIF is duly
registered with the SEC as a closed-end, management investment company under
the Investment Company Act and all ASIF Shares which have been offered for sale
have been duly registered under the Securities Act and have been duly
registered, qualified or are exempt from registration or qualification under
the securities laws of each state or other jurisdiction in which such shares
have been offered for sale, and no action has been taken by ASIF to revoke or
rescind any such registration or qualification. ASIF is in compliance in all
material respects with all applicable laws, rules and regulations, including,
without limitation, the Investment Company Act, the Securities Act, the
Exchange Act and all applicable state securities laws. ASIF is in compliance
in all material respects with the applicable investment policies and
restrictions set forth in its registration statement currently in effect. The
value of the net assets of ASIF is determined using portfolio valuation methods
that comply in all material respects with the requirements of the Investment
Company Act.
Section 3.3. Financial Statements. The books of account and
related records of ASIF fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited financial statements
dated December 31, 1995, of ASIF previously delivered to AFG (the "ASIF
Financial Statements") present fairly in all material respects the financial
position of ASIF as at the dates indicated and the results of operations and
cash flows for the periods then ended in accordance with generally accepted
accounting principles applied on a consistent basis for the periods then ended.
Section 3.4. No Material Adverse Changes; Contingent Liabilities.
Except as disclosed by ASIF to AFG in writing, since December 31, 1995, no
material adverse change has occurred in the financial condition, results of
operations, business, assets or liabilities of ASIF or the status of ASIF as a
regulated investment company under the Code, other than changes resulting from
any change in general conditions in the financial or securities markets or the
performance of any investments made by ASIF or occurring in the ordinary course
of business of ASIF. There are no contingent
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liabilities of ASIF not disclosed in the ASIF Financial Statements which are
required to be disclosed in accordance with generally accepted accounting
principles.
Section 3.5. ASIF Shares; Liabilities; Business Operations.
(a) The ASIF Shares have been duly authorized and validly issued and
are fully paid and non-assessable.
(b) There is no plan or intention by the shareholders of ASIF who own
five percent (5%) or more of the ASIF Shares, and to the knowledge of ASIF's
management, the remaining ASIF Shareholders have no present plan or intention
of selling, exchanging, redeeming or otherwise disposing of a number of the
Portfolio Shares received by them in connection with the Reorganization that
would reduce the ASIF Shareholders' ownership of Portfolio Shares to a number
of shares having a value, as of the Closing Date, of less than fifty percent
(50%) of the value of all of the formerly outstanding ASIF Shares as of the
same date. For purposes of this representation, ASIF Shares and Portfolio
Shares held by ASIF Shareholders and otherwise sold, redeemed or disposed of
prior or subsequent to the Reorganization will be considered in making this
representation, except for Portfolio Shares which will be redeemed by the
Portfolio in the ordinary course of business as an open-end diversified
management investment company (or as a series thereof) under the Investment
Company Act.
(c) At the time of the Reorganization, ASIF shall not have outstanding
any warrants, options, convertible securities or any other type of right
pursuant to which any Person could acquire ASIF Shares.
(d) For the period from July 25, 1991 and ending on the Closing Date,
ASIF will have conducted its historic business within the meaning of Section
1.368-1(d) of the Income Tax Regulations under the Code in a substantially
unchanged manner.
(e) The liabilities of ASIF assumed by the Portfolio and the
liabilities to which the transferred assets of ASIF are subject, if any, were
incurred by ASIF in the ordinary course of its business (or in substitution of
liabilities so incurred.)
Section 3.6. Accountants. KPMG Peat Marwick LLP, which has
reported upon ASIF Financial Statements for the period ended December 31, 1995,
are independent public accountants as required by the Securities Act and the
Exchange Act.
Section 3.7. Binding Obligation. This Agreement has been duly
authorized, executed and delivered by ASIF and, assuming this Agreement has
been duly executed and delivered by AFG and approved by the ASIF Shareholders,
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constitutes the legal, valid and binding obligation of ASIF, enforceable
against ASIF in accordance with its terms, except as the enforceability hereof
may be limited by bankruptcy, insolvency, reorganization or similar laws
relating to or affecting creditors' rights generally, or by general equity
principles (whether applied in a court of law or a court of equity and
including limitations on the availability of specific performance or other
equitable remedies).
Section 3.8. No Breaches or Defaults . The execution and delivery
of this Agreement by ASIF and performance of its obligations hereunder has been
duly authorized by all necessary corporate action on the part of ASIF, other
than ASIF Shareholder approval, and (i) does not and, on the Closing Date, will
not result in any violation of the articles of incorporation or by-laws of ASIF
and (ii) does not and, will not on the Closing Date, result in a breach of any
of the terms or provisions of, or constitute (with or without the giving of
notice or the lapse of time or both) a default under, or give rise to a right
of termination, cancellation or acceleration of any obligation or to the loss
of a material benefit under, or result in the creation or imposition of any
Lien upon any property or assets of ASIF (except for such breaches or defaults
or Liens that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect) under (A) any indenture, mortgage
or loan agreement or any other material agreement or instrument to which ASIF
is a party or by which it may be bound or to which any of its properties may be
subject; (B) any Permit; or (C) any existing applicable law, rule, regulation,
judgment, order or decree of any Governmental Authority having jurisdiction
over ASIF or any of its properties. ASIF is not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
Section 3.9. Authorizations or Consents. Other than those which
shall have been obtained or made on or prior to the Closing Date and those that
must be made after the Closing Date to comply with Section 2.6 of this
Agreement, no authorization or approval or other action by, and no notice to or
filing with, any Governmental Authority will be required to be obtained or made
by ASIF in connection with the due execution and delivery by ASIF of this
Agreement and the consummation by ASIF of the transactions contemplated hereby.
Section 3.10. Permits. ASIF has in full force and effect all
Federal, state, local and foreign governmental approvals, consents,
authorizations, certificates, filings, franchises, licenses, notices, permits
and rights (collectively, "Permits") necessary for it to conduct its business
as presently conducted, and there has occurred no default under any Permit,
except for the absence of Permits and for defaults under Permits the absence or
default of which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. To the knowledge of ASIF there are
no proceedings relating to the suspension, revocation or modification of any
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Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
Section 3.11. No Actions, Suits or Proceedings.
(a) There is no pending action, litigation or proceeding, nor, to the
knowledge of ASIF, has any litigation been overtly threatened in writing or
orally, against ASIF before any Governmental Authority which questions the
validity or legality of this Agreement or of the actions contemplated hereby or
which seeks to prevent the consummation of the transactions contemplated
hereby, including the Reorganization.
(b) There are no legal, administrative or arbitration actions, suits,
or proceedings instituted or pending or, to the knowledge of ASIF, threatened
in writing or, if probable of assertion, orally against ASIF that could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect with respect to ASIF. There are not in existence on the date
hereof any plea agreements, judgments, injunctions, consents, decrees,
exceptions or orders that were entered by, filed with or issued by Governmental
Authority relating to ASIF's conduct of its business affecting in any
significant respect the conduct of such business. ASIF is not, and has not
been, to the knowledge of ASIF, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of ASIF.
Section 3.12. Contracts. ASIF is not in default under any
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party, by which its assets, business, or operations
may be bound or affected, or under which it or its assets, business or
operations receives benefits, and which default could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, and, to
the knowledge of ASIF, there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
Section 3.13. Properties and Assets. ASIF has good and marketable
title to all properties and assets reflected in the ASIF Financial Statements
as owned by it, free and clear of all Liens, except as described in the ASIF
Financial Statements.
Section 3.14. Taxes.
(a) ASIF has elected to be treated as a regulated investment company
under Subchapter M of the Code. ASIF has qualified as such for each taxable
year since inception and that has ended prior to the Closing Date and will have
satisfied the requirements of Section 851(b) of the Code for the period
beginning on the first day of its current taxable year and ending on the
Closing Date. In order to (i) ensure
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continued qualification of ASIF as a "regulated investment company" for tax
purposes and (ii) eliminate any tax liability of ASIF arising by reason of
undistributed investment company taxable income or net capital gain, ASIF will
declare to the ASIF Shareholders of record on or prior to the Valuation Date, a
dividend or dividends that, together with all previous such dividends shall
have the effect of distributing (A) all of ASIF's investment company taxable
income (determined without regard to any deductions for dividends paid) for the
taxable year ended December 31, 1995 and for the short taxable year beginning
on January 1, 1996 and ending on the Closing Date and (B) all of ASIF's net
capital gains realized in its taxable year ended December 31, 1995 and in such
short taxable year (after reduction for any capital loss carryover).
(b) ASIF has timely filed all Returns required to be filed by it and
all Taxes with respect thereto have been paid, except where the failure so to
file or so to pay, would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Adequate provision has been made
in the financial statements of ASIF for all Taxes in respect of all periods
ending on or before the date of such financial statements, except where the
failure to make such provisions would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. No deficiencies for
any Taxes have been proposed, assessed or asserted in writing by any taxing
authority against ASIF, and no deficiency has been proposed, assessed or
asserted, in writing, where such deficiency would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. Except as
disclosed by ASIF in writing on or prior to the Closing Date, no waivers of the
time to assess any such Taxes are outstanding nor are any written requests for
such waivers pending and no Return of ASIF is currently being or has been
audited since December 31, 1990 with respect to income taxes (and since
December 31, 1992 with respect to all other Taxes) by any Federal, state,
local, or foreign Tax authority.
(c) ASIF's fiscal year has not been changed for tax purposes since the
date on which it commenced operations.
Section 3.15. Benefit and Employment Obligations. Except as
disclosed on Schedule 3.15 on or prior to the Closing Date, ASIF has no
obligation to provide any post-retirement or post-employment benefit to any
Person, including but not limited to under any Benefit Plan, and has no
obligation to provide unfunded deferred compensation or other unfunded or
self-funded benefits to any Person.
Section 3.16. Brokers. No broker, finder or similar intermediary
has acted for or on behalf of ASIF in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with ASIF or any action taken by it.
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Section 3.17. Voting Requirements; Dissenter's Rights. The
affirmative votes of a majority of the holders of the outstanding ASIF Shares
(the "Required ASIF Shareholder Vote") are the only votes of the holders of any
class or series of ASIF's capital stock necessary to approve this Agreement and
the transactions contemplated by this Agreement. The ASIF Shareholders may not
exercise dissenter's rights granted under the Maryland Business Corporation Law
with respect to the Reorganization.
Section 3.18. State Takeover Statutes. No state takeover statute
or similar statute or regulation applies or purports to apply to the
Reorganization, this Agreement or any of the transactions contemplated by this
Agreement.
Section 3.19. Books and Records. The books and records of ASIF
reflecting, among other things, the purchase and sale of ASIF Shares by ASIF
Shareholders, the number of issued and outstanding shares owned by each ASIF
Shareholder and the state or other jurisdiction in which such shares were
offered and sold, are complete and accurate in all material respects.
Section 3.20. Prospectus; Proxy Materials. The prospectus for ASIF
dated March 23, 1989, did not contain, and as supplemented by any supplement
thereto dated prior to or on the Closing Date, does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. Any
information or data provided by ASIF that describes ASIF or its business
operations or plans for use in any proxy materials required for the
shareholders meeting of ASIF called for the purpose of approving the
Reorganization or other matters relating directly or indirectly to the
Reorganization will not contain any untrue statement of material fact or omit
to state any material fact required to be stated therein, where necessary in
order to make the statements made therein, in light of the circumstances under
which they are made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AFG
AFG, for itself and on behalf of the Portfolio, represents and
warrants to ASIF as follows:
Section 4.1. Organization; Authority. AFG is duly organized,
validly existing and in good standing under the Business Trust Act of the State
of Delaware, with all requisite trust power and authority to enter into this
Agreement and perform its obligations hereunder.
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Section 4.2. Binding Obligation. This Agreement has been duly
authorized, executed and delivered by AFG and, assuming this Agreement has been
duly executed and delivered by ASIF, constitutes the legal, valid and binding
obligation of AFG, enforceable against AFG in accordance with its terms from
and with respect to the revenues and assets of the Portfolio, except as the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization
or similar laws relating to or affecting creditors' rights generally, or by
general equity principles (whether applied in a court or law or a court of
equity and including limitations on the availability of specific performance or
other equitable remedies).
Section 4.3. Financial Statements. The books of account and
related records of the Portfolio fairly reflect in reasonable detail its
assets, liabilities and transactions in accordance with generally accepted
accounting principles applied on a consistent basis. The audited financial
statements dated December 31, 1995 of the Portfolio previously delivered to
ASIF (the "Portfolio Financial Statements") present fairly in all material
respects the financial position of the Portfolio as at the dates indicated and
the results of operations and cash flows for the periods then ended in
accordance with generally accepted accounting principles applied on a
consistent basis for the periods then ended.
Section 4.4. No Material Adverse Changes; Contingent Liabilities.
Since December 31, 1995, no material adverse change has occurred in the
financial condition, results of operations, business, assets or liabilities of
the Portfolio or the status of the Portfolio as a regulated investment company
under the Code, other than changes resulting from any change in general
conditions in the financial or securities markets or the performance of any
investments made by the Portfolio or occurring in the ordinary course of
business of the Portfolio or AFG. There are no contingent liabilities of the
Portfolio not disclosed in the Portfolio Financial Statements which are
required to be disclosed in accordance with generally accepted accounting
principles.
Section 4.5. No Breaches or Defaults . The execution and delivery
of this Agreement by AFG and performance by AFG of its obligations hereunder
have been duly authorized by all necessary trust action on the part of AFG and
(i) do not, and on the Closing Date will not, result in any violation of the
Agreement and Declaration of Trust, as amended, or by-laws, as amended, of AFG
and (ii) does not, and on the Closing Date will not, result in a breach of any
of the terms or provisions of, or constitute (with or without the giving of
notice or the lapse of time or both) a default under, or give rise to a right
of termination, cancellation or acceleration of any obligation or to the loss
of a material benefit under, or result in the creation or imposition of any
Lien upon any property or assets of the Portfolio (except for such breaches or
defaults or Liens that would not reasonably be expected, individually or in the
aggregate, to adversely affect the consummation of the Reorganization) under
(A) any indenture, mortgage or loan or any other material agreement or
instrument to which
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AFG is a party or by which it may be bound which relates to the Portfolio or to
which any properties of the Portfolio may be subject; (B) any Permit; or (C)
any existing applicable law, rule, regulation, judgment, order or decree of any
Governmental Authority having jurisdiction over AFG or any of the Portfolio's
properties.
Section 4.6. Accountants. KPMG Peat Marwick LLP, which has
reported upon the Portfolio Financial Statements for the period ended December
31, 1995, are independent public accountants as required by the Securities Act
and the Exchange Act.
Section 4.7. Authorizations or Consents. Other than those which
shall have been obtained or made on or prior to the Closing Date, no
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority will be required to be obtained or made by AFG in
connection with the due execution and delivery by AFG of this Agreement and the
consummation by AFG of the transactions contemplated hereby.
Section 4.8. Permits. AFG has in full force and effect all
Permits necessary for it to conduct its business as presently conducted as it
relates to the Portfolio, and there has occurred no default under any Permit,
except for the absence of Permits and for defaults under Permits the absence or
default of which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. To the knowledge of AFG there are no
proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
Section 4.9. No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding, nor, to the
knowledge of AFG, has any litigation been overtly threatened in writing or, if
probable of assertion, orally, against AFG before any Governmental Authority
which questions the validity or legality of this Agreement or of the
transactions contemplated hereby, or which seeks to prevent the consummation of
the transactions contemplated hereby, including the Reorganization.
(b) There are no legal, administrative or arbitration actions, suits,
or proceedings instituted or pending or, to the knowledge of AFG, threatened in
writing or, if probable of assertion, orally against AFG affecting any
property, asset, interest, or right of the Portfolio, that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to the Portfolio. There are not in existence on the date hereof
any plea agreements, judgments, injunctions, consents, decrees, exceptions or
orders that were entered by, filed with or issued by Governmental Authority
relating to AFG's conduct of the business of the Portfolio
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affecting in any significant respect the conduct of such business. AFG is not,
and has not been, to the knowledge of AFG, the target of any investigation by
the SEC or any state securities administrator with respect to its conduct of
the business of the Portfolio.
Section 4.10. Ineligible Persons. Neither AFG nor any "Affiliated
Person" of AFG has been convicted of any felony or misdemeanor, described in
Section 9(a)(1) of the Investment Company Act, nor has any affiliated person of
AFG been subject, or presently is subject, to any disqualification that would
be a basis for denial, suspension or revocation of registration of an
investment adviser under Section 203(e) of the Advisors Act or Rule 206(4)-4(b)
thereunder or of a broker-dealer under Section 15 of the Exchange Act, or for
disqualification as an investment adviser, employee, officer or director of an
investment company under Section 9 of the Investment Company Act, and, to AFG's
knowledge, there is no proceeding or investigation that is reasonably likely to
become the basis for any such disqualification, denial, suspension or
revocation.
Section 4.11. Taxes.
(a) The Portfolio has elected to be treated as a regulated investment
company under Subchapter M of the Code. The Portfolio has qualified as such
for each taxable year since inception that has ended prior to the Closing Date.
(b) The Portfolio has timely filed all Returns required to be filed by
it and all Taxes with respect thereto have been paid, except where the failure
so to file or so to pay, would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect. Adequate provision has been
made in the financial statements of the Portfolio for all Taxes in respect of
all periods ending on or before the date of such financial statements, except
where the failure to make such provisions would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No
deficiencies for any Taxes have been proposed, assessed or asserted in writing
by any taxing authority against the Portfolio, and no deficiency has been
proposed, assessed or asserted, in writing, where such deficiency would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No waivers of the time to assess any such Taxes are
outstanding nor are any written requests for such waivers pending and no Return
of the Portfolio is currently being or has been audited since December 31, 1990
with respect to income taxes (and since December 31, 1992 with respect to all
other Taxes) by any Federal, state, local, or foreign Tax authority.
(c) The Portfolio's fiscal year has not been changed for tax purposes
since inception of its business operations.
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Section 4.12. Brokers. No broker, finder or similar intermediary
has acted for or on behalf of AFG or the Portfolio in connection with this
Agreement or the transactions contemplated hereby, and no broker, finder, agent
or similar intermediary is entitled to any broker's, finder's or similar fee or
other commission in connection therewith based on any agreement, arrangement or
understanding with AFG or any action taken by AFG.
Section 4.13. Registration and Regulation of Company. AFG is
registered with the SEC under the Investment Company Act as an open-end,
management, series, investment company. The Portfolio is in compliance in all
material respects with all applicable laws, rules and regulations, including
without limitation the Investment Company Act, the Securities Act, the Exchange
Act and all applicable state securities laws. The Portfolio is in compliance
in all material respects with the applicable investment policies and
restrictions set forth in its registration statement currently in effect. The
value of the net assets of the Portfolio is determined using portfolio
valuation methods that comply in all material respects with the requirements of
the Investment Company Act.
Section 4.14. Registration of Portfolio Shares.
(a) The shares of beneficial interest of AFG are divided into nine
portfolios, including the Portfolio. The Portfolio has two classes of shares,
Class A Shares and Class B Shares. Under the Delaware Business Trust Act and
its Agreement and Declaration of Trust, as amended, AFG is authorized to issue
an unlimited number of shares of any class representing an investment in each
of its portfolios, including the Portfolio.
(b) The Portfolio Shares of AFG to be issued pursuant to Section 2.7
shall on the Closing Date be duly registered under the Securities Act by a
Registration Statement on Form N-14 of AFG then in effect.
(c) The Portfolio Shares to be issued pursuant to Section 2.7 are duly
authorized and on the Closing Date will be validly issued and fully paid and
non-assessable and will conform to the description thereof contained in the
Registration Statement on Form N-14 then in effect. At the time of the
Reorganization, the Portfolio shall not have outstanding any warrants, options,
convertible securities or any other type of right pursuant to which any Person
could acquire Portfolio Shares, except for the right of investors to acquire
Portfolio Shares at the public offering price in the normal course of its
business as an open-ended diversified management investment company operating
under the Investment Company Act.
(d) The combined proxy statement/prospectus (the "Combined Proxy
Statement/Prospectus") which forms a part of AFG's Registration Statement on
Form
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N-14 shall be furnished to ASIF and ASIF Shareholders entitled to vote at the
ASIF Shareholders Meeting. The Combined Proxy Statement/Prospectus and related
Statement of Additional Information of the Portfolio, when they become
effective, shall conform to the applicable requirements of the Securities Act
and the Investment Company Act and shall not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not materially misleading, provided, however, that
no representation or warranty is made with respect to written information
provided by ASIF for inclusion in the Combined Prospectus/Proxy Statement.
(e) The shares of the Portfolio which have been or are being offered
for sale (other than Portfolio Shares to be issued in connection with the
Reorganization) have been duly registered under the Securities Act by the AFG
Registration Statement then in effect and have been duly registered, qualified
or are exempt from registration or qualification under the securities laws of
each state or other jurisdiction in which such shares have been or are being
offered for sale, and no action has been taken by AFG to revoke or rescind any
such registration or qualification.
Section 4.15. Representations Concerning the Reorganization.
(a) AFG has no plan or intention to reacquire any of the Portfolio
Shares issued in the Reorganization, except to the extent that the Portfolio is
required by the Investment Company Act to redeem any of its shares presented
for redemption.
(b) The Portfolio has no plan or intention to sell or otherwise
dispose of any of the assets of ASIF acquired in the Reorganization, other than
in the ordinary course of its business and to the extent necessary to maintain
its status as a "regulated investment company" under the Code.
(c) Following the Reorganization, the Portfolio will continue the
"historic business" of ASIF (within the meaning of Section 1.368-1(d) of the
Income Tax Regulations under the Code) or use a significant portion of ASIF's
historic business assets in a business.
Section 4.16. Prospectus. The current prospectus and statement of
additional information for the Portfolio as of the date on which they were
issued did not contain, and as supplemented by any supplement thereto dated
prior to or on the Closing Date do not contain, any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
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ARTICLE V
COVENANTS
Section 5.1. Conduct of Business.
(a) From the date of this Agreement up to and including the Closing
Date (or, if earlier, the date upon which this Agreement is terminated pursuant
to Article VII), ASIF shall conduct its business only in the ordinary course
and substantially in accordance with past practices (unless AFG shall otherwise
consent in writing), and shall use its reasonable best efforts to preserve
intact its business organization and material assets and maintain the rights,
franchises and business and customer relations necessary to conduct its
business in the ordinary course in all material respects. Without limiting the
generality of the foregoing, ASIF shall not do any of the following without the
prior written consent of AFG, which consent shall not be unreasonably withheld:
(i) split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock;
(ii) amend its articles of incorporation or by-laws;
(iii) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or any
assets that are material, individually or in the aggregate, to ASIF taken
as a whole, except purchases of assets in the ordinary course of business
consistent with past practice;
(iv) sell, lease or otherwise dispose of any of its material
properties or assets, or mortgage or otherwise encumber or subject to any
Lien any of its material properties or assets, other than in the ordinary
course of business;
(v) incur any indebtedness for borrowed money or guarantee any
indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of ASIF, guarantee
any debt securities of another Person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another Person,
or enter into any arrangement having the economic effect of any of the
foregoing;
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(vi) settle or compromise any material income tax liability or
make any material tax election;
(vii) pay, discharge or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than in the ordinary course of business;
(viii) change its methods of accounting, except as required by
changes in generally accepted accounting principles as concurred in by its
independent auditors, or change its fiscal year;
(ix) make or agree to make any material severance, termination,
indemnification or similar payments except pursuant to existing agreements;
or
(x) adopt any Benefit Plan.
(b) From the date of this Agreement up to and including the Closing
Date (or, if earlier, the date upon which this Agreement is terminated pursuant
to Article VII), AFG shall conduct the business of the Portfolio only in the
ordinary course and substantially in accordance with past practices, and shall
use its reasonable best efforts to preserve intact its business organization
and material assets and maintain the rights, franchises and business relations
necessary to conduct the business operations of the Portfolio in the ordinary
course in all material respects.
Section 5.2. Announcements. Promptly following execution and
delivery of this Agreement, ASIF and AFG shall agree upon and release a
mutually acceptable press release and ASIF shall give any and all notices
required to be given by law.
Section 5.3. Expenses. ASIF and the Portfolio shall each bear the
expenses it incurs in connection with this Agreement and the Reorganization and
other transactions contemplated hereby.
Section 5.4. Further Assurances. Each of the parties hereto shall
execute such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall, on or prior to the Closing Date,
use its reasonable best efforts to fulfill or obtain the fulfillment of the
conditions precedent to the consummation of the Reorganization, including the
execution and delivery of any documents, certificates, instruments or other
papers that are reasonably required for the consummation of the Reorganization.
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Section 5.5. Notice of Events. AFG shall give prompt notice to
ASIF, and ASIF shall give prompt notice to AFG, of (i) the occurrence or
nonoccurrence of any event of which to the knowledge of AFG or to the knowledge
of ASIF, the occurrence or non-occurrence of which would be likely to result in
any of the conditions specified in (x) in the case of AFG, Sections 6.1 and 6.2
or (y) in the case of ASIF, Sections 6.2 and 6.3, not being satisfied so as to
permit the consummation of the Reorganization and (ii) any material failure on
its part, or on the part of the other party hereto of which it has knowledge,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.5 shall not limit or otherwise affect the
remedies available hereunder to any party.
Section 5.6. Access to Information.
(a) ASIF will, during regular business hours and on reasonable prior
notice, allow AFG and its authorized representatives reasonable access to the
books and records of ASIF pertaining to the assets of ASIF and to employees of
ASIF knowledgeable thereof; provided, however, that any such access shall not
significantly interfere with the business or operations of ASIF.
(b) AFG will, during regular business hours and on reasonable notice,
allow ASIF and its authorized representatives reasonable access to the books
and records of AFG pertaining to the assets of the Portfolio and to employees
of AFG knowledge thereof; provided, however, that any such access shall not
significantly interfere with the business or operations of AFG.
Section 5.7. Consents, Approvals and Filings. Each of ASIF and
AFG shall make all necessary filings, as soon as reasonably practicable,
including, without limitation, those required under the Securities Act, the
Exchange Act, the Investment Company Act and the Advisers Act, in order to
facilitate prompt consummation of the Reorganization and the other transactions
contemplated by this Agreement. In addition, each of ASIF and AFG shall use
its reasonable best efforts, and shall cooperate fully with each other (i) to
comply as promptly as reasonably practicable with all requirements of
Governmental Authorities applicable to the Reorganization and the other
transactions contemplated herein and (ii) to obtain as promptly as reasonably
practicable all necessary permits, orders or other consents of Governmental
Authorities and consents of all third parties necessary for the consummation of
the Reorganization and the other transactions contemplated herein. Each of
ASIF and AFG shall use reasonable efforts to provide such information and
communications to Governmental Authorities as such Governmental Authorities may
request.
Section 5.8. Submission of Agreement to Shareholders. ASIF shall
take all action necessary in accordance with applicable law and its articles of
incorporation
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and by-laws to convene the ASIF Shareholders Meeting. ASIF shall, through its
Board of Directors, recommend to the ASIF Shareholders approval of this
Agreement and the other transactions contemplated by this Agreement. ASIF
shall use its reasonable best efforts to hold the ASIF Shareholders Meeting as
soon as practicable after the date hereof.
ARTICLE VI
CONDITIONS PRECEDENT TO THE REORGANIZATION
Section 6.1. Conditions Precedent of AFG. The obligation of AFG
to consummate the Reorganization is subject to the satisfaction, at or prior to
the Closing Date, of all of the following conditions, any one or more of which
may be waived in writing by AFG.
(a) The representations and warranties of ASIF set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date with the same effect as though all
such representations and warranties had been made as of the Closing Date.
(b) ASIF shall have complied with and satisfied in all material
respects all agreements and conditions set forth herein on its part to be
performed or satisfied at or prior to the Closing Date.
(c) AFG shall have received at the Closing Date (i) a certificate,
dated as of the Closing Date, from an officer of ASIF to the effect that the
conditions specified in Section 6.1(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of ASIF certifying as to the accuracy and completeness of the
attached articles of incorporation and by-laws, and resolutions, consents and
authorizations with respect to the execution and delivery of this Agreement and
the transactions contemplated hereby.
(d) AFG shall have received the signed opinion of Ballard Spahr
Andrews & Ingersoll in form and substance reasonably acceptable to AFG, as to
the matters set forth in Schedule 6.1(d).
Section 6.2. Mutual Conditions. The obligation of ASIF and AFG to
consummate the Reorganization is subject to the satisfaction, at or prior to
the Closing Date, of all of the following further conditions, any one or more
may be waived in writing by ASIF and AFG (to the extent permitted by law), but
only if and to the extent that such waiver is mutual.
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(a) All filings required to be made prior to the Closing Date with,
and all consents, approvals, permits and authorizations required to be obtained
on or prior to the Closing Date from Governmental Authorities, in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated herein by ASIF and AFG shall have been made or
obtained, as the case may be; provided, however, that such consents, approvals,
permits and authorizations may be subject to conditions that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) This Agreement, the Reorganization and related corporate matters
shall have been approved and adopted at the ASIF Shareholders Meeting by the
shareholders of ASIF on the record date by the Required ASIF Shareholder Vote.
(c) The assets of ASIF to be acquired by the Portfolio shall
constitute at least 90% of the fair market value of the net assets and at least
70% of the fair market value of the gross assets held by ASIF immediately prior
to the Reorganization. For purposes of this Section 6.2(c), assets used by
ASIF to pay the expenses it incurs in connection with this Agreement and the
Reorganization and to effect all distributions (other than regular, normal
dividends not in excess of the requirements of Section 852 of the Code
occurring in the ordinary course of ASIF's business as an closed-end
diversified management investment company) after the date of this Agreement
shall be included as assets of ASIF immediately prior to the Reorganization.
(d) No temporary restraining order, preliminary or permanent
injunction or other order issued by any Governmental Authority preventing the
consummation of the Reorganization on the Closing Date shall be in effect;
provided, however, that the party or parties invoking this condition shall use
reasonable efforts to have any such order or injunction vacated.
(e) The Registration Statement on Form N-14 filed by AFG with respect
to the Portfolio Shares to be issued to ASIF Shareholders in connection with
the Reorganization shall have become effective under the Securities Act and no
stop orders suspending the effectiveness thereof shall have been issued and, to
the best knowledge of the parties hereto, no investigation or proceeding for
that purpose shall have been instituted or be pending, threatened or
contemplated under the Securities Act.
(f) ASIF and AFG shall have received on or before the Closing Date an
opinion of Ballard Spahr Andrews & Ingersoll in form, scope and substance
satisfactory to ASIF and AFG, set forth on Schedule 6.2(f). In rendering such
opinions, counsel may rely upon letters of representation from ASIF and AFG.
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<PAGE> 83
(g) The dividend or dividends described in the last sentence of
Section 3.14(a) shall have been declared.
Section 6.3. Conditions Precedent of ASIF. The obligation of ASIF
to consummate the Reorganization is subject to the satisfaction, at or prior to
the Closing Date, of all of the following conditions, any one or more of which
may be waived in writing by ASIF.
(a) The representations and warranties of AFG on behalf of the
Portfolio set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date with the
same effect as though all such representations and warranties had been made as
of the Closing Date.
(b) AFG shall have complied with and satisfied in all material
respects all agreements and conditions set forth herein on its part to be
performed or satisfied at or prior to the Closing Date.
(c) ASIF shall have received on the Closing Date (i) a certificate,
dated as of the Closing Date, from an officer of AFG to the effect that the
conditions specified in Section 6.3(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, of AFG, certifying as to the
accuracy and completeness of the attached Agreement and Declaration of Trust,
as amended, and by-laws, as amended, and resolutions, consents and
authorizations with respect to the execution and delivery of this Agreement and
the transactions contemplated hereby.
(d) ASIF shall have received the signed opinion of Ballard Spahr
Andrews & Ingersoll in form and substance reasonably acceptable to ASIF, as to
the matters set forth on Schedule 6.3(d).
ARTICLE VII
TERMINATION OF AGREEMENT
Section 7.1. Termination.
(a) This Agreement may be terminated on or prior to the Closing Date
as follows:
(i) by mutual written consent of ASIF and AFG; and
(ii) at the election of ASIF or AFG:
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<PAGE> 84
(A) if the Closing Date shall not be on or before December 31,
1996, or such later date as the parties hereto may agree upon, unless
the failure to consummate the Reorganization is the result of a
willful and material breach of this Agreement by the party seeking to
terminate this Agreement;
(B) if, upon a vote at ASIF Shareholders Meeting or any
adjournment thereof, the Required ASIF Shareholder Vote shall not have
been obtained as contemplated by Section 5.8; or
(C) if any Governmental Authority shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Reorganization and such
order, decree, ruling or other action shall have become final and
nonappealable.
(b) The termination of this Agreement shall be effectuated by the
delivery by the terminating party to the other party of a written notice of
such termination. If this Agreement so terminates, it shall become null and
void and have no further force or effect, except as provided in Section 7.2.
Section 7.2. Survival After Termination. If this Agreement is
terminated in accordance with Section 7.1 hereof and the transactions
contemplated hereby are not consummated, this Agreement shall become void and
of no further force and effect, except for the provisions of Section 5.3.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations and Warranties. None
of the representations, warranties or covenants in this Agreement or in any
certificate or instrument delivered pursuant to this Agreement shall survive
the Closing Date and no party shall, therefore, have any recourse therefor
against any other party in connection therewith. This Section 8.1 shall not
limit any covenant or agreement of the parties which by its terms contemplates
performance after the Closing Date.
Section 8.2. Law Governing. This Agreement shall be construed and
interpreted according to the laws of the State of Delaware applicable to
contracts made and to be performed wholly within such state.
Section 8.3. Binding Effect, Persons Benefiting, No Assignment.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and the respective successors and assigns of the parties and such
Persons. Nothing in this
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Agreement is intended or shall be construed to confer upon any entity or Person
other than the parties hereto and their respective successors and permitted
assigns any right, remedy or claim under or by reason of this Agreement or any
part hereof. Without the prior written consent of the parties hereto, this
Agreement may not be assigned by any of the parties hereto.
Section 8.4. Obligations of AFG.
ASIF and AFG hereby acknowledge and agree that the Portfolio is a
separate investment portfolio of AFG, that AFG is executing this Agreement on
behalf of the Portfolio, and that any amounts payable by AFG under or in
connection with this Agreement shall be payable solely from the revenues and
assets of the Portfolio. ASIF further acknowledges and agrees that this
Agreement has been executed by an authorized officer of AFG in his or her
capacity as an officer of AFG intending to bind AFG as provided herein, and
that no officer, trustee or shareholder of AFG shall be personally liable for
the liabilities or obligations of AFG incurred hereunder.
Section 8.5. Amendments. This Agreement may not be amended,
altered or modified except by a written instrument executed by ASIF and AFG.
Section 8.6. Enforcement. The parties agree irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
any state having jurisdiction, in addition to any other remedy to which they
are entitled at law or in equity.
Section 8.7. Interpretation. When a reference is made in this
Agreement to a Section or Schedule, such reference shall be to a Section of, or
a Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". Each representation and warranty contained in Article III or IV
that relates to a general category of a subject matter shall be deemed
superseded by a specific representation and warranty relating to a subcategory
thereof to the extent of such specific representation or warranty.
Section 8.8. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and each of which shall
constitute one and the same instrument.
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<PAGE> 86
Section 8.9. Entire Agreement; Schedules. This Agreement,
including the Schedules, certificates and lists referred to herein, and any
documents executed by the parties simultaneously herewith or pursuant thereto,
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, written or oral, between the parties with respect to such
subject matter.
Section 8.10. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand or by overnight courier, two days after being
sent by registered mail, return receipt requested, or when sent by telecopier
(with receipt confirmed), provided, in the case of a telecopied notice, a copy
is also sent by registered mail, return receipt requested, or by courier,
addressed as follows (or to such other address as a party may designate by
notice to the other):
(a) If to AFG:
AIM Funds Group
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
with a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
Attn: William H. Rheiner, Esq.
Fax: (215) 864-8999
(b) If to ASIF:
AIM Funds Group
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
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with a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
Attn: William H. Rheiner, Esq.
Fax: (215) 864-8999
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<PAGE> 88
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
AIM STRATEGIC INCOME FUND, INC.
By: /s/ ROBERT H. GRAHAM
------------------------------------
AIM FUNDS GROUP, acting
on behalf of AIM High Yield Fund
By: /s/ ROBERT H. GRAHAM
------------------------------------
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Schedule 3.15
Benefit and Employment Obligations
----------------------------------------
To be provided on or before the Closing Date.
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Schedule 6.1(d)
OPINION OF COUNSEL TO ASIF
1. ASIF is a corporation duly incorporated and validly existing under the
laws of the State of Maryland.
2. ASIF is an closed-end, management investment company registered under
the Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by ASIF have
been duly authorized and approved by all requisite corporate action on
the part of ASIF. The Agreement has been duly executed and delivered
by ASIF and constitutes the valid and binding obligation of ASIF.
4. The ASIF Shares outstanding on the date hereof have been duly
authorized and validly issued, and are fully paid and are
non-assessable.
5. ASIF is not required to submit any notice, report or other filing with
or obtain any authorization consent or approval from any Governmental
Authority or self-regulatory organization prior to the consummation of
the transactions contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer who is
the current primary contact for ASIF or who has devoted substantive attention
on behalf of ASIF during the preceding twelve months and who is still currently
employed by or is currently a member of this firm, no litigation or
governmental proceeding is pending or threatened in writing against ASIF (i)
with respect to the Agreement or (ii) which involves in excess of $500,000 in
damages.
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Schedule 6.2(g)
Tax Opinions.
---------------
(i) The transfer of the assets of ASIF to the Portfolio in
exchange for the Portfolio Shares distributed directly to the ASIF
Shareholders, as provided in the Agreement, will constitute a
"reorganization" within the meaning of Section 368(a) of the Code and that
ASIF and AFG will each be a "party to a reorganization" within the meaning
of 368(b) of the Code.
(ii) In accordance with Section 361(a) and Section 361(c)(1) of
the Code, no gain or loss will be recognized by ASIF as a result of such
transaction.
(iii) In accordance with Section 1032 of the Code, no gain or
loss will be recognized by the Portfolio upon the receipt of assets of ASIF
in exchange for Portfolio Shares issued directly to the ASIF Shareholders.
(iv) In accordance with Section 354(a)(1) of the Code, no gain
or loss will be recognized by ASIF Shareholders on issuance by AFG of
Portfolio Shares in exchange for their ASIF Shares.
(v) In accordance with Section 362(b) of the Code, the basis to
the Portfolio of the assets of ASIF transferred to it will be the same as
the basis of such assets in the hands of ASIF immediately prior to the
exchange.
(vi) In accordance with Section 358(a) of the Code, a ASIF
Shareholder's basis for Portfolio Shares issued to such ASIF Shareholder
pursuant to Section 2.7 of the Agreement ("Issued Shares") will be the same
as his basis for ASIF Shares.
(vii) In accordance with Section 1223(1) of the Code, a ASIF
Shareholder's holding period for Portfolio Shares will be determined by
including said ASIF Shareholder's holding period for ASIF Shares exchanged
therefor, provided that ASIF Shareholder held such ASIF Shares as a capital
asset.
(viii) In accordance with Section 1223(2) of the Code, the
holding period with respect to the assets of ASIF transferred to the
Portfolio will include the holding period for such assets in the hands of
ASIF.
(ix) In accordance with Section 381(a)(2) of the Code, the
Portfolio will succeed to and take into account the items of ASIF described
in
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Section 381(c) of the Code, subject to the conditions and limitations
specified in Sections 381 through 384 of the Code and the Internal Revenue
Service regulations thereunder.
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<PAGE> 93
Schedule 6.3(d)
OPINION OF COUNSEL TO AFG
1. AFG is duly organized and validly existing as a business trust under
the Business Trust Law of the State of Delaware.
2. AFG is an open-end, management investment company registered under the
Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by AFG have
been duly authorized and approved by all requisite trust action on the
part of AFG. The Agreement has been duly executed and delivered by AFG
and constitutes the valid and binding obligation of the Portfolio.
4. The Portfolio Shares outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are non-assessable.
5. AFG is not required to submit any notice, report or other filing with
or obtain any authorization consent or approval from any Governmental
Authority or self-regulatory organization prior to the consummation of
the transactions contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer who is
the current primary contact for AFG or who has devoted substantive attention on
behalf of AFG during the preceding twelve months and who is still currently
employed by or is currently a member of this firm, no litigation or
governmental proceeding is pending or threatened in writing against the
Portfolio (i) with respect to the Agreement or (ii) which involves in excess of
$500,000 in damages.
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APPENDIX II
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS(R)
AIM BALANCED FUND
AIM GLOBAL UTILITIES FUND
AIM GROWTH FUND
AIM HIGH YIELD FUND
AIM INCOME FUND
AIM INTERMEDIATE GOVERNMENT FUND
AIM MONEY MARKET FUND
AIM MUNICIPAL BOND FUND
AIM VALUE FUND
(SERIES PORTFOLIOS OF AIM FUNDS GROUP)
PROSPECTUS
MAY 1, 1996
This Prospectus contains information about the nine mutual
funds listed above (the "Funds") which are separate series
portfolios of AIM Funds Group (the "Trust"), a Delaware
business trust. The investment objectives of the Funds are
listed on the inside cover page.
This Prospectus sets forth basic information about the
Funds that prospective investors should know before
investing. It should be read and retained for future
reference. A Statement of Additional Information, dated
May 1, 1996, has been filed with the United States
Securities and Exchange Commission ("SEC") and is
incorporated herein by reference. The Statement of
Additional Information is available without charge upon
written request to the Trust at P.O. Box 4739, Houston,
Texas 77210-4739 or by calling (800) 347-4246.
AIM HIGH YIELD FUND MAY INVEST UP TO 100% OF ITS NET ASSETS
IN NON-INVESTMENT GRADE DEBT SECURITIES, COMMONLY REFERRED
TO AS "JUNK BONDS." JUNK BONDS ARE CONSIDERED TO BE
SPECULATIVE, AND ENTAIL GREATER RISKS, INCLUDING DEFAULT
RISKS, THAN THOSE FOUND IN HIGHER RATED SECURITIES.
PURCHASERS SHOULD CAREFULLY CONSIDER THE RISKS ASSOCIATED
WITH AN INVESTMENT IN THIS FUND PRIOR TO INVESTING. SEE
"INVESTMENT PROGRAMS -- AIM HIGH YIELD FUND," "CERTAIN
INVESTMENT STRATEGIES AND POLICIES -- RISK FACTORS
REGARDING NON-INVESTMENT GRADE DEBT SECURITIES" AND
"APPENDIX C -- DESCRIPTIONS OF RATING CATEGORIES."
THE FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND THE FUNDS' SHARES
ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE
FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
THERE CAN BE NO ASSURANCE THAT AIM MONEY MARKET FUND WILL
BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 95
INVESTMENT OBJECTIVES
- --------------------------------------------------------------------------------
The investment objectives of the Funds are as follows:
AIM BALANCED FUND: To achieve as high a total return as possible, consistent
with preservation of capital, by investing in a broadly diversified portfolio of
high-yielding securities, including common stocks, preferred stocks, convertible
securities and bonds.
AIM GLOBAL UTILITIES FUND: To achieve a high level of current income, and as a
secondary objective to achieve capital appreciation, by investing primarily in
the common and preferred stocks of public utility companies.
AIM GROWTH FUND: To achieve long-term growth of capital by investing primarily
in the common stocks of established medium-to-large size companies with
prospects for above-average, long-term earnings growth.
AIM HIGH YIELD FUND: To achieve a high level of current income by investing
primarily in publicly traded debt securities of less than investment grade.
AIM INCOME FUND: To achieve a high level of current income consistent with
reasonable concern for safety of principal by investing primarily in fixed rate
corporate debt and U.S. Government obligations.
AIM INTERMEDIATE GOVERNMENT FUND: To achieve a high level of current income
consistent with reasonable concern for safety of principal by investing in debt
securities issued, guaranteed or otherwise backed by the United States
Government.
AIM MONEY MARKET FUND: To provide as high a level of current income as is
consistent with the preservation of capital and liquidity.
AIM MUNICIPAL BOND FUND: To achieve a high level of current income exempt from
federal income taxes consistent with the preservation of principal by investing
in a diversified portfolio of municipal bonds.
AIM VALUE FUND: To achieve long-term growth of capital by investing primarily
in equity securities judged by the Fund's investment advisor to be undervalued
relative to the investment advisor's appraisal of the current or projected
earnings of the companies issuing the securities, or relative to current market
values of assets owned by the companies issuing the securities or relative to
the equity market generally. Income is a secondary objective.
SUMMARY
- --------------------------------------------------------------------------------
THE FUNDS. AIM Funds Group (the "Trust") is a Delaware business trust
organized as an open-end, series, management investment company. Currently the
Trust offers nine separate series portfolios, each of which pursues unique
investment objectives. This Prospectus relates to all of such portfolios (the
"Funds"), which are listed on the cover.
THE ADVISOR. A I M Advisors, Inc. ("AIM") serves as each Fund's investment
advisor pursuant to a Master Investment Advisory Agreement (the "Advisory
Agreement").
AIM, together with its affiliates, manages or advises 43 investment company
portfolios. As of April 1, 1996, the total assets of the investment company
portfolios advised or managed by AIM or its affiliates were approximately $48.2
billion. Under the terms of the Advisory Agreement, AIM supervises all aspects
of each Fund's operations and provides investment advisory services to each
Fund. As compensation for these services AIM receives a fee based on each Fund's
average daily net assets. Under a Master Administrative Services Agreement, AIM
may be reimbursed by each Fund for its costs of performing, or arranging for the
performance of, certain accounting, shareholder servicing and other
administrative services for the Funds.
MULTIPLE DISTRIBUTION SYSTEM. Investors may select Class A or Class B shares
of each Fund and, in the case of AIM MONEY MARKET FUND, Class C shares, all of
which are offered by this Prospectus at an offering price that reflects
differing sales charges and expense levels. See "Terms and Conditions of
Purchase of the AIM Funds -- Sales Charges and Dealer Concessions."
Class A Shares -- Shares are offered at net asset value plus any
applicable initial sales charge.
Class B Shares -- Shares are offered at net asset value, without an
initial sales charge, and are subject to a maximum contingent deferred
sales charge of 5% on certain redemptions made within six years from the
date such shares were purchased. Class B shares automatically convert to
Class A shares of the same Fund eight years following the end of the
calendar month in which a purchase was made. Class B shares are subject to
higher expenses than Class A shares.
Class C Shares (AIM MONEY MARKET FUND only) -- Shares are offered at
net asset value, without an initial sales charge and without contingent
deferred sales charges.
SUITABILITY FOR INVESTORS. The Multiple Distribution System permits an
investor to choose the method of purchasing shares that is most beneficial given
the amount of the purchase, the length of time the shares are expected to be
held, whether dividends will be
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<PAGE> 96
paid in cash or reinvested in additional shares of a Fund and other
circumstances. Class A shares of AIM MONEY MARKET FUND are designed to meet the
needs of an investor who wishes to establish a dollar cost averaging program,
pursuant to which Class A shares of AIM MONEY MARKET FUND are exchanged for
shares of other funds advised by AIM that are sold with an initial sales charge.
Investors should consider whether, during the anticipated life of their
investment in a Fund, the accumulated distribution fees and any applicable
contingent deferred sales charges on Class B shares prior to conversion would be
less than the initial sales charge and accumulated distribution fees on Class A
shares purchased at the same time, and to what extent such differential would be
offset by the higher return on Class A shares. To assist investors in making
this determination, the table under the caption "Table of Fees and Expenses"
sets forth examples of the charges applicable to each class of shares. Class A
shares will normally be more beneficial than Class B shares to the investor who
qualifies for reduced initial sales charges, as described below. Therefore,
A I M Distributors, Inc. will reject any order for purchase of more than
$250,000 for Class B shares.
PURCHASING SHARES. Initial investments in any class of shares must be at least
$500 and additional investments must be at least $50. The minimum initial
investment is modified for investments through tax-qualified retirement plans
and accounts initially established with an Automatic Investment Plan. The
distributor of the Funds' shares is A I M Distributors, Inc. ("AIM
Distributors"), P.O. Box 4739, Houston, Texas 77210-4739. See "How to Purchase
Shares" and "Special Plans."
EXCHANGE PRIVILEGE. The Funds are among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds"). Class A, Class B and
Class C shares of the Funds may be exchanged for shares of other funds in The
AIM Family of Funds in the manner and subject to the policies and charges set
forth herein. See "Exchange Privilege."
REDEEMING SHARES. Holders of Class A shares may redeem all or a portion of
their shares at net asset value on any business day, generally without charge. A
contingent deferred sales charge of 1% may apply to certain redemptions of Class
A shares, where purchases of $1 million or more were made at net asset value.
See "How to Redeem Shares -- Contingent Deferred Sales Charge Program for Large
Purchases."
Holders of Class B shares may redeem all or a portion of their shares at net
asset value on any business day, less a contingent deferred sales charge for
redemptions made within six years from the date such shares were purchased.
Class B shares redeemed after six years from the date such shares were purchased
will not be subject to any contingent deferred sales charge. See "How to Redeem
Shares -- Multiple Distribution System."
Holders of Class C shares of AIM MONEY MARKET FUND may redeem all or a portion
of their shares at net asset value on any business day, without charge.
DISTRIBUTIONS. AIM GLOBAL UTILITIES FUND, AIM HIGH YIELD FUND, AIM INCOME
FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM MONEY MARKET FUND and AIM MUNICIPAL
BOND FUND currently declare dividends from net investment income on a daily
basis and pay such dividends on a monthly basis. AIM BALANCED FUND currently
declares and pays dividends from net investment income on a quarterly basis. AIM
GROWTH FUND and AIM VALUE FUND currently declare and pay dividends from net
investment income, if any, on an annual basis. All of the Funds make
distributions of realized capital gains, if any, on an annual basis, although
AIM MONEY MARKET FUND may distribute net realized short-term capital gains more
frequently. Dividends and distributions paid with respect to Class A shares of a
Fund may be paid by check, reinvested in additional Class A shares of the Fund
or reinvested in shares of another fund in The AIM Family of Funds, subject to
certain conditions. Dividends and distributions paid with respect to Class B
shares of a Fund may be paid by check or reinvested in additional Class B shares
of other funds in The AIM Family of Funds at net asset value. Dividends and
distributions paid with respect to Class C shares of AIM MONEY MARKET FUND may
be paid by check, reinvested in additional Class C shares of the Fund, or
reinvested in shares of another fund in The AIM Family of Funds, subject to
certain conditions. See "Dividends, Distributions and Tax Matters" and "Special
Plans."
RISK FACTORS. Subject to certain restrictions designed to reduce any
associated risks, AIM MONEY MARKET FUND may invest in securities such as money
market instruments which are not rated (but are determined by AIM to be of
comparable quality to securities which have received the highest ratings),
certain repurchase agreements, and U.S. dollar-denominated obligations issued by
foreign banks. Accordingly, an investment in AIM MONEY MARKET FUND may entail
somewhat different risks from an investment in an investment company which does
not engage in such investment practices. See "Investment Programs."
AIM HIGH YIELD FUND, and to a lesser extent AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM INCOME FUND and AIM MUNICIPAL BOND FUND, seek to meet their
respective investment objectives by investing in non-investment grade debt
securities, commonly known as "junk bonds." Investments in junk bonds, while
generally providing greater income and opportunity for gain, may be subject to
greater risks than higher rated securities. Such risks may include: greater
market fluctuations and risk of loss of income and principal, limited liquidity
and secondary market support, greater sensitivity to economic and business
downturns, and certain other risks. See "Certain Investment Strategies and
Policies -- Risk Factors Regarding Non-Investment Grade Debt Securities."
Investors should carefully consider the relative risks and rewards of investing
in each of the above-named Funds prior to investing, and should not consider an
investment in any of those Funds to represent a complete investment program.
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos is a service mark of A I M Management
Group Inc.
3
<PAGE> 97
THE FUNDS
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor in the Funds understand
the various costs that an investor will bear, both directly and indirectly.
Except where noted, the fees and expenses set forth in the table are based on
the expenses of the Fund's for the most recent fiscal year.
<TABLE>
<CAPTION>
AIM
AIM GLOBAL AIM AIM AIM
BALANCED UTILITIES GROWTH HIGH YIELD INCOME
FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B A B A B A B A B
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum sales load imposed
on purchase of shares
(as a % of the offering
price)................................ 4.75% None 5.50% None 5.50% None 4.75% None 4.75% None
Maximum sales load on
reinvested dividends.................. None None None None None None None None None None
Deferred sales load (as a
% of original purchase price
or redemption proceeds,
whichever is lower)................... None* 5.0% None* 5.0% None* 5.0% None* 5.0% None* 5.0%
Redemption fees.......................... None None None None None None None None None None
Exchange fee**........................... None None None None None None None None None None
Annual Fund Operating
Expenses (as a % of average net assets)
Management fees(1)....................... 0.75% 0.75% 0.59% 0.59% 0.74% 0.74% 0.53% 0.53% 0.48% 0.48%
Rule 12b-1 distribution
plan payments......................... 0.25% 1.00% 0.25% 1.00% 0.25% 1.00% 0.25% 1.00% 0.25% 1.00%
All other expenses....................... 0.46% 0.48% 0.37% 0.38% 0.29% 0.39% 0.18% 0.20% 0.25% 0.31%
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total fund
operating
expenses....................... 1.46% 2.23% 1.21% 1.97% 1.28% 2.13% 0.96% 1.73% 0.98% 1.79%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
AIM
INTERMEDIATE AIM AIM AIM
GOVERNMENT MONEY MUNICIPAL VALUE
FUND MARKET FUND BOND FUND FUND
------------ -------------------- ------------ ------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B A B C A B A B
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on
purchase of shares (as a % of
the offering price)........... 4.75% None 5.50% None None 4.75% None 5.50% None
Maximum sales load on reinvested
dividends..................... None None None None None None None None None
Deferred sales load (as a % of
original purchase price or
redemption proceeds, whichever
is lower)..................... None* 5.0% None* 5.0% None None* 5.0% None* 5.0%
Redemption fees.................. None None None None None None None None None
Exchange fee**................... None None None None None None None None None
Annual Fund Operating Expenses (as
a % of average net assets)
Management fees (after fee
waivers)...................... 0.50% 0.50% 0.55% 0.55% 0.55% 0.47% 0.47% 0.62%(2)0.62%(2)
Rule 12b-1 distribution plan
payments...................... 0.25% 1.00% 0.25% 1.00% 0.25% 0.25% 1.00% 0.25% 1.00%
All other expenses(1)............ 0.33% 0.36% 0.23% 0.23% 0.24% 0.16% 0.30% 0.25% 0.32%
---- ---- ---- ---- ---- ---- ---- ---- ----
Total fund operating
expenses............... 1.08% 1.86% 1.03% 1.78% 1.04% 0.88% 1.77% 1.12% 1.94%
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- ------------------------
(1) "Management fees" for both classes of AIM BALANCED FUND have been restated
to reflect the current level of such fees. "Other expenses" for Class B
shares of AIM MUNICIPAL BOND FUND have been restated to reflect the
current level of such expenses. In addition, the rules of the SEC require
that the maximum sales charge be reflected in the table even though
certain investors may qualify for reduced sales charges. See "How to
Purchase Shares."
(2) After fee waivers. If management fees were not being waived, they would be
0.63% on both classes of AIM VALUE FUND.
* Purchases of $1 million or more are not subject to an initial sales charge.
However, a contingent deferred sales charge of 1% applies to certain
redemptions made within 18 months from the date such shares were purchased.
See the Investor's Guide, under the caption "How to Redeem Shares --
Contingent Deferred Sales Charge Program for Large Purchases."
** No fee will be charged for exchanges among The AIM Family of Funds; however,
a $5 service fee may be charged for exchanges by accounts of market timers.
4
<PAGE> 98
- --------------------------------------------------------------------------------
EXAMPLES. You would pay the following expenses on a $1,000 investment in Class
A shares of the Funds, assuming (1) a 5% annual return and (2) redemption at the
end of each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year...... $ 62 $ 67 $ 67 $ 57 $ 57 $ 58 $ 65 $ 56 $ 66
3 years..... 91 91 93 77 77 80 86 74 89
5 years..... 123 118 121 98 99 104 109 94 113
10 years.... 214 194 201 160 162 173 174 151 184
</TABLE>
The above examples assume payment of a sales charge at the time of purchase;
actual expenses may vary for purchases of $1 million or more, which are made at
net asset value and are subject to a contingent deferred sales charge for 18
months from the date such shares were purchased.
You would pay the following expenses on a $1,000 investment in Class B shares
of the Funds, assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year...... $ 73 $ 70 $ 72 $ 68 $ 68 $ 69 $ 68 $ 68 $ 70
3 years..... 100 92 97 84 86 88 86 86 91
5 years..... 139 126 134 114 117 121 116 116 125
10 years*... 237 210 225 184 189 198 190 185 205
</TABLE>
You would pay the following expenses on the same $1,000 investment in Class B
shares, assuming no redemption at the end of each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year...... $ 23 $ 20 $ 22 $ 18 $ 18 $ 19 $ 18 $ 18 $ 20
3 years..... 70 62 67 54 56 58 56 56 61
5 years..... 119 106 114 94 97 101 96 96 105
10 years*... 237 210 225 184 189 198 190 185 205
</TABLE>
You would pay the following expenses on a $1,000 investment in Class C shares
of AIM MONEY MARKET FUND, assuming (1) a 5% annual return and (2) redemption at
the end of each time period:
<TABLE>
<CAPTION>
AIM
MONEY
MARKET
FUND
----
<S> <C>
1 year.................................. $ 11
3 years................................. 33
5 years................................. 57
10 years................................ 127
</TABLE>
As a result of 12b-1 distribution plan payments, a long-term shareholder of
the Funds may pay more than the economic equivalent of the maximum front-end
sales charges permitted by rules of the National Association of Securities
Dealers, Inc. Given the maximum front-end and contingent deferred sales charges
and the 12b-1 distribution plan payments applicable to Class A shares and Class
B shares of the Funds, it is estimated that it would require a substantial
number of years to exceed the maximum permissible front-end sales charges.
The above examples should not be considered to be representative of the Funds'
actual or future expenses, which may be greater or less than those shown. In
addition, while the examples assume a 5% annual return, each Fund's actual
performance will vary and may result in an actual return that is greater or less
than 5%. The examples assume reinvestment of all dividends and distributions and
that the percentage amounts for total fund operating expenses remain the same
for each year.
- ---------------
* Reflects the conversion to Class A shares eight years following the end of
the calendar month in which a purchase was made; therefore years nine and ten
reflect Class A expenses.
5
<PAGE> 99
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following per share data, ratios and supplemental data for the Class A
shares of AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM
HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND (formerly,
AIM Government Securities Fund), AIM MUNICIPAL BOND FUND and AIM VALUE FUND for
(i) all periods presented for AIM BALANCED FUND and (ii) the years ended
December 31, 1995 and 1994, and the period ended December 31, 1993 for the Funds
other than AIM BALANCED FUND have been audited by KPMG Peat Marwick
LLP,independent auditors, whose reports thereon were unqualified. The per share
data, ratios and supplemental data for the Class A shares of AIM GLOBAL
UTILITIES FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM MUNICIPAL BOND FUND and AIM VALUE FUND for
each of the periods presented other than those described above have been derived
from financial statements audited by Price Waterhouse LLP, independent
accountants, whose reports thereon were also unqualified. This information
should be read in conjunction with the Funds' financial statements included in
the Statement of Additional Information. The investment advisor to the
above-named Funds, other than AIM BALANCED FUND, changed on June 30, 1992.+
(PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
AIM BALANCED FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 1,
DECEMBER 31, 1993 TO YEAR ENDED AUGUST 31,
------------------- DECEMBER 31, ------------------------------------------
1995 1994 1993 1993 1992 1991 1990
------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 14.62 $ 16.10 $ 15.97 $ 12.77 $ 12.04 $ 9.73 $ 10.67
Income from investment operations:
Net investment income............................ 0.49 0.44 0.10 0.32 0.29 0.28 0.32
Net gains or losses on securities (both realized
and unrealized)................................ 4.57 (1.31) 0.18 3.18 0.74 2.33 (0.91)
------- ------- ------- ------- ------- -------- --------
Total from investment operations................. 5.06 (0.87) 0.28 3.50 1.03 2.61 (0.59)
------- ------- ------- ------- ------- -------- --------
Less distributions:
Dividends from net investment income............. (0.46) (0.39) (0.15) (0.30) (0.30) (0.30) (0.35)
Distributions from net realized capital gains.... -- (0.22) -- -- -- -- --
------- ------- ------- ------- ------- -------- --------
Total distributions.............................. (0.46) (0.61) (0.15) (0.30) (0.30) (0.30) (0.35)
------- ------- ------- ------- ------- -------- --------
Net asset value, end of period.................... $ 19.22 $ 14.62 $ 16.10 $ 15.97 $ 12.77 $ 12.04 $ 9.73
======= ======= ======= ======= ======= ========= =========
Total return(a)................................... 34.97% (5.44)% 1.76% 27.75% 8.66% 27.41% (5.67)%
======= ======= ======= ======= ======= ========= =========
Ratios/supplemental data:
Net assets, end of period (000s omitted)......... $92,241 $37,572 $23,520 $19,497 $11,796 $ 11,750 $ 10,965
======= ======= ======= ======= ======= ========= =========
Ratio of expenses to average net assets.......... 1.43%(b) 1.25%(c) 2.17%(d) 2.07% 2.12% 2.39% 2.15%
======= ======= ======= ======= ======= ========= =========
Ratio of net investment income to average net
assets......................................... 2.81%(b) 3.07%(c) 1.81%(d) 2.23% 2.32% 2.74% 3.18%
======= ======= ======= ======= ======= ========= =========
Portfolio turnover rate.......................... 76.63% 76% 233% 154% 166% 208% 307%
======= ======= ======= ======= ======= ========= =========
Borrowings for the period:
Amount of debt outstanding at end of period...... -- -- -- -- -- -- --
Average amount of debt outstanding during the
period(e)...................................... -- -- -- -- -- -- $138,181
Average number of shares outstanding during the
period (000s omitted)(e)....................... 3,173 2,061 1,305 1,046 939 1,051 1,238
Average amount of debt per share during the
period......................................... -- -- -- -- -- -- $ 0.110
<CAPTION>
YEAR ENDED
AUGUST 31,
------------------------------
1989 1988 1987
-------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $ 9.08 $ 11.89 $ 12.89
Income from investment operations:
Net investment income............................ 0.39 0.42 0.55
Net gains or losses on securities (both realized
and unrealized)................................ 1.63 (2.65) 0.15
-------- ------- -------
Total from investment operations................. 2.02 (2.23) 0.70
-------- ------- -------
Less distributions:
Dividends from net investment income............. (0.43) (0.50) (0.66)
Distributions from net realized capital gains.... -- (0.08) (1.04)
-------- ------- -------
Total distributions.............................. (0.43) (0.58) (1.70)
-------- ------- -------
Net asset value, end of period.................... $ 10.67 $ 9.08 $ 11.89
========= ======= =======
Total return(a)................................... 22.96% (18.57)% 5.78%
========= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)......... $ 14,405 $16,789 $27,973
========= ======= =======
Ratio of expenses to average net assets.......... 1.94% 2.31% 1.87%
========= ======= =======
Ratio of net investment income to average net
assets......................................... 3.99% 4.50% 4.54%
========= ======= =======
Portfolio turnover rate.......................... 149% 118% 250%
========= ======= =======
Borrowings for the period:
Amount of debt outstanding at end of period...... $260,000 -- --
Average amount of debt outstanding during the
period(e)...................................... $ 83,195 -- --
Average number of shares outstanding during the
period (000s omitted)(e)....................... 1,589 2,131 2,010
Average amount of debt per share during the
period......................................... $ 0.052 -- --
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges and are not annualized for periods
of less than one year.
(b) Ratios are based on average daily net assets of $53,819,848. Ratios of
expenses and net investment income to average daily net assets prior to
waiver of advisory fees are 1.46% and 2.78%, respectively.
(c) After reduction of advisory fees. Ratios of expenses and net investment
income to average net assets prior to reduction of advisory fees are 1.68%
and 2.64%, respectively.
(d) Annualized.
(e) Averages computed on a daily basis.
6
<PAGE> 100
AIM GLOBAL UTILITIES FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JANUARY 18,
YEAR ENDED DECEMBER 31, TO
------------------------------------------------------------------------------- DECEMBER 31,
1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period... $ 11.85 $ 14.09 $ 13.31 $ 13.75 $ 12.45 $ 13.73 $ 10.99 $ 10.00
Income from investment
operations:
Net investment
income.............. 0.55 0.59 0.60 0.67 0.70 0.66 0.77 0.82
Net gains or losses on
securities (both
realized and
unrealized)......... 2.71 (2.20) 1.02 0.36 2.12 (1.10) 3.06 0.83
-------- -------- -------- -------- ------- ------- ------- -------
Total from investment
operations.......... 3.26 (1.61) 1.62 1.03 2.82 (0.44) 3.83 1.65
-------- -------- -------- -------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income... (0.52) (0.60) (0.61) (0.68) (0.66) (0.70) (0.69) (0.66)
Distributions from net
realized capital
gains............... -- -- (0.23) (0.79) (0.86) (0.14) (0.40) --
Returns of capital.... -- (0.03) -- -- -- -- -- --
-------- -------- -------- -------- ------- ------- ------- -------
Total distributions... (0.52) (0.63) (0.84) (1.47) (1.52) (0.84) (1.09) (0.66)
-------- -------- -------- -------- ------- ------- ------- -------
Net asset value, end of
period................ $ 14.59 $ 11.85 $ 14.09 $ 13.31 $ 13.75 $ 12.45 $ 13.73 $ 10.99
========== ========== ========= ========= ======== ======== ======== ========
Total return(a)......... 28.07% (11.57)% 12.32% 7.92% 23.65% (2.98)% 36.11% 17.03%
========== ========== ========= ========= ======== ======== ======== ========
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted)............ $170,624 $150,515 $200,016 $111,771 $91,939 $69,541 $58,307 $20,104
========== ========== ========= ========= ======== ======== ======== ========
Ratio of expenses to
average net
assets.............. 1.21%(b) 1.18% 1.16% 1.17% 1.23% 1.21%(c) 1.05%(c) 1.22%(c)(e)
========== ========== ========= ========= ======== ======== ======== ========
Ratio of net
investment income to
average net
assets.............. 4.20%(b) 4.67% 4.21% 4.96% 5.36% 5.21%(d) 6.13%(d) 7.63%(d)(e)
========== ========== ========= ========= ======== ======== ======== ========
Portfolio turnover
rate................ 88% 101% 76% 148% 169% 123% 115% 87%
========== ========== ========= ========= ======== ======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges and are not annualized for periods
of less than one year.
(b) Ratios are based on average daily net assets of $157,394,436.
(c) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22%, 1.11% and 1.69% (annualized) for 1990-1988, respectively.
(d) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 5.20%, 6.07% and 7.16% (annualized) for 1990-1988,
respectively.
(e) Annualized.
AIM GROWTH FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 10.32 $ 11.32 $ 12.28 $ 14.73 $ 12.35 $ 13.92 $ 11.93
Income from investment operations:
Net investment income................. 0.02 -- -- 0.06 0.11 0.21 0.25
Net gains or losses on securities
(both realized and unrealized)...... 3.50 (0.57) 0.41 (0.04) 4.33 (0.91) 3.16
-------- -------- -------- -------- -------- -------- --------
Total from investment operations...... 3.52 (0.57) 0.41 0.02 4.44 (0.70) 3.41
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income.............................. -- -- -- (0.06) (0.13) (0.20) (0.27)
Distributions from net realized
capital gains....................... (0.79) (0.43) (1.37) (2.41) (1.93) (0.67) (1.15)
-------- -------- -------- -------- -------- -------- --------
Total distributions................... (0.79) (0.43) (1.37) (2.47) (2.06) (0.87) (1.42)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period......... $ 13.05 $ 10.32 $ 11.32 $ 12.28 $ 14.73 $ 12.35 $ 13.92
========= ========= ========= ========= ========= ========= =========
Total return(a)........................ 34.31% (4.99)% 3.64% 0.19% 37.05% (5.04)% 28.87%
========= ========= ========= ========= ========= ========= =========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $168,217 $123,271 $146,723 $168,395 $185,461 $153,245 $187,805
========= ========= ========= ========= ========= ========= =========
Ratio of expenses to average net
assets.............................. 1.28%(b) 1.22% 1.17% 1.17% 1.21% 1.16% 1.00%
========= ========= ========= ========= ========= ========= =========
Ratio of net investment income to
average net assets.................. 0.20%(b) 0.02% 0.02% 0.42% 0.73% 1.41% 1.62%
========= ========= ========= ========= ========= ========= =========
Portfolio turnover rate............... 87% 201% 192% 133% 73% 61% 53%
========= ========= ========= ========= ========= ========= =========
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1988 1987 1986
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period... $ 11.04 $ 12.91 $ 14.95
Income from investment operations:
Net investment income................. 0.23 0.24 0.26
Net gains or losses on securities
(both realized and unrealized)...... 0.89 0.30 1.57
-------- -------- --------
Total from investment operations...... 1.12 0.54 1.83
-------- -------- --------
Less distributions:
Dividends from net investment
income.............................. (0.23) (0.31) (0.35)
Distributions from net realized
capital gains....................... -- (2.10) (3.52)
-------- -------- --------
Total distributions................... (0.23) (2.41) (3.87)
-------- -------- --------
Net asset value, end of period......... $ 11.93 $ 11.04 $ 12.91
========= ========= =========
Total return(a)........................ 10.13% 3.62% 12.85%
========= ========= =========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $180,793 $203,329 $213,346
========= ========= =========
Ratio of expenses to average net
assets.............................. 0.98% 0.84% 0.85%
========= ========= =========
Ratio of net investment income to
average net assets.................. 1.73% 1.51% 1.82%
========= ========= =========
Portfolio turnover rate............... 38% 78% 66%
========= ========= =========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $149,642,693.
7
<PAGE> 101
AIM HIGH YIELD FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07 $ 8.94 $ 10.01
Income from investment operations:
Net investment income................ 0.93 0.96 0.97 1.04 1.02 1.09 1.21
Net gains or losses on securities
(both realized and unrealized)..... 0.52 (1.12) 0.69 0.55 1.81 (1.84) (1.07)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations..... 1.45 (0.16) 1.66 1.59 2.83 (0.75) 0.14
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................. (0.95) (0.96) (1.01) (1.05) (1.04) (1.12) (1.21)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period........ $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07 $ 8.94
======== ======== ======== ======== ======== ======== ========
Total return(a)....................... 16.86% (1.67)% 18.40% 18.60% 42.18% (9.03)% 1.18%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)..................... $886,106 $578,959 $550,760 $324,518 $259,677 $204,932 $261,920
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................. 0.96%(b) 1.00% 1.12% 1.15% 1.22% 1.21%(c) 0.99%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................. 9.95%(b) 10.07% 9.82% 11.00% 12.67% 13.59%(d) 12.40%
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate.............. 61% 53% 53% 56% 61% 27% 36%
======== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1988 1987 1986
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of
period............................... $ 9.67 $ 10.54 $ 10.21
Income from investment operations:
Net investment income................ 1.18 1.16 1.26
Net gains or losses on securities
(both realized and unrealized)..... 0.34 (0.83) 0.31
-------- -------- --------
Total from investment operations..... 1.52 0.33 1.57
-------- -------- --------
Less distributions:
Dividends from net investment
income............................. (1.18) (1.20) (1.24)
-------- -------- --------
Net asset value, end of period........ $ 10.01 $ 9.67 $ 10.54
======== ======== ========
Total return(a)....................... 16.41% 3.07% 15.97%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)..................... $274,631 $242,858 $246,865
======== ======== ========
Ratio of expenses to average net
assets............................. 0.96%(c) 0.92% 0.92%
======== ======== ========
Ratio of net investment income to
average net assets................. 11.84%(d) 11.21% 11.84%
======== ======== ========
Portfolio turnover rate.............. 76% 81% 86%
======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $722,145,319.
(c) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22% and 1.00% for 1990 and 1988, respectively.
(d) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 13.58% and 11.80% for 1990 and 1988, respectively.
AIM INCOME FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41 $ 7.80 $ 7.53
Income from investment operations:
Net investment income................. 0.58 0.58 0.60 0.60 0.61 0.65 0.66
Net gains or losses on securities
(both realized and unrealized)...... 1.00 (1.22) 0.61 (0.03) 0.66 (0.39) 0.32
-------- -------- -------- -------- -------- -------- --------
Total from investment operations...... 1.58 (0.64) 1.21 0.57 1.27 0.26 0.98
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income.............................. (0.61) (0.49) (0.60) (0.61) (0.61) (0.65) (0.71)
Distributions from net realized
capital gains....................... -- (0.01) (0.19) -- -- -- --
Returns of capital.................... -- (0.11) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions................... (0.61) (0.61) (0.79) (0.61) (0.61) (0.65) (0.71)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period......... $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41 $ 7.80
======== ======== ======== ======== ======== ======== ========
Total return(a)........................ 22.77% (7.65)% 15.38% 7.42% 18.00% 3.65% 13.56%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)...................... $251,280 $201,677 $244,168 $218,848 $231,798 $215,987 $229,222
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets.............................. 0.98%(b) 0.98% 0.98% 0.99%(c) 1.00%(c) 1.00% 0.96%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets.................. 7.52%(b) 7.53% 7.01% 7.54%(c) 7.97%(c) 8.73% 8.56%
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate............... 227% 185% 99% 82% 67% 106% 222%
======== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1988 1987 1986
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period... $ 7.55 $ 8.20 $ 7.53
Income from investment operations:
Net investment income................. 0.68 0.67 0.71
Net gains or losses on securities
(both realized and unrealized)...... (0.02) (0.63) 0.60
-------- -------- --------
Total from investment operations...... 0.66 0.04 1.31
-------- -------- --------
Less distributions:
Dividends from net investment
income.............................. (0.68) (0.69) (0.64)
Distributions from net realized
capital gains....................... -- -- --
Returns of capital.................... -- -- --
-------- -------- --------
Total distributions................... (0.68) (0.69) (0.64)
-------- -------- --------
Net asset value, end of period......... $ 7.53 $ 7.55 $ 8.20
======== ======== ========
Total return(a)........................ 9.01% 0.56% 18.04%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)...................... $218,946 $237,466 $273,121
======== ======== ========
Ratio of expenses to average net
assets.............................. 0.95% 0.84% 0.82%
======== ======== ========
Ratio of net investment income to
average net assets.................. 8.81% 8.64% 8.93%
======== ======== ========
Portfolio turnover rate............... 361% 195% 85%
======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $220,320,889.
(c) After waiver of advisory fees and expense reimbursements. Ratios of expenses
to average net assets prior to waiver of advisory fees and expense
reimbursements were 1.00% and 1.03% for 1992 and 1991, respectively. Ratios
of net investment income to average net assets prior to waiver of advisory
fees and expense reimbursements were 7.53% and 7.94% for 1992 and 1991,
respectively.
8
<PAGE> 102
AIM INTERMEDIATE GOVERNMENT FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
APRIL 28,
1987*
YEAR ENDED DECEMBER 31, TO
------------------------------------------------------------------------------------------- DECEMBER 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............... $ 8.99 $ 10.05 $ 10.19 $ 10.34 $ 9.95 $ 9.91 $ 9.70 $ 9.92 $ 10.00
Income from investment
operations:
Net investment
income............. 0.69 0.68 0.74 0.77 0.82 0.87 0.90 0.89 0.55
Net gains or losses
on securities (both
realized and
unrealized)........ 0.73 (1.02) (0.04) (0.15) 0.41 0.01 0.15 (0.27) (0.14)
-------- -------- -------- -------- -------- ------- ------- ------- -------
Total from investment
operations......... 1.42 (0.34) 0.70 0.62 1.23 0.88 1.05 0.62 0.41
-------- -------- -------- -------- -------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment
income............. (0.67) (0.58) (0.70) (0.74) (0.84) (0.84) (0.84) (0.84) (0.49)
Distributions from
net realized
capital gains...... -- (0.04) (0.14) (0.03) -- -- -- -- --
Returns of
capital............ (0.04) (0.10) -- -- -- -- -- -- --
-------- -------- -------- -------- -------- ------- ------- ------- -------
Total
distributions...... (0.71) (0.72) (0.84) (0.77) (0.84) (0.84) (0.84) (0.84) (0.49)
-------- -------- -------- -------- -------- ------- ------- ------- -------
Net asset value, end of
period............... $ 9.70 $ 8.99 $ 10.05 $ 10.19 $ 10.34 $ 9.95 $ 9.91 $ 9.70 $ 9.92
========== ========== ========== ========== ========== ======== ======== ======== ========
Total return(a)........ 16.28% (3.44)% 7.07% 6.26% 12.98% 9.39% 11.28% 6.43% 4.18%
========== ========== ========== ========== ========== ======== ======== ======== ========
Ratios/supplemental
data:
Net assets, end of
period
(000s omitted)..... $176,318 $158,341 $139,586 $123,484 $101,409 $61,463 $57,077 $48,372 $28,052
========== ========== ========== ========== ========== ======== ======== ======== ========
Ratio of expenses to
average net assets
(exclusive of
interest
expense)(c)........ 1.08%(b) 1.04% 1.00% 0.98% 1.00% 1.00% 1.00% 1.00% 1.20%(e)
========== ========== ========== ========== ========== ======== ======== ======== ========
Ratio of net
investment income
to average net
assets(d).......... 7.36%(b) 7.34% 7.08% 7.53% 8.15% 8.85% 9.10% 9.11% 8.64%(e)
========== ========== ========== ========== ========== ======== ======== ======== ========
Portfolio turnover
rate............... 140% 109% 110% 42% 26% 16% 15% 15% 35%
========== ========== ========== ========== ========== ======== ======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges and are not annualized for periods
of less than one year.
(b) Ratios are based on average net assets of $161,543,053.
(c) Ratios of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement were 1.05%, 1.04%, 1.04%, 1.10%, 1.13%, 1.08% and
1.08% for 1994-1988, respectively.
(d) Ratios of net investment income to average net assets prior to reduction of
advisory fee and expense reimbursement were 7.32%, 7.04%, 7.48%, 8.05%,
8.72%, 9.03% and 9.03% for 1994-1988, respectively.
(e) Annualized.
AIM MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 7.78 $ 8.61 $ 8.27 $ 8.13 $ 7.66 $ 7.81 $ 7.64
Income from investment operations:
Net investment income.................... 0.43 0.46 0.48 0.51 0.52 0.53 0.54
Net gains or losses on securities (both
realized and unrealized)............... 0.56 (0.78) 0.46 0.21 0.46 (0.14) 0.18
-------- -------- -------- -------- -------- -------- --------
Total from investment operations......... 0.99 (0.32) 0.94 0.72 0.98 0.39 0.72
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income..... (0.43) (0.45) (0.48) (0.51) (0.51) (0.53) (0.55)
Distributions from net realized capital
gains.................................. -- (0.03) (0.11) (0.07) -- -- --
Returns of capital....................... (0.03) (0.03) (0.01) -- -- (0.01) --
-------- -------- -------- -------- -------- -------- --------
Total distributions...................... (0.46) (0.51) (0.60) (0.58) (0.51) (0.54) (0.55)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period............ $ 8.31 $ 7.78 $ 8.61 $ 8.27 $ 8.13 $ 7.66 $ 7.81
========= ========= ========= ========= ========= ========= =========
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1988 1987 1986
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period...... $ 7.32 $ 8.41 7.69
Income from investment operations:
Net investment income.................... 0.53 0.51 0.58
Net gains or losses on securities (both
realized and unrealized)............... 0.34 (0.65) 1.00
-------- -------- --------
Total from investment operations......... 0.87 (0.14) 1.58
-------- -------- --------
Less distributions:
Dividends from net investment income..... (0.55) (0.49) (0.60)
Distributions from net realized capital
gains.................................. -- (0.46) (0.26)
Returns of capital....................... -- -- --
-------- -------- --------
Total distributions...................... (0.55) (0.95) (0.86)
-------- -------- --------
Net asset value, end of period............ $ 7.64 $ 7.32 $ 8.41
========= ========= =========
</TABLE>
<TABLE>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total return(a)........................... 13.05% (3.79)% 11.66% 9.10% 13.30% 5.27% 9.70%
========= ========= ========= ========= ========= ========= =========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)......................... $284,803 $257,456 $294,209 $271,205 $273,037 $258,194 $262,997
========= ========= ========= ========= ========= ========= =========
Ratio of expenses to average net
assets................................. 0.88%(b) 0.89% 0.91% 0.90% 0.94% 0.91% 0.89%
========= ========= ========= ========= ========= ========= =========
Ratio of net investment income to average
net assets............................. 5.26%(b) 5.61% 5.65% 6.15% 6.58% 6.91% 6.97%
========= ========= ========= ========= ========= ========= =========
Portfolio turnover rate.................. 36% 43% 24% 160% 289% 230% 305%
========= ========= ========= ========= ========= ========= =========
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1988 1987 1986
-------- -------- --------
<S> <C> <C> <C>
Total return(a)........................... 12.33% (1.88)% 21.19%
========= ========= =========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)......................... $243,480 $237,225 $281,575
========= ========= =========
Ratio of expenses to average net
assets................................. 0.87% 0.80% 0.78%
========= ========= =========
Ratio of net investment income to average
net assets............................. 7.11% 6.71% 6.99%
========= ========= =========
Portfolio turnover rate.................. 381% 392% 249%
========= ========= =========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $274,523,268.
9
<PAGE> 103
AIM VALUE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
--------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................ $ 21.14 $ 20.82 $ 18.24 $ 17.55 $ 13.75 $ 14.53 $ 12.79
Income from investment
operations:
Net investment income.... 0.14 0.16 0.04 0.12 0.13 0.26 0.40
Net gains on securities
(both realized and
unrealized)............ 7.21 0.52 3.34 2.68 5.73 0.01 3.58
--------- --------- -------- -------- -------- -------- --------
Total from investment
operations............. 7.35 0.68 3.38 2.80 5.86 0.27 3.98
--------- --------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income...... (0.09) (0.16) (0.03) (0.12) (0.14) (0.26) (0.43)
Distributions from net
realized capital
gains.................. (1.59) (0.20) (0.77) (1.99) (1.92) (0.79) (1.81)
--------- --------- -------- -------- -------- -------- --------
Total distributions...... (1.68) (0.36) (0.80) (2.11) (2.06) (1.05) (2.24)
--------- --------- -------- -------- -------- -------- --------
Net asset value, end
of period................ $ 26.81 $ 21.14 $ 20.82 $ 18.24 $ 17.55 $ 13.75 $ 14.53
========== ========== ========= ========= ========= ========= =========
Total return(a)........... 34.85% 3.28% 18.71% 16.39% 43.45% 1.88% 31.54%
========== ========== ========= ========= ========= ========= =========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)......... $3,408,952 $1,358,725 $765,305 $239,663 $152,149 $ 86,565 $ 76,444
========== ========== ========= ========= ========= ========= =========
Ratio of expenses to
average net assets..... 1.12%(b)(c) 0.98% 1.09% 1.16% 1.22% 1.21%(c) 1.00%(c)
========== ========== ========= ========= ========= ========= =========
Ratio of net investment
income to average net
assets................. 0.74%(b)(d) 0.92% 0.30% 0.75% 0.89% 1.87%(d) 2.65%(d)
========== ========== ========= ========= ========= ========= =========
Portfolio turnover
rate................... 151% 127% 177% 170% 135% 131% 152%
========== ========== ========= ========= ========= ========= =========
<CAPTION>
YEAR ENDED DECEMBER
--------------------------------
1988 1987 1986
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning
of period................ $ 11.47 $ 12.26 $ 12.90
Income from investment
operations:
Net investment income.... 0.26 0.25 0.36
Net gains on securities
(both realized and
unrealized)............ 2.07 0.53 0.75
-------- -------- --------
Total from investment
operations............. 2.33 0.78 1.11
-------- -------- --------
Less distributions:
Dividends from net
investment income...... (0.26) (0.39) (0.43)
Distributions from net
realized capital
gains.................. (0.75) (1.18) (1.32)
-------- -------- --------
Total distributions...... (1.01) (1.57) (1.75)
-------- -------- --------
Net asset value, end
of period................ $ 12.79 $ 11.47 $ 12.26
========= ========= =========
Total return(a)........... 20.61% 5.96% 8.80%
========= ========= =========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)......... $ 60,076 $ 55,527 $ 46,642
========= ========= =========
Ratio of expenses to
average net assets..... 1.00%(c) 1.00% 1.00%(c)
========= ========= =========
Ratio of net investment
income to average net
assets................. 1.98%(d) 1.91% 3.15%(d)
========= ========= =========
Portfolio turnover
rate................... 124% 219% 134%
========= ========= =========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $2,364,597,465.
(c) Ratios of expenses to average net assets prior to reduction of advisory
fees were 1.13%, 1.23%, 1.09%, 1.08% and 1.05% for 1995, 1990-1988 and
1986, respectively.
(d) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 0.73%, 1.85%, 2.56%, 1.90% and 3.14% for 1995, 1990-1988
and 1986, respectively.
+ Each of the Funds is a separate series of shares of AIM Funds Group, a
Delaware business trust established May 5, 1993 (the "Trust"). The
shareholders of the applicable Funds separately approved a plan of
reorganization pursuant to which, effective October 15, 1993, each of the
predecessor funds to AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM HIGH
YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
MUNICIPAL BOND FUND and AIM VALUE FUND, organized as separate series
portfolios of AIM Funds Group, a Massachusetts business trust ("AFG(MA)"),
and to AIM BALANCED FUND, organized as AIM Convertible Securities, Inc., a
Maryland corporation, was reorganized as a separate series portfolio of the
Trust. AIM Convertible Securities, Inc. had investment objectives and
policies that differed from those of AIM BALANCED FUND. Certain information
reported in these statements pertains to such Funds as separate series
portfolios of AFG(MA) and as a corporation, as applicable, rather than
separate series of the Trust.
In addition, on April 24, 1987, the shareholders of AIM HIGH YIELD FUND
approved a plan of reorganization pursuant to which the Fund, organized as
a Maryland corporation, was reorganized as a separate series portfolio of
AFG(MA). The information reported in these statements prior to 1987 for AIM
HIGH YIELD FUND pertains to that Fund as a corporation rather than as a
series of the Trust.
* Commencement of operations.
10
<PAGE> 104
The following per share data, ratios and supplemental data for the Class B
shares of AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM
HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND (formerly,
AIM Government Securities Fund), AIM MUNICIPAL BOND FUND and AIM VALUE FUND for
the periods indicated have been audited by KPMG Peat Marwick LLP, independent
auditors, whose reports thereon were unqualified. This information should be
read in conjunction with the Funds' financial statements included in the
Statement of Additional Information.
AIM BALANCED FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, OCTOBER 18, 1993*
------------------------------- TO
1995 1994 DECEMBER 31, 1993
------------ ------------ -----------------
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 14.62 $ 16.11 $ 16.69
Income from investment operations:
Net investment income............................... 0.31 0.31 0.04
Net gains (losses) on securities (both realized and
unrealized)...................................... 4.61 (1.31) (0.58)
---------- ------- ------
Total from investment operations.................... 4.92 (1.00) (0.54)
---------- ------- ------
Less distributions:
Dividends from net investment income................ (0.32) (0.27) (0.04)
Distributions from net realized capital gains....... -- (0.22) --
---------- ------- ------
Total distributions................................. (0.32) (0.49) (0.04)
---------- ------- ------
Net asset value, end of period........................ $ 19.22 $ 14.62 $ 16.11
========== ======== =======
Total return(a)....................................... 33.93% (6.23)% (3.23)%
========== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)............ $ 72,634 $ 20,245 $ 2,754
========== ======== =======
Ratio of expenses to average net assets............. 2.21%(b) 1.98%(c) 2.83%(d)
========= ======== =======
Ratio of net investment income to average net
assets........................................... 2.03%(b) 2.34%(c) 1.15%(d)
========= ======== ======
Portfolio turnover rate............................. 76.63% 76% 233%
========= ========== =======
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $38,286,051. Ratios of expenses
and net investment income prior to waiver of advisory fees are 2.23% and
2.01%, respectively.
(c) After waiver of advisory fees. Ratios of expenses and net investment income
prior to waiver of advisory fees are 2.45% and 1.87%, respectively.
(d) Annualized.
AIM GLOBAL UTILITIES FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
SEPTEMBER 1,
YEAR ENDED 1993*
DECEMBER 31, TO
--------------------- DECEMBER 31,
1995 1994 1993
------- ------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period.......................... $ 11.84 $ 14.08 $ 15.30
Income from investment operations:
Net investment income....................................... 0.44 0.47 0.17
Net gains (losses) on securities (both realized and
unrealized).............................................. 2.73 (2.19) (0.98)
------- ------- -------
Total from investment operations............................ 3.17 (1.72) (0.81)
------- ------- -------
Less distributions:
Dividends from net investment income........................ (0.41) (0.49) (0.17)
Distributions from net realized capital gains............... -- -- (0.24)
Returns of capital.......................................... -- (0.03) --
------- ------- -------
Total distributions......................................... (0.41) (0.52) (0.41)
------- ------- -------
Net asset value, end of period................................ $ 14.60 $ 11.84 $ 14.08
======== ======== ========
Total return(a)............................................... 27.16% (12.35)% (5.32)%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted).................... $70,693 $42,568 $23,892
======== ======== ========
Ratio of expenses to average net assets..................... 1.97%(b) 2.07% 1.99%(c)
======== ======== ========
Ratio of net investment income to average net assets........ 3.44%(b) 3.78% 3.38%(c)
======== ======== ========
Portfolio turnover rate..................................... 88% 101% 76%
======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $53,847,853.
(c) Annualized.
11
<PAGE> 105
AIM GROWTH FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993*
------------------------ TO
1995 1994 DECEMBER 31, 1993
-------- ------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 10.21 $ 11.31 $ 12.83
Income from investment operations:
Net investment income (loss)........................ (0.08)(a) (0.06) (0.01)
Net gains (losses) on securities (both realized and
unrealized)...................................... 3.43(a) (0.61) (0.14)
-------- ------- --------
Total from investment operations.................... 3.35 (0.67) (0.15)
-------- ------- --------
Less distributions:
Distributions from net realized capital gains....... (0.79) (0.43) (1.37)
-------- ------- --------
Total distributions................................. (0.79) (0.43) (1.37)
-------- ------- --------
Net asset value, end of period........................ $ 12.77 $ 10.21 $ 11.31
========= ======== ========
Total return(b)....................................... 33.00% (5.88)% (0.92)%
========= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted)............ $138,034 $38,448 $ 11,053
========= ======== ========
Ratio of expenses to average net assets............. 2.13%(c) 2.18% 1.91%(d)
========= ======== ========
Ratio of net investment income (loss) to average net
assets........................................... (0.65)%(c) (0.94)% (0.72)%(d)
========= ======== ========
Portfolio turnover rate............................. 87% 201% 192%
========= ======== ========
</TABLE>
- ---------------
(a) Calculated using average shares outstanding.
(b) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(c) Ratios are based on average net assets of $82,822,307.
(d) Annualized.
AIM HIGH YIELD FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993*
------------------------- TO
1995 1994 DECEMBER 31, 1993
-------- -------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period................. $ 8.92 $ 10.04 $ 9.96
Income from investment operations:
Net investment income.............................. 0.85 0.87 0.32
Net gains (losses) on securities (both realized and
unrealized)..................................... 0.52 (1.10) 0.07
-------- -------- --------
Total from investment operations................... 1.37 (0.23) 0.39
-------- -------- --------
Less distributions:
Dividends from net investment income............... (0.87) (0.89) (0.31)
-------- -------- --------
Net asset value, end of period....................... $ 9.42 $ 8.92 $ 10.04
========= ========= =========
Total return(a)...................................... 15.91% (2.48)% 4.00%
========= ========= =========
Ratios/supplemental data:
Net assets, end of period (000s omitted)........... $557,926 $191,338 $ 31,264
========= ========= =========
Ratio of expenses to average net assets............ 1.73(b) 1.80% 1.93%(c)
========= ========= =========
Ratio of net investment income to average net
assets.......................................... 9.18%(b) 9.27% 8.99%(c)
========= ========= =========
Portfolio turnover rate............................ 61% 53% 53%
========= ========= =========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $348,366,442.
(c) Annualized.
12
<PAGE> 106
AIM INCOME FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993*
----------------------- TO
1995 1994 DECEMBER 31, 1993
------- ------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 7.18 $ 8.43 $ 8.95
Income from investment operations:
Net investment income............................... 0.53 0.52 0.19
Net gains (losses) on securities (both realized and
unrealized)...................................... 0.98 (1.23) (0.34)
------- ------- --------
Total from investment operations.................... 1.51 (0.71) (0.15)
------- ------- --------
Less distributions:
Dividends from net investment income................ (0.54) (0.42) (0.18)
Distributions from net realized capital gains....... -- (0.01) (0.19)
Returns of capital.................................. -- (0.11) --
------- ------- --------
Total distributions................................. (0.54) (0.54) (0.37)
------- ------- --------
Net asset value, end of period........................ $ 8.15 $ 7.18 $ 8.43
======== ======== =========
Total return(b)....................................... 21.72% (8.46)% (0.75)%
======== ======== =========
Ratios/supplemental data:
Net assets, end of period (000s omitted)............ $44,304 $12,321 $ 3,602
======== ======== =========
Ratio of expenses to average net assets............. 1.79%(b) 1.83%(c) 1.75%(c)
======== ======== =========
Ratio of net investment income to average net
assets........................................... 6.71%(b) 6.69%(c) 6.24%(c)
======== ======== =========
Portfolio turnover rate............................. 227% 185% 99%
======== ======== =========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $23,741,406.
(c) After expense reimbursements. Ratios of expenses and net investment income
to average net assets prior to expense reimbursements were 2.04% and 2.50%
(annualized) and 6.48% and 5.49% (annualized) for 1994 and 1993,
respectively.
AIM INTERMEDIATE GOVERNMENT FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 7, 1993*
----------------------- TO
1995 1994 DECEMBER 31, 1993
------- ------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 8.99 $ 10.04 $ 10.44
Income from investment operations:
Net investment income............................... 0.63 0.61 0.21
Net gains (losses) on securities (both realized and
unrealized)...................................... 0.70 (1.02) (0.27)
------- ------- --------
Total from investment operations.................... 1.33 (0.41) (0.06)
------- ------- --------
Less distributions:
Dividends from net investment income................ (0.59) (0.50) (0.20)
Distributions from net realized capital gains....... -- (0.04) (0.14)
Returns of capital.................................. (0.04) (0.10) --
------- ------- --------
Total distributions................................. (0.63) (0.64) (0.34)
------- ------- --------
Net asset value, end of period........................ $ 9.69 $ 8.99 $ 10.04
======== ======== =========
Total return(a)....................................... 15.22% (4.13)% (0.52)%
======== ======== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted)............ $61,300 $23,415 $ 6,160
======== ======== =========
Ratio of expenses to average net assets (exclusive
of interest expense)(c).......................... 1.86%(b) 1.82% 1.71%(e)
======== ======== =========
Ratio of net investment income to average net
assets(d)........................................ 6.58%((b) 6.56% 6.37%(e)
======== ======== =========
Portfolio turnover rate............................. 140% 109% 110%
======== ======== =========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $37,793,057.
(c) Ratio of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement for 1994 and 1993 were 1.87% and 2.18%
(annualized), respectively.
(d) Ratio of net investment income to average net assets prior to reduction of
advisory fee and expense reimbursement for 1994 and 1993 were 6.50% and
5.90% (annualized), respectively.
(e) Annualized.
13
<PAGE> 107
AIM MUNICIPAL BOND FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993*
----------------------- TO
1995 1994 DECEMBER 31, 1993
------- ------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period.................. $ 7.78 $ 8.61 $ 8.71
Income from investment operations:
Net investment income............................... 0.39 0.39 0.14
Net gains (losses) on securities (both realized and
unrealized)...................................... 0.54 (0.78) 0.01
------- ------- --------
Total from investment operations.................... 0.93 (0.39) 0.15
------- ------- --------
Less distributions:
Dividends from net investment income................ (0.37) (0.38) (0.13)
Distributions from net realized capital gains....... -- (0.03) (0.11)
Returns of capital.................................. (0.03) (0.03) (0.01)
------- ------- --------
Total distributions................................. (0.40) (0.44) (0.25)
------- ------- --------
Net asset value, end of period........................ $ 8.31 $ 7.78 $ 8.61
======== ======== =========
Total return(a)....................................... 12.14% (4.57)% 1.95%
======== ======== =========
Ratios/supplemental data:
Net assets, end of period (000s omitted)............ $21,478 $ 9,175 $ 2,319
======== ======== =========
Ratio of expenses to average net assets(c).......... 1.68%(b) 1.67% 1.65%(d)
======== ======== =========
Ratio of net investment income to average net
assets(c)........................................ 4.46%(b) 4.83% 4.91%(d)
======== ======== =========
Portfolio turnover rate............................. 36% 43% 24%
======== ======== =========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $14,533,031.
(c) Ratios of expenses and net investment income to average daily net assets
prior to expense reimbursements are 1.77%, 1.84% and 3.08% (annualized) and
4.37%, 4.66% and 3.48% (annualized) for 1995-1993, respectively.
(d) Annualized.
AIM VALUE FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, OCTOBER 18, 1993*
--------------------------- TO
1995 1994 DECEMBER 31, 1993
---------- -------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period............... $ 21.13 $ 20.82 $ 21.80
Income from investment operations:
Net investment income............................ (0.01) -- 0.02
Net gains (losses) on securities (both realized
and unrealized)............................... 7.12 0.51 (0.21)
---------- -------- --------
Total from investment operations................. 7.11 0.51 (0.19)
---------- -------- --------
Less distributions:
Dividends from net investment income............. -- -- (0.02)
Distributions from net realized capital gains.... (1.59) (0.20) (0.77)
---------- -------- --------
Total distributions.............................. (1.59) (0.20) (0.79)
---------- -------- --------
Net asset value, end of period..................... $ 26.65 $ 21.13 $ 20.82
=========== ========= =========
Total return(a).................................... 33.73% 2.46% (0.74)%
=========== ========= =========
Ratios/supplemental data:
Net assets, end of period (000s omitted)......... $2,860,531 $680,119 $ 63,215
=========== ========= =========
Ratio of expenses to average net assets.......... 1.94%(b) 1.90% 1.85%(c)
=========== ========= =========
Ratio of net investment income (loss) to average
net assets.................................... (0.08)%(b) 0.00% (0.46)%(c)
=========== ========= ==========
Portfolio turnover rate.......................... 151% 127% 177%
=========== ========= =========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $1,646,600,430. The ratios of
expenses and net investment income to average net assets prior to reduction
of advisory fees were 1.96% and (0.09)% for 1995, respectively.
(c) Annualized.
* Date sales commenced.
14
<PAGE> 108
The following per share data, ratios and supplemental data for the Class A,
Class B and Class C shares of AIM MONEY MARKET FUND for the years ended December
31, 1995 and 1994 and the period October 16, 1993 (date operations commenced)
through December 31, 1993 have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon was unqualified. This information
should be read in conjunction with the financial statements of AIM MONEY MARKET
FUND included in the Statement of Additional Information.
AIM MONEY MARKET FUND -- CLASS A, CLASS B AND CLASS C SHARES
<TABLE>
<CAPTION>
Class A Shares Class B Shares
-------------------------------------- --------------------------------------
October 16, October 16,
Year Ended 1993 Year Ended 1993
December 31, to December 31, to
--------------------- December 31, ---------------------- December 31,
1995 1994 1993 1995 1994 1993
-------- -------- ------------ -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income............ 0.0495 0.0337 0.0048 0.0419 0.0259 0.0032
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income.............. (0.0495) (0.0337) (0.0048) (0.0419) (0.0259) (0.0032)
-------- -------- -------- -------- -------- --------
Net asset value, end of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return(a).................... 5.06% 3.43% 2.27% 4.27% 2.62% 1.51%
======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)................. $221,487 $148,886 $ 81,460 $ 69,857 $ 33,999 $ 1,289
======== ======== ======== ======== ======== ========
Ratio of expenses to
average net assets............. 1.03%(b) 0.97%(c) 1.00%(c)(d) 1.78%(b) 1.78%(e) 1.75%(d)(e)
======== ======== ======== ======== ======== ========
Ratio of net investment
income to average net
assets......................... 4.91%(b) 3.53%(c) 2.27%(c)(d) 4.14%(b) 3.14%(e) 1.54%(d)(e)
======== ======== ======== ======== ======== ========
<CAPTION>
Class C Shares
-------------------------------------
October 16,
Year Ended 1993
December 31, to
---------------------- December 31,
1995 1994 1993
-------- -------- ------------
<S> <C> <C> <C>
Net asset value, beginning
of period......................... $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income............. 0.0493 0.0337 0.0048
-------- -------- --------
Less distributions:
Dividends from net
investment income............... (0.0493) (0.0337) (0.0048)
-------- -------- --------
Net asset value, end of period...... $ 1.00 $ 1.00 $ 1.00
======== ======== ========
Total return(a)..................... 5.04% 3.42% 2.27%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted).................. $293,450 $359,952 $241,778
======== ======== ========
Ratio of expenses to
average net assets.............. 1.04%(b) 0.99%(f) 1.00%(d)(f)
======== ======== ========
Ratio of net investment
income to average net
assets.......................... 4.92%(b) 3.49%(f) 2.27%(d)(f)
======== ======== ========
</TABLE>
- ---------------
(a) Does not deduct sales charges or contingent deferred sales charges, where
applicable.
(b) Ratios are based on average daily net assets as follows: Class A
Shares - $164,281,243, Class B Shares - $38,140,475 and Class C Shares -
$268,454,942.
(c) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.06% and 3.44% for 1994 and 1.20%
(annualized) and 2.07% (annualized) for 1993.
(d) Annualized.
(e) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.87% and 3.05% for 1994 and 1.95%
(annualized) and 1.34% (annualized) for 1993.
(f) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.08% and 3.40% for 1994 and 1.20%
(annualized) and 2.07% (annualized) for 1993.
15
<PAGE> 109
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Funds will disclose the maximum sales charge
(including deferred sales charges) to which investments in a Fund's shares may
be subject. Each Fund will also include performance data on Class A and Class B
shares, and, as applicable, Class C shares in any advertisement or promotional
material which includes Fund performance data. If any advertised performance
data does not reflect the maximum sales charge (if any), such advertisement
will disclose that the sales charge has not been deducted in computing the
performance data, and that, if reflected, the maximum sales charge would reduce
the performance quoted. See the Statement of Additional Information for further
details concerning performance comparisons used in advertisements by the Funds.
Further information regarding each Fund's performance is contained in that
Fund's annual report to shareholders, which is available upon request and
without charge.
Each Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. Standardized total return
for Class A shares reflects the deduction of a Fund's maximum initial sales
charge at the time of purchase. Standardized total return for Class B shares
reflects the deduction of the maximum applicable contingent deferred sales
charge on a redemption of shares held for the period.
A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested. A cumulative total return reflects the Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
compounded annual rate of return that would have produced the same cumulative
total return if the Fund's performance had been constant over the entire period.
BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE FUND'S RETURN,
INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL YEAR-
BY-YEAR RESULTS. To illustrate the components of overall performance, a Fund may
separate its cumulative and average annual returns into income results and
capital gains or losses.
Yield is computed in accordance with standardized formulas described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, the
yield information may not provide a basis for comparison with investments which
pay a fixed rate of interest for a stated period of time. Yield reflects
investment income net of expenses over the relevant period attributable to a
Fund share, expressed as an annualized percentage of the maximum offering price
per share for Class A shares, net asset value per share for Class B shares and
net asset value per share for Class C shares of AIM MONEY MARKET FUND.
Yield is a function of the type and quality of a Fund's investments, the
maturity of the securities held in a Fund's portfolio and the operating expense
ratio of the Fund. A shareholder's investment in a Fund is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in a Fund. A tax-equivalent yield is calculated in the same
manner as the standard yield with an adjustment for a stated, assumed tax rate.
AIM MUNICIPAL BOND FUND may also demonstrate the effect of such tax-equivalent
adjustments generally by comparing various yield levels with their corresponding
tax-equivalent yields, given a stated tax rate.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of any Fund. Such practices will
have the effect of increasing that Fund's yield and total return. The
performance of each Fund will vary from time to time and past results are not
necessarily representative of future results. A Fund's performance is a function
of its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund as well as by
general market conditions.
- --------------------------------------------------------------------------------
ABOUT THE FUNDS
The Funds are separate series of shares of the Trust, a Delaware business
trust established on May 5, 1993 and registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company (see "Organization of the Trust"). Each Fund has its own investment
objective(s) and policies designed to meet specific investment goals, operates
as a diversified portfolio and intends to be treated as a regulated investment
company for federal income tax purposes.
Each Fund invests in securities of different issuers and industry
classifications (with the exception of AIM GLOBAL UTILITIES FUND which
concentrates its investments in the utilities industry) in an attempt to spread
and reduce the risks inherent in all investing. Each Fund continuously offers
new shares for sale to the public, and stands ready to redeem its outstanding
shares for cash at net asset value (subject, in certain circumstances, to a
contingent deferred sales charge). See "How to Redeem Shares." AIM, the
investment advisor for each Fund, continuously reviews and, from time to time,
changes the portfolio holdings of each of the Funds in pursuit of each Fund's
objective(s).
16
<PAGE> 110
- --------------------------------------------------------------------------------
INVESTMENT PROGRAMS
The investment objective(s) of each Fund, except AIM HIGH YIELD FUND, are
deemed to be fundamental policies which may not be changed without the approval
of a majority of the Fund's outstanding shares (within the meaning of the 1940
Act). The Board of Trustees on behalf of AIM HIGH YIELD FUND is permitted to
change the investment objective of that Fund without shareholder approval.
Further information is available in the Statement of Additional Information.
Individuals considering the purchase of shares of any Fund should recognize that
there are risks in the ownership of any security and that no assurance can be
given that any particular Fund will attain its investment objective(s).
AIM BALANCED FUND. The Fund's objective is to achieve as high a total return
to investors as possible, consistent with preservation of capital, by investing
in a broadly diversified portfolio of high-yielding securities, including common
stocks, preferred stocks, convertible securities and bonds. Although equity
securities will be purchased primarily for capital appreciation and fixed income
securities will be purchased primarily for income purposes, income and capital
appreciation potential will be considered in connection with all investments.
The Fund normally will have a minimum of 30% and a maximum of 70% of its assets
invested in equity securities and a minimum of 30% and a maximum of 70% of its
assets invested in fixed income securities. Most of such fixed income securities
will be rated Baa or better by Moody's Investors Service, Inc. ("Moody's") or
BBB or better by Standard & Poor's Corporation ("S&P") or, if unrated, deemed to
be of comparable quality by AIM, although the Fund may invest to a limited
extent in lower-rated securities. The fixed income securities in which the Fund
invests may include U.S. Government obligations, mortgage-backed securities,
asset-backed securities, bank obligations, corporate debt obligations and
unrated obligations, including those of foreign issuers. The Fund may, in
pursuit of its objective, invest up to 10% of its total assets in debt
securities rated lower than Baa by Moody's or BBB by S&P, which are commonly
known as "junk bonds." During 1995, the Fund invested less than 5% of its net
assets in below investment grade debt securities. See "Certain Investment
Strategies and Policies -- Risk Factors Regarding Non-Investment Grade Debt
Securities" for more information concerning the risk factors associated with
investing in such securities.
Compliance with such percentage requirements may limit the ability of the Fund
to maximize total return. Only that portion of the value of convertible senior
securities that is attributable to their fixed income characteristics will be
used for purposes of determining the percentage of the assets of the Fund that
are invested in fixed income senior securities. The actual percentage of the
assets invested in equity and fixed income securities will vary from time to
time, depending on the judgment of AIM as to general market and economic
conditions and trends, yields and interest rates and changes in fiscal and
monetary policies.
AIM GLOBAL UTILITIES FUND. The Fund's objective is to achieve a high level of
current income, and as a secondary objective the Fund seeks to achieve capital
appreciation, by investing primarily in the common and preferred stocks of
public utility companies. Under normal circumstances, at least 65% of the Fund's
total assets will be invested in securities of public utility companies (either
domestic or foreign). Public utility companies include companies that provide
electricity, natural gas or water and other sanitary services to the public, and
telephone or telegraph companies, and other companies providing public
communications services. The Fund may also invest in developing utility
technology companies and in holding companies which derive a substantial portion
of their revenues from utility-related activities. Generally, a holding company
will be considered to derive a substantial portion of its revenues from
utility-related activities if such activities account for at least 40% of its
revenues. When AIM deems it appropriate, the Fund may also purchase bonds of any
such companies. Investments in bonds, however, will not exceed 25% of the Fund's
total assets. The Fund may invest up to 10% of its total assets in bonds rated
lower than Baa by Moody's or BBB by S&P (or comparable ratings by other
nationally recognized statistical rating organizations "NRSROs") or unrated
bonds which AIM determines to be of comparable quality. During 1995, the Fund
invested less than 5% of its net assets in below investment grade debt
securities. See "Certain Investment Strategies and Policies -- Risk Factors
Regarding Non-Investment Grade Debt Securities" for more information concerning
the risk factors associated with investing in such securities.
The Fund may invest up to 80% of its total assets in foreign securities,
including investments in American Depositary Receipts, European Depositary
Receipts and other securities representing underlying securities of foreign
issuers. Under normal market conditions, the Fund will be invested in securities
of issuers located in at least four countries, one of which will be the United
States, although for temporary defensive purposes it may invest 100% of its
total assets in securities of United States issuers. In some foreign countries,
utility companies are partially owned by government agencies. In some cases,
foreign government agencies may have significant investments in businesses other
than utility companies. Also, investments in securities of foreign issuers may
involve other risks which are not ordinarily associated with investments in
domestic issuers (see "Certain Investment Strategies and Policies -- Investments
in Foreign Securities").
In addition, investors should also be aware that the Fund may invest in
companies located within emerging or developing countries. An "emerging or
developing country" is a country in the initial stages of its industrial cycle.
Investments in emerging or developing countries involve exposure to economic
structures that are generally less diverse and mature and to political systems
which can be expected to have less stability than those of more developed
countries. Such countries may have relatively unstable governments,
17
<PAGE> 111
economies based on only a few industries, and securities markets which trade
only a small number of securities. Historical experience indicates that markets
of emerging or developing countries have been more volatile than the markets of
more mature economies; such markets have also from time to time provided higher
rates of return and greater risks to investors. AIM believes that these
characteristics of emerging or developing countries can be expected to continue
in the future.
A portfolio of utility company securities is subject to a different degree of
volatility than a more broadly diversified portfolio. Economic, operational or
regulatory changes that affect utility companies will have a material impact
upon the value of the securities that the Fund owns. Events that have no direct
connection with companies whose securities are owned by the Fund may affect the
prices of those securities, such as emergencies involving nuclear power plants.
Moreover, a portfolio of utilities industry securities is subject to the risks
unique to that industry, such as inflationary or other cost increases in fuel
and operating expenses, possible increases in the interest costs of loans needed
for capital construction programs, compliance with environmental regulations,
possible adverse changes in the regulatory climate and availability of fuel
sources. A description of the utilities industry is contained in the Statement
of Additional Information.
AIM GROWTH FUND. The Fund's objective is to achieve long-term growth of
capital by investing primarily in the common stocks of established medium-to
large-size companies with prospects for above-average, long-term earnings
growth. Realization of current income is an incidental consideration.
It is anticipated that common stocks will be the principal form of investment
by the Fund. The Fund's portfolio is primarily comprised of securities of two
basic categories of companies: (1) "core" companies, which the Fund's management
considers to have experienced above-average and consistent long-term growth in
earnings and to have excellent prospects for outstanding future growth, and (2)
"earnings acceleration" companies, which the Fund's management believes are
currently enjoying a dramatic increase in profits.
AIM HIGH YIELD FUND. The Fund's objective is to achieve a high level of
current income by investing primarily in publicly traded non-investment grade
debt securities. The Fund will also consider the possibility of capital growth
when it purchases and sells securities. Debt securities of less than investment
grade are considered "high risk" securities (commonly referred to as junk
bonds).
The Fund seeks high income principally by purchasing securities that are rated
Baa, Ba or B by Moody's or BBB, BB or B by S&P, or securities of comparable
quality in the opinion of AIM that are either unrated or rated by other NRSROs.
The Fund may also hold, from time to time, securities rated Caa by Moody's or
CCC by S&P, or, if unrated or rated by other NRSROs securities of comparable
quality as determined by AIM. It should be noted, however, that achieving the
Fund's investment objective may be more dependent on the credit analysis of AIM,
and less on that of credit rating agencies, than may be the case for funds that
invest in more highly rated bonds. At least 80% of the value of the Fund's total
assets will be invested in debt securities, including convertible debt
securities, and/or cash and cash equivalents. The Fund may also invest in
preferred stocks.
For a breakdown of the quality ratings of the Fund's investments as of
December 31, 1995, see the chart on page 21.
While the securities held by the Fund are expected to provide greater income
and, possibly, opportunity for greater gain than investments in more highly
rated securities, they may be subject to greater risk of loss of income and
principal and are more speculative in nature. The Fund's yield and the net asset
value of its shares may be expected to fluctuate over time. Therefore, an
investment in the Fund may not be appropriate for some investors and should not
constitute a complete investment program for others. See "Certain Investment
Strategies and Policies -- Risk Factors Regarding Non-Investment Grade Debt
Securities."
The Fund may invest in both illiquid securities and securities which are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933. See "Certain Investment Strategies and
Policies -- Illiquid Securities" for further information regarding such
investments.
AIM INCOME FUND. The Fund's objective is to achieve a high level of current
income consistent with reasonable concern for safety of principal, by investing
primarily in fixed rate corporate debt, U.S. Government obligations and U.S.
Government Agency Mortgage-Backed Securities. The Fund may also invest in
preferred stock issues and convertible corporate debt. In selecting portfolio
securities the Fund will, in accordance with its concern for safety of
principal, consider individual credit risks, but shareholders should recognize
that the market value of even high quality long-term fixed rate securities will
fluctuate with changes in interest rate levels. The percent of the Fund's assets
in various types of securities will vary in light of the Fund's investment
objective and existing market conditions.
The Fund may invest up to 40% of its total assets in securities issued by
foreign entities. Purchases of foreign securities which are payable in foreign
currencies will be affected either favorably or unfavorably by changes in the
value of the foreign currencies against the U.S. dollar. Investing in foreign
securities payable in foreign currencies carries increased risk to the Fund (see
"Certain Investment Strategies and Policies -- Investments in Foreign
Securities" and " -- Foreign Exchange Transactions"). The Fund will maintain
less than 35% of its net assets in debt securities rated below Baa/BBB, which
are commonly known as "junk bonds." See "Certain Investment Strategies and
Policies -- Risk Factors Regarding Non-Investment Grade Debt Securities."
18
<PAGE> 112
For a breakdown of the quality ratings of the Fund's investments as of
December 31, 1995, see the chart on page 21.
Ordinarily, the Fund does not purchase securities with the intention of
engaging in short-term trading. However, any particular security will be sold,
and the proceeds reinvested, whenever such action is deemed prudent in light of
the Fund's investment objectives, regardless of the holding period of that
security. The Fund will not necessarily dispose of a security because of a
reduction in rating. A higher rate of portfolio turnover may result in higher
transaction costs, including brokerage commissions. Also, to the extent that
higher portfolio turnover results in a higher rate of net realized capital gains
to a Fund, the portion of the Fund's distributions constituting taxable capital
gains may increase. See "Dividends, Distributions and Tax Matters."
AIM INTERMEDIATE GOVERNMENT FUND. The Fund's objective is to achieve a high
level of current income consistent with reasonable concern for safety of
principal by investing, under normal circumstances, at least 65% of its total
assets in debt securities issued, guaranteed or otherwise backed by the United
States Government. The Government securities which may be purchased by the Fund
include but are not limited to (1) U.S. Treasury obligations such as Treasury
Bills (maturities of one year or less), Treasury Notes (maturities of one to ten
years) and Treasury Bonds (generally maturities of greater than ten years) and
(2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities ("Agency Securities") which are supported by any of the
following: (a) the full faith and credit of the U.S. Treasury, such as
obligations of the Government National Mortgage Association ("GNMA"), (b) the
right of the issuer to borrow an amount limited to a specific line of credit
from the U.S. Treasury, such as obligations of the Federal National Mortgage
Association ("FNMA"), the Federal Home Loan Bank and the U.S. Postal Service, or
(c) the credit of the agency or instrumentality, such as obligations of the
Federal Home Loan Mortgage Corporation ("FHLMC") and Federal Farm Credit System.
Although their close relationship with the U.S. Government is believed to make
them high-quality securities with minimal credit risks, the U.S. Government is
not obligated by law to support either FNMA or FHLMC. Accordingly, such
securities may involve risk of loss of principal and interest; however,
historically there have not been any defaults of such issues. For a listing of
some of the types of Agency Securities in which the Fund may invest, see
Appendix B to this Prospectus. The Fund may also invest in U.S. Government
Agency Mortgage-Backed Securities. Mortgage-backed securities consist of
interests in underlying mortgages with maturities of up to thirty years.
The Fund purchases primarily fixed-rate securities, including but not limited
to high coupon U.S. Government Agency Mortgage-Backed Securities, which provide
a higher coupon at the time of purchase than the then prevailing market rate
yield. The prices of high coupon U.S. Government Agency Mortgage-Backed
Securities do not tend to rise as rapidly as those of traditional fixed-rate
securities at times when interest rates are decreasing, and tend to decline more
slowly at times when interest rates are increasing. The Fund may purchase such
securities at a premium, which means that a faster principal prepayment rate
than expected will reduce the market value of and income from such securities,
while a slower prepayment rate will tend to increase the market value of and
income from such securities.
The composition and weighted average maturity of the Fund's portfolio will
vary from time to time, based upon AIM's determination of how best to achieve
the Fund's investment objective. The Fund may invest in Government securities of
all maturities, short-term, intermediate-term and long-term. The Fund will
maintain a dollar-weighted average portfolio maturity of between three and ten
years. This policy regarding portfolio maturity is a non-fundamental policy of
the Fund.
AIM MONEY MARKET FUND. The Fund's objective is to provide as high a level of
current income as is consistent with the preservation of capital and liquidity.
The Fund intends to invest in money market instruments such as bankers'
acceptances, certificates of deposit, repurchase agreements, master notes, time
deposits and commercial paper, all of which will be denominated in U.S. dollars
(referred to collectively as "Money Market Instruments") and U.S. Government
direct obligations and U.S. Government agencies' securities. Bankers'
acceptances, certificates of deposit and time deposits may be purchased from
U.S. or foreign banks. Certain types of Money Market Instruments are briefly
described in Appendix A to this Prospectus and are described more fully in the
Statement of Additional Information.
The Fund may invest in other types of Money Market Instruments not prohibited
by its investment restrictions, if approved by the trustees. The Fund will not
invest in instruments maturing more than 397 days from the date of investment,
and will maintain a dollar-weighted average portfolio maturity of 90 days or
less.
The Fund will limit investments in Money Market Instruments to those which at
the date of purchase are "First Tier" securities as defined in Rule 2a-7 under
the 1940 Act, as such Rule may be amended from time to time. Generally, "First
Tier" securities are securities that are rated in the highest rating category by
two NRSROs, or, if only rated by one NRSRO, are rated in the highest rating
category by that NRSRO, or, if unrated, are determined by AIM (under the
supervision of and pursuant to guidelines established by the Board of Trustees)
to be of comparable quality to a rated security that meets the foregoing quality
standards. For a complete definition of a "First Tier" security, see the
definition set forth in the Statement of Additional Information.
The Fund must also comply with the requirements of Rule 2a-7 under the 1940
Act, which governs the operations of money market funds and may be more
restrictive than the Fund's restrictions. If any of the Fund's policies and
restrictions are more restrictive than Rule 2a-7, such policies and restrictions
will be followed.
19
<PAGE> 113
The Fund will normally hold portfolio securities to maturity but may dispose
of such securities prior to maturity if AIM believes such disposition advisable.
Investing in Money Market Instruments of short maturity and/or actively managing
its portfolio will result in a large number of transactions, but since the costs
of these transactions are small, they are not expected to have a significant
effect on net asset value or yield.
AIM MUNICIPAL BOND FUND. The Fund's objective is to achieve a high level of
current income exempt from federal income taxes consistent with the preservation
of principal by investing in a diversified portfolio of municipal bonds. These
investments may include obligations issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies, authorities and instrumentalities,
the interest from which, in the opinion of bond counsel, is exempt from federal
income tax.
Municipal bonds include debt obligations of varying maturities issued to
obtain funds for various public purposes, including the construction of a wide
range of public facilities, the refunding of outstanding obligations, the
obtaining of funds for general operating expenses and the lending of such funds
to other public institutions and facilities. In addition, certain types of
industrial development bonds are issued by or on behalf of public authorities to
obtain funds to provide for the construction, equipment, repair or improvement
of privately operated facilities ("private activity bonds"). Such obligations
are considered to be municipal bonds appropriate for investment by the Fund,
provided that the interest paid thereon, in the opinion of bond counsel, is
exempt from federal income taxes. As used in this Prospectus and the Statement
of Additional Information, interest which is "tax-exempt" or "exempt from
federal income taxes" means interest on municipal bonds which is excluded from
gross income for federal income tax purposes, but which may give rise to federal
alternative minimum tax liability. The principal and interest payments on
private activity bonds (such as industrial development or pollution control
bonds) are the responsibility of the industrial user and, therefore, are not
backed by the taxing power of the issuing municipality. Such obligations are
included within the term municipal bonds if the interest paid thereon qualifies
for exemption from federal income tax, but the interest on private activity
bonds will be considered to be an item of preference for purposes of alternative
minimum tax liability under the Internal Revenue Code of 1986, as amended (the
"Code"). See "Tax Matters" in the Statement of Additional Information. The Fund
will invest at least 80% of its total invested assets in securities that do not
pay interest subject to federal income taxes and that do not constitute an item
of preference for purposes of the alternative minimum tax.
In addition, the Fund will invest at least 80% of its total invested assets in
municipal bonds. At least 80% of the municipal securities purchased by the Fund
will be rated within the four highest ratings, or will be obligations of issuers
having an issue of outstanding municipal bonds rated within the four highest
ratings of Moody's, S&P or any other NRSRO. However, up to 20% of the Fund's
total assets may be invested in unrated municipal bonds if in the judgment of
AIM, after considering available information regarding the creditworthiness of
the issuer, such bonds are similar in quality to those bonds rated within the
four highest ratings mentioned above. The Fund will maintain less than 20% of
its total assets in securities rated below Baa/BBB (or a comparable rating of
any other NRSRO). For purposes of the foregoing percentage limitations,
municipal securities (i) which have been collateralized with U.S. Government
securities held in escrow until the municipal securities' refunding date or
final maturity, but (ii) which have not been re-rated by a NRSRO, will be
treated by the Fund as the equivalent of Aaa/AAA rated securities. During 1995,
the Fund invested less than 5% of its net assets in below investment grade debt
securities. See "Certain Investment Strategies and Policies -- Risk Factors
Regarding Non-Investment Grade Debt Securities" for more information concerning
the risk factors associated with investing in such securities.
Since the Fund invests primarily in municipal obligations, the marketability
and market value of these obligations may be affected by certain constitutional
amendments, legislative measures, executive orders, administrative regulations
and voter initiatives as well as regional economies. The ability of the Fund to
achieve its objective is affected by the ability of municipal issuers to meet
their payment obligations. Problems which may arise in the foregoing areas and
which are not resolved could adversely affect the various municipal issuers'
abilities to meet their financial obligations.
The Fund may invest in short-term obligations, including taxable investments,
to establish a defensive position in anticipation of a market decline with a
corresponding rise in interest rates. Such short-term obligations include notes
issued by or on behalf of municipal issuers, obligations of the U.S. Government,
its agencies or instrumentalities, instruments of domestic banks, domestic
commercial paper and other cash equivalent investments. Interest income from
certain short-term holdings may be taxable to shareholders as ordinary income.
AIM VALUE FUND. The Fund's objective is to achieve long-term growth of capital
by investing primarily in equity securities judged by the Fund's investment
advisor to be undervalued relative to the investment advisor's appraisal of the
current or projected earnings of the companies issuing the securities, or
relative to current market values of assets owned by the companies issuing the
securities or relative to the equity market generally. Income is a secondary
objective and would be satisfied principally from the income (interest and
dividends) generated by the common stocks, convertible bonds and convertible
preferred stocks that make up the Fund's portfolio. The Fund should not be
purchased by those who seek income as their primary investment objective.
20
<PAGE> 114
In addition to the securities described above, the Fund may also acquire
preferred stocks and debt instruments having prospects for growth of capital.
Although these different types of securities can be expected to generate amounts
of income to satisfy the Fund's secondary objective, they will be purchased for
their potential for growth of capital.
The primary emphasis of AIM's search for undervalued equity securities is in
four categories: (1) out-of-favor cyclical growth companies; (2) established
growth companies that are undervalued compared to historical relative valuation
parameters; (3) companies where there is early but tangible evidence of
improving prospects which are not yet reflected in the price of the company's
equity securities; and (4) companies whose equity securities are selling at
prices that do not reflect the current market value of their assets and where
there is reason to expect realization of this potential in the form of increased
equity values.
Because AIM VALUE FUND invests in equity securities judged by the Fund's
investment advisor to be undervalued relative to the investment advisor's
appraisal of the current or projected earnings of the companies issuing such
securities, investors should carefully assess the risks associated with an
investment in the Fund.
PORTFOLIO RATINGS. During 1995, the percentage of average annual assets of AIM
HIGH YIELD FUND and AIM INCOME FUND, calculated on a dollar weighted basis,
which was invested in securities within the various rating categories (based on
the higher of Standard and Poor's Corporation and Moody's Investors Service,
Inc. ratings as described in Appendix C), and in unrated securities determined
to be of comparable quality, was as follows:
<TABLE>
<CAPTION>
AIM
HIGH AIM
YIELD INCOME
FUND FUND
----- -----
<S> <C> <C>
AAA/Aaa................................................................... 0% 28.03%
AA/Aa..................................................................... 0% 4.97%
A/A....................................................................... 0% 11.97%
BBB/Baa................................................................... 0% 24.67%
BB/Ba..................................................................... 11.52% 10.59%
B/B....................................................................... 75.82% 18.45%
CCC/Caa................................................................... 7.60% 1.08%
CC/Ca..................................................................... 0% 0%
C/C....................................................................... 0% 0%
Unrated................................................................... 5.06% 0.24%
----- -----
Total Average Annual Assets.......................................... 100% 100%
</TABLE>
- --------------------------------------------------------------------------------
CERTAIN INVESTMENT STRATEGIES AND POLICIES
In pursuit of its objectives and policies, one or more of the Funds may employ
one or more of the following strategies in order to enhance investment results:
MONEY MARKET INSTRUMENTS. (All Funds). When deemed appropriate for temporary
or defensive purposes, each of the Funds may hold substantially all of its
assets in the form of cash or cash equivalent Money Market Instruments. Of
course, AIM MONEY MARKET FUND invests exclusively in Money Market Instruments.
None of the Funds, other than AIM MONEY MARKET FUND, is required to limit such
investments to those which, at the date of purchase, are "First Tier" securities
as that term is defined in Rule 2a-7 under the 1940 Act.
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. (All Funds).
Each Fund may purchase securities on a "when-issued" basis, that is, delivery of
and payment for the securities is not fixed at the date of purchase, but is set
after the securities are issued (normally within forty-five days after the date
of the transaction). Each Fund also may purchase or sell securities on a delayed
delivery basis. The payment obligation and the interest rate that will be
received on the delayed delivery securities are fixed at the time the buyer
enters into the commitment. A Fund will only make commitments to purchase
when-issued or delayed delivery securities with the intention of actually
acquiring such securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable.
Investment in securities on a when-issued or delayed delivery basis may
increase a Fund's exposure to market fluctuation and may increase the
possibility that the Fund will incur short-term gains subject to federal
taxation or short-term losses if the Fund must engage in portfolio transactions
in order to honor a when-issued or delayed delivery commitment. In a delayed
delivery transaction, the Fund relies on the other party to complete the
transaction. If the transaction is not completed, the Fund may miss a price or
yield considered to be advantageous. A Fund will employ techniques designed to
reduce such risks. If a Fund purchases a when-issued security, the Fund's
custodian bank will segregate cash or other high grade securities (including
temporary investments and Municipal Securities) in an amount equal to the
when-issued commitment. If the market value of such securities declines,
additional cash or securities will be segregated on a daily basis so that the
market value of the segregated assets will equal the amount of the Fund's
21
<PAGE> 115
when-issued commitments. To the extent cash and securities are segregated, they
will not be available for new investments or to meet redemptions. Securities
purchased on a delayed delivery basis may require a similar segregation of cash
or other high grade securities. For a more complete description of when-issued
securities and delayed delivery transactions see the Statement of Additional
Information.
DOLLAR ROLL TRANSACTIONS. AIM INCOME FUND and AIM INTERMEDIATE GOVERNMENT FUND
only. In order to enhance portfolio returns and manage prepayment risks, AIM
INCOME FUND and AIM INTERMEDIATE GOVERNMENT FUND may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA and FHLMC.
In a dollar roll transaction, a Fund sells a mortgage security held in the
portfolio to a financial institution such as a bank or broker-dealer, and
simultaneously agrees to repurchase a substantially similar security (same type,
coupon and maturity) from the institution at a later date at an agreed upon
price. The mortgage securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by different pools of
mortgages with different prepayment histories. During the period between the
sale and repurchase, a Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be invested
in short-term instruments, and the income from these investments, together with
any additional fee income received on the sale, could generate income for a Fund
exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the
securities retained by a Fund may decline below the price of the securities that
the Fund has sold but is obligated to repurchase under the agreement. In the
event the buyer of securities in a dollar roll transaction files for bankruptcy
or becomes insolvent, the Fund's use of the proceeds from the sale of the
securities may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the Fund's obligation to repurchase the
securities. AIM INCOME FUND and AIM INTERMEDIATE GOVERNMENT FUND will limit
their respective borrowings from banks, reverse repurchase agreements and dollar
roll transactions to an aggregate of 33-1/3% of their respective total assets at
the time of investment. A Fund will not purchase additional securities when any
borrowings from banks exceed 5% of the Fund's total assets. For further
information regarding reverse repurchase agreements see the Statement of
Additional Information.
STOCK INDEX FUTURES CONTRACTS AND RELATED OPTIONS. (AIM BALANCED FUND, AIM
GLOBAL UTILITIES FUND, AIM GROWTH FUND and AIM VALUE FUND ("Equity Funds")).
INTEREST RATE FUTURES CONTRACTS AND RELATED OPTIONS. (AIM BALANCED FUND, AIM
HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND and AIM
MUNICIPAL BOND FUND ("Debt Funds")). Each of the Equity Funds may purchase and
sell stock index futures contracts or purchase and sell options thereon in order
to hedge the value of their respective portfolios against changes in market
conditions. Similarly, each of the Debt Funds may purchase and sell interest
rate futures contracts or purchase and sell options thereon in order to hedge
the value of their respective portfolios against changes in market conditions. A
stock index futures contract is an agreement pursuant to which two parties agree
to take or make delivery of an amount of cash equal to a specified dollar or
other currency amount times the difference between the stock index value at the
close of the last trading day of the contract and the price at which the futures
contract is originally struck. No physical delivery of the underlying stocks in
the index is made. An interest rate futures contract is an agreement between two
parties to buy and sell a debt security for a set price on a future date.
Generally, a Fund may elect to close a position in a futures contract by taking
an opposite position which will operate to terminate the Fund's position in the
futures contract.
There are risks associated with investments in stock index futures contracts,
interest rate futures contracts, and options on such contracts. During certain
market conditions, purchases and sales of futures contracts may not completely
offset a decline or rise in the value of a Fund's portfolio. In the futures
markets, it may not always be possible to execute a buy or sell order at the
desired price, or to close out an open position due to market conditions, limits
on open positions and/or daily price fluctuations. Changes in the market value
of a Fund's portfolio may differ substantially from the changes anticipated by
the Fund when hedged positions were established and unanticipated price
movements in a futures contract may result in a loss substantially greater than
a Fund's initial investment in such contract. Successful use of futures
contracts and related options is dependent upon AIM's ability to predict
correctly movements in the direction of the applicable markets. No assurance can
be given that AIM's judgment in this respect will be correct.
No Fund may purchase or sell futures contracts or purchase or sell related
options if, immediately thereafter, the sum of the amount of margin deposits and
premiums on open positions with respect to futures contracts and related options
would exceed 5% of the market value of a Fund's total assets. See the Statement
of Additional Information for a description of a Fund's investments in futures
contracts and options on futures contracts, including certain additional risks.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets (10% of
the net assets of AIM MONEY MARKET FUND) in securities that are illiquid.
Illiquid securities include securities that have no readily available market
quotations and cannot be disposed of promptly (within seven days) in the normal
course of business at a price at which they are valued. Illiquid securities may
include securities that are subject to restrictions on resale because they have
not been registered under the Securities Act of 1933. Restricted securities may,
in certain circumstances, be resold pursuant to Rule 144A, and thus may or may
not constitute illiquid securities. Limitations on the resale of restricted
securities may have an adverse effect on their marketability, which may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering such securities for resale, and the risk of
substantial delays in effecting such registrations. The Trust's Board of
Trustees is responsible for developing and estab-
22
<PAGE> 116
lishing guidelines and procedures for determining the liquidity of Rule 144A
restricted securities on behalf of the Funds and monitoring AIM's implementation
of the guidelines and procedures.
RISK FACTORS REGARDING NON-INVESTMENT GRADE DEBT SECURITIES. AIM HIGH YIELD
FUND, and to a lesser extent AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM
INCOME FUND and AIM MUNICIPAL BOND FUND, seek to meet their respective
investment objectives by investing in non-investment grade debt securities,
commonly known as "junk bonds." While generally providing greater income and
opportunity for gain, non-investment grade debt securities may be subject to
greater risks than higher-rated securities. Economic downturns tend to disrupt
the market for junk bonds and adversely affect their values. Such economic
downturns may be expected to result in increased price volatility for junk bonds
and of the value of shares of the above-named Funds, and increased issuer
defaults on junk bonds.
In addition, many issuers of junk bonds are substantially leveraged, which may
impair their ability to meet their obligations. In some cases, junk bonds are
subordinated to the prior payment of senior indebtedness, which potentially
limits a Fund's ability to fully recover principal or to receive payments when
senior securities are subject to a default.
The credit rating of a junk bond does not necessarily address its market value
risk, and ratings may from time to time change to reflect developments regarding
the issuer's financial condition. Junk bonds have speculative characteristics
which are likely to increase in number and significance with each successive
lower rating category.
When the secondary market for junk bonds becomes more illiquid, or in the
absence of readily available market quotations for such securities, the relative
lack of reliable objective data makes it more difficult for the trustees to
value a Fund's securities, and judgment plays a more important role in
determining such valuations. Increased illiquidity in the junk bond market also
may affect a Fund's ability to dispose of such securities at desirable prices.
In the event a Fund experiences an unexpected level of net redemptions, the
Fund could be forced to sell its junk bonds without regard to their investment
merits, thereby decreasing the asset base upon which the Fund's expenses can be
spread and possibly reducing the Fund's rate of return. Prices of junk bonds
have been found to be less sensitive to fluctuations in interest rates, and more
sensitive to adverse economic changes and individual corporate developments than
those of higher-rated debt securities.
INVESTMENTS IN FOREIGN SECURITIES. (All Funds except AIM INTERMEDIATE
GOVERNMENT FUND and AIM MUNICIPAL BOND FUND). Each Fund may invest up to 25% of
its total assets (up to 20% for AIM BALANCED FUND, 40% for AIM INCOME FUND, 50%
for AIM MONEY MARKET FUND and 80% for AIM GLOBAL UTILITIES FUND) in foreign
securities, although AIM MONEY MARKET FUND may only invest in foreign securities
denominated in U.S. dollars. To the extent it invests in securities denominated
in foreign currencies, each Fund bears the risks of changes in the exchange
rates between U.S. currency and the foreign currency, as well as the
availability and status of foreign securities markets. Each Fund (other than AIM
MONEY MARKET FUND) may invest in securities of foreign issuers which are in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), or other securities representing underlying securities of foreign
issuers, and such investments are treated as foreign securities for purposes of
percentage limitations on investments in foreign securities. For a discussion of
the risks pertaining to investments in foreign securities. See "Risk Factors
Regarding Foreign Securities" below.
FOREIGN EXCHANGE TRANSACTIONS. (All Funds except AIM INTERMEDIATE GOVERNMENT
FUND, AIM MONEY MARKET FUND and AIM MUNICIPAL BOND FUND). Each Fund has
authority to deal in foreign exchange between currencies of the different
countries in which it will invest as a hedge against possible variations in the
foreign exchange rates between those countries. This may be accomplished through
direct purchases or sales of foreign currency, purchases of options on futures
contracts with respect to foreign currency, and contractual agreements to
purchase or sell a specified currency at a specified future date (up to one
year) at a price set at the time of the contract. Such contractual commitments
may be forward contracts entered into directly with another party or exchange
traded futures contracts.
The Funds may purchase and sell options on futures contracts, forward
contracts or futures contracts which are denominated in a particular foreign
currency to hedge the risk of fluctuations in the value of another currency.
Each Fund's dealings in foreign exchange will be limited to hedging involving
either specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of foreign currency with respect to specific receivables or
payables of the Fund accruing in connection with the purchase or sale of its
portfolio securities, the sale and redemption of shares of the Fund, or the
payment of dividends and distributions by the Fund. Position hedging is the
purchase or sale of foreign currency with respect to portfolio security
positions denominated or quoted in a foreign currency. The Funds will not
speculate in foreign exchange. No Fund will commit a larger percentage of its
total assets to foreign exchange hedges than the percentage of its total assets
which it could invest in foreign securities. Further information concerning
futures contracts and related options is set forth above.
RISK FACTORS REGARDING FOREIGN SECURITIES. Investments by a Fund in foreign
securities, whether denominated in U.S. dollars or foreign currencies, may
entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs or
similar securities also may entail some or all of the risks described below.
23
<PAGE> 117
Currency Risk. The value of the Funds' foreign investments will be affected by
changes in currency exchange rates. The U.S. dollar value of a foreign security
decreases when the value of the U.S. dollar rises against the foreign currency
in which the security is denominated, and increases when the value of the U.S.
dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which
the Funds may invest may not be as developed as the United States' economy and
may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation, and limitations on the
removal of funds or other assets could also adversely affect the value of the
Funds' investments.
Regulatory Risk. Foreign companies are not registered with the Securities and
Exchange Commission and are generally not subject to the regulatory controls
imposed on United States issuers and, as a consequence, there is generally less
publicly available information about foreign securities than is available about
domestic securities. Foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic companies. Income from foreign
securities owned by the Funds may be reduced by a withholding tax at the source,
which tax would reduce dividend income payable to the Fund's shareholders.
Market Risk. The securities markets in many of the countries in which the
Funds invest will have substantially less trading volume than the major United
States markets. As a result, the securities of some foreign companies may be
less liquid and experience more price volatility than comparable domestic
securities. Increased custodian costs as well as administrative costs (such as
the need to use foreign custodians) may be associated with the maintenance of
assets in foreign jurisdictions. There is generally less government regulation
and supervision of foreign stock exchanges, brokers and issuers which may make
it difficult to enforce contractual obligations. In addition, transaction costs
in foreign securities markets are likely to be higher, since brokerage
commission rates in foreign countries are likely to be higher than in the United
States.
PORTFOLIO TURNOVER. (All Funds except AIM MONEY MARKET FUND). Any particular
security will be sold, and the proceeds reinvested, whenever such action is
deemed prudent from the viewpoint of a Fund's investment objectives, regardless
of the holding period of that security. Each Fund's historical portfolio
turnover rates are included in the Financial Highlights tables above. A higher
rate of portfolio turnover may result in higher transaction costs, including
brokerage commissions. Also, to the extent that higher portfolio turnover
results in a higher rate of net realized capital gains to a Fund, the portion of
the Fund's distributions constituting taxable capital gains may increase. See
"Dividends, Distributions and Tax Matters."
- --------------------------------------------------------------------------------
MANAGEMENT
The overall management of the business and affairs of the Funds is vested in
the Trust's Board of Trustees. The Board of Trustees approves all significant
agreements between the Trust, on behalf of one or more of the Funds, and persons
or companies furnishing services to the Funds, including the investment advisory
agreement and administrative services agreement with AIM, the agreements with
AIM Distributors regarding distribution of each Fund's shares, the agreements
with State Street Bank and Trust Company and The Bank of New York as the
custodians and the transfer agency agreement with A I M Fund Services, Inc., a
wholly-owned subsidiary of AIM. The day-to-day operations of each Fund are
delegated to the officers of the Trust and to AIM, subject always to the
objective and policies of the applicable Fund and to the general supervision of
the Board of Trustees. Certain trustees and officers of the Trust are affiliated
with AIM and A I M Management Group Inc. ("AIM Management"), the parent
corporation of AIM. AIM Management is a holding company engaged in the financial
services business. Information concerning the Board of Trustees may be found in
the Statement of Additional Information.
INVESTMENT ADVISOR. A I M Advisors, Inc. ("AIM"), 11 Greenway Plaza, Suite
1919, Houston, Texas 77046, serves as the investment advisor to each Fund
pursuant to a Master Investment Advisory Agreement, dated as of October 18, 1993
(the "Advisory Agreement"). AIM was organized in 1976 and, together with its
affiliates, manages or advises 43 investment company portfolios. As of April 1,
1996, the total assets of such investment company portfolios were approximately
$48.2 billion.
Under the terms of the Advisory Agreement, AIM supervises all aspects of each
Fund's operations and provides investment advisory services to the Funds. AIM
obtains and evaluates economic, statistical and financial information to
formulate and implement investment programs for the Funds. The Advisory
Agreement also provides that, upon the request of the Board of Trustees, AIM may
perform or arrange for certain accounting and other administrative services for
the Funds which are not required to be performed by AIM under the Advisory
Agreement. The Board of Trustees has made such a request. As a result, AIM and
the Trust have entered into a Master Administrative Services Agreement, dated as
of October 18, 1993, pursuant to which AIM is entitled to receive from each Fund
reimbursement of its costs or such reasonable compensation as may be approved by
the Board of Trustees. Currently, AIM is reimbursed for the services of the
Funds' principal financial officer and his staff, and any expenses related to
fund accounting services. In addition, pursuant to the terms of a Transfer
Agency and Service Agreement, A I M Fund Services, Inc. ("AFS"), a wholly-owned
subsidiary of AIM and registered transfer agent, receives a fee for its
provision of transfer agency, dividend distribution and disbursement and
shareholder services to the Funds. AFS' principal address is P.O. Box 4739,
Houston, Texas 77210-4739.
24
<PAGE> 118
For a discussion of AIM's brokerage allocation policies and practices, see
"Portfolio Transactions and Brokerage" in the Statement of Additional
Information. In accordance with policies established by the Board of Trustees,
AIM may take into account sales of shares of the Funds and other funds advised
by AIM in selecting broker-dealers to effect portfolio transactions on behalf of
the Funds.
PORTFOLIO MANAGEMENT. AIM uses a team approach and disciplined investment
strategy in providing investment advisory services to all its accounts,
including the Funds. AIM's investment staff consists of 85 individuals. While
individual members of AIM's investment staff are assigned primary responsibility
for the day-to-day management of each of AIM's accounts, all accounts are
reviewed on a regular basis by AIM's Investment Policy Committee to ensure that
they are being invested in accordance with the accounts' and AIM's investment
policies. The individuals on the investment team who are primarily responsible
for the day-to-day management of each of the Funds (other than AIM MONEY MARKET
FUND) and their titles, if any, with AIM or its affiliates and the Trust, the
length of time they have been responsible for the management of the Funds, their
years of investment experience and prior experience (if they have been with AIM
for less than five years) are described below:
AIM Balanced Fund. Claude C. Cody IV is Vice President of A I M Capital
Management, Inc. ("AIM Capital"), a wholly-owned subsidiary of AIM; and has been
responsible for the Fund since its investment objective and policies were
changed to that of a balanced fund in 1993. Mr. Cody has been associated with
AIM since 1992 and has a total of 20 years of experience as an investment
professional. Prior to joining AIM in 1992, he was an Independent Consultant
(from 1990-1992), and Senior Vice President of America Savings and Loan (from
1988-1990) and Senior Vice President of Western Reserve Life (1988-1990) (both
subsidiaries of Kinder-Care Inc.), where he established an investment management
operation and managed three portfolios. Robert G. Alley is Senior Vice President
of AIM Capital; Vice President of AIM and of the Trust; and also has been
responsible for the Fund since 1993. Mr. Alley has been associated with AIM
since 1992 and has a total of 24 years of experience as an investment
professional. Prior to joining AIM, he was Senior Fixed Income Manager for
Waddell and Reed, Inc. Craig A. Smith is Vice President of AIM Capital and also
has been responsible for the Fund since January 1996. Mr. Smith has been
associated with AIM since 1989 and has a total of six years of experience as an
investment professional.
AIM Global Utilities Fund. Claude C. Cody IV and Robert G. Alley have been
responsible for the management of the Fund since 1992. Craig A. Smith has been
responsible for the management of the Fund since January 1996. Background
information for Mr. Cody, Mr. Alley and Mr. Smith is discussed above with
respect to the management of AIM BALANCED FUND.
AIM Growth Fund. Jonathan C. Schoolar is Senior Vice President and Director of
AIM Capital, Vice President of AIM and the Trust, and has been responsible for
the Fund since 1994. He has been associated with AIM and/or its affiliates since
1986 and has 11 years of experience as an investment professional. Robert M.
Kippes is Vice President of AIM Capital and has been responsible for the Fund
since 1994. Mr. Kippes has been associated with AIM and/or its affiliates since
1989 and has over five years of experience as an investment professional. David
P. Barnard is Vice President of AIM Capital and has been responsible for the
Fund since 1992. Mr. Barnard has been associated with AIM since 1982 and has 21
years of experience as an investment professional.
AIM High Yield Fund. John L. Pessarra is Vice President of AIM Capital and has
been responsible for the Fund since 1992. Mr. Pessarra has been associated with
AIM since 1990 and has a total of 12 years of experience as an investment
professional. Kevin E. Rogers is Vice President of AIM Capital and has been
responsible for the Fund since 1995. Mr. Rogers has been associated with AIM
since 1991 and has over nine years of experience as an investment professional.
AIM Income Fund. Robert G. Alley and John L. Pessarra have been responsible
for the management of the Fund since 1992. Mr. Alley's background is discussed
above with respect to the management of AIM BALANCED FUND, and Mr. Pessarra's
background is discussed above with respect to the management of AIM HIGH YIELD
FUND. Carolyn L. Gibbs is Assistant Vice President of AIM Capital and has been
responsible for the Fund since 1995. Ms. Gibbs has been associated with AIM
since 1992 and has over 11 years of experience as an investment professional.
Prior to 1992, Ms. Gibbs was a financial analyst with Northwest Airlines.
AIM Intermediate Government Fund. Karen Dunn Kelley is Senior Vice President
of AIM Capital, Vice President of AIM and of the Trust and has been responsible
for the Fund since 1992. Ms. Kelley has been associated with AIM since 1989 and
has a total of 12 years of experience as an investment professional. Meggan
Walsh is Vice President of AIM Capital and has been responsible for the Fund
since 1992. Ms. Walsh has been associated with AIM since 1991 and has over eight
years of experience as an investment professional.
AIM Municipal Bond Fund. Richard A. Berry is Vice President of AIM Capital and
has been responsible for the Fund since 1992. Mr. Berry has been associated with
AIM since 1987 and has a total of 28 years of experience as an investment
professional. Stephen D. Turman is Vice President of AIM Capital and has been
responsible for the Fund since 1992. Mr. Turman has been associated with AIM
since 1985 and has a total of 15 years of experience as an investment
professional.
AIM Value Fund. Joel E. Dobberpuhl is Vice President of AIM Capital and has
been responsible for the Fund since 1992. Mr. Dobberpuhl has been associated
with AIM since 1990 and has a total of seven years of experience as an
investment professional. Claude C. Cody IV has been responsible for the
management of the Fund since 1992. Mr. Cody's background is discussed above with
respect to the management of AIM BALANCED FUND.
25
<PAGE> 119
FEES AND EXPENSES. For the year ended December 31, 1995, each Fund (other than
AIM MONEY MARKET FUND) paid the following compensation to AIM for its advisory
services, and the total expenses of each such Fund's class were, stated as a
percentage of that Class' average daily net assets, as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
COMPENSATION EXPENSE EXPENSE
TO AIM RATIO RATIO
------------ ------- -------
<S> <C> <C> <C>
AIM Balanced Fund............................ 0.72% 1.43% 2.21%
AIM Global Utilities Fund.................... 0.59% 1.21% 1.97%
AIM Growth Fund.............................. 0.74% 1.28% 2.13%
AIM High Yield Fund.......................... 0.53% 0.96% 1.73%
AIM Income Fund.............................. 0.48% 0.98% 1.79%
AIM Intermediate Government Fund............. 0.50% 1.08% 1.86%
AIM Municipal Bond Fund...................... 0.47% 0.88% 1.68%
AIM Value Fund............................... 0.62% 1.12% 1.94%
</TABLE>
For the year ended December 31, 1995, AIM MONEY MARKET FUND paid 0.55% of its
average daily net assets to AIM as compensation for its advisory services, and
the Class A shares', Class B shares' and Class C shares' total expenses for such
period were 1.03%, 1.78% and 1.04% of the Class' average daily net assets,
respectively.
For the year ended December 31, 1995, each Fund reimbursed AIM for
administrative services in the following amounts, stated as a percentage of the
Funds' average daily net assets:
<TABLE>
<CAPTION>
REIMBURSEMENT
PAYMENTS
-------------
<S> <C>
AIM Balanced Fund................................................ .07%
AIM Global Utilities Fund........................................ .03%
AIM Growth Fund.................................................. .03%
AIM High Yield Fund.............................................. .01%
AIM Income Fund.................................................. .03%
AIM Intermediate Government Fund................................. .04%
AIM Money Market Fund............................................ .01%
AIM Municipal Bond Fund.......................................... .02%
AIM Value Fund................................................... .003%
</TABLE>
FEE WAIVERS. In order to increase the return to investors, AIM may from time
to time voluntarily waive or reduce its fee, while retaining its ability to be
reimbursed for such fee prior to the end of each fiscal year. AIM is currently
voluntarily waiving a portion of its advisory fees payable by AIM VALUE FUND as
follows: 0.80% of the first $150 million of the Fund's average daily net assets,
plus 0.625% of the Fund's average daily net assets in excess of $150 million to
and including $2 billion, plus 0.60% of the Fund's average daily net assets in
excess of $2 billion. Fee waivers or reductions, other than those set forth in
the Advisory Agreement, may be rescinded at any time and without notice to
investors.
DISTRIBUTOR. The Trust has entered into Master Distribution Agreements
relating to the Funds (the "Distribution Agreements") with A I M Distributors,
Inc. ("AIM Distributors"), a registered broker-dealer and a wholly-owned
subsidiary of AIM, pursuant to which AIM Distributors acts as the distributor of
Class A and Class B shares of the Funds and Class C shares of AIM MONEY MARKET
FUND. The address of AIM Distributors is P.O. Box 4739, Houston, Texas
77210-4739. Certain trustees and officers of the Trust are affiliated with AIM
Distributors and AIM Management.
The Distribution Agreements provide AIM Distributors with the exclusive right
to distribute shares of the Funds directly and through institutions with whom
AIM Distributors has entered into selected dealer agreements. Under the
Distribution Agreement for the Class B shares, AIM Distributors sells Class B
shares at net asset value subject to a contingent deferred sales charge
established by AIM Distributors. AIM Distributors is authorized to advance to
institutions through whom Class B shares are sold a sales commission under
schedules established by AIM Distributors. The Distribution Agreement for the
Class B shares provides that AIM Distributors (or its assignee or transferee)
will receive 0.75% (of the total 1.00% payable under the distribution plan
applicable to Class B shares) of each Fund's average daily net assets
attributable to Class B shares attributable to the sales efforts of AIM
Distributors. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset based
sales charges in respect of the outstanding Class B shares attributable to the
distribution efforts of AIM Distributors; provided, however, that
26
<PAGE> 120
a complete termination of the Class B shares master distribution plan (as
defined in the plan) would terminate all payments to AIM Distributors.
Termination of the Class B shares distribution plan or Distribution Agreement
does not affect the obligation of Class B shareholders to pay contingent
deferred sales charges.
DISTRIBUTION PLANS. The Trust has adopted a master distribution plan
applicable to Class A shares of the Funds and Class C shares of AIM MONEY MARKET
FUND (the "Class A and C Plan") pursuant to Rule 12b-1 under the 1940 Act. Under
the Class A and C Plan, each Fund pays compensation of 0.25% per annum of the
average daily net assets attributable to such Fund's Class A shares or Class C
shares, respectively, to AIM Distributors for the purpose of financing any
activity which is primarily intended to result in the sale of Class A shares or
Class C shares of the Fund. The Class A and C Plan is designed to compensate AIM
Distributors for certain promotional and other sales related costs, and to
implement a program which provides periodic payments to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own shares of the Funds.
The Trust has also adopted a master distribution plan applicable to Class B
shares of the Funds (the "Class B Plan"). Under the Class B Plan, each Fund pays
distribution expenses at an annual rate of 1.00% of the average daily net assets
attributable to such Fund's Class B shares. Of such amount, the Fund pays a
service fee of 0.25% of the average daily net assets attributable to such Fund's
Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee would
constitute an asset-based sales charge. Amounts paid in accordance with the
Class B Plan with respect to any Fund may be used to finance any activity
primarily intended to result in the sale of Class B shares of such Fund.
Activities that may be financed under the Class A and C Plan and the Class B
Plan (collectively, the "Plans") include, but are not limited to: printing of
prospectuses and statements of additional information and reports for other than
existing shareholders, overhead, preparation and distribution of advertising
material and sales literature, supplemental payments to dealers and other
institutions such as asset-based sales charges or as payments of service fees
under shareholder service arrangements, and the cost of administering the Plans.
These amounts payable by a Fund under the Plans need not be directly related to
the expenses actually incurred by AIM Distributors on behalf of each Fund. Thus,
even if AIM Distributors' actual expenses exceed the fee payable to AIM
Distributors thereunder at any given time, the Trust will not be obligated to
pay more than that fee, and if AIM Distributors' expenses are less than the fee
it receives, AIM Distributors will retain the full amount of the fee. Payments
pursuant to the Plans are subject to any applicable limitations imposed by the
rules of the National Association of Securities Dealers, Inc.
Each of the Plans may be terminated at any time by a vote of the majority of
those trustees who are not "interested persons" of the Trust or by a vote of the
holders of the majority of the outstanding shares of the applicable class.
Under the Plans, AIM Distributors may in its discretion from time to time
agree to waive voluntarily all or any portion of its fee that has not been
assigned or transferred, while retaining its ability to be reimbursed for such
fee prior to the end of each fiscal year.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Funds on an agency basis, may
receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent, for the Funds in
making such payments. The Funds will obtain a representation from such financial
institutions that they will either be licensed as dealers as required under
applicable state law, or that they will not engage in activities which would
constitute acting as a "dealer" as defined under applicable state law. Financial
intermediaries and any other person entitled to receive compensation for selling
Fund shares may receive different compensation for selling shares of one class
over another.
For additional information concerning the operation of the Plans see the
Statement of Additional Information.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST
The Trust is organized as a Delaware business trust pursuant to an Agreement
and Declaration of Trust dated May 5, 1993, as amended (the "Trust Agreement").
The Trust is an open-end series management investment company, and may consist
of one or more series portfolios as authorized from time to time by the Board of
Trustees. The Trust currently consists of nine separate series, and each of the
Funds represents one series.
Class A shares, Class B shares and, in the case of AIM MONEY MARKET FUND,
Class C shares, of the same Fund represent interests in that Fund's assets and
have identical voting, dividend, liquidation and other rights on the same terms
and conditions, except that each class of shares bears differing class-specific
expenses, is subject to differing sales loads, conversion features and exchange
privileges, and has exclusive voting rights on matters pertaining to that class'
distribution plan (although both Class A and C shareholders and Class B
shareholders of a given portfolio must approve any material increase in fees
payable with respect to such portfolio under the Class A and C Plan).
27
<PAGE> 121
The Trust is not required to hold annual or regular meetings of shareholders.
Meetings of shareholders of a Fund will be held from time to time to consider
matters requiring a vote of such shareholders in accordance with the
requirements of the 1940 Act, state law or the provisions of the Trust
Agreement. It is not expected that shareholder meetings will be held annually.
Except as specifically noted above, shareholders of each Fund are entitled to
one vote per share (with proportionate voting for fractional shares),
irrespective of the relative net asset value of the shares of a Fund. However,
on matters affecting an individual Fund or class of shares, a separate vote of
shareholders of that Fund or class is required. Shareholders of a Fund or class
are not entitled to vote on any matter which does not affect that Fund or class
but which requires a separate vote of another Fund or class. An example of a
matter which would be voted on separately by shareholders of each Fund is the
approval of the Advisory Agreement, and an example of a matter which would be
voted on separately by shareholders of each class of shares is approval of the
distribution plans. When issued, shares of each Fund are fully paid and
nonassessable, have no preemptive or subscription rights, and are fully
transferable. Other than the automatic conversion of Class B shares to Class A
shares, there are no conversion rights. Shares do not have cumulative voting
rights, which means that in situations in which shareholders elect trustees,
holders of more than 50% of the shares voting for the election of trustees can
elect all of the trustees of the Trust, and the holders of less than 50% of the
shares voting for the election of trustees will not be able to elect any
trustees.
The Trust Agreement provides that the trustees of the Trust shall hold office
during the existence of the Trust, except as follows: (a) any trustee may resign
or retire; (b) any trustee may be removed by a vote of the majority of the
outstanding shares of the Trust, or at any time by written instrument signed by
at least two-thirds of the trustees and specifying when such removal becomes
effective; or (c) any trustee who has died or become incapacitated and is unable
to serve may be removed by a written instrument signed by a majority of the
trustees.
Under Delaware law, the shareholders of the Trust enjoy the same limitations
of liability extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
the Trust Agreement disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
trustee. The Trust Agreement provides for indemnification from the Trust
property for all losses and expenses of any shareholder held personally liable
for the Trust's obligations. Thus, the risk of a shareholder incurring financial
loss on account of such liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and where the other party was
held not to be bound by the disclaimer.
28
<PAGE> 122
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND SHAREHOLDER
ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 5:30 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS(R)
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM AGGRESSIVE GROWTH FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM BALANCED FUND AIM INTERNATIONAL EQUITY FUND
AIM CHARTER FUND AIM LIMITED MATURITY TREASURY SHARES
AIM CONSTELLATION FUND AIM MONEY MARKET FUND*
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM MUNICIPAL BOND FUND
AIM GLOBAL GROWTH FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM GLOBAL INCOME FUND AIM TAX-EXEMPT CASH FUND*
AIM GLOBAL UTILITIES FUND AIM TAX-FREE INTERMEDIATE SHARES
AIM GROWTH FUND AIM VALUE FUND
AIM HIGH YIELD FUND AIM WEINGARTEN FUND
AIM INCOME FUND
</TABLE>
* Shares of AIM TAX-EXEMPT CASH FUND, and Class C shares of AIM MONEY MARKET
FUND, are offered to investors at net asset value, without payment of a sales
charge, as described below. Other funds, including the Class A and Class B
shares of AIM MONEY MARKET FUND, are sold with an initial sales charge or
subject to a contingent deferred sales charge upon redemption, as described
below.
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds ("AIM Funds"), an investor must submit a fully completed new Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by A I M Distributors, Inc. ("AIM
Distributors") to sell shares of the AIM Funds.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed IRS Form W-8 (for non-resident aliens) or Form
W-9 (certifying exempt status) accompanying the registration information will be
subject to backup withholding. See the Account Application for applicable
Internal Revenue Service penalties. The minimum initial investment is $500,
except for accounts initially established through an Automatic Investment Plan,
which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for an Individual Retirement Account ("IRA") is $250. There are no
minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, IRA/Simplified Employee
Pension ("SEP") accounts, 403(b) plans or 457 (state deferred compensation)
plans (except that the minimum initial investment for salary deferrals for such
plans is $25), or for investment of dividends and distributions of any of the
AIM Funds into any existing AIM Funds account.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus are offered
pursuant to separate prospectuses. Copies of other prospectuses may be obtained
by calling (800) 347-4246.
MCF 04/96*
A-1
<PAGE> 123
HOW TO PURCHASE ADDITIONAL SHARES. The minimum investment for subsequent
purchases is $50. The minimum employee salary deferral investment for
participants in money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or
457 plans is $25. There are no such minimum investment requirements for
investment of dividends and distributions of any of the AIM Funds into any other
existing AIM Funds account.
Additional shares may be purchased directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors.
Direct investments may be made by mail or by wiring payment to AFS as follows:
SUBSEQUENT PURCHASES BY MAIL: Investors must indicate their account number and
the name of the Fund being purchased. The remittance slip from a confirmation
statement should be used for this purpose, and sent to AFS.
PURCHASES BY WIRE: To insure prompt credit to his account, an investor or his
dealer should call AFS' Client Services Department at (800) 959-4246 prior to
sending a wire to receive a reference number for the wire. The following wire
instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: AIM Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM AGGRESSIVE GROWTH FUND, AIM BALANCED FUND, AIM CHARTER FUND, AIM
CONSTELLATION FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND,
AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM HIGH
YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL
EQUITY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM VALUE FUND and
AIM WEINGARTEN FUND (other than AIM AGGRESSIVE GROWTH FUND, and AIM
CONSTELLATION FUND, collectively, the "Multiple Class Funds") may be purchased
at their respective net asset value plus a sales charge as indicated below,
except that shares of AIM TAX-EXEMPT CASH FUND and Class C shares (the "Class C
shares") of AIM MONEY MARKET FUND are sold without a sales charge and Class B
shares (the "Class B shares") of the Multiple Class Funds are sold at net asset
value subject to a contingent deferred sales charge payable upon certain
redemptions. These contingent deferred sales charges are described under the
caption "How to Redeem Shares -- Multiple Distribution System." Securities
dealers and other persons entitled to receive compensation for selling or
servicing shares of a Multiple Class Fund may receive different compensation for
selling or servicing one particular class of shares over another class in the
same Multiple Class Fund. Factors an investor should consider prior to
purchasing Class A or Class B shares (or, if applicable, Class C shares) of a
Multiple Class Fund are described below under "Special Information Relating to
Multiple Class Funds." For information on purchasing any of the AIM Funds and to
receive a prospectus, please call (800) 347-4246. As described below, the sales
charge otherwise applicable to a purchase of shares of a fund may be reduced if
certain conditions are met. In order to take advantage of a reduced sales
charge, the prospective investor or his dealer must advise AIM Distributors that
the conditions for obtaining a reduced sales charge have been met. Net asset
value is determined in the manner described under the caption "Determination of
Net Asset Value." The following tables show the sales charge and dealer
concession at various investment levels for the AIM Funds.
MCF 04/96*
A-2
<PAGE> 124
SALES CHARGES AND DEALER CONCESSIONS
GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds include Class A shares of each of AIM AGGRESSIVE GROWTH FUND, AIM
CHARTER FUND, AIM CONSTELLATION FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH
FUND, AIM INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM VALUE FUND and
AIM WEINGARTEN FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
- ----------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." Purchases of $1,000,000 or more are
at net asset value, subject to a contingent deferred sales charge of 1% if
shares are redeemed prior to 18 months from the date such shares were purchased,
as described under the caption "How to Redeem Shares -- Contingent Deferred
Sales Charge Program for Large Purchases."
GROUP II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: AIM TAX-EXEMPT BOND FUND OF CONNECTICUT; and the Class A
shares of each of AIM BALANCED FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM HIGH YIELD FUND, AIM INCOME
FUND, AIM INTERMEDIATE GOVERNMENT FUND and AIM MUNICIPAL BOND FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
- ----------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." Purchases of $1,000,000 or more are
at net asset value, subject to a contingent deferred sales charge of 1% if
shares are redeemed prior to 18 months from the date such shares were purchased,
as described under the caption "How to Redeem Shares -- Contingent Deferred
Sales Charge Program for Large Purchases."
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are AIM LIMITED MATURITY TREASURY SHARES and AIM TAX-FREE
INTERMEDIATE SHARES.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
- ----------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions.
MCF 04/96*
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ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than AIM LIMITED MATURITY TREASURY SHARES and AIM TAX-FREE INTERMEDIATE
SHARES as follows: 1% of the first $2 million of such purchases, plus 0.80% of
the next $1 million of such purchases, plus 0.50% of the next $17 million of
such purchases, plus 0.25% of amounts in excess of $20 million of such
purchases. See "Contingent Deferred Sales Charge Program for Large Purchases."
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of shares which normally involve
payment of initial sales charges, and which are sold at net asset value and are
not subject to a contingent deferred sales charge, in an amount up to 0.10% of
such purchases of shares of AIM LIMITED MATURITY TREASURY SHARES, and in an
amount up to 0.25% of such purchases of shares of AIM TAX-FREE INTERMEDIATE
SHARES.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.0% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of the New York Stock Exchange ("NYSE"), which is generally 4:00 p.m.
Eastern Time (and which is hereinafter referred to as "NYSE Close") on any
business day of an AIM Fund will be confirmed at the price next determined.
Orders received after NYSE Close will be confirmed at the price determined on
the next business day of the AIM Fund. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent.
Any loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. Please see "How to Purchase
Shares -- Purchases by Wire" for information on obtaining a reference number for
wire orders, which will facilitate the handling of such orders and ensure prompt
credit to an investor's account. A "business day" of an AIM Fund is any day on
which the NYSE is open for business. It is expected that the NYSE will be closed
during the next twelve months on Saturdays and Sundays and on the days on which
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class
Funds, other than AIM MONEY MARKET FUND, currently offer two classes of shares,
and AIM MONEY MARKET FUND currently offers three classes of shares, through
separate distribution systems (the "Multiple Distribution System"). Although the
Class A and Class B shares (and with respect to AIM MONEY MARKET FUND, Class C
shares) of a particular Multiple Class Fund represent an interest in the same
portfolio of investments, each class is subject to a different distribution
structure and, as a result, differing expenses. This Multiple Distribution
System allows investors to select the class that is best suited to the
investor's needs and objectives. In considering the options afforded by the
Multiple Distribution System, investors should consider both the applicable
initial sales charge or contingent deferred sales charge, as well as the ongoing
expenses borne by Class A or Class B shares and, if applicable, Class C shares,
and other relevant factors, such as whether his or her investment goals are
long-term or short-term.
MCF 04/96*
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<PAGE> 126
CLASS A SHARES are sold subject to the initial sales charges described
above and are subject to the other fees and expenses described herein.
Class A shares of AIM MONEY MARKET FUND are designed to meet the needs of
an investor who wishes to establish a dollar cost averaging program,
pursuant to which Class A shares an investor owns may be exchanged at net
asset value for Class A shares of another Multiple Class Fund or shares of
another AIM Fund which is not a Multiple Class Fund, subject to the terms
and conditions described under the caption "Exchange Privilege -- Terms and
Conditions of Exchanges."
CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Class B Plan payments of 1.00% per
annum on the average daily net assets of a Multiple Class Fund attributable
to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the date such shares were purchased are subject to a
contingent deferred sales charge ranging from 5% for redemptions made
within the first year to 1% for redemptions made within the sixth year. No
contingent deferred sales charge will be imposed if Class B shares are
redeemed after six years from the date such shares were purchased.
Redemptions of Class B shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B
shares was made. Following such conversion of their Class B shares,
investors will be relieved of the higher Class B Plan payments associated
with Class B shares. See "Management -- Distribution Plans."
CLASS C SHARES of AIM MONEY MARKET FUND are sold without an initial sales
charge and are not subject to a contingent deferred sales charge. Such
shares are, however, subject to the other fees and expenses described in
the prospectus for AIM MONEY MARKET FUND.
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon or NYSE Close on any business day of
the Fund will be confirmed at the price next determined. Net asset value is
normally determined at 12:00 noon and NYSE Close on each business day of AIM
MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO AIM MONEY MARKET FUND AND AIM TAX-EXEMPT CASH
FUND (THE "MONEY MARKET FUNDS"). Because each Money Market Fund uses the
amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of such funds will remain constant at $1.00 per share.
However, there is no assurance that either Money Market Fund can maintain a
$1.00 net asset value per share. In order to earn dividends with respect to AIM
MONEY MARKET FUND on the same day that a purchase is made, purchase payments in
the form of federal funds must be received by the Transfer Agent before 12:00
noon Eastern Time on that day. Purchases made by payments in any other form, or
payments in the form of federal funds received after such time but prior to NYSE
Close, will begin to earn dividends on the next business day following the date
of purchase. The Money Market Funds generally will not issue share certificates
but will record investor holdings in noncertificate form and regularly advise
the shareholder of his ownership position. Class B shares of AIM MONEY MARKET
FUND are designed for temporary investment as part of an investment program in
the Class B shares and, unlike shares of most money market funds, are subject to
a contingent deferred sales charge as well as Rule 12b-1 distribution fees and
service fees.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of shares of AIM
TAX-EXEMPT CASH FUND, Class C shares of AIM MONEY MARKET FUND and Class B shares
of the Multiple Class Funds will not be taken into account in determining
whether a purchase qualifies for a reduction in initial sales charges.
MCF 04/96*
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<PAGE> 127
The term "purchaser" means:
o an individual and his or her spouse and minor children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, a single-participant
money-purchase/profit-sharing plan or an individual participant in a 403(b)
Plan (unless such 403(b) plan qualifies as the purchaser as defined below);
o a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
o a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code and 457 plans, although more than one beneficiary or participant is
involved;
o a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP") where the employer has
notified AIM Distributors in writing that all of its related employee SEP
or SARSEP accounts should be linked;
o any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
o the discretionary advised accounts of A I M Advisors, Inc. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge as provided herein.
(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for (i) AIM
TAX-EXEMPT CASH FUND and Class C shares of AIM MONEY MARKET FUND and (ii) Class
B shares of the Multiple Class Funds) within the following 13 consecutive
months. By marking the LOI section on the account application and by signing the
account application, the purchaser indicates that he understands and agrees to
the terms of the LOI and is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does
MCF 04/96*
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<PAGE> 128
not pay such difference within 20 days of the expiration date, he irrevocably
constitutes and appoints the Transfer Agent as his attorney to surrender for
redemption any or all shares, to make up such difference within 60 days of the
expiration date.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) AIM TAX-EXEMPT CASH
FUND and Class C shares of AIM MONEY MARKET FUND and (ii) Class B shares of the
Multiple Class Funds) at the time of the proposed purchase. Rights of
Accumulation are also available to holders of the Connecticut General Guaranteed
Account, established for tax-qualified group annuities, for contracts purchased
on or before June 30, 1992. To determine whether or not a reduced initial sales
charge applies to a proposed purchase, AIM Distributors takes into account not
only the money which is invested upon such proposed purchase, but also the value
of all shares of the AIM Funds (except for (i) AIM TAX-EXEMPT CASH FUND and
Class C shares of AIM MONEY MARKET FUND and (ii) Class B shares of the Multiple
Class Funds) owned by such purchaser, calculated at their then current public
offering price. If a purchaser so qualifies for a reduced sales charge, the
reduced sales charge applies to the total amount of money then being invested by
such purchaser and not just to the portion that exceeds the breakpoint above
which a reduced sales charge applies. For example, if a purchaser already owns
qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest
an additional $20,000 in a fund with a maximum initial sales charge of 5.50%,
the reduced initial sales charge of 5.25% will apply to the full $20,000
purchase and not just to the $15,000 in excess of the $25,000 breakpoint. To
qualify for obtaining the discount applicable to a particular purchase, the
purchaser or his dealer must furnish AFS with a list of the account numbers and
the names in which such accounts of the purchaser are registered at the time the
purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a fund
(see "Dividends, Distributions and Tax Matters"); (b) exchanges of shares of
certain other funds (see "Exchange Privilege"); (c) use of the reinstatement
privilege (see "How to Redeem Shares"); or (d) a merger, consolidation or
acquisition of assets of a fund.
Shareholders of record of Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
shares of the particular AIM Fund(s) whose shares they owned on such date, at
net asset value (without payment of a sales charge) for as long as they
continuously own Class A shares of such AIM Fund(s) having a market value of at
least $500. In addition, discretionary advised clients of any investment
advisors whose clients held Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A shares of the applicable AIM
Fund(s) at the net asset value of such shares.
The following persons may purchase shares of the AIM Funds through AIM
Distributors without payment of an initial sales charge: (a) A I M Management
Group Inc. ("AIM Management") and its affiliated companies; (b) any current or
retired officer, director, trustee or employee, or any member of the immediate
family (including spouse, minor children, parents and parents of spouse) of any
such person, of AIM Management or its affiliates or of certain mutual funds
which are advised or managed by AIM, or any trust established exclusively for
the benefit of such persons; (c) any employee benefit plan established for
employees of AIM Management or its affiliates; (d) any current or retired
officer, director, trustee or employee, or any member of the immediate family
(including spouse, minor children, parents and parents of spouse) of any such
person, or of CIGNA Corporation or of any of its affiliated companies, or of
First Data Investor Services Group (formerly The Shareholders Services Group,
Inc.); (e) any investment company sponsored by CIGNA Investments, Inc. or any of
its affiliated companies for the benefit of its directors' deferred compensation
plans; (f) discretionary advised clients of AIM or AIM Capital; (g) registered
representatives and employees of dealers who have entered into agreements with
AIM Distributors (or financial institutions that have arrangements with such
dealers with respect to the sale of shares of the AIM Funds) and any member of
the immediate family (including spouse, minor children, parents and parents of
spouse) of any such person, provided that purchases at net asset value are
permitted by the policies of such person's employer; and (h) certain
broker-dealers, investment advisers or bank trust departments that provide asset
allocation, similar specialized investment services or investment company
transaction services for their customers, that charge a minimum annual fee for
such services, and that have entered into an agreement with AIM Distributors
with respect to their use of the AIM Funds in connection with such services.
In addition, shares of any AIM Fund may be purchased at net asset value,
without payment of a sales charge, by pension, profit-sharing or other employee
benefit plans created pursuant to a plan qualified under Section 401 of the Code
or plans under Section 457 of the Code, or employee benefit plans created
pursuant to Section 403(b) of the Code and sponsored by nonprofit organizations
defined under Section 501(c)(3) of the Code. Such plans will qualify for
purchases at net asset value provided that (1) the initial amount invested in
the fund(s) is at least $1,000,000, (2) the sponsor signs a $1,000,000 LOI, (3)
such shares are purchased by an employer-sponsored plan with at least 100
eligible employees, or (4) all of the plan's transactions are executed through a
single om-
MCF 04/96*
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<PAGE> 129
nibus account per fund and the financial institution or service organization has
entered into an agreement with AIM Distributors with respect to their use of the
AIM Funds in connection with such accounts. Section 403(b) plans sponsored by
public educational institutions will not be eligible for net asset value
purchases based on the aggregate investment made by the plan or the number of
eligible employees. Participants in such plans will be eligible for reduced
sales charges based solely on the aggregate value of their individual
investments in the applicable AIM Fund. PLEASE NOTE THAT TAX-EXEMPT FUNDS ARE
NOT APPROPRIATE INVESTMENTS FOR SUCH PLANS. AIM Distributors may pay investment
dealers or other financial service firms up to 1.00% of the net asset value of
any shares of the Load Funds (as defined on page A-10 herein) up to 0.10% of the
net asset value of any shares of AIM LIMITED MATURITY TREASURY SHARES, and up to
0.25% of the net asset value of any shares of all other AIM Funds sold at net
asset value to an employee benefit plan in accordance with this paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A shares of such funds may also be purchased at net asset
value by other unit investment trusts approved by the Board of Directors of AIM
Equity Funds, Inc. Unit holders of such trusts may elect to invest cash
distributions from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND at net asset value, including: (a) distributions of any
dividend income or other income received by such trusts; (b) distributions of
any net capital gains received in respect of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sale of Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such trusts;
and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided: (a) that the investment in Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND is effected within 30 days of such
redemption or repurchase; and (b) that the unit holder or his dealer provides
AIM Distributors with a letter which: (i) identifies the name, address and
telephone number of the dealer who sold to the unit holder the units to be
redeemed or repurchased; and (ii) states that the investment in Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND is being funded exclusively by
the proceeds from the redemption or repurchase of units of such trusts.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns Class A shares of a Multiple Class Fund, Class C shares of AIM Money
Market Fund, or shares of another AIM Fund can arrange for monthly, quarterly or
annual checks in any amount (but not less than $50) to be drawn against the
balance of his account in the designated AIM Fund. Shareholders who own Class B
shares of a Multiple Class Fund can only arrange for monthly or quarterly
withdrawals under a Systematic Withdrawal Plan. Payment of this amount is
normally made on or about the tenth or the twenty-fifth day of each month in
which a payment is to be made. A minimum account balance of $5,000 is required
to establish a Systematic Withdrawal Plan, but there is no requirement
thereafter to maintain any minimum investment. No contingent deferred sales
charge with respect to Class B shares of a Multiple Class Fund will be imposed
on withdrawals made under a Systematic Withdrawal Plan, provided that the
amounts withdrawn under such a plan do not exceed on an annual basis 12% of the
account value at the time the shareholder elects to participate in the
Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to Class B
shares that exceed on an annual basis 12% of such account will be subject to a
contingent deferred sales charge on the amounts exceeding 12% of the initial
account value.
Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested in shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic With-
MCF 04/96*
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drawal Plan, the Transfer Agent redeems sufficient full and fractional shares at
their net asset value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B Shares and Class C Shares of the Multiple Class Funds), it
is disadvantageous to effect such purchases while a Systematic Withdrawal Plan
is in effect.
The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make monthly or quarterly
investments may establish an Automatic Investment Plan. Under this plan, on or
about the tenth and/or twenty-fifth day of the applicable month, a draft is
drawn on the shareholder's bank account in the amount specified by the
shareholder (minimum $50 per investment, per account). The proceeds of the draft
are invested in shares of the designated AIM Fund at the applicable offering
price determined on the date of the draft. An Automatic Investment Plan may be
discontinued upon 10 days' prior notice to the Transfer Agent or AIM
Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; and dividends and distributions attributable to
Class C shares of AIM MONEY MARKET FUND may be reinvested in additional shares
of such fund, in Class A shares of another Multiple Class Fund or in shares of
another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" for a description
of payment dates for these options. In order to qualify to have dividends and
distributions of one AIM Fund invested in shares of another AIM Fund, the
following conditions must be satisfied: (a) the shareholder must have an account
balance in the dividend paying fund of at least $5,000; (b) the account must be
held in the name of the shareholder (i.e., the account may not be held in
nominee name); and (c) the shareholder must have requested and completed an
authorization relating to the reinvestment of dividends into another AIM Fund.
An authorization may be given on the account application or on an authorization
form available from AIM Distributors. An AIM Fund will waive the $5,000 minimum
account value requirement if the shareholder has an account in the fund selected
to receive the dividends and distributions with a value of at least $500.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." The account from
which exchanges are to be made must have a value of at least $5,000 when a
shareholder elects to begin this program, and the exchange minimum is $50 per
transaction. All of the accounts that are part of this program must have
identical registrations. The net asset value of shares purchased under this
program may vary, and may be more or less advantageous than if shares were not
exchanged automatically. There is no charge for entering the Dollar Cost
Averaging program. Sales charges may apply, as described under the caption
"Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM TAX-FREE
INTERMEDIATE SHARES, AIM TAX-EXEMPT CASH FUND, AIM MUNICIPAL BOND FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the following prototype
retirement plans available to corporations, individuals and employees of
non-profit organizations and public schools: combination money-
purchase/profit-sharing plans; 403(b) plans; IRA plans; and SEP plans
(collectively, "retirement accounts"). Information concerning these plans,
including the custodian's fees and the forms necessary to adopt such plans, can
be obtained by calling or writing the AIM Funds or AIM Distributors. Shares of
the AIM Funds are also available for investment through existing 401(k) plans
(for both individuals and employers) adopted under the Code. The plan custodian
currently imposes an annual $10 maintenance fee with respect to each retirement
account for which it serves as the custodian. This fee is generally charged in
December. Each AIM Fund and/or the custodian reserve the right to change this
maintenance fee and to initiate an establishment fee (not to exceed its cost).
MCF 04/96*
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- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds,
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds, referred to
herein as the "Load Funds," are sold at a public offering price that includes a
maximum sales charge of 5.50% or 4.75% of the public offering price of such
shares; shares of certain of the AIM Funds, referred to herein as the "Lower
Load Funds," are sold at a public offering price that includes a maximum sales
charge of 1.00% of the public offering price of such shares; and shares of
certain other funds, including the Class C shares of AIM MONEY MARKET FUND,
referred to herein as the "No Load Funds," are sold at net asset value, without
payment of a sales charge.
<TABLE>
LOAD FUNDS: LOWER LOAD FUNDS:
----------- -----------------
<S> <C> <C>
AIM AGGRESSIVE GROWTH AIM HIGH YIELD FUND -- CLASS A AIM LIMITED MATURITY TREASURY SHARES
FUND -- CLASS A AIM INCOME FUND -- CLASS A AIM TAX-FREE INTERMEDIATE SHARES
AIM BALANCED FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT
AIM CHARTER FUND -- CLASS A FUND -- CLASS A NO LOAD FUNDS:
AIM CONSTELLATION AIM INTERNATIONAL EQUITY --------------
FUND -- CLASS A FUND -- CLASS A AIM MONEY MARKET FUND
AIM GLOBAL AGGRESSIVE GROWTH AIM MONEY MARKET -- CLASS C
FUND -- CLASS A FUND -- CLASS A AIM TAX-EXEMPT CASH FUND
AIM GLOBAL GROWTH AIM MUNICIPAL BOND
FUND -- CLASS A FUND -- CLASS A
AIM GLOBAL INCOME AIM TAX-EXEMPT BOND FUND
FUND -- CLASS A OF CONNECTICUT
AIM GLOBAL UTILITIES AIM VALUE FUND -- CLASS A
FUND -- CLASS A AIM WEINGARTEN FUND -- CLASS A
AIM GROWTH FUND -- CLASS A
</TABLE>
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund,
except that (i) Load Fund share purchases of $1,000,000 or more which are
subject to a contingent deferred sales charge may not be exchanged for Lower
Load Funds or for AIM TAX-EXEMPT CASH FUND; (ii) Lower Load Fund share purchases
of $1,000,000 or more and No Load Fund purchases may be exchanged for Load Fund
shares in amounts of $1,000,000 or more which will then be subject to a
contingent deferred sales charge; however, for purposes of calculating the
contingent deferred sales charge on the Load Fund shares acquired, the 18-month
period shall be computed from the date of such exchange; (iii) Class A shares
and shares of all other AIM Funds may not be exchanged for Class B shares; (iv)
Class B shares may be exchanged only for Class B shares; and (v) Class C shares
of AIM MONEY MARKET FUND may not be exchanged for Class A shares of AIM MONEY
MARKET FUND or for Class B shares. DEPENDING UPON THE FUND FROM WHICH AND INTO
WHICH AN EXCHANGE IS BEING MADE, SHARES BEING ACQUIRED IN AN EXCHANGE MAY BE
ACQUIRED AT THEIR OFFERING PRICE OR AT THEIR NET ASSET VALUE (WITHOUT PAYMENT OF
A SALES CHARGE) AS SET FORTH IN THE TABLE BELOW FOR SHARES INITIALLY PURCHASED
PRIOR TO MAY 1, 1994:
<TABLE>
<CAPTION>
MULTIPLE CLASS
LOWER LOAD NO LOAD FUNDS:
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B
----- ----------------- ---------- ------- -----------
<S> <C> <C> <C> <C>
Load Funds...... Net Asset Value Net Asset Value Net Asset Value Not
Applicable
Lower Load Net Asset Value if shares were held Net Asset Value Net Asset Value Not
Funds......... for at least 30 days; or if shares Applicable
were acquired upon exchange of any
Load Fund; or if shares were acquired
upon exchange from any Lower Load
Fund and such shares were held for at
least 30 days. (No exchange privilege
is available for the first 30 days
following the purchase of the Lower
Load Fund shares.)
</TABLE>
(Table continued on following page)
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<PAGE> 132
<TABLE>
<CAPTION>
MULTIPLE
CLASS
LOWER LOAD NO LOAD FUNDS:
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B
----- ----------------- ---------- ------- --------
<S> <C> <C> <C> <C>
No Load Funds... Offering Price if No Load shares were Net Asset Value if No Net Asset Value Not
directly purchased. Net Asset Value Load shares were Applicable
if No Load shares were acquired upon acquired upon
exchange of shares of any Load Fund exchange of shares of
or any Lower Load Fund; Net Asset any Load Fund or any
Value if No Load shares were acquired Lower Load Fund;
upon exchange of Lower Load Fund otherwise,
shares and were held for at least 30 Offering Price.
days following the purchase of the
Lower Load Fund shares. (No exchange
privilege is available for the first
30 days following the acquisition of
the Lower Load Fund shares.)
Multiple Class
Funds:
Class B....... Not Applicable Not Applicable Not Applicable Net Asset
Value
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:
Load Funds...... Net Asset Value Net Asset Value Net Asset Value Not
Applicable
Lower Load Net Asset Value if shares were Net Asset Value Net Asset Value Not
Funds......... acquired upon exchange of any Load Applicable
Fund. Otherwise, difference in sales
charge will apply.
No Load Funds... Offering Price if No Load shares were Net Asset Value if No Net Asset Value Not
directly purchased. Net Asset Value Load shares were Applicable
if No Load shares were acquired upon acquired upon
exchange of shares of any Load Fund. exchange of shares of
Difference in sales charge will apply any Load Fund or any
if No Load shares were acquired upon Lower Load Fund;
exchange of Lower Load Fund shares. otherwise, Offering
Price.
Multiple Class
Funds:
Class B....... Not Applicable Not Applicable Not Applicable Net Asset
Value
</TABLE>
An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A and Class B shares of a Multiple Class Fund cannot be
exchanged for each other), except that Class C shares of AIM MONEY MARKET FUND
may be exchanged for Class A shares of another Multiple Class Fund; (b) the
dollar amount of the exchange must be at least equal to the minimum investment
applicable to the shares of the fund acquired through such exchange; (c) the
shares of the fund acquired through exchange must be qualified for sale in the
state in which the shareholder resides; (d) the exchange must be made between
accounts having identical registrations and addresses; (e) the full amount of
the purchase price for the shares being exchanged must have already been
received by the fund; (f) the account from which shares have been exchanged must
be coded as having a certified taxpayer identification number on file or, in the
alternative, an appropriate Internal Revenue Service ("IRS") Form W-8
(certificate of foreign status) or Form W-9 (certifying exempt status) must have
been received by the fund; (g) newly acquired shares (through either an initial
or subsequent investment) are held in an account for at least ten business days,
and all other shares are held in an account for at least one day, prior to the
exchange; and (h) certificates representing shares must be returned before
shares can be exchanged.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
There is no fee for exchanges among the AIM Funds. A service fee of $5 per
transaction may, however, be charged by AIM Distributors on accounts of market
timing investment firms to help to defray the costs of maintaining an automated
exchange service. This service fee will be charged against the market timing
account from which shares are being exchanged.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received after NYSE Close will result in the redemption of shares at their net
asset value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. Normally, shares of an AIM Fund to be acquired
by exchange are purchased at their net asset value or applicable offering price,
as the case may be, determined on the date that such request is received, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is
MCF 04/96*
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<PAGE> 133
determined that a fund would be materially disadvantaged by an immediate
transfer of the proceeds of the exchange. If a shareholder is exchanging into a
fund paying daily dividends (See "Dividends, Distributions and Tax
Matters -- Dividends and Distributions," below), and the release of the exchange
proceeds is delayed for the foregoing five-day period, such shareholder will not
begin to accrue dividends until the sixth business day after the exchange.
Shares purchased by check may not be exchanged until it is determined that the
check has cleared, which may take up to ten business days from the date that the
check is received. See "Terms and Conditions of Purchase of the AIM
Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AFS. The request should contain the account registration and
account number, the dollar amount or number of shares to be exchanged, and the
names of the funds from which and into which the exchange is to be made. The
request should comply with all of the requirements for redemption by mail,
except those required for redemption of IRAs. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AFS at (800) 959-4246. If a shareholder is unable to reach
AFS by telephone, he may also request exchanges by telegraph or use overnight
courier services to expedite exchanges by mail, which will be effective on the
business day received by the Transfer Agent as long as such request is received
prior to NYSE Close. The Transfer Agent and AIM Distributors will not be liable
for any loss, expense or cost arising out of any telephone exchange request that
they reasonably believe to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
Social Security Number and current address, and mailings of confirmations
promptly after the transaction.
EXCHANGES OF CLASS B SHARES. A contingent deferred sales charge will not be
imposed in connection with exchanges among Class B shares of Multiple Class
Funds. For purposes of determining a shareholder's holding period of Class B
shares in the calculation of the applicable contingent deferred sales charge,
the period of time during which Class B shares were held prior to an exchange
will be added to the holding period of Class B shares acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors. In
addition to the obligation of the fund(s) named on the cover page to redeem
shares, AIM Distributors also repurchases shares. Although a contingent deferred
sales charge may be applicable to certain redemptions, as described below, there
is no redemption fee imposed when shares are redeemed or repurchased; however,
dealers may charge service fees for handling repurchase transactions.
MULTIPLE DISTRIBUTION SYSTEM. Class B shares purchased under the Multiple
Distribution System may be redeemed on any business day of a Multiple Class Fund
at the net asset value per share next determined following receipt of the
redemption order, as described under the caption "Timing and Pricing of
Redemption Orders," less the applicable contingent deferred sales charge shown
in the table below. No deferred sales charge will be imposed (i) on redemptions
of Class B shares following six years from the date such shares were purchased,
(ii) on Class B shares acquired through reinvestments of dividends and
distributions attributable to Class B shares or (iii) on amounts that represent
capital appreciation in the shareholder's account above the purchase price of
the Class B shares.
<TABLE>
<CAPTION>
YEAR CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
-------- -------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>
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<PAGE> 134
In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
Contingent deferred sales charges on Class B shares will be waived on
redemptions (1) following the registered shareholder's (or in the case of joint
accounts, all registered joint owners') death or disability, as defined in
Section 72(m)(7) of the Code (provided AIM Distributors is notified of such
death or disability at the time of the redemption request and is provided with
satisfactory evidence of such death or disability), (2) in connection with
certain distributions from individual retirement accounts, custodial accounts
maintained pursuant to Code Section 403(b), deferred compensation plans
qualified under Code Section 457 and plans qualified under Code Section 401
(collectively, "Retirement Plans"), (3) pursuant to a Systematic Withdrawal
Plan, provided that amounts withdrawn under such plan do not exceed on an annual
basis 12% of the value of the shareholder's investment in Class B shares at the
time the shareholder elects to participate in the Systematic Withdrawal Plan,
(4) effected pursuant to the right of a Multiple Class Fund to liquidate a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the designated minimum account size described in the
prospectus of such Multiple Class Fund and (5) effected by AIM of its investment
in Class B shares. Waiver category (1) above applies only to redemptions: (i)
made within one year following death or initial determination of disability and
(ii) of Class B shares held at the time of death or initial determination of
disability. Waiver category (2) above applies only to redemptions resulting
from: (i) required minimum distributions to plan participants or beneficiaries
who are age 70-1/2 or older, and only with respect to that portion of such
distributions which does not exceed 12% annually of the participant's or
beneficiary's account value; (ii) in kind transfers of assets where the
participant or beneficiary notifies AIM Distributors of such transfer no later
than the time such transfer occurs; (iii) tax-free rollovers or transfers of
assets to another Retirement Plan invested in Class B shares of one or more
Multiple Class Funds; (iv) tax-free returns of excess contributions or returns
of excess deferral amounts; and (v) distributions upon the death or disability
(as defined in the Code) of the participant or beneficiary.
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B shares of a Multiple Class Fund and purchases of shares of
the No Load Funds and Lower Load Funds, a contingent deferred sales charge of 1%
applies to purchases of $1,000,000 or more that are redeemed within 18 months of
the date of purchase. For a description of the AIM Funds participating in this
program, see "Terms and Conditions of Purchase of the AIM Funds -- Sales Charges
and Dealer Concessions." This charge will be 1% of the lesser of the value of
the shares redeemed (excluding reinvested dividends and capital gain
distributions) or the total original cost of such shares. In determining whether
a contingent deferred sales charge is payable, and the amount of any such
charge, shares not subject to the contingent deferred sales charge are redeemed
first (including shares purchased by reinvested dividends and capital gains
distributions and amounts representing increases from capital appreciation), and
then other shares are redeemed in the order of purchase. No such charge will be
imposed upon exchanges unless the shares acquired by exchange are redeemed
within 18 months of the date the shares were originally purchased. For purposes
of computing this 18-month period (i) shares of any Load Fund or Class C shares
of AIM MONEY MARKET FUND which were acquired through an exchange of shares which
previously were subject to the 1% contingent deferred sales charge will be
credited with the period of time such exchanged shares were held, and (ii)
shares of any Load Fund which are subject to the 1% contingent deferred sales
charge and which were acquired through an exchange of shares of a Lower Load
Fund or a No Load Fund which previously were not subject to the 1% contingent
deferred sales charge will not be credited with the period of time such
exchanged shares were held. The charge will be waived in the following
circumstances: (1) redemptions of shares by employee benefit plans ("Plans")
qualified under Sections 401 or 457 of the Code, or Plans created under Section
403(b) of the Code and sponsored by nonprofit organizations as defined under
Section 501(c)(3) of the Code, where (a) the initial amount invested by a Plan
in one or more of the AIM Funds is at least $1,000,000, (b) the sponsor of a
Plan signs a letter of intent to invest at least $1,000,000 in one or more of
the AIM Funds, or (c) the shares being redeemed were purchased by an
employer-sponsored Plan with at least 100 eligible employees; provided, however,
that Plans created under Section 403(b) of the Code which are sponsored by
public educational institutions shall qualify under (a), (b) or (c) above on the
basis of the value of each Plan participant's aggregate investment in the AIM
Funds, and not on the aggregate investment made by the Plan or on the number of
eligible employees; (2) redemptions of shares following the registered
shareholder's (or in the case of joint accounts, all registered joint owners')
death or disability, as defined in Section 72(m)(7) of the Code; (3) redemptions
of shares purchased at net asset value by private foundations or endowment funds
where the initial amount invested was at least $1,000,000; and (4) redemptions
of shares purchased by an investor in amounts of $1,000,000 or more where such
investor's dealer of record, due to the nature of the investor's account,
notifies AIM Distributors prior to the time of investment that the dealer waives
the payments otherwise payable to the dealer as described in the third paragraph
under the caption "Terms and Conditions of Purchase of the AIM Funds -- All
Groups of AIM Funds."
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
MCF 04/96*
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<PAGE> 135
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnerships, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
In addition to these requirements, shareholders who have invested in a fund to
establish an IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares: (a) a statement
as to whether or not the shareholder has attained age 59-1/2; and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or wired to the pre-authorized bank
account as indicated on the account application; (b) there has been no change of
address of record on the account within the preceding 30 days; (c) the shares to
be redeemed are not in certificate form; (d) the person requesting the
redemption can provide proper identification information; and (e) the proceeds
of the redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth at that item of the account application if they reasonably believe such
request to be genuine, but may in certain cases be liable for losses due to
unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
EXPEDITED REDEMPTIONS (AIM MONEY MARKET FUND ONLY). If a redemption order is
received prior to 11:30 a.m. Eastern Time, the redemption will be effective on
that day and AIM MONEY MARKET FUND will endeavor to transmit payment on that
same business day. If the redemption order is received after 11:30 a.m. and
prior to NYSE Close, the redemption will be made at the next determined net
asset value and payment will generally be transmitted on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND and Class C Shares of AIM MONEY
MARKET FUND). After completing the appropriate authorization form, shareholders
may use checks to effect redemptions from AIM TAX-EXEMPT CASH FUND and the Class
C Shares of AIM MONEY MARKET FUND. This privilege does not apply to retirement
accounts or qualified plans. Checks may be drawn in any amount of $250 or more.
Checks drawn against insufficient shares in the account, against shares held
less than ten business days, or in amounts of less than the applicable minimum
will be returned to the payee. The payee of the check may cash or deposit it in
the same way as an ordinary bank check. When a check is presented to the
Transfer Agent for payment, the Transfer Agent will cause a sufficient number of
shares of such fund to be redeemed to cover the amount of the check.
Shareholders are entitled to dividends on the shares redeemed through the day on
which the check is presented to the Transfer Agent for payment.
TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds
(other than AIM MONEY MARKET FUND) are redeemed at their net asset value next
computed after a request for redemption in proper form (including signature
guarantees and other required documentation for written redemptions) is received
by the Transfer Agent, except that Class B shares of the Multiple Class Funds,
and Class A shares of the Multiple Class Funds and shares of the other AIM Funds
that are subject to the contingent deferred sales charge program for large
purchases described above, may be subject to the imposition of deferred sales
charges that will be deducted from the redemption proceeds. See "Multiple
Distribution System" and "Contingent Deferred Sales Charge Program for Large
Purchases." Orders for the redemption of shares received in proper form prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer's failure to
submit a request for redemption within the prescribed time frame will be borne
by that dealer. Telephone redemption requests must be made by NYSE Close on any
business day of an AIM Fund and will be confirmed at the price determined as of
the close of that day. No AIM Fund will accept requests which specify a
particular date for redemption or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally mailed within seven
days following the redemption date. However, in the event of a redemption of
shares purchased by check, the investor may be required to wait up to ten
business days before the redemption proceeds are sent. See "Terms and Conditions
of Purchase of the AIM Funds -- Timing of Purchase Orders." A charge for special
handling (such as wiring of funds or expedited delivery services) may be made by
the Transfer Agent. The right of redemption may
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not be suspended or the date of payment upon redemption postponed except under
unusual circumstances such as when trading on the NYSE is restricted or
suspended. Payment of the proceeds of redemptions relating to shares for which
checks sent in payment have not yet cleared will be delayed until it is
determined that the check has cleared, which may take up to ten business days
from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent by wire to
other than the bank of record for the account; (4) redemptions requesting
proceeds to be sent to a new address or an address that has been changed within
the past 30 days; (5) requests to transfer the registration of shares to another
owner; (6) telephone exchange and telephone redemption authorization forms; (7)
changes in previously designated wiring instructions; and (8) written
redemptions or exchanges of shares previously reported as lost, whether or not
the redemption amount is under $50,000 or the proceeds are to be sent to the
address of record. These requirements may be waived or modified upon notice to
shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the Securities and
Exchange Commission ("SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the NYSE Medallion Signature Program,
provided that in either event, the amount of the transaction involved does not
exceed the surety coverage amount indicated on the medallion. For information
regarding whether a particular institution or organization qualifies as an
"eligible guarantor institution," an investor should contact the Client Services
Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY). Within 90 days of a redemption,
a shareholder may invest all or part of the redemption proceeds in shares of the
AIM Fund from which the redemption was made at the net asset value next computed
after receipt by the Transfer Agent of the funds to be reinvested. The
shareholder must ask the Transfer Agent for such privilege at the time of
reinvestment. A realized gain on the redemption is taxable, and reinvestment
will not alter any capital gains payable. If there has been a loss on the
redemption, all of the loss may not be tax deductible, depending on the timing
and amount reinvested. Under the Code, if the redemption proceeds of fund shares
on which a sales charge was paid are reinvested in (or exchanged for) shares of
the same fund within 90 days of the payment of the sales charge, the
shareholder's basis in the fund shares redeemed may not include the amount of
the sales charge paid, thereby reducing the loss or increasing the gain
recognized from the redemption. Each AIM Fund may amend, suspend or cease
offering this privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation. This privilege may only be exercised once
each year by a shareholder with respect to each AIM Fund.
Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares of the Multiple Class Funds or shares of
any other AIM Fund, and who subsequently reinvest a portion or all of the value
of the redeemed shares in shares of the same AIM Fund within 90 days after such
redemption may do so at net asset value if such privilege is claimed at the time
of reinvestment. Such reinvested proceeds will not be subject to either a
front-end sales charge at the time of reinvestment or an additional contingent
deferred sales charge upon subsequent redemption. In order to exercise this
reinvestment privilege, the shareholder must notify the Transfer Agent of his or
her intent to do so at the time of reinvestment. This reinvestment privilege
does not apply to Class B shares.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon and 4:00 p.m. Eastern Time with respect
to AIM MONEY MARKET FUND), on each "business day" of a fund as previously
defined. In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time)
on a particular day, the net asset value of an AIM Fund's share will be
determined as of the close of the NYSE on such day. For purposes of determining
net asset value per share, futures and options contract closing prices which are
available 15 minutes after the close of trading of the NYSE will generally be
used. The net asset value per share is calculated by subtracting a class'
liabilities from its assets and dividing the result by the total number of class
shares outstanding. The determination of net asset value per share is made in
accordance with generally accepted accounting principles. Among other items,
liabilities include accrued expenses and dividends payable, and total assets
include portfolio securities valued at their market value, as well as income
accrued but not yet received. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the supervision of the fund's officers and in accordance with methods
which are specifically authorized by its governing Board of Directors or
Trustees. Short-term obligations with maturities of 60 days or less, and the
securities held by the Money Market Funds, are valued at amortized cost as
reflecting fair value. AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT and AIM TAX-FREE INTERMEDIATE SHARES value variable rate securities
that have an unconditional demand or put feature exercisable within seven days
or less at par, which reflects the market value of such securities.
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Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund.
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DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund's policy regarding the payment of dividends and distributions is
set forth below.
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- ----------------------- --------------- ---------------
<S> <C> <C> <C>
AIM AGGRESSIVE GROWTH FUND.............. declared and paid annually annually
annually
AIM BALANCED FUND....................... declared and paid annually annually
quarterly
AIM CHARTER FUND........................ declared and paid annually annually
quarterly
AIM CONSTELLATION FUND.................. declared and paid annually annually
annually
AIM GLOBAL AGGRESSIVE GROWTH FUND....... declared and paid annually annually
annually
AIM GLOBAL GROWTH FUND.................. declared and paid annually annually
annually
AIM GLOBAL INCOME FUND.................. declared daily; paid annually annually
monthly
AIM GLOBAL UTILITIES FUND............... declared daily; paid annually annually
monthly
AIM GROWTH FUND......................... declared and paid annually annually
annually
AIM HIGH YIELD FUND..................... declared daily; paid annually annually
monthly
AIM INCOME FUND......................... declared daily; paid annually annually
monthly
AIM INTERMEDIATE GOVERNMENT FUND........ declared daily; paid annually annually
monthly
AIM INTERNATIONAL EQUITY FUND........... declared and paid annually annually
annually
AIM LIMITED MATURITY TREASURY SHARES.... declared daily; paid quarterly annually
monthly
AIM MONEY MARKET FUND................... declared daily; paid at least annually
monthly annually
AIM MUNICIPAL BOND FUND................. declared daily; paid annually annually
monthly
AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT........................... declared daily; paid annually annually
monthly
AIM TAX-EXEMPT CASH FUND................ declared daily; paid at least annually
monthly annually
AIM TAX-FREE INTERMEDIATE SHARES........ declared daily; paid annually annually
monthly
AIM VALUE FUND.......................... declared and paid annually annually
annually
AIM WEINGARTEN FUND..................... declared and paid annually annually
annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods.
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to Class A, Class B or Class C shares
are reinvested in additional shares of such Class, absent an election by a
shareholder to receive cash or to have such dividends and distributions
reinvested in Class A or Class B shares of another Multiple Class Fund, to the
extent permitted. For funds that do not declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date. Shareholders may elect, by written notice to the Transfer
Agent, to receive such distributions, or the dividend portion thereof, in cash,
or to invest such dividends and distributions in shares of another fund in the
AIM Funds; provided that (i) dividends and distributions attributable to Class B
shares may only be reinvested in Class B shares, (ii) dividends and
distributions attributable to Class A shares may not be reinvested in Class B
shares, and (iii) dividends and distributions attributable to the Class C shares
of AIM MONEY MARKET FUND may not be reinvested in the Class A shares of that
Fund or in any Class B shares. Investors who have not previously selected such a
reinvestment option on the account application form may contact the Transfer
Agent at any time to obtain a form to authorize such reinvestments in another
AIM Fund. Such reinvestments into the AIM Funds are not subject to sales
charges, and shares so purchased are automatically credited to the account of
the shareholder.
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Dividends on Class B shares are expected to be lower than those for Class A or
Class C shares because of higher distribution fees paid by Class B shares.
Dividends on Class A, Class B and Class C shares may also be affected by other
class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
TAX MATTERS
Each AIM Fund has qualified and intends to qualify for treatment as a
regulated investment company under Subchapter M of the Code. As long as a fund
qualifies for this tax treatment, it is not subject to federal income taxes on
net investment income and capital gains that are distributed to shareholders.
Each fund, for purposes of determining taxable income, distribution requirements
and other requirements of Subchapter M, is treated as a separate corporation.
Therefore, no fund may offset its gains against another fund's losses and each
fund must individually comply with all of the provisions of the Code which are
applicable to its operations.
TAX TREATMENT OF DISTRIBUTIONS -- GENERAL. Because each AIM Fund intends to
distribute substantially all of its net investment income and net realized
capital gains to its shareholders, it is not expected that any such fund will be
required to pay any federal income tax. Each AIM Fund also intends to meet the
distribution requirements of the Code to avoid the imposition of a
non-deductible 4% excise tax calculated as a percentage of certain undistributed
amounts of taxable ordinary income and capital gain net income. Nevertheless,
shareholders normally are subject to federal income taxes, and any applicable
state and local income taxes, on the dividends and distributions received by
them from a fund whether in the form of cash or additional shares of a fund,
except for tax-exempt dividends paid by AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND, and AIM TAX-FREE
INTERMEDIATE SHARES (the "Tax-Exempt Funds") which are exempt from federal tax.
Dividends paid by a fund (other than capital gain distributions) may qualify for
the federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM HIGH
YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL
EQUITY FUND, AIM LIMITED MATURITY TREASURY SHARES, AIM MONEY MARKET FUND, AIM
MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT
CASH FUND or AIM TAX-FREE INTERMEDIATE SHARES will qualify for this dividends
received deduction. Shortly after the end of each year, shareholders will
receive information regarding the amount and federal income tax treatment of all
distributions paid during the year. No gain or loss will be recognized by
shareholders upon the automatic conversion of Class B shares of a Multiple Class
Fund into Class A shares of such Fund.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, SHAREHOLDERS OF A FUND MUST
FURNISH THE FUND WITH THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER
PENALTIES OF PERJURY THAT THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT
SUBJECT TO BACKUP WITHHOLDING FOR ANY REASON.
Under existing provisions of the Code, nonresident alien individuals, foreign
partnerships and foreign corporations may be subject to federal income tax
withholding at a 30% rate on income dividends and distributions (other than
exempt-interest dividends and capital gain dividends) and return of capital
distributions. Under applicable treaty law, residents of treaty countries may
qualify for a reduced rate of withholding or a withholding exemption.
DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE OR LOCAL TAX
LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED HEREIN.
ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE STATEMENT OF ADDITIONAL
INFORMATION.
TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may give rise to a federal alternative minimum tax liability, may
affect the amount of social security benefits subject to federal income tax, may
affect the deductibility of interest on certain indebtedness of the shareholder,
and may have other collateral federal income tax consequences. The Tax-Exempt
Funds may invest in Municipal Securities the interest on which will constitute
an item of tax preference and which therefore could give rise to a federal
alternative minimum tax liability for shareholders, and may invest up to 20% of
their net assets in such securities and
MCF 04/96*
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other taxable securities. For additional information concerning the alternative
minimum tax and certain collateral tax consequences of the receipt of
exempt-interest dividends, see the Statements of Additional Information
applicable to the Tax-Exempt Funds.
The Tax-Exempt Funds may pay dividends to shareholders which are taxable, but
will endeavor to avoid investments which would result in taxable dividends. The
percentage of dividends which constitute exempt-interest dividends, and the
percentage thereof (if any) which constitute an item of tax preference, will be
determined annually. This percentage may differ from the actual percentages for
any particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional shares.
Distributions of net long-term capital gains will be taxable as long-term
capital gains, whether received in cash or additional shares, and regardless of
the length of time a particular shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM INTERMEDIATE GOVERNMENT FUND and AIM LIMITED MATURITY TREASURY
SHARES -- SPECIAL TAX INFORMATION. Certain states exempt from state income taxes
dividends paid by mutual funds out of interest on U.S. Treasury and certain
other U.S. Government obligations, and investors should consult with their own
tax advisors concerning the availability of such exemption.
AIM INTERNATIONAL EQUITY FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL INCOME FUND AND AIM GLOBAL UTILITIES FUND -- SPECIAL TAX
INFORMATION. For taxable years in which it is eligible to do so, each of these
funds may elect to pass through to shareholders credits for foreign taxes paid.
If the fund makes such an election, a shareholder who receives a distribution
(1) will be required to include in gross income his proportionate share of
foreign taxes allocable to the distribution and (2) may claim a credit or
deduction for such share for his taxable year in which the distribution is
received, subject to the general limitations imposed on the allowance of foreign
tax credits and deductions. Shareholders should also note that certain gains or
losses attributable to fluctuations in exchange rates or foreign currency
forward contracts may increase or decrease the amount of income of the fund
available for distribution to shareholders, and should note that if such losses
exceed other income during a taxable year, the fund would not be able to pay
ordinary income dividends.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM MUNICIPAL BOND
FUND and AIM LIMITED MATURITY TREASURY SHARES, for which The Bank of New York,
110 Washington Street, New York, New York 10286, serves as custodian. Texas
Commerce Bank National Association, P.O. Box 2558, Houston, Texas 77252-8084,
serves as Sub-Custodian for retail purchases of the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a
wholly-owned subsidiary of AIM, serves as each AIM Fund's transfer agent and
dividend payment agent.
LEGAL COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll,
Philadelphia, Pennsylvania, serves as counsel to the AIM Funds and has passed
upon the legality of the shares offered pursuant to this Prospectus.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. A Statement of Additional Information has been filed with the SEC and is
available upon request and without charge, by writing or calling AIM
Distributors. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
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APPENDIX A
- --------------------------------------------------------------------------------
DESCRIPTION OF MONEY MARKET INSTRUMENTS
The following list does not purport to be an exhaustive list of all Money
Market Instruments, and the Funds reserve the right to invest in Money Market
Instruments other than those listed below:
U.S. GOVERNMENT DIRECT OBLIGATIONS -- Bills, notes and bonds issued by the U.S.
Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES -- Certain federal agencies such as the
Government National Mortgage Association have been established as
instrumentalities of the U.S. Government to supervise and finance certain types
of activities. Issues of these agencies, while not direct obligations of the
U.S. Government, are either backed by the full faith and credit of the United
States or are guaranteed by the Treasury or supported by the issuing agencies'
right to borrow from the Treasury.
BANKERS' ACCEPTANCES -- A bill of exchange or time draft drawn on and accepted
by a commercial bank. It is used by corporations to finance the shipment and
storage of goods and to furnish dollar exchange. Maturities are generally six
months or less.
CERTIFICATES OF DEPOSIT -- A negotiable interest-bearing instrument with a
specific maturity. Certificates of deposit are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market, prior to maturity.
TIME DEPOSITS -- A non-negotiable receipt issued by a bank in exchange for the
deposit of funds. Like a certificate of deposit, it earns a specified rate of
interest over a definite period of time; however, it cannot be traded in the
secondary market.
COMMERCIAL PAPER -- The term used to designate unsecured short-term promissory
notes issued by corporations and other entities. Maturities on these issues vary
from a few days to nine months.
REPURCHASE AGREEMENTS -- A repurchase agreement is a contractual undertaking
whereby the seller of securities (limited to U.S. Government securities,
including securities issued or guaranteed by the U.S. Treasury or the various
agencies and instrumentalities of the U.S. Government, including mortgage-backed
securities issued by U.S. Government agencies) agrees to repurchase the
securities at a specified price on a future date determined by negotiations.
MASTER NOTES -- Unsecured demand notes that permit investment of fluctuating
amounts of money at varying rates of interest pursuant to arrangements with
issuers who meet the quality criteria of a Fund. The interest rate on a master
note may fluctuate based upon changes in specified interest rates or be reset
periodically according to a prescribed formula or may be a set rate. Although
there is no secondary market in master notes, if such notes have a demand
feature, the payee may demand payment of the principal amount of the note on
relatively short notice.
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks or corporations,
may carry variable or floating rates of interest. Such instruments bear interest
at rates which are not fixed, but which vary with changes in specified market
rates or indices, such as a Federal Reserve composite index.
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<PAGE> 141
APPENDIX B
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DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED
BY U.S. GOVERNMENT AGENCIES OR INSTRUMENTALITIES
AIM INTERMEDIATE GOVERNMENT FUND may invest in "Agency Securities," as defined
in the Prospectus, including some or all of those listed below. The following
list does not purport to be an exhaustive list of all Agency Securities, and the
Fund reserves the right to invest in Agency Securities other than those listed
below.
EXPORT-IMPORT BANK CERTIFICATES -- are certificates of beneficial interest and
participation certificates issued and guaranteed by the Export-Import Bank of
the United States.
FEDERAL FARM CREDIT SYSTEM NOTES AND BONDS -- are bonds issued by a
cooperatively owned, nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
FEDERAL HOME LOAN BANK NOTES AND BONDS -- are notes and bonds issued by the
Federal Home Loan Bank System.
FHA DEBENTURES -- are debentures issued by the Federal Housing Administration
of the U.S. Government.
FHA INSURED NOTES -- are bonds issued by the Farmers Home Administration of
the U.S. Government.
FEDERAL HOME LOAN MORTGAGE CORPORATION ("FHLMC") BONDS -- are bonds issued and
guaranteed by FHLMC, a corporate instrumentality of the U.S. Government. The
Federal Home Loan Banks own all the capital stock of FHLMC, which obtains its
funds by selling mortgages (as well as participation interests in the mortgages)
and by borrowing funds through the issuance of debentures and otherwise.
FHLMC PARTICIPATION CERTIFICATES OR "FREDDIE MACS" -- represent undivided
interests in specified groups of conventional mortgage loans (and/or
participation interests in those loans) underwritten and owned by FHLMC. At
least 95% of the aggregate principal balance of the whole mortgage loans and/or
participations in a group formed by FHLMC typically consist of single-family
mortgage loans, and not more than 5% consists of multi-family loans. FHLMC
Participation Certificates are not guaranteed by, and do not constitute a debt
or obligation of, the U.S. Government or any Federal Home Loan Bank. FHLMC
Participation Certificates are issued in fully registered form only, in original
unpaid principal balances of $25,000, $100,000, $200,000, $500,000, $1 million
and $5 million. FHLMC guarantees to each registered holder of a Participation
Certificate, to the extent of such holder's pro rata share (i) the timely
payment of interest accruing at the applicable certificate rate on the unpaid
principal balance outstanding on the mortgage loans, and (ii) collection of all
principal on the mortgage loans without any offset or deductions. Pursuant to
these guaranties, FHLMC indemnifies holders of Participation Certificates
against any reduction in principal by reason of charges for property repairs,
maintenance, and foreclosure.
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") BONDS -- are bonds issued and
guaranteed by the Federal National Mortgage Association, a federally chartered
and privately-owned corporation.
FNMA PASS-THROUGH CERTIFICATES OR "FANNIE MAES" -- are mortgage pass-through
certificates issued and guaranteed by FNMA. FNMA Certificates represent a
fractional undivided ownership interest in a pool of mortgage loans either
provided from FNMA's own portfolio or purchased from primary lenders. The
mortgage loans included in the pool are conventional, insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. FNMA
Certificates are not backed by, nor entitled to, the full faith and credit of
the U.S. Government.
Loans not provided from FNMA's own portfolio are purchased only from primary
lenders that satisfy certain criteria developed by FNMA, including depth of
mortgage origination experience, servicing experience and financial capacity.
FNMA may purchase an entire loan pool from a single lender, and issue
Certificates backed by that loan pool alone, or may package a pool made up of
loans purchased from various lenders.
Various types of mortgage loans, and loans with varying interest rates, may be
included in a single pool, although each pool will consist of mortgage loans
related to one-family or two-to-four family residential properties.
Substantially all FNMA mortgage pools currently consist of fixed interest rate
and growing equity mortgage loans, although FNMA mortgage pools may also consist
of adjustable interest rate mortgage loans or other types of mortgage loans.
Each mortgage loans must conform to FNMA's published requirements or guidelines
with respect to maximum principal amount, loan-to-value ratio, loan term,
underwriting standards and insurance coverage.
All mortgage loans are held by FNMA as trustee pursuant to a trust indenture
for the benefit of Certificate holders. The trust indenture gives FNMA
responsibility for servicing or administering the loans in a pool. FNMA
contracts with the lenders or other servicing institutions to perform all
services and duties customary to the servicing of mortgages, as well as duties
specifically prescribed by FNMA, and under FNMA supervision. FNMA may remove
service providers for cause.
The pass-through rate on FNMA Certificates is the lowest annual interest rate
borne by an underlying mortgage loan in the pool, less a fee to FNMA as
compensation for servicing and for FNMA's guarantee. Lenders servicing the
underlying mortgage loans receive as
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<PAGE> 142
compensation a portion of the fee paid to FNMA, the excess yields on pooled
loans with coupon rates above the lowest rate borne by any mortgage loan in the
pool and certain other amounts collected, such as late charges.
The minimum size of a FNMA pool is $1 million of mortgage loans. Registered
holders purchase Certificates in amounts not less than $25,000.
FNMA Certificates are marketed by the servicing lender banks, usually through
securities dealers. The lender of a single lender pool typically markets all
Certificates based on that pool, and lenders of multiple lender pools market
Certificates based on a pro rata interest in the aggregate pool. The amounts of
FNMA Certificates currently outstanding is limited.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") CERTIFICATES OR "GINNIE
MAES" -- are mortgage-backed securities which represent a partial ownership
interest in a pool of mortgage loans issued by lenders such as mortgage bankers,
commercial banks and savings and loan associations. Each mortgage loan included
in the pool is either insured by the Federal Housing Administration or
guaranteed by the Veterans Administration. A "pool" or group of such mortgages
is assembled, and, after being approved by GNMA, is offered to investors through
securities dealers. GNMA is a U.S. Government corporation within the Department
of Housing and Urban Development.
The Portfolio will purchase only GNMA Certificates of the "modified
pass-through" type, which entitle the holder to receive its proportionate share
of all interest and principal payments owed on the mortgage pool, net of fees
paid to the issuer and GNMA, regardless of whether or not the mortgagor actually
makes the payment. GNMA Certificates differ from bonds in that the principal is
paid back monthly by the borrower over the term of the loan rather than returned
in a lump sum at maturity. Payment of principal of and interest on GNMA
Certificates of the "modified pass-through" type is guaranteed by GNMA and
backed by the full faith and credit of the U.S. Government.
The average life of a GNMA Certificate is likely to be substantially less than
the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return on the greater part of principal invested far in advance of
the maturity of the mortgages in the pool. Foreclosures impose no risk to
principal investment because of the GNMA guarantee.
As the prepayment rates of individual mortgage pools will vary widely, it is
not possible to accurately predict the average life of a particular issue of
GNMA Certificates. However, statistics published by the FHA indicate that the
average life of a single-family dwelling mortgage with 25- to 30-year maturity,
the type of mortgage which backs the vast majority of GNMA Certificates, is
approximately 12 years. It is therefore customary practice to treat GNMA
Certificates as 30-year mortgage-backed securities which prepay fully in the
twelfth year.
As a consequence of the fees paid to GNMA and the issuer of GNMA Certificates,
the coupon rate of interest of GNMA Certificates is lower than the interest paid
on the VA-guaranteed or FHA-insured mortgages underlying the Certificates.
The yield which will be earned on GNMA Certificates may vary from their coupon
rates for the following reasons: (i) Certificates may be issued at a premium or
discount, rather than at par; (ii) Certificates may trade in the secondary
market at a premium or discount after issuance; (iii) interest is earned and
compounded monthly which has the effect of raising the effective yield earned on
the Certificates; and (iv) the actual yield of each Certificate is affected by
the prepayment of mortgages included in the mortgage pool underlying the
Certificates and the rate at which principal so prepaid is reinvested. In
addition, prepayment of mortgages included in the mortgage pool underlying a
GNMA Certificate purchased at a premium may result in a loss to the Portfolio.
Due to the large amount of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors, GNMA
Certificates are highly liquid instruments. Prices of GNMA Certificates are
readily available from securities dealers and depend on, among other things, the
level of market rates, the Certificate's coupon rate and the prepayment
experience of the pool of mortgages backing each Certificate.
GENERAL SERVICES ADMINISTRATION PARTICIPATION CERTIFICATES -- are
participation certificates issued by the General Services Administration of the
U.S. Government.
MARITIME ADMINISTRATION BONDS -- are bonds issued and provided by the
Department of Transportation of the U.S. Government.
NEW COMMUNITIES DEBENTURES -- are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
PUBLIC HOUSING NOTES AND BONDS -- are short-term project notes and long-term
bonds issued by public housing and urban renewal agencies in connection with
programs administered by the Department of Housing and Urban Development of the
U.S. Government, the payment of which is secured by the U.S. Government.
SBA DEBENTURES -- are debentures fully guaranteed as to principal and interest
by the Small Business Administration of the U.S. Government.
SLMA DEBENTURES -- are debentures backed by the Student Loan Marketing
Association.
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<PAGE> 143
TITLE XI BONDS -- are bonds issued in accordance with the provisions of Title
XI of the Merchant Marine Act of 1936, as amended, the payment of which is
guaranteed by the U.S. Government.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY BONDS -- are bonds issued by
the Washington Metropolitan Area Transit Authority and are guaranteed by the
Secretary of Transportation of the U.S. Government.
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<PAGE> 144
APPENDIX C
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DESCRIPTIONS OF RATING CATEGORIES
The following are descriptions of ratings assigned by Moody's Investors
Service, Inc. ("Moody's") and Standard and Poor's Corporation ("S&P") to certain
debt securities in which AIM HIGH YIELD FUND and AIM INCOME FUND may invest. See
the Statement of Additional Information for descriptions of other Moody's and
S&P rating categories and those of other rating agencies.
MOODY'S: Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. These are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements, their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
S&P: AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C -- Debt rated BB, B, CCC, CC and C is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties of major risk exposures to adverse conditions.
A-23
<PAGE> 145
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
------------ ----------------------- ------------ -------------------
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
o a corporation
o an organization exempt from tax under Section 501(a), an individual
retirement plan (IRA), or a custodial account under Section 403(b)(7)
o the United States or any of its agencies or instrumentalities
o a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
o a foreign government or any of its political subdivisions, agencies or
instrumentalities
o an international organization or any of its agencies or instrumentalities
o a foreign central bank of issue
o a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
o a futures commission merchant registered with the Commodity Futures Trading
Commission
o a real estate investment trust
o an entity registered at all times during the tax year under the Investment
Company Act of 1940
o a common trust fund operated by a bank under Section 584(a)
o a financial institution
o a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
o a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES - Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF 04/96*
B-1
<PAGE> 146
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney to surrender for redemption any and all unissued shares held
by the Transfer Agent in the designated account(s), or in any other account with
any of the AIM Funds, present or future, which has the identical registration as
the designated account(s), with full power of substitution in the premises. The
Transfer Agent and AIM Distributors are thereby authorized and directed to
accept and act upon any telephone redemptions of shares held in any of the
account(s) listed, from any person who requests the redemption proceeds to be
applied to purchase shares in any one or more of the AIM Funds, provided that
such fund is available for sale and provided that the registration and mailing
address of the shares to be purchased are identical to the registration of the
shares being redeemed. An investor acknowledges by signing the form that he
understands and agrees that the Transfer Agent and AIM Distributors may not be
liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction. The Transfer Agent
reserves the right to cease to act as agent subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone exchange
privilege at any time without notice.
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney to surrender for redemption any and all unissued shares
held by the Transfer Agent in the designated account(s), present or future, with
full power of substitution in the premises. The Transfer Agent and AIM
Distributors are thereby authorized and directed to accept and act upon any
telephone redemptions of shares held in any of the account(s) listed, from any
person who requests the redemption. An investor acknowledges by signing the form
that he understands and agrees that the Transfer Agent and AIM Distributors may
not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as agent subject to this appointment,
and AIM Distributors reserves the right to modify or terminate the telephone
redemption privilege at any time without notice. An investor may elect not to
have this privilege by marking the appropriate box on the application. Then any
exchanges must be effected in writing by the investor (see the applicable Fund's
prospectus under the caption "Exchange Privilege -- Exchanges by Mail").
MCF 04/96*
B-2
<PAGE> 147
[AIM LOGO APPEARS HERE]
THE AIM FAMILY OF FUNDS(R)
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Investment Advisor INVESTMENT OBJECTIVES.................... 2
A I M Advisors, Inc. SUMMARY.................................. 2
11 Greenway Plaza, Suite 1919 THE FUNDS................................ 4
Houston, TX 77046-1173 Table of Fees and Expenses............. 4
Financial Highlights................... 6
Transfer Agent Performance............................ 16
A I M Fund Services, Inc. About the Funds........................ 16
P.O. Box 4739 Investment Programs.................... 17
Houston, TX 77210-4739 Certain Investment Strategies and
Policies............................... 21
Custodian Management............................. 24
State Street Bank and Trust Organization of the Trust.............. 27
Company INVESTOR'S GUIDE TO THE AIM FAMILY OF
225 Franklin Street FUNDS(R)............................... A-1
Boston, MA 02110 Introduction to The AIM Family of
Funds.................................. A-1
The Bank of New York How to Purchase Shares................. A-1
90 Washington Street, 11th Floor Terms and Conditions of Purchase of the
New York, New York 10286 AIM Funds........................... A-2
[AIM Municipal Bond Fund only] Special Plans.......................... A-8
Exchange Privilege..................... A-10
Principal Underwriter How to Redeem Shares................... A-12
A I M Distributors, Inc. Determination of Net Asset Value....... A-15
P.O. Box 4739 Dividends, Distributions and Tax
Houston, TX 77210-4739 Matters................................ A-16
General Information.................... A-18
Independent Accountants Appendix A............................. A-19
KPMG Peat Marwick LLP Appendix B............................. A-20
700 Louisiana Appendix C............................. A-23
NationsBank Bldg. Application Instructions................. B-1
Houston, Texas 77002
</TABLE>
For more complete information about any other fund in The AIM Family of Funds,
including charges and expenses, please call (800) 347-4246 or write to A I M
Distributors, Inc. and request a free prospectus. Please read the prospectus
carefully before you invest or send money.
<PAGE> 148
APPENDIX III
Reproduced below is a discussion of the performance of AIM High Yield for
the fiscal year ended December 31, 1995 that was prepared by its officers and
AIM and was included in its Annual Report dated December 31, 1995.
BONDS STAGE A DRAMATIC RECOVERY IN 1995
Healthy corporate profits, mild inflation, and moderate growth in the
economy mixed the powerful recipe that launched one of the strongest rallies in
bonds on record. The strength of the rally surprised many investors, coming on
the heels of the disappointing performance of bonds in 1994.
During 1995, general bond funds averaged total returns of 16.56%, as
measured by the Lipper General Bond Funds Index. Such performance would be a
strong showing for equity funds in a more typical year. Moreover, 1995 bond
fund returns outdistanced those achieved in 1993, a vintage year for bond
investors when interest rates fell to their lowest levels in a quarter-century.
Declining interest rates were the most visible catalyst driving bond
markets during the year. After boosting interest rates at a record clip in
1994, the Federal Reserve Board reversed its policy and eased interest rates
twice in 1995. It was the first time the central bank had lowered rates since
1992.
The bond market's rally was paced by a sharp drop in long-term yields,
which saw the benchmark 30-year U.S. Treasury fall to 5.95% by year-end, from
7.88% at the close of 1994. According to Lipper Analytical Services, Inc.,
general U.S. Treasury bond funds gained 20.89% for the year, closely followed by
corporate debt BBB-rated funds which rose 18.04%.
Prices of high-yield bonds, which tend to track economic cycles, lagged
behind other fixed-income classes amid concerns that a slowing economy would
impact rising corporate profits. Such concerns were not borne out as the year
progressed. With fourth-quarter earnings just coming in as of this writing,
Barron's estimated that corporate earnings were up 20% overall for the year,
thanks in particular to upside earnings surprises.
Of the companies reporting earnings in the third quarter of 1995, I/B/E/S
International Inc. reported in The Wall Street Journal that 55% were higher
than analysts' expectations, with 14% on target, and 31% below expectations.
These results compared favorably with second-quarter reports, of which 57%
exceeded expectations and 30% were below target.
In the final three months of the year, fixed-income funds actually
outperformed equity funds. The Lipper Fixed-Income Funds Average gained 3.53%
in the last quarter of 1995, compared to 3.05% for the Lipper General Equity
Funds Average.
As the year drew to a close, fixed-income markets were anticipating yet
another interest rate cut by the central bank and a credible budget compromise
in Congress. In December, the 30-year U.S. Treasury bond yield was pushed
below 6% for the first time since late 1993. The further decline in interest
rates encouraged investors to direct funds to high-yield funds. Bloomberg
recently reported that investors poured almost $1.5 billion into high-yield
funds in the 10 weeks ending December 29, 1995.
At year-end, economic conditions continued to favor bonds. Growth in the
economy was predicted at a 2.5% annual rate for the fourth quarter, with
inflation estimated at only 2.4%. Such modest growth lessens the demand for
borrowed funds and keeps interest rates down. It seemed a fitting finale for
1995, which ended triumphantly for investors with stocks at historic highs,
bond yields the lowest since 1993, and the U.S. dollar on solid ground.
YOUR INVESTMENT PORTFOLIO
A glance at the Fund's top 10 industry holdings confirms a successful
theme for AIM High Yield Fund during the reporting period - change. Seven of
the Fund's top 10 holdings were new to the list. The Fund's portfolio was
<PAGE> 149
dynamic and broadly diversified during the reporting period. A rapidly
changing market calls for persistent diligence in credit analysis. Remember to
keep in mind, the Fund's portfolio composition is subject to change and there
is no guarantee the Fund will continue to hold any particular security
mentioned in this report.
Positions in telecommunications and cable TV companies - close to 20% of
the portfolio - comprised the largest weighting by year-end. Many of the
Fund's holdings reported strong earnings during the reporting period thanks to
expanding market penetration and increased sales, particularly overseas.
As the economy slowed during the year, the Fund sold issues in early
cyclical companies, including auto parts, steel, and selected paper and forest
products. The Fund reduced its position in chemical companies, and sold it
specialty chemical complement. Defensive positions in food and drug retailers,
health care, and established venue gaming companies were increased.
Among the new groups added to the portfolio during the year were oil and
gas services, consumer non-durables, and medical instruments/products.
The Fund had an average quality rating of Bf as evaluated by Standard &
Poor's Corporation (S&P), a widely known credit-rating agency. S&P's rating
are historical and are based on an annual analysis of the Fund's credit
quality, composition, and management.
OUTLOOK FOR THE FUTURE
Most analysts and market watchers agree: 1995 will be a hard act to
follow. To trigger similar returns in 1996, the yield on the bellwether
30-year U.S. Treasury bond would have to decline to just over 4%, a level not
seen in 30 years. However, a decline to 5.75% for that same bond would
generate a solid total return of about 12%.
The pace of growth in corporate earnings, one of the strongest drivers for
the high-yield market, appeared to have slowed by year-end. Still, certain
positive remain. By pouring more than $1.5 billion into high-yield funds
during the 10 weeks ended December 29, investors have demonstrated phenomenal
demand for higher current income. By year-end, six-month certificates of
deposit yielded just 4.78%, compared to the more than 10% average yield from
high-yield funds.
Rather than make any projections of future market performance, AIM High
Yield Fund continues to look for value, one company at a time. By confining
the scope of our analysis to individual companies, we can maintain our focus on
credit fundamentals. We believe our commitment to this time-tested,
quality-driven strategy will best serve our shareholders over the long term.
<PAGE> 150
APPENDIX IV
Reproduced below is a discussion of the performance of ASIF for its fiscal
year ended December 31, 1995, that was prepared by its officers and AIM and
included in its Annual Report dated December 31, 1995.
MARKETS STAGE A DRAMATIC RECOVERY IN 1995
Sharply declining interest rates, mild inflation, and healthy corporate
profits mixed the powerful recipe that launched one of the strongest rallies
for stocks and bonds on record. The strength of the rally surprised many
investors, coming on the heels of the disappointing performance of financial
markets in 1994.
The strength in stock markets was broad-based, resuscitating
large-capitalization stocks that had been out of favor for three years. The
popular Dow Jones Industrial Average (DJIA) breached two milestones - sailing
past 4000 in February and 5000 in November - shattering 69 record levels in its
wake by year-end. Not to be outdone, the S&P 500 sprinted ahead of the DJIA to
deliver its best one-year performance since 1958.
The record advance also netted only modest relative volatility - the
largest correction in the DJIA has been no more than 3.3% since its trough in
1990 - thanks to more frequent group rotations within the market. Evolving
market leadership carried various sectors into and out of favor, yet left the
major averages virtually unscathed.
The bond market's rally was paced by a sharp drop in long-term yields,
which saw the benchmark 30-year U.S. Treasury fall to 5.95% by year-end, from
7.88% at the close of 1994. Yields on one-year and five-year U.S. Treasury
securities followed suit by declining more than 200 basis points to 5.132% and
5.150%, respectively. (A basis point is 1/100 of a percentage point.) The
yield on the 90-day U.S. Treasury bill ended the year at 5.08%, and the 30-year
U.S. Treasury bond yield was pushed below 6% for the first time since late
1993.
As the year drew to a close, economic conditions continued to favor bonds.
However, end-of-year profit taking and seasonal tax selling slowed the stock
market's remarkable advance, and most major averages peaked for the year. One
the whole, 1995 ended triumphantly for investors with stocks at historic highs,
bond yields the lowest since 1993, and the U.S. dollar on solid ground.
YOUR INVESTMENT PORTFOLIO
AIM Strategic Income Fund, Inc. delivered a solid performance during 1995
thanks to its unique investment strategy. The Fund invests primarily in
convertible securities, which tend to participate in the appreciation of the
underlying common stocks while providing a higher level of current income.
Convertible securities also tend to decline less in falling markets than the
underlying common stocks. The Fund seeks to generate income from the interest
and dividends paid on the convertible securities, and from the proceeds
generated on "short sales."
In a short sale, the investor first sells the stock at the current market
value, and later repurchases the stock. As a result of short sales, the Fund
creates a credit balance in the portfolio - and may earn additional income for
the shareholder. Short selling also helps the Fund to cushion the portfolio
against market risk.
Remember to keep in mind, the Fund's portfolio composition is subject to
change and there is no guarantee the Fund will continue to hold any particular
security mentioned in this report.
1995 was the strongest year in recent memory for the technology sector.
Semiconductor stocks led the group for much of the year, thanks to surging
demand for PCs from consumer and business systems markets. The Fund benefited
from its positions in such market leaders as LAM Research Corp. and LSI Logic
Corp., which reported record revenues during the year. While the group
retreated late in the year, the Fund maintained a core position in a number of
issues which appeared to offer solid value over the longer term. Worldwide
revenues from the semiconductor market are expected to grow by approximately
20% in 1996.
The phenomenal rise in Internet-related companies later in the year
boosted prices for computer networking stocks, including Bay Networks and 3Com
Corp. Software publishers also reported record profits in 1995.
<PAGE> 151
Approximately 18% of the Fund's portfolio was invested in the health-care
sector. The continuing profit drivers for the health-care sector are three:
an aging baby-boomer population, improving cost containment, and anticipation
of universal coverage for all Health maintenance organizations, hospitals, and
medical services distributors are beginning to reap benefits from ongoing
cost-containment campaigns. The Fund chose to address these themes by
emphasizing those companies most likely to benefit, including Genesis Health
Ventures and Multicare Companies, which posted strong gains during 1995.
The Fund increased its weighting in selected specialty retailers,
particularly "superstores" which have attracted significant business away from
community malls, and the emerging niche retailers which target mail order
customers by offering attractive pricing, better selection, superior
distribution systems, and the convenience of catalogue shopping.
OUTLOOK FOR THE FUTURE
Most analysts and market watchers agree: 1995 will be a hard act to
follow. Yet some maintain that this aging bull market - the Dow has gone more
than five years without experiencing a 10% correction - may have plenty of
steam left. Barron's recently reported analysts' estimates that projected the
Dow well past 5500 during the coming year. Of course, a significant complement
of market strategists also believe a correction is due.
At this writing, the bond market appears to be extending its rally into
the new year. The central bank recently lowered short-term interest rates by
0.25%, a move apparently anticipated by investors given current slope of the
U.S. Treasury yield curve. Lower interest rates could help extend the positive
growth cycle for corporate earnings, a boost for stocks.
Rather than make any projections of future market performance, AIM
Strategic Income Fund, Inc. remains focused on a disciplined investment
strategy which endeavors to reduce volatility and generate above-average
income. The Fund selects convertible securities on a company-by-company basis
to determine which issues to own and which to sell - without the guesswork of
market timing. We believe our commitment to this time-tested strategy will
provide the best opportunity for growth for our shareholders over the long
term.
<PAGE> 152
AIM FUNDS GROUP
SPECIAL PURPOSE STATEMENT OF ADDITIONAL INFORMATION
(PART B)
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Proxy Statement and Prospectus of AIM
Funds Group ("AFG") dated June 7, 1996 which may be obtained at no charge by
writing AFG, 11 Greenway Plaza, Suite 1919, Houston, Texas 77046 or by calling
(800) 347-4246.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement and Prospectus.
A Statement of Additional Information for AIM High Yield Fund ("AIM High
Yield") dated May 1, 1996 has been filed with the SEC, and is incorporated by
reference herein and is attached hereto as Appendix I (the "AIM High Yield
Statement of Additional Information").
The date of this Statement of Additional Information is June 7, 1996.
TABLE OF CONTENTS
ADDITIONAL INFORMATION ABOUT AFG AND AIM HIGH YIELD........................ B-2
FINANCIAL INFORMATION...................................................... B-2
AIM HIGH YIELD STATEMENT OF ADDITIONAL INFORMATION ................. Appendix I
AIM STRATEGIC INCOME FUND ANNUAL REPORT............................. Appendix II
<PAGE> 153
ADDITIONAL INFORMATION ABOUT AFG AND AIM HIGH YIELD
Additional information about AFG and AIM High Yield is contained in the
AIM High Yield Statement of Additional Information. For more information with
respect to AFG and AIM High Yield concerning the following topics, please refer
to the AIM High Yield Statement of Additional Information as indicated: (i)
see the discussion "Introduction" and "General Information About the Trust" for
further general and historical information regarding AFG and AIM High Yield;
(ii) see the discussion "Investment Objectives and Policies," "Investment
Restrictions," "Repurchase Agreements and Reverse Repurchase Agreements" and
"Ratings of Securities" for further information regarding the investment
objectives and policies of AIM High Yield; (iii) see the discussion "Management
of the Trust" for further information regarding management of AIM High Yield;
(iv) see the discussion "Investment Advisory and Other Services," "The
Distribution Plans" and "The Distributor" for further information regarding
investment advisory and other services for AIM High Yield; (v) see the
discussion "Portfolio Transactions and Brokerage" for further information
regarding brokerage allocation and other practices relating to AIM High Yield;
(vi) see the discussion "General Information About the Trust" for further
information regarding the capital stock of AIM High Yield; (vii) see the
discussion "Purchase, Redemption and Pricing of Securities," "Qualifying for a
Reduced Front-End Sales Charge," "Programs and Services for Shareholders" and
"Redemptions Paid in Cash" for further information regarding the purchase,
redemption and pricing of the AIM High Yield securities being offered; (viii)
see the discussion "Tax Matters" for a discussion of the tax status of AIM High
Yield; (ix) see the discussion "The Distributor" for further information
regarding AIM High Yield's distributor; and (x) see the discussion "Performance
Information" for further information regarding the calculation of AIM High
Yield's performance data.
Information regarding control persons and principal holders of AIM High
Yield's securities is set forth under the discussion "Ownership of ASIF and AIM
High Yield Shares" in the Combined Proxy Statement and Prospectus relating to
this Statement of Additional Information.
FINANCIAL INFORMATION
FINANCIAL INFORMATION FOR AIM HIGH YIELD
The Financial Statements for AIM High Yield are set forth under the
discussion "Financial Statements" in the AIM High Yield Statement of Additional
Information attached hereto as Appendix I.
FINANCIAL INFORMATION FOR ASIF
The Financial Statements for the AIM Strategic Income Fund, Inc. ("ASIF")
for the fiscal year ended December 31, 1995 are set forth in the Annual Report
of ASIF dated December 31, 1995, which is incorporated herein and attached
hereto as Appendix II.
B-2
<PAGE> 154
APPENDIX I
STATEMENT OF
ADDITIONAL INFORMATION
AIM FUNDS GROUP
AIM BALANCED FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM GLOBAL UTILITIES FUND AIM MONEY MARKET FUND
AIM GROWTH FUND AIM MUNICIPAL BOND FUND
AIM HIGH YIELD FUND AIM VALUE FUND
AIM INCOME FUND
11 Greenway Plaza
Suite 1919
Houston, Texas 77046-1173
(713) 626-1919
_________________________
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND IT SHOULD BE
READ IN CONJUNCTION WITH A PROSPECTUS FOR THE ABOVE-NAMED FUNDS, A COPY OF
WHICH MAY BE OBTAINED FROM AUTHORIZED DEALERS OR BY WRITING A I M DISTRIBUTORS,
INC., P.O. BOX 4739, HOUSTON, TEXAS 77210-4739, OR BY CALLING (800) 347-4246
_________________________
Statement of Additional Information Dated: May 1, 1996
Relating to the Prospectus Dated: May 1, 1996
<PAGE> 155
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GENERAL INFORMATION ABOUT THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Trust and its Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Total Return Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Yield Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
General Brokerage Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 28(e) Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
All Funds except AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
AIM Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
AIM Global Utilities Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Lending Portfolio Securities: All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Covered Call Options: All Funds except AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . 13
Short Sales: AIM Balanced Fund and AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Futures Contracts: All Funds except AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . 14
Options on Futures Contracts: All Funds except AIM Money Market Fund . . . . . . . . . . . . . . . . . . . 15
Risks as to Futures Contracts and Related Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Delayed Delivery Agreements: All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
When-Issued Securities: All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
AIM Balanced Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
AIM Global Utilities Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
AIM Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
AIM Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
AIM Intermediate Government Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
AIM Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
AIM Value Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
MANAGEMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
THE DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
THE DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
i
<PAGE> 156
<TABLE>
<S> <C>
HOW TO PURCHASE AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
QUALIFYING FOR A REDUCED FRONT-END SALES CHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
PROGRAMS AND SERVICES FOR SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Dividend Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
REDEMPTIONS PAID IN CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
DESCRIPTION OF MONEY MARKET INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Money Market Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Custodians and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
RATINGS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS-1
</TABLE>
ii
<PAGE> 157
INTRODUCTION
AIM Funds Group (the "Trust") is a series mutual fund. The rules and
regulations of the Securities and Exchange Commission (the "SEC") require all
mutual funds to furnish prospective investors certain information concerning
the activities of a fund being considered for investment. This information is
included in a Prospectus (the "Prospectus"), dated May 1, 1996, which relates
to all nine of the Trust's portfolios (collectively, the "Funds" and each
separately a "Fund"). Copies of the Prospectus and additional copies of this
Statement of Additional Information may be obtained without charge by writing
the principal distributor of the Funds' shares, A I M Distributors, Inc. ("AIM
Distributors"), P.O. Box 4739, Houston, Texas 77210-4739, or by calling (800)
347-4246. Investors must receive a Prospectus before they invest in any Fund.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Funds' current Prospectus, and in order to avoid
repetition, reference will be made herein to sections of the Prospectus.
Additionally, the Prospectus and this Statement of Additional Information omit
certain information contained in the Trust's Registration Statement filed with
the SEC. Copies of the Registration Statement, including items omitted from the
Prospectus and this Statement of Additional Information, may be obtained from
the SEC by paying the charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust was previously organized as a Massachusetts business trust
pursuant to a Master Trust Agreement, dated October 30, 1984, as amended.
Pursuant to agreements and plans of reorganization, the Funds were reorganized
on October 15, 1993 as portfolios of AIM Funds Group, a Delaware business
trust. The Trust currently is organized under an Agreement and Declaration of
Trust, dated May 5, 1993, as amended (the "Trust Agreement"). Each Fund is a
series of shares of the Trust. Under the Trust Agreement, the Board of Trustees
is authorized to create new series of shares without the necessity of a vote of
shareholders of the Trust.
On October 15, 1993, the Funds (other than AIM BALANCED FUND and AIM
MONEY MARKET FUND) succeeded to the assets and assumed the liabilities of the
funds with corresponding names (the "Predecessor Funds") of AIM Funds Group, a
Massachusetts business trust ("AFG"), pursuant to an Agreement and Plan of
Reorganization between the Trust and AFG. Also on October 15, 1993, AIM
BALANCED FUND succeeded to the assets and assumed the liabilities of AIM
Convertible Securities, Inc., a Maryland corporation ("ACS"), pursuant to an
Agreement and Plan of Reorganization between the Trust and ACS. Finally, on
October 16, 1993, AIM MONEY MARKET FUND succeeded to the assets and assumed the
liabilities of the AIM Cash Fund and AIM Money Market Fund(C) portfolios of AFG
and the AIM Money Market Fund portfolio of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization among the Trust, AFG and STIC. All historical financial and
other information contained in this Statement of Additional Information for
periods prior to October 15, 1993 relating to the Funds (or a class thereof) is
that of the Predecessor Funds (or the corresponding class thereof) or ACS.
However, the historical financial and other information relating to AIM MONEY
MARKET FUND does not reflect information prior to October 16, 1993. Pursuant
to an Amendment to the Trust Agreement, dated May 1, 1995, AIM UTILITIES FUND
changed its name to AIM GLOBAL UTILITIES FUND. Also, the Trust Agreement was
amended on September 25, 1995, to reflect a name change of AIM Government
Securities Fund to AIM INTERMEDIATE GOVERNMENT FUND. Shares of beneficial
interest of the Trust are redeemable at their net asset value at the option of
the shareholder or at the option of the Trust in certain circumstances. For
information concerning the methods of redemption and the rights of share
ownership, investors should consult the Prospectus under the captions
"Organization of the Trust" and "How to Redeem Shares."
1
<PAGE> 158
The assets received by the Trust from the issue or sale of shares of
each of its series of shares, and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
the appropriate Fund. They constitute the underlying assets of each Fund, are
required to be segregated on the Trust's books of account, and are to be
charged with the expenses with respect to such Fund and its respective classes.
Any general expenses of the Trust not readily identifiable as belonging to a
particular Fund are allocated by or under the direction of the Board of
Trustees, primarily on the basis of relative net assets, or other relevant
factors.
Each share of each Fund represents an equal proportionate interest in
that Fund with each other share and is entitled to such dividends and
distributions out of the income belonging to such Fund as are declared by the
Board. Each Fund, except AIM MONEY MARKET FUND, offers two separate classes of
shares: Class A shares and Class B shares. AIM MONEY MARKET FUND offers three
separate classes of shares: Class A shares, Class B shares and Class C shares.
Each such class represents interests in the same portfolio of investments but,
as further described in the Prospectus, each such class is subject to differing
sales charges and expenses, which differences will result in differing net
asset values and dividends and distributions. Upon any liquidation of the
Trust, shareholders of each class are entitled to share pro rata in the net
assets belonging to the applicable Fund available for distribution.
PERFORMANCE INFORMATION
Total return and yield figures for the Funds are neither fixed nor
guaranteed, and no Fund's principal is insured. Performance quotations reflect
historical information and should not be considered representative of a Fund's
performance for any period in the future. Performance is a function of a
number of factors which can be expected to fluctuate. The Funds may provide
performance information in reports, sales literature and advertisements. The
Funds may also, from time to time, quote information about the Funds published
or aired by publications or other media entities which contain articles or
segments relating to investment results or other data about one or more of the
Funds. The following is a list of such publications or media entities:
<TABLE>
<S> <C> <C>
Advertising Age Forbes Nation's Business
Barron's Fortune New York Times
Best's Review Hartford Courant Pension World
Broker World Inc. Pensions & Investments
Business Week Institutional Investor Personal Investor
Changing Times Insurance Forum Philadelphia Inquirer
Christian Science Monitor Insurance Week USA Today
Consumer Reports Investor's Daily U.S. News & World Report
Economist Journal of the American Wall Street Journal
FACS of the Week Society of CLU & ChFC Washington Post
Financial Planning Kiplinger Letter CNN
Financial Product News Money CNBC
Financial Services Week Mutual Fund Forecaster PBS
Financial World
</TABLE>
Each Fund may also compare its performance to performance data of
similar mutual funds as published by the following services:
<TABLE>
<S> <C>
Bank Rate Monitor Stanger
Donoghue's Weisenberger
Mutual Fund Values (Morningstar) Lipper Analytical Services
</TABLE>
2
<PAGE> 159
Each Fund's performance may also be compared in advertising to the
performance of comparative benchmarks such as the following:
<TABLE>
<S> <C>
Standard & Poor's 400 Index
Standard & Poor's 500 Stock Index Bond Buyer Index
Dow Jones Industrial Average NASDAQ
EAFE Index COFI
Consumer Price Index First Boston High Yield Index
Lehman Bond Indices
</TABLE>
Each Fund may also compare its performance to rates on Certificates of
Deposit and other fixed rate investments such as the following:
10 year Treasuries
30 year Treasuries
90 day Treasury Bills
Advertising for AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND and AIM
VALUE FUND may from time to time include discussions of general economic
conditions and interest rates. Advertising for such Funds and for AIM BALANCED
FUND may also include references to the use of those Funds as part of an
individual's overall retirement investment program. From time to time, sales
literature and/or advertisements for any of the Funds may disclose (i) the
largest holdings in the Fund's portfolio, (ii) certain selling group members
and/or (iii) certain institutional shareholders.
From time to time, the Funds' sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. This
includes, but is not limited to, literature addressing general information
about mutual funds, variable annuities, dollar-cost averaging, stocks, bonds,
money markets, certificates of deposit, retirement, retirement plans, asset
allocation, tax-free investing, college planning, inflation.
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential
investments, investors should note that the methods of computing performance of
other potential investments are not necessarily comparable to the methods
employed by a Fund.
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return, as described in the
Prospectus, is as follows:
n
P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable
maximum sales load is deducted at the beginning of the
1, 5, or 10 year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the 1, 5, or 10 year periods (or
fractional portion of such period).
The average annual total returns for each of the named Funds, with
respect to its Class A shares, for the one, five and ten year periods (or since
inception, if shorter) ended December 31, 1995 were as follows:
3
<PAGE> 160
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1995
--------------------------------------
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS
-------------- ------ ------- --------
<S> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . . . . . . . . 28.56% 17.10% 9.40%
AIM Global Utilities Fund . . . . . . . . . . . . . . . . 21.02% 9.92% N/A
AIM Growth Fund . . . . . . . . . . . . . . . . . . . . . 26.93% 11.40% 10.46%
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . 11.26% 16.93% 10.84%
AIM Income Fund . . . . . . . . . . . . . . . . . . . . . 16.93% 9.57% 9.17%
AIM Intermediate Government Fund . . . . . . . . . . . . . 10.74% 6.56% N/A
AIM Municipal Bond Fund . . . . . . . . . . . . . . . . . 7.65% 7.42% 8.24%
AIM Value Fund . . . . . . . . . . . . . . . . . . . . . . 27.43% 21.14% 17.13%
</TABLE>
* The inception dates of the Class A shares of AIM GLOBAL UTILITIES
FUND and AIM INTERMEDIATE GOVERNMENT FUND were January 18, 1988 and
April 28, 1987, respectively.
The average annual total returns for each of the named Funds, with
respect to its Class B shares, for the periods ended December 31, 1995, were as
follows:
<TABLE>
<CAPTION>
CLASS B SHARES: PERIODS ENDED DECEMBER 31, 1995
-------------- -------------------------------
1 YEAR SINCE INCEPTION**
-------- -------------------
<S> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . . . . 28.92% 8.03%
AIM Global Utilities Fund . . . . . . . . . . . . 22.16% 1.13%
AIM Growth Fund . . . . . . . . . . . . . . . . . 28.00% 8.54%
AIM High Yield Fund . . . . . . . . . . . . . . . 10.91% 6.07%
AIM Income Fund . . . . . . . . . . . . . . . . . 16.72% 3.29%
AIM Intermediate Government Fund . . . . . . . . . 10.22% 3.20%
AIM Municipal Bond Fund . . . . . . . . . . . . . 7.14% 2.63%
AIM Value Fund . . . . . . . . . . . . . . . . . . 28.73% 13.84%
</TABLE>
** The inception date of the Class B shares of AIM GLOBAL UTILITIES
FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND and AIM MUNICIPAL BOND FUND was September
1, 1993; and the inception date of the Class B shares of AIM BALANCED
FUND and AIM VALUE FUND was October 18, 1993.
The average annual total returns for AIM MONEY MARKET FUND, with
respect to its Class A shares, Class B shares and Class C shares, for the year
ended December 31, 1995 were -0.88%, -0.73% and 5.04%, respectively; and since
inception (October 16, 1993) were 1.35%, 1.94% and 4.04%, respectively.
Standard total return quotes may be accompanied by total return
figures calculated by alternative methods. For example, average annual total
return may be calculated without assuming payment of the full sales load
according to the following formula:
n
P(1+U) =ERV
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only a
stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
4
<PAGE> 161
Cumulative total return across a stated period may be calculated
as follows:
n
P(1+V) =ERV
Where P = a hypothetical initial payment of $1,000.
V = cumulative total return assuming payment of all of, a
stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
YIELD QUOTATIONS
The standard formula for calculating yield (including tax-equivalent
yield for AIM MUNICIPAL BOND FUND) for each Fund except AIM MONEY MARKET FUND,
as described in the Prospectus, is as follows:
6
YIELD = 2[((a-b)/(c x d) + 1) -1]
Where a = dividends and interest earned during a stated 30-day
period. For purposes of this calculation, dividends
are accrued rather than recorded on the ex-dividend
date. Interest earned under this formula must
generally be calculated based on the yield to maturity
of each obligation (or, if more appropriate, based on
yield to call date).
b = expenses accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during
the period.
d = the maximum offering price per share on the last day of
the period.
Tax-equivalent yield for AIM MUNICIPAL BOND FUND will be calculated by
dividing that portion of the yield of the Fund (as determined above) which is
tax-exempt by one minus a stated income tax rate and adding the product to that
portion of the yield that is not tax-exempt.
The yields for each of the named Funds were as follows:
<TABLE>
<CAPTION>
30 DAYS ENDED DECEMBER 31, 1995
---------------------------------
CLASS A SHARES CLASS B SHARES
-------------- --------------
<S> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . . . . . . 2.33% 1.60%
AIM Global Utilities Fund . . . . . . . . . . . . . . 2.95% 2.48%
AIM High Yield Fund . . . . . . . . . . . . . . . . . 10.39%* 10.26%*
AIM Income Fund . . . . . . . . . . . . . . . . . . . 6.83% 6.47%
AIM Intermediate Government Fund . . . . . . . . . . . 5.05% 4.92%
AIM Municipal Bond Fund . . . . . . . . . . . . . . . 4.22%** 3.61%**
</TABLE>
* The relatively high yields in this Fund, like that of other junk
bond funds, reflect a substantial premium for the high default
risk perceived by the market. Investors should not consider these
yields a measure of income potential.
** The tax-equivalent yield, assuming a tax rate of 36%, for the
Class A shares and Class B shares of AIM MUNICIPAL BOND FUND was
6.59% and 5.64%, respectively.
The standard formula for calculating annualized yield for AIM MONEY
MARKET FUND, as described in the Prospectus, is as follows:
5
<PAGE> 162
V - V
1 0 365
Y = ------- X ---
V 7
0
Where Y = annualized yield.
V = the value of a hypothetical pre-existing account in
0 the Fund having a balance of one share at the
beginning of a stated seven-day period.
V = the value of such an account at the end of the stated
1 period.
The annualized yield for each of the Class A, Class B and Class C shares
of AIM MONEY MARKET FUND for the 7 days ended December 31, 1995, was 4.71%,
4.00% and 4.69%, respectively.
The standard formula for calculating effective annualized yield for AIM
MONEY MARKET FUND, as described in the Prospectus, is as follows:
365/7
EY = (Y+1) -1
Where EY = effective annualized yield.
Y = annualized yield, as determined above.
The effective annualized yield for each of the Class A, Class B and
Class C shares of AIM MONEY MARKET FUND for the 7 days ended December 31, 1995
was 4.82%, 4.08% and 4.80%, respectively.
For the purpose of determining the annualized yield and effective
annualized yield, the net change in the value of the hypothetical AIM MONEY
MARKET FUND account reflects the value of additional shares purchased with
dividends from the original shares and any such additional shares, and all fees
charged, other than non-recurring account or sales charges, to all shareholder
accounts in proportion to the length of the base period and the Fund's average
account size, but does not include realized gains and losses or unrealized
appreciation and depreciation.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
Subject to policies established by the Board of Trustees of the Trust,
A I M Advisors, Inc. ("AIM") is responsible for decisions to buy and sell
securities for each Fund, for the selection of broker-dealers, for the
execution of each Fund's investment portfolio transactions, for the allocation
of brokerage fees in connection with such transactions, and where applicable,
for the negotiation of commissions and spreads on transactions. AIM's primary
consideration in effecting a security transaction is to obtain the best net
price and the most favorable execution of the order. While AIM generally seeks
reasonably competitive commission rates, a Fund does not necessarily pay the
lowest commission or spread available.
A portion of the securities in which each Fund invests may be traded in
over-the-counter ("OTC") markets, and in such transactions, the Fund deals
directly with the dealers who make markets in the securities involved, except
in those circumstances where better prices and executions are available
elsewhere. Portfolio transactions placed through dealers serving as primary
market makers are effected at net prices, without commissions as such, but
which include compensation in the form of mark up or mark down.
Foreign equity securities may be held by a Fund in the form of American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") or other
securities representing underlying securities of foreign issuers, or securities
convertible into foreign equity securities. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs are receipts typically issued by a United States
bank or trust company which evidence ownership of underlying securities
6
<PAGE> 163
issued by a foreign corporation. EDRs are receipts issued in Europe which
evidence a similar ownership arrangement. Generally, ADRs, in registered form,
are designed for use in the United States securities markets, and EDRs, in
bearer form, are designed for use in European securities markets. ADRs and
EDRs may be listed on stock exchanges, or traded in OTC markets in the United
States or Europe, as the case may be. ADRs, like other securities traded in
the United States, will be subject to negotiated commission rates.
AIM may from time to time determine target levels of commission business
for AIM to transact with various brokers on behalf of its clients (including
the Funds) over a certain time period. The target levels will be determined
based upon the following factors, among others: (1) the execution services
provided by the broker; (2) the research services provided by the broker; and
(3) the broker's attitude toward and interest in mutual funds in general and in
the Funds and other mutual funds advised by AIM (collectively, the "AIM Funds")
in particular. No specific formula will be used in connection with any of the
foregoing considerations in determining the target levels. However, if a
broker has indicated a certain level of desired commissions in return for
certain research services provided by the broker, this factor will be taken
into consideration by AIM.
Subject to the overall objective of obtaining best price and execution
for the Funds, AIM may also consider sales of shares of the Funds and of the
other AIM Funds as a factor in the selection of broker-dealers to execute
portfolio transactions for the Funds.
AIM will seek, whenever possible, to recapture for the benefit of each
Fund any commissions, fees, brokerage or similar payments paid by such Fund on
portfolio transactions. Normally, the only fees which may be recaptured are
the soliciting dealer fees on the tender of an account's portfolio securities
in a tender or exchange offer.
The Funds are not under any obligation to deal with any broker or group
of brokers in the execution of transactions in portfolio securities. Brokers
who provide supplemental investment research to AIM may receive orders for
transactions by the Funds. Information so received will be in addition to and
not in lieu of the services required to be performed by AIM under its
agreements with the Trust, on behalf of each Fund, and the expenses of AIM will
not necessarily be reduced as a result of the receipt of such supplemental
information. Certain research services furnished by broker-dealers may be
useful to AIM in connection with its services to other advisory clients,
including the other AIM Funds. Also, each Fund may pay a higher price for
securities or higher commissions in recognition of research services furnished
by broker-dealers.
For the year ended December 31, 1995, AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM GROWTH FUND and AIM VALUE FUND directed certain brokerage
transactions to broker-dealers that provided AIM with research, statistical and
other information: $4,535,522, $11,696,495, $21,954,975 and $753,201,273,
respectively. For the same period, AIM BALANCED FUND, AIM GLOBAL UTILITIES
FUND, AIM GROWTH FUND and AIM VALUE FUND paid the following in related
brokerage commissions: $7,039, $20,758, $35,253 and $1,146,015, respectively.
AIM and its affiliates manage several other investment accounts, some of
which may have investment objectives similar to those of one or more of the
Funds. It is possible that, at times, identical securities will be appropriate
for investment by one or more of the Funds and by one or more of such
investment accounts. The position of each account; however, in the securities
of the same issue may vary and the length of time that each account may choose
to hold its investment in the securities of the same issue may likewise vary.
The timing and amount of purchase by each account will also be determined by
its cash position. If the purchase or sale of securities is consistent with
the investment policies of a Fund and one or more of these accounts, and is
considered at or about the same time, transactions in such securities will be
allocated among such Fund and such accounts in a manner deemed equitable by
AIM. AIM may combine such transactions, in accordance with applicable laws and
regulations, in order to obtain the best net price and most favorable
execution. Simultaneous transactions could, however, adversely affect the
ability of a Fund to obtain or dispose of the full amount of a security which
it seeks to purchase or sell.
7
<PAGE> 164
In some cases the procedure for allocating portfolio transactions among
the various investment accounts advised by AIM could have an adverse effect on
the price or amount of securities available to a Fund. In making such
allocations, the main factors considered by AIM are the respective investment
objectives and policies of its advisory clients, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment, the size of investment commitments generally held and the judgments
of the persons responsible for recommending the investment.
From time to time, an identical security may be sold by an AIM Fund or
another investment account advised by AIM or A I M Capital Management, Inc.
("AIM Capital") and simultaneously purchased by another investment account
advised by AIM or AIM Capital, when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment
objective(s) and policies of the investment accounts involved. Procedures
pursuant or Rule 17a-7 under the Investment Company Act of 1940, as amended
(the "1940 Act") regarding transactions between investment accounts advised by
AIM or AIM Capital have been adopted by the Boards of Directors/Trustees of the
various AIM Funds including the Trust. Although such transactions may result
in custodian, tax or other related expenses, no brokerage commissions or other
direct transaction costs are generated by transactions among the investment
accounts advised by AIM or AIM Capital.
The increase in the portfolio turnover rate for AIM INCOME FUND from
1993 to 1994 was in response to increases in the prevailing market interest
rates, and resulted from AIM's attempt to shorten the Fund's average duration
and increase investments in the foreign sector and non-investment grade debt
securities. The decrease in the portfolio turnover rate for AIM GROWTH FUND
from 1994 to 1995 was a result of the completion of AIM's realignment of the
Fund's portfolio investments.
SECTION 28(e) STANDARDS
Under Section 28(e) of the Securities Exchange Act of 1934, AIM shall
not be deemed to have acted unlawfully or to have breached its fiduciary duty
solely because under certain circumstances it has caused an account to pay a
higher commission than the lowest available. To obtain the benefit of Section
28(e), AIM must make a good faith determination that the commissions paid are
"reasonable in relation to the value of the brokerage and research services
provided . . . viewed in terms of either that particular transaction or
[AIM's] overall responsibilities with respect to the accounts as to which it
exercises investment discretion," and that the services provided by a broker
provide AIM with lawful and appropriate assistance in the performance of its
investment decision-making responsibilities. Accordingly, the price to a Fund
in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered.
Broker-dealers utilized by AIM may furnish statistical, research and
other information or services which are deemed by AIM to be beneficial to the
Funds' investment programs. Research services received from brokers supplement
AIM's own research (and the research of sub-advisors to other clients of AIM),
and may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
political developments; portfolio management strategies; performance
information on securities and information concerning prices of securities; and
information supplied by specialized services to AIM and to the Trust's trustees
with respect to the performance, investment activities and fees and expenses of
other mutual funds. Such information may be communicated electronically,
orally or in written form. Research services may also include the providing of
equipment used to communicate research information, the arranging of meetings
with management of companies and the providing of access to consultants who
supply research information.
The outside research assistance is useful to AIM since the brokers
utilized by AIM as a group tend to follow a broader universe of securities and
other matters than AIM's staff can follow. In addition, this research provides
AIM with a diverse perspective on financial markets. Research services which
are provided to AIM by brokers are available for the benefit of all accounts
managed or advised by AIM or by sub-advisors to
8
<PAGE> 165
accounts managed or advised by AIM. In some cases, the research services are
available only from the broker providing such services. In other cases, the
research services may be obtainable from alternative sources in return for cash
payments. AIM is of the opinion that because the broker research supplements
rather than replaces its research, the receipt of such research does not tend
to decrease its expenses, but tends to improve the quality of its investment
advice. However, to the extent that AIM would have purchased any such research
services had such services not been provided by brokers, the expenses of such
services to AIM could be considered to have been reduced accordingly. Certain
research services furnished by broker-dealers may be useful to AIM in advising
clients other than the Funds. Similarly, any research services received by AIM
through the placement of portfolio transactions of other clients may be of
value to AIM in fulfilling its obligations to the Funds. AIM is of the opinion
that this material is beneficial in supplementing AIM's research and analysis
and therefore it may benefit the Funds by improving the quality of AIM's
investment advice. The advisory fees paid by the Funds are not reduced because
AIM receives such services.
Some broker-dealers may indicate that the provision of research services
is dependent upon the generation of certain specified levels of commissions and
underwriting concessions by AIM's clients, including the Funds.
With respect to AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM MONEY MARKET FUND and AIM MUNICIPAL BOND FUND, purchases
and sales of portfolio securities are generally transacted with the issuer or a
primary market maker for the securities on a net basis, without any brokerage
commission being paid by the Funds for such purchases. Purchases and sales of
certain portfolio securities for AIM BALANCED FUND are transacted on a net
basis, without any brokerage commission being paid by the Fund. Purchases from
dealers serving as primary market makers reflect the spread between the bid and
asked prices. Purchases and sales for AIM GLOBAL UTILITIES FUND, AIM GROWTH
FUND and AIM VALUE FUND generally involve a broker, and purchases and sales for
AIM BALANCED FUND often involve a broker, and consequently involve the payment
of commissions.
As of December 31, 1995, AIM BALANCED FUND held an amount of common
stock issued by Merrill Lynch & Co. Inc. having a market value of
$357,000. As of December 31, 1995, AIM MONEY MARKET FUND had entered into
a repurchase agreement with Goldman, Sachs & Co. having a market value of
$135,000,000. Goldman, Sachs & Co. and Merrill Lynch & Co. Inc. are regular
brokers of the Trust, as defined in Rule 10b-1 under the 1940 Act.
Except as noted, the Trust does not utilize an affiliated broker or
dealer in effecting portfolio transactions and does not recapture commissions
paid in such transactions. Brokerage commissions or underwriting concessions
(or both) paid by each of the Funds listed below were as follows for the years
ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
FUND 1995 1994 1993
---- ------------ ------ -------
(000) (000) (000)
<S> <C> <C> <C>
AIM Global Utilities Fund . . . . . . . . . $ 596 $ 799 $ 729
AIM Growth Fund . . . . . . . . . . . . . . 520 803 880
AIM High Yield Fund . . . . . . . . . . . . -0- -0- -0-
AIM Income Fund . . . . . . . . . . . . . . 4 106 -0-
AIM Intermediate Government Fund . . . . . -0- -0- -0-
AIM Municipal Bond Fund . . . . . . . . . . -0- -0- -0-
AIM Value Fund . . . . . . . . . . . . . . 17,964 6,611 3,075
----------
</TABLE>
AIM BALANCED FUND paid brokerage commissions or underwriting
commissions (or both) for the years ended December 31, 1995 and 1994 in the
amounts of $116,541 and $85,610, respectively, for the four-month
period ended December 31, 1993 in the amount of $10,867, and for the year ended
August 31, 1993 in the amount of $38,185.
9
<PAGE> 166
Provisions of the 1940 Act and rules and regulations thereunder have
been construed to prohibit the Funds from purchasing securities or instruments
from, or selling securities or instruments to, any holder of 5% or more of the
voting securities of any investment company managed or advised by AIM. The
Funds have obtained an order of exemption from the SEC which permits them to
engage in certain transactions with such a 5% holder if the Funds comply with
conditions and procedures designed to ensure that such transactions are
executed at fair market value and present no conflict of interest.
INVESTMENT OBJECTIVES AND POLICIES
For a general discussion of the investment objective(s) and policies
of each Fund, see the sections entitled "Investment Objectives" and "Investment
Programs" in the Prospectus.
ALL FUNDS EXCEPT AIM MONEY MARKET FUND
AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND and AIM VALUE FUND invest
in securities traded in the over-the-counter market or listed on a national
securities exchange, while AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND and AIM MUNICIPAL BOND FUND generally acquire
bonds in new offerings or in principal trades with broker-dealers. AIM
BALANCED FUND, investing in both equity and debt securities, acquires
securities in the over-the-counter market and on national securities
exchanges, and acquires bonds in new offerings or in principal trades with
broker-dealers. Ordinarily, the Funds do not purchase securities with the
intention of engaging in short-term trading. However, any particular security
will be sold, and the proceeds reinvested, whenever such action is deemed
prudent from the viewpoint of a Fund's investment objectives, regardless of the
holding period of that security.
The Funds may invest in high quality, short-term money market
instruments such as certificates of deposit, commercial paper, bankers'
acceptances, short-term U.S. Government obligations and repurchase agreements,
pending investment in portfolio securities, to meet anticipated short-term cash
needs such as dividend payments or redemptions of shares, or for temporary
defensive purposes. Such investments generally are the type in which AIM MONEY
MARKET FUND invests, generally will have maturities of 60 days or less and
normally are held to maturity. See "Description of Money Market Instruments."
The underlying securities that are subject to a repurchase agreement will be
"marked-to-market" on a daily basis so that AIM can determine the value of the
securities in relation to the amount of the repurchase agreement.
U.S. Government securities may take the form of participation
interests in, and may be evidenced by, deposit or safekeeping receipts.
Participation interests are pro rata interests in U.S. Government securities.
A Fund may acquire participation interests in pools of mortgages sold by the
Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Banks. Instruments
evidencing deposit or safekeeping are documentary receipts for such original
securities held in custody by others.
U.S. Government securities, including those that are guaranteed by
federal agencies or instrumentalities, may or may not be backed by the "full
faith and credit" of the United States. Some securities issued by federal
agencies or instrumentalities are only supported by the credit of the agency or
instrumentality (such as the Federal Home Loan Banks) while others have an
additional line of credit with the U.S. Treasury (such as the Federal National
Mortgage Association). In the case of securities not backed by the full faith
and credit of the United States, the Funds must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments.
AIM MONEY MARKET FUND
The types of money market instruments in which the Fund presently
invests are listed under "Description of Money Market Instruments" in the
Prospectus and this Statement of Additional Information. If the trustees
determine that it may be advantageous to invest in other types of money market
instruments, the
10
<PAGE> 167
Fund may invest in such instruments, if it is permitted to do so by its
investment objectives, policies and restrictions.
The rating applied to a security at the time the security is purchased
by the Fund may be changed while the Fund holds such security in its portfolio.
This change may affect, but will not necessarily compel, a decision to dispose
of a security. If the major rating services used by the Fund were to alter
their standards or systems for ratings, the Fund would then employ ratings
under the revised standards or systems that would be comparable to those
specified in its current investment objectives, policies and restrictions.
The Board of Trustees has established procedures in compliance with
Rule 2a-7 under the 1940 Act that include reviews of portfolio holdings by the
trustees at such intervals as they may deem appropriate to determine whether
net asset value, calculated by using available market quotations, deviates from
$1.00 per share and, if so, whether such deviation may result in material
dilution or is otherwise unfair to investors or existing shareholders. In the
event the trustees determine that a deviation having such a result exists, they
intend to take such corrective action as they deem necessary and appropriate,
including, but not limited to, the following: the sale of portfolio
instruments prior to maturity in order to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends; authorizing
redemption of shares in kind; or establishing a net asset value per share by
using available market quotations, in which case, the net asset value could
possibly be greater or less than $1.00 per share. If the trustees deem it
inadvisable to continue the practice of maintaining a net asset value of $1.00
per share, they may alter this procedure. The shareholders of the Fund will be
notified promptly after any such change.
Any increase in the value of a shareholder's investment in the Fund
resulting from the reinvestment of dividend income is reflected by an increase
in the number of shares in the shareholder's account.
AIM MUNICIPAL BOND FUND
The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source.
Industrial development bonds, which are municipal bonds, are in most cases
revenue bonds and do not generally constitute the pledge of the credit of the
issuer of such bonds.
The Fund invests in securities representing a number of different
investment classifications. In addition, there are variations in the security
of municipal bonds, both within a particular classification and between
classifications, depending on various factors.
AIM HIGH YIELD FUND
The Fund will not acquire equity securities, other than preferred
stocks, except when (a) attached to or included in a unit with
income-generating securities that otherwise would be attractive to the Fund;
(b) acquired through the exercise of equity features accompanying convertible
securities held by the Fund, such as conversion or exchange privileges or
warrants for the acquisition of stock or equity interests of the same or a
different issuer; or (c) in the case of an exchange offer whereby the equity
security would be acquired with the intention of exchanging it for a debt
security issued on a "when-issued" basis. The Fund does not expect to invest
more than 5% of the value of its total assets in issues, other than preferred
stocks, of the type discussed in this paragraph.
AIM GLOBAL UTILITIES
DESCRIPTION OF THE UTILITIES INDUSTRY
Electric Utility Industry. Electric utilities are heavily regulated.
Local rates are subject to the review of state commissions, and sales either
between companies or that cross state lines are subject to review by
11
<PAGE> 168
the Federal Energy Regulatory Commission. The industry is also subject to
regulation by the SEC under the Public Utility Holding Company Act of 1935. In
addition, companies constructing or operating nuclear powered generating
stations are subject to extensive regulation by the Nuclear Regulatory
Commission.
Electric utility companies are also subject to extensive local
regulation in environmental and site location matters. Future legislation with
regard to the issues of acid rain and toxic and radioactive wastes could have a
significant impact on the manner in which utility companies conduct their
business, and the costs that they incur. Since the late 1970s, investor-owned
utilities have experienced a number of unfavorable regulatory trends, including
increased regulatory resistance to price increases and new legislation
encouraging competition.
Natural Gas Industry. The natural gas industry is comprised primarily
of many small distribution companies and a few large interstate pipeline
companies. The Public Utility Holding Company Act of 1935 has generally acted
as a bar to the consolidation of pipeline and distribution companies.
Regulation of these companies is similar to that of electric companies. The
performance of natural gas utilities may also be substantially affected by
fluctuations in energy prices.
Communications Industry. Most of the communications industry capacity
is concentrated in the hands of a few very large publicly-held companies,
unlike the situation in the electric and gas industries. Significant risks for
the investor to overcome still exist, however, including risk related to
pricing at marginal versus embedded cost. New entrants may have lower costs of
material due to newer technologies or lower standards of reliability than those
imposed in the past by American Telephone & Telegraph ("AT&T") on the industry.
Accordingly, the marginal cost of incremental service is much lower than the
costs embedded in an existing network. Communications companies are not
subject to the Public Utility Holding Company Act of 1935.
Interstate communications service may be subject to Federal
Communications Commission regulation. Local service may be regulated by the
states. In addition, AT&T and its former subsidiaries are still subject to
judicial review pursuant to the settlement of the antitrust case brought
against them by the Department of Justice.
Water Utility Industry. The water utility industry is composed of
regulated public utilities that are involved in the distribution of drinking
water to densely populated areas. The industry is geographically diverse and
subject to the same rate base and rate of return regulations as are other
public utilities. Demand for water is most heavily influenced by the local
weather, population growth in the service area and new construction. Supplies
of clean, drinkable water are limited and are primarily a function of the
amount of past rainfall.
Other. In addition to the particular types of utilities industries
described above, the Fund may invest in developing utility technology companies
(such as cellular telephone, fiber optics and satellite communications firms)
and in holding companies which derive a substantial portion of their revenues
from utility-related activities. Generally, a holding company will be
considered to derive a substantial portion of its revenues from utility-related
activities if such activities account for at least 40% of its revenues.
LENDING PORTFOLIO SECURITIES: ALL FUNDS
Consistent with applicable regulatory requirements, the Funds may lend
their portfolio securities (principally to broker-dealers) to the extent of
one-third of their respective total assets. Such loans would be callable at
any time and would be continuously secured by collateral equal to no less than
the market value, determined daily, of the loaned securities. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. The Funds would continue to receive the income on loaned
securities and would, at the same time, earn interest on the loan collateral or
on the investment of the loan collateral if it were cash. Any cash collateral
pursuant to these loans would be invested in short-term money market
instruments. Where voting or consent rights with respect to loaned securities
pass to the borrower, the
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Funds will follow the policy of calling the loan, in whole or in part as may be
appropriate, to permit the exercise of such voting or consent rights if the
matters involved are expected to have a material effect on the Funds'
investment in the loaned securities. Lending securities entails a risk of loss
to the Funds if and to the extent that the market value of the securities
loaned were to increase and the lender did not increase the collateral
accordingly.
COVERED CALL OPTIONS: ALL FUNDS EXCEPT AIM MONEY MARKET FUND
Each Fund may write call options, but only on a covered basis; that
is, the Fund will own the underlying security. The exercise price of a call
option may be below, equal to, or above the current market value of the
underlying security at the time the option is written. When a Fund writes a
covered call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the liability
is subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the last sale
price, or in the absence of a sale, the last offering price. If a written
call option expires on the stipulated expiration date, or if the Fund enters
into a closing purchase transaction, the Fund realizes a gain (or a loss if
the closing purchase transaction exceeds the premium received when the option
was written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the sale
of the underlying security and the proceeds of the sale are increased by the
premium originally received.
A call option gives the purchaser of such option the right to buy, and
the writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call option
owns or has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, a Fund has given up
the opportunity for capital appreciation above the exercise price should the
market price of the underlying security increase, but has retained the risk of
loss should the price of the underlying security decline. During the option
period, a Fund may be required at any time to deliver the underlying security
against payment of the exercise price. This obligation is terminated upon the
expiration of the option period or at such earlier time at which a Fund effects
a closing purchase transaction by purchasing (at a price which may be higher
than was received when the call option was written) a call option identical to
the one originally written. A Fund will not write a covered call option if,
immediately thereafter, the aggregate value of the securities underlying all
such options, determined as of the dates such options were written, would
exceed 5% of the net assets of the Fund.
SHORT SALES: AIM BALANCED FUND AND AIM HIGH YIELD FUND
Each of AIM BALANCED FUND and AIM HIGH YIELD FUND may from time to
time make short sales of securities which it owns or which it has the right to
acquire through the conversion or exchange of other securities it owns. In a
short sale, a Fund does not immediately deliver the securities sold and does
not receive the proceeds from the sale. A Fund is said to have a short
position in the securities sold until it delivers the securities sold, at which
time it receives the proceeds of the sale. A Fund will neither make short
sales of securities nor maintain a short position unless, at all times when a
short position is open, the Fund owns an equal amount of such securities or
securities convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue as, and equal in amount to, the
securities sold short. This is a technique known as selling short "against the
box." To secure its obligation to deliver the securities sold short, a Fund
will deposit in escrow in a separate account with its custodian, State Street
Bank and Trust Company ("State Street"), an equal amount of the securities sold
short or securities convertible into or exchangeable for such securities.
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Since a Fund ordinarily will want to continue to receive interest and
dividend payments on securities in its portfolio which are convertible into the
securities sold short, the Fund will normally close out a short position by
purchasing and delivering an equal amount of the securities sold short, rather
than by delivering securities which it already holds.
A Fund will make a short sale, as a hedge, when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund or a security convertible into or exchangeable for such
security, or when the Fund does not want to sell the security it owns, because,
among other reasons, it wishes to defer recognition of gain or loss for federal
income tax purposes. In such case, any future losses in a Fund's long position
should be reduced by a gain in the short position. Conversely, any gain in the
long position should be reduced by a loss in the short position. The extent to
which such gains or losses are reduced will depend upon the amount of the
security sold short relative to the amount a Fund owns, either directly or
indirectly, and, in the case where the Fund owns convertible securities,
changes in the conversion premium. In determining the number of shares to be
sold short against a Fund's position in a convertible security, the anticipated
fluctuation in the conversion premium is considered. A Fund may also make
short sales to generate additional income from the investment of the cash
proceeds of short sales.
FUTURES CONTRACTS: ALL FUNDS EXCEPT AIM MONEY MARKET FUND
In cases of purchases of futures contracts, an amount of cash and cash
equivalents, equal to the cost of the futures contracts (less any related
margin deposits), will be segregated with a Fund's custodian to collateralize
the position and ensure that the use of such futures contracts is unleveraged.
Unlike when a Fund purchases or sells a security, no price is paid or received
by a Fund upon the purchase or sale of a futures contract. Initially, a Fund
will be required to deposit with its custodian for the account of the broker a
stated amount, as called for by the particular contract, of cash or U.S.
Treasury bills. This amount is known as "initial margin." The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract assuming all contractual obligations have
been satisfied. Subsequent payments, called "variation margin," to and from
the broker will be made on a daily basis as the price of the futures contract
fluctuates, making the long and short positions in the futures contract more or
less valuable. This process is known as "marking-to-market." For example, when
a Fund has purchased a stock index futures contract and the price of the
underlying stock index has risen, that position will have increased in value
and the Fund will receive from the broker a variation margin payment with
respect to that increase in value. Conversely, where a Fund has purchased a
stock index futures contract and the price of the underlying stock index has
declined, that position would be less valuable and the Fund would be required
to make a variation margin payment to the broker. Variation margin payments
would be made in a similar fashion when a Fund has purchased an interest rate
futures contract. At any time prior to expiration of the futures contract, a
Fund may elect to close the position by taking an opposite position which will
operate to terminate the Fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Fund and the Fund realizes a loss or a gain.
A description of the various types of futures contracts utilized by
certain Funds and the identification of those Funds whose investment policies
permit such investments is as follows:
Stock Index Futures Contracts - AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM GROWTH FUND and AIM VALUE FUND ("Equity Funds")
A stock index assigns relative values to the common stocks included in
the index and the index fluctuates with changes in the market values of the
common stocks so included. A stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day
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of the contract and the price at which the futures contract is originally
struck. No physical delivery of the underlying stocks in the index is made.
Currently, stock index futures contracts can be purchased or sold primarily
with respect to broad based stock indices such as the Standard & Poor's 500
Stock Index, the New York Stock Exchange Composite Index, the American Stock
Exchange Major Market Index, the NASDAQ - 100 Stock Index and the Value Line
Stock Index.
The stock indices listed above consist of a spectrum of stocks not
limited to any one industry such as utility stocks. Utility stocks, at most,
would be expected to comprise a minority of the stocks comprising the portfolio
of an index.
Interest Rate Futures Contracts - AIM BALANCED FUND, AIM HIGH YIELD
FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND and AIM MUNICIPAL BOND
FUND ("Debt Funds")
An interest rate futures contract is an agreement between two parties
to buy and sell a debt security for a set price on a future date. Currently,
there are futures contracts based on long-term U.S. Treasury bonds, U.S.
Treasury notes, U.S. Treasury bills, Eurodollars and the Bond Buyer Municipal
Bond Index.
Foreign Currency Futures Contracts - All Funds (except AIM
INTERMEDIATE GOVERNMENT FUND, AIM MONEY MARKET FUND and AIM MUNICIPAL BOND
FUND)
Futures contracts may also be used to hedge the risk of changes in the
exchange rates of foreign currencies.
OPTIONS ON FUTURES CONTRACTS: ALL FUNDS EXCEPT AIM MONEY MARKET FUND
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the option exercise period.
The writer of the option is required upon exercise to assume an offsetting
futures position (a short position if the option is a call and a long position
if the option is a put) at a specified exercise price at any time during the
period of the option. Upon exercise of the option, the assumption of
offsetting futures positions by the writer and holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's futures
margin account which represents the amount by which the market price of the
futures contract, at exercise, exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract.
If an option on a futures contract is exercised on the last trading date prior
to the expiration date of the option, the settlement will be made entirely in
cash equal to the difference between the exercise price of the option and the
closing price of the futures contract on the expiration date.
A Fund may purchase and sell put and call options on futures contracts
in order to hedge the value of their respective portfolios against changes in
market conditions. Depending on the pricing of the option compared to either
the price of the futures contract upon which it is based or the price of the
underlying securities or currency, it may or may not be less risky than
ownership of the futures contract or underlying securities or currency.
RISKS AS TO FUTURES CONTRACTS AND RELATED OPTIONS
The use of futures contracts and related options as hedging devices
presents several risks. One risk arises because of the imperfect correlation
between movements in the price of hedging instruments and movements in the
price of the stock, debt securities or foreign currency which are the subject
of the hedge. If the price of a hedging instrument moves less than the price
of the stocks, debt securities or foreign currency which are the subject of the
hedge, the hedge will not be fully effective. If the price of a hedging
instrument moves more than the price of the stock, debt securities or foreign
currency, a Fund will experience either a loss or a gain on the hedging
instrument which will not be completely offset by movements in the price of the
stock, debt securities or foreign currency which are the subject of the hedge.
The use of options on futures contracts
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involves the additional risk that changes in the value of the underlying
futures contract will not be fully reflected in the value of the option.
Successful use of hedging instruments by a Fund is also subject to
AIM's ability to predict correctly movements in the direction of the stock
market (Equity Funds), of interest rates (Debt Funds) or of foreign exchange
rates (foreign currencies). Because of possible price distortions in the
futures and options markets, and because of the imperfect correlation between
movements in the prices of hedging instruments and the investments being
hedged, even a correct forecast by AIM of general market trends may not result
in a completely successful hedging transaction.
It is also possible that where a Fund has sold futures contracts to
hedge its portfolio against a decline in the market, the market may advance and
the value of stocks or debt securities held in a Fund's portfolio may decline.
If this occurred, a Fund would lose money on the futures contracts and also
experience a decline in the value of its portfolio securities. Similar risks
exist with respect to foreign currency hedges.
Positions in futures contracts or options may be closed out only on an
exchange on which such contracts are traded. Although the Funds intend to
purchase or sell futures contracts or purchase options only on exchanges or
boards of trade where there appears to be an active market, there is no
assurance that a liquid market on an exchange or board of trade will exist for
any particular contract or at any particular time. If there is not a liquid
market at a particular time, it may not be possible to close a futures position
or purchase an option at such time. In the event of adverse price movements
under those circumstances, the Fund would continue to be required to make daily
cash payments of maintenance margin on its futures positions. The extent to
which the Fund may engage in futures contracts or related options will be
limited by Internal Revenue Code requirements for qualification as a regulated
investment company and the Funds' intent to continue to qualify as such. The
result of a hedging program cannot be foreseen and may cause a Fund to suffer
losses which it would not otherwise sustain.
DELAYED DELIVERY AGREEMENTS: ALL FUNDS
Delayed delivery agreements involve commitments by a Fund to dealers
or issuers to acquire securities or instruments at a specified future date
beyond the customary same-day settlement for such securities or instruments.
These commitments may fix the payment price and interest rate to be received on
the investment. Delayed delivery agreements will not be used as a speculative
or leverage technique. Rather, from time to time, AIM can anticipate that cash
for investment purposes will result from, among other things, scheduled
maturities of existing portfolio instruments or from net sales of shares of a
Fund. To assure that a Fund will be as fully invested as possible in
instruments meeting the Fund's investment objective, the Fund may enter into
delayed delivery agreements, but only to the extent of anticipated funds
available for investment during a period of not more than five business days.
Until the settlement date, a Fund will segregate high-quality debt securities
of a dollar value sufficient at all times to make payment for the delayed
delivery securities. No more than 25% of a Fund's total assets will be
committed to delayed delivery agreements and when-issued securities, as
described below. The delayed delivery securities, which will not begin to
accrue interest or dividends until the settlement date, will be recorded as an
asset of a Fund and will be subject to the risk of market fluctuation. The
purchase price of the delayed delivery securities is a liability of a Fund
until settlement. Absent extraordinary circumstances, a Fund will not sell or
otherwise transfer the delayed delivery securities prior to settlement. If
cash is not available to a Fund at the time of settlement, the Fund may be
required to dispose of portfolio securities that it would otherwise hold to
maturity in order to meet its obligation to accept delivery under a delayed
delivery agreement. The Board of Trustees has determined that entering into
delayed delivery agreements does not present a materially increased risk of
loss to shareholders, but the Board of Trustees may restrict the use of delayed
delivery agreements if the risk of loss is determined to be material, or if it
affects the stable net asset value of AIM MONEY MARKET FUND.
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WHEN-ISSUED SECURITIES: ALL FUNDS
Many new issues of securities are offered on a "when-issued" basis,
that is, the date for delivery of and payment for the securities is not fixed
at the date of purchase, but is set after the securities are issued (normally
within forty-five days after the date of the transaction). The payment
obligation and, if applicable, the interest rate that will be received on the
securities are fixed at the time the buyer enters into the commitment. A Fund
will only make commitments to purchase such securities with the intention of
actually acquiring such securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable. No additional
when-issued commitments will be made if as a result more than 25% of a Fund's
total assets would become committed to purchases of when-issued securities and
delayed delivery agreements.
If a Fund purchases a when-issued security, it will direct its
custodian bank to collateralize the when-issued commitment by segregating
assets in the same fashion as required for a delayed delivery agreement. Such
segregated assets will likewise be marked-to-market, and the amount segregated
will be increased if necessary to maintain adequate coverage of the when-issued
commitments.
Securities purchased on a when-issued basis and the securities held in
a Fund's portfolio are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and, if applicable,
changes in the level of interest rates. Therefore, if a Fund is to remain
substantially fully invested at the same time that it has purchased securities
on a when-issued basis, there will be a possibility that the market value of
the Fund's assets will fluctuate to a greater degree. Furthermore, when the
time comes for the Fund to meet its obligations under when-issued commitments,
the Fund will do so by using then available cash flow, by sale of the
segregated assets, by sale of other securities or, although it would not
normally expect to do so, by directing the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation).
A sale of securities to meet such obligations carries with it a
greater potential for the realization of net short-term capital gains, which
are not exempt from federal income taxes. The value of when-issued securities
on the settlement date may be more or less than the purchase price.
INVESTMENT RESTRICTIONS
Each Fund is subject to the following restrictions which may not be
changed without approval of the lesser of (i) 67% or more of the Fund's shares
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or represented by proxy, or (ii) more than 50% of the
Fund's outstanding shares. Any investment restriction that involves a maximum
or minimum percentage of securities or assets shall not be considered to be
violated unless an excess over or a deficiency under the percentage occurs
immediately after, and is caused by, an acquisition or disposition of
securities or utilization of assets by the Fund.
AIM BALANCED FUND
The Fund may not:
1. With respect to 75% of its total assets, purchase the
securities of any issuer if such purchase would cause more than 5% of
the value of its total assets to be invested in the securities of such
issuer (except U.S. Government securities or securities issued by its
agencies and instrumentalities).
2. Concentrate 25% or more of its investments in a particular
industry.
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3. Make short sales of securities or maintain a short
position in securities unless at all times when a short position is
open, it owns at least an equal amount of such securities or owns
securities comparable to or exchangeable for at least an equal amount
of such securities.
4. Purchase or sell commodity contracts, except that the Fund
may, as appropriate and consistent with its investment policies and
other investment restrictions, for hedging purposes, write, purchase
or sell options (including puts, calls and combinations thereof),
write covered call options, enter into futures contracts on
securities, securities indices and currencies, options on such futures
contracts, forward foreign currency exchange contracts, forward
commitments and repurchase agreements.
5. Purchase or sell real estate (except that this restriction
does not preclude investments in companies engaged in real estate
activities or in real estate investment trusts or in securities
secured by real estate).
6. Borrow money or pledge its assets except that the Fund may
enter into reverse repurchase agreements and except, as a temporary
measure for extraordinary or emergency purposes and not for investment
purposes, the Fund may borrow from banks (including the Fund's
custodian bank) amounts of up to 33-1/3% of the value of its total
assets (including the amount of such borrowings) less its liabilities
(excluding the amount of such borrowings) and may pledge amounts of up
to 33-1/3% of its total assets to secure such borrowings. The Fund
will not purchase securities while borrowings in an amount in excess
of 5% of its total assets are outstanding. The Fund may not issue
senior securities, except to the extent permitted by the 1940 Act,
including permitted borrowings.
7. Make loans, except (a) through the purchase of a portion
of an issue of bonds or other obligations of types commonly offered
publicly and purchased by financial institutions, (b) through the
purchase of short-term obligations (maturing within a year),
including repurchase agreements, and (c) the Fund may lend its
portfolio securities, provided that the value of the securities loaned
does not exceed 33-1/3% of the Fund's total assets.
8. Acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets and except for the investment
in such securities of funds representing compensation otherwise
payable to its trustees pursuant to any deferred compensation plan
existing at any time between the Trust and its trustees.
AIM GLOBAL UTILITIES FUND
The Fund may not:
1. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer.
2. Purchase the securities of any issuer if such purchase
would cause more than 5% of the voting securities, or more than 10% of
the securities of any class of such issuer, to be held by the Fund.
3. Make short sales of securities or purchase securities on
margin, but it may obtain such short-term credits as are necessary for
the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in financial futures
contracts and options thereon.
4. Act as a securities underwriter.
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5. Make loans, except (a) through the purchase of a portion
of an issue of bonds or other obligations of types commonly offered
publicly and purchased by financial institutions, and (b) through the
purchase of short-term obligations (maturing within a year), including
repurchase agreements, and (c) the Fund may lend its portfolio
securities, provided that the value of the securities loaned does not
exceed 33-1/3% of the Fund's total assets.
6. Borrow money or mortgage, pledge, or hypothecate its
assets, except that the Fund may enter into financial futures
contracts, and except that the Fund may borrow from banks to pay for
redemptions and for temporary purposes in an amount not exceeding
one-third of the value of its total assets (including the amount of
such borrowings) less its liabilities (excluding the amount of such
borrowings) and may secure such borrowings by pledging up to one-third
of the value of its total assets. For the purpose of this
restriction, collateral arrangements with respect to margin for a
financial futures contract are not deemed to be a pledge of assets.
The Fund will not purchase securities while borrowings in an amount in
excess of 5% of its total assets are outstanding.
7. Invest in puts, straddles, spreads or any combination
thereof, except, however, that the Fund may write covered call options
and purchase and sell options on stock index futures contracts and
options on stock indices.
8. Buy or sell commodities or commodity contracts, although
the Fund may purchase and sell financial futures contracts and options
thereon for hedging purposes.
9. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate.
10. Acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets and except for the investment
in such securities of funds representing compensation otherwise
payable to its trustees pursuant to any deferred compensation plan
existing at any time between the Trust and its trustees.
AIM GROWTH FUND
The Fund may not:
1. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer (except U.S. Government securities,
including securities issued by its agencies and instrumentalities).
2. Purchase the securities of any issuer if such purchase
would cause more than 5% of the voting securities, or more than 10% of
the securities of any class of such issuer, to be held by the Fund.
3. Concentrate 25% or more of its investments in a particular
industry.
4. Make short sales of securities or purchase securities on
margin, but it may obtain such short-term credits as are necessary for
the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in stock index futures
contracts and options thereon.
5. Act as a securities underwriter.
6. Make loans, except (a) through the purchase of a portion
of an issue of bonds or other obligations of types commonly offered
publicly and purchased by financial institutions, (b) through the
purchase of short-term obligations (maturing within a year), including
repurchase agreements, and (c)
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the Fund may lend its portfolio securities, provided that the value of
the securities loaned does not exceed 33-1/3% of the Fund's total
assets.
7. Borrow, except that the Fund may enter into stock index
futures contracts and that the right is reserved to borrow from banks,
provided that no borrowing may exceed one-third of the value of its
total assets (including the amount of such borrowings) less its
liabilities (excluding the amount of such borrowings) and may secure
such borrowings by pledging up to one-third of the value of its total
assets. For the purposes of this restriction, collateral arrangements
with respect to margin for a stock index futures contract are not
deemed to be a pledge of assets. The Fund will not purchase
securities while borrowings in excess of 5% of its total assets are
outstanding.
8. Invest in puts, calls, straddles, spreads or any
combination thereof, except, however, that the Fund may invest in
financial futures and options thereon for hedging purposes and may
sell covered call options.
9. Buy or sell commodities or commodity contracts, although
the Fund may invest in financial futures and options thereon for
hedging purposes.
10. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate.
11. Acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets and except for the investment
in such securities of funds representing compensation otherwise
payable to its trustees pursuant to any deferred compensation plan
existing at any time between the Trust and its trustees.
AIM HIGH YIELD FUND
The Fund may not:
1. Borrow money or issue senior securities or mortgage,
pledge, or hypothecate its assets, except that the Fund may enter into
financial futures contracts, and borrow from banks to pay for
redemptions and for temporary purposes in an amount not exceeding
one-third of the value of its total assets (including the amount of
such borrowings) less its liabilities (excluding the amount of such
borrowings) and may secure such borrowings by pledging up to one-third
of the value of its total assets. For the purpose of this
restriction, collateral arrangements with respect to margin for a
financial futures contract are not deemed to be a pledge of assets.
Secured temporary borrowings may take the form of reverse repurchase
agreements, pursuant to which the Fund would sell portfolio securities
for cash and simultaneously agree to repurchase them at a specified
date for the same amount of cash plus an interest component. The Fund
will not purchase securities while borrowings in excess of 5% of its
total assets are outstanding.
2. Make short sales of securities or maintain short
positions, unless, at all times when a short position is open, the
Fund owns at least an equal amount of the securities sold short or
owns securities convertible into or exchangeable for at least an equal
amount of such securities sold short, without the payment of further
consideration.
3. Purchase or sell real estate or interests therein, but the
Fund may purchase and sell (a) securities which are secured by real
estate, and (b) the securities of companies which invest or deal in
real estate or interests therein, including real estate investment
trusts.
4. Act as a securities underwriter.
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5. Purchase or sell commodities or commodity contracts, other
than financial futures contracts and options thereon.
6. With respect to 75% of the value of its total assets,
invest more than 5% of the market value of its total assets in the
securities of any one issuer, other than obligations of or guaranteed
by the U.S. Government or any of its agencies or instrumentalities.
7. Concentrate 25% or more of the value of its total assets
in the securities of issuers which conduct their principal business
activities in the same industry. Gas, electric, water and telephone
companies as well as banks, credit institutions, and insurance
companies will be considered to be in separate industries.
8. Make loans, except that the Fund may lend its portfolio
securities provided that the value of the securities loaned does not
exceed 33-1/3% of its total assets, and except that the Fund may enter
into repurchase agreements.
9. Purchase securities on margin, except that the Fund may
obtain such short-term credits as may be necessary for the clearance
of purchases and sales of securities and may make margin payments in
connection with transactions in financial futures contracts and
options thereon.
10. Invest in puts, calls, or any combinations thereof,
except, however, that the Fund may invest in financial futures
contracts, purchase and sell options on financial futures contracts,
may acquire and hold puts which relate to equity securities acquired
by the Fund when such puts are attached to or included in a unit with
such equity securities, and may sell covered call options.
11. Acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets and except for the investment
in such securities of funds representing compensation otherwise
payable to its trustees pursuant to any deferred compensation plan
existing at any time between the Trust and its trustees.
AIM INCOME FUND
The Fund may not:
1. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer (except U.S. Government securities,
including securities issued by its agencies and instrumentalities).
2. Purchase the securities of any issuer if such purchase
would cause more than 5% of the voting securities, or more than 10% of
the securities of any class of such issuer, to be held by the Fund.
3. Concentrate 25% or more of its investments in a particular
industry.
4. Make short sales of securities or purchase securities on
margin, but it may obtain such short-term credits as are necessary for
the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in financial futures
contracts and options thereon.
5. Act as a securities underwriter.
6. Make loans, except (a) through the purchase of a portion
of an issue of bonds or other obligations of types commonly offered
publicly and purchased by financial institutions, (b) through the
purchase of short-term obligations (maturing within a year), including
repurchase agreements, and (c)
21
<PAGE> 178
the Fund may lend its portfolio securities, provided that the value of
the securities loaned does not exceed 33-1/3% of the Fund's total
assets.
7. Borrow, except that the Fund may enter into financial
futures contracts and that the right is reserved to borrow from banks,
provided that no borrowing may exceed one-third of the value of its
total assets (including the amount of such borrowings) less its
liabilities (excluding the amount of such borrowings) and may secure
such borrowings by pledging up to one-third of the value of its total
assets. (For the purposes of this restriction, collateral
arrangements with respect to margin for a financial futures contract
are not deemed to be a pledge of assets.) The Fund will not purchase
securities while borrowings in an amount in excess of 5% of its total
assets are outstanding.
8. Invest in puts, calls, straddles, spreads or any
combination thereof, except, however, that the Fund may purchase and
sell options on financial futures contracts and may sell covered call
options.
9. Buy or sell commodities or commodity contracts, although
the Fund may purchase and sell financial futures contracts and options
thereon.
10. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate.
11. Acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets and except for the investment
in such securities of funds representing compensation otherwise
payable to its trustees pursuant to any deferred compensation plan
existing at any time between the Trust and its trustees.
12. Invest in securities with unlimited liability except for
assessability allowed by statutes with respect to wages.
13. Issue senior securities except to the extent permitted by
the 1940 Act, including permitted borrowing.
AIM INTERMEDIATE GOVERNMENT FUND
The Fund may not:
1. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer (except U.S. Government securities,
including securities issued by its agencies and instrumentalities, as
described under "Investment Objectives" in the Prospectus).
2. Purchase the securities of any issuer if such purchase
would cause more than 5% of the voting securities, or more than 10% of
the securities of any class of such issuer, to be held by the Fund
(except U.S. Government securities including securities issued by its
agencies and instrumentalities, as described under "Investment
Objectives" in the Prospectus).
3. Concentrate 25% or more of its investments in a particular
industry.
4. Make short sales of securities or purchase securities on
margin, but it may obtain such short-term credits as are necessary for
the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in financial futures
contracts and options thereon.
5. Act as a securities underwriter.
22
<PAGE> 179
6. Make loans, except (a) through the purchase of a portion
of an issue of bonds or other obligations of types commonly offered
publicly and purchased by financial institutions, (b) through the
purchase of short-term obligations (maturing within a year), including
repurchase agreements, and (c) the Fund may lend its portfolio
securities provided that the value of the securities loaned does not
exceed 33-1/3% of the Fund's total assets.
7. Borrow money or mortgage, pledge, or hypothecate its
assets, except that the Fund may enter into financial futures
contracts, and except that the Fund may borrow from banks to pay for
redemptions and for temporary purposes in an amount not exceeding
one-third of the value of its total assets (including the amount of
such borrowings) less its liabilities (excluding the amount of such
borrowings) and may secure such borrowings by pledging up to one-third
of the value of its total assets. For the purpose of this
restriction, collateral arrangements with respect to margin for a
financial futures contract are not deemed to be a pledge of assets.
The Fund will not purchase securities while borrowings in an amount in
excess of 5% of its total assets are outstanding.
8. Invest in puts, calls, straddles, spreads or any
combination thereof, except, however, that the Fund may purchase and
sell options on financial futures contracts and may sell covered call
options.
9. Buy or sell commodities or commodity contracts, although
the Fund may purchase and sell financial futures contracts and options
thereon.
10. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate.
11. Acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets and except for the investment
in such securities of funds representing compensation otherwise
payable to its trustees pursuant to any deferred compensation plan
existing at any time between the Trust and its trustees.
AIM MONEY MARKET FUND
The Fund may not:
1. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer, except U.S. Government securities,
including securities issued by its agencies and instrumentalities, and
except to the extent permitted by Rule 2a-7 under the 1940 Act, as
amended from time to time.
2. Concentrate 25% or more of its investments in a particular
industry, provided that this limitation does not apply to securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and obligations of domestic banks.
3. Pledge, mortgage or hypothecate more than 33-1/3% of the
total assets of the Fund, except that reverse repurchase agreements
and loans of portfolio securities are not deemed to involve pledging,
mortgaging or hypothecating assets.
4. Purchase securities on margin or make short sales of
securities, except as is necessary for the clearance of purchases and
sales of securities.
5. Underwrite securities (except to the extent that the
purchase of securities either directly from the issuer or from an
underwriter for an issuer and the later disposition of such securities
may be deemed an underwriting).
23
<PAGE> 180
6. Make loans, except it may purchase instruments and
securities permitted by the investment objectives and policies, it may
invest in reverse repurchase agreements, and it may loan portfolio
securities in an amount equal to one-third of its total assets.
7. Borrow money or issue senior securities (which term shall
not include delayed delivery and when-issued securities) except as a
temporary measure for extraordinary or emergency purposes and except
that the Fund may enter into reverse repurchase agreements in amounts,
inclusive of all borrowings, up to one-third of the value of the
Fund's total assets (including the amount of such borrowings) less its
liabilities (excluding the amount of such borrowings) at the time it
enters into such agreements. The Fund will not purchase portfolio
securities while borrowings in an amount in excess of 5% of its total
assets are outstanding.
8. Invest in puts or calls or engage in arbitrage
transactions.
9. Buy or sell commodities or commodity futures contracts.
10. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate or interests therein.
11. Acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets and except for the investment
in such securities of funds representing compensation otherwise
payable to its trustees pursuant to any deferred compensation plan
existing at any time between the Trust and its trustees.
AIM MUNICIPAL BOND FUND
The Fund may not:
1. Invest less than 65% of its total assets in securities
other than municipal bonds.
2. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer (except U.S. Government securities,
including securities issued by its agencies and instrumentalities).
For the purpose of this restriction and that set forth in restriction
3, the Fund will regard each state and each political subdivision,
agency or instrumentality of such state and each multi-state agency of
which such state is a member as a separate issuer.
3. Purchase the securities of any issuer if such purchase
would cause more than 10% of the debt obligations of such issuer to be
held by the Fund.
4. Purchase securities if such purchase would cause, at the
time of purchase, 25% or more of total Fund assets to be invested in
any one industry. Investment in municipal bonds and obligations
issued or guaranteed by the U.S. Government, its agencies, authorities
or instrumentalities does not involve investment in any industry.
5. Make short sales of securities or purchase securities on
margin, but it may obtain such short-term credits as are necessary for
the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in financial futures
contracts and options thereon and municipal bond index futures
contracts.
6. Act as a securities underwriter except to the extent that
it may be deemed to be an underwriter under the Securities Act of 1933
when purchasing or selling a portfolio security.
24
<PAGE> 181
7. Make loans, except that it may purchase debt instruments,
including repurchase agreements maturing within seven days, as
permitted by the investment objective and policies of the Fund, and
except that it may lend its portfolio securities provided that the
value of the securities loaned does not exceed 33-1/3% of its total
assets.
8. Borrow, except that the Fund may enter into financial
futures contracts and municipal bond index futures contracts and that
the right is reserved to borrow from banks, provided that no borrowing
may exceed one-third of the value of its total assets (including the
amount of such borrowings) less its liabilities (excluding the amount
of such borrowings) and may secure such borrowings by pledging up to
one-third of the value of its total assets. (For the purposes of this
restriction, collateral arrangements with respect to margin for a
financial or a municipal bond index futures contract are not deemed to
be a pledge of assets.) The Fund will not purchase securities while
borrowings in excess of 5% of its total assets are outstanding.
9. Invest in puts, calls, straddles, spreads or any
combination thereof, except, however, that the Fund may purchase and
sell options on financial futures contracts and may sell covered call
options.
10. Buy or sell commodities or commodity contracts, although
the Fund may purchase and sell financial futures contracts and options
thereon and municipal bond index futures contracts.
11. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate.
12. Acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets and except for the investment
in such securities of funds representing compensation otherwise
payable to its trustees pursuant to any deferred compensation plan
existing at any time between the Trust and its trustees.
AIM VALUE FUND
The Fund may not:
1. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer (except U.S. Government securities,
including securities issued by its agencies and instrumentalities).
2. Purchase the securities of any issuer if such purchase
would cause more than 5% of the voting securities, or more than 10% of
the securities of any class of such issuer, to be held by the Fund.
3. Concentrate 25% or more of its investments in a particular
industry.
4. Make short sales of securities or purchase securities on
margin, but it may obtain such short-term credits as are necessary for
the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in stock index futures
contracts and options thereon.
5. Act as a securities underwriter.
6. Make loans, except (a) through the purchase of a portion
of an issue of bonds or other obligations of types commonly offered
publicly and purchased by financial institutions, (b) through the
purchase of short-term obligations (maturing within a year), including
repurchase agreements, and (c)
25
<PAGE> 182
the Fund may lend its portfolio securities, provided that the value of
the securities loaned does not exceed 33-1/3% of the Fund's total
assets.
7. Borrow, except that the Fund may enter into stock index
futures contracts and that the right is reserved to borrow from banks,
provided that no borrowing may exceed one-third of the value of its
total assets (including the amount of such borrowings) less its
liabilities (excluding the amount of such borrowings) and may secure
such borrowings by pledging up to one-third of the value of its total
assets. (For the purposes of this restriction, collateral
arrangements with respect to margin for a stock index futures contract
are not deemed to be a pledge of assets.) The Fund will not purchase
securities while borrowings in an amount in excess of 5% of its total
assets are outstanding.
8. Invest in puts, calls, straddles, spreads or any
combination thereof, except, however, that the Fund may invest in
financial futures and options thereon for hedging purposes and may
sell covered call options.
9. Buy or sell commodities or commodity contracts, although
the Fund may invest in financial futures and options thereon for
hedging purposes.
10. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate.
11. Acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets and except for the investment
in such securities of funds representing compensation otherwise
payable to its trustees pursuant to any deferred compensation plan
existing at any time between the Trust and its trustees.
In order to permit the sale of the Funds' shares in certain states,
the Funds may from time to time make commitments that are more restrictive than
the restrictions described above. For example, as of the date of this Statement
of Additional Information, (1) each of the Funds has undertaken that it will
not invest more than 15% of its average net assets at the time of purchase in
investments which are not readily marketable (Texas); (2) AIM BALANCED FUND,
AIM GROWTH FUND and AIM VALUE FUND have undertaken that each Fund's investments
in warrants, valued at the lower of cost or market, may not exceed 5% of its
net assets, and that included within that amount (but not to exceed 2% of the
value of net assets) may be warrants which are not listed on the New York or
American stock exchanges (Texas); (3) AIM HIGH YIELD FUND has undertaken that
it will notify shareholders in writing at least 30 days prior to any change in
its investment objective (Arizona, Kentucky and South Dakota); (4) each of the
Funds will comply with California Rule 260.140.85(b) by purchasing and selling
only financial futures contracts, options on financial futures contracts and
municipal bond index futures contracts which are listed on national securities
or commodities exchanges, by limiting the aggregate premiums paid on all such
options held at any one time to less than 20% of each Fund's net assets and by
limiting the aggregate margin deposits required on all such futures contracts
or options thereon to less than 5% of each Fund's total assets; (5) no Fund
will exercise its right to redeem shareholder accounts of less than $500 unless
the account balance falls below $500 as a result of shareholder action and not
as a result of market fluctuation (Texas); (6) AIM BALANCED FUND and AIM VALUE
FUND will comply with Texas Rule 123.2(6), and follow SEC guidelines, that
provide that loans of their portfolio securities will be fully collateralized;
and (7) each of the Funds will comply with Texas Rule 123.2(4) and not issue
shares for any consideration other than cash. These restrictions are not
fundamental and may be changed by the trustees without shareholder approval.
In accordance with the requirements of the Texas State Securities
Board, the Funds will not purchase or sell real estate (including limited
partnership interests) and shall not invest in oil, gas or mineral leases. In
addition, none of the Funds intends to: (1) purchase securities of any company
with a record of less than three years' continuous operation (including that of
predecessors) if such purchase would cause the Fund's aggregate investments in
all such companies taken at cost to exceed 5% of the Fund's total assets taken
at market value; (2) invest for the purpose of influencing management or
exercising control; or (3) purchase or retain the securities of any issuer if
those officers and trustees of the Trust or officers and directors of AIM who
26
<PAGE> 183
own beneficially more than 1/2 of 1% of the securities of such issuer together
own more than 5% of the securities of such issuer. These restrictions are not
fundamental and may be changed by the trustees without shareholder approval.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 1, 1996, the trustees and officers of the Trust as a group
owned less than 1% of all classes of outstanding shares of the Trust; except
that the trustees and officers as a group owned 1.46% and 1.62% of the
outstanding Class C shares of AIM MONEY MARKET FUND and the outstanding Class A
shares of AIM MUNICIPAL BOND FUND, respectively.
To the best knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Trust's
equity securities as of April 1, 1996, and the percentage of the outstanding
shares held by such holders are set forth below:
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address Owned of and
Fund of Owner Record* Beneficially
- ---- --------------------- -------- ------------
<S> <C> <C> <C>
AIM Balanced Fund - Merrill Lynch, Pierce, 7.46% -0-
Class A shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 11.77% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
AIM Global Utilities Fund - Merrill Lynch, Pierce, 6.87% -0-
Class B shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
AIM Growth Fund - Merrill Lynch, Pierce, 16.92% -0-
Class B shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
</TABLE>
__________________________________
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
27
<PAGE> 184
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address Owned of and
Fund of Owner Record* Beneficially
- ---- --------------------- -------- ------------
<S> <C> <C> <C>
AIM High Yield Fund - Merrill Lynch, Pierce, 6.30% -0-
Class A shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 15.46% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
AIM Income Fund - Merrill Lynch, Pierce, 5.54% -0-
Class A shares Fenner & Smith
Mutual Fund Operations
P.O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 9.17% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
AIM Intermediate Government Fund - Merrill Lynch, Pierce, 5.84% -0-
Class A shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 12.22% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
AIM Money Market Fund - A I M Advisors, Inc. 6.95% -0-
Class C shares 11 Greenway Plaza
Suite 1919
Houston, Texas 77046-1173
</TABLE>
________________________
* The Trust has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
28
<PAGE> 185
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address Owned of and
Fund of Owner Record* Beneficially
- ---- --------------------- -------- ------------
<S> <C> <C> <C>
AIM Municipal Bond Fund - Merrill Lynch, Pierce 6.12% -0-
Class B shares Fenner Smith
Mutual Fund Operations
P.O. Box 45286
Jacksonville, FL 32232-5286
AIM Value Fund - Merrill Lynch, Pierce, 12.06% -0-
Class A shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 16.91% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
</TABLE>
__________________________________
* The Trust has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The trustees and officers of the Trust and their principal occupations
during the last five years are set forth below. Unless otherwise indicated,
the address of each trustee and officer is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046.
*CHARLES T. BAUER, Trustee and Chairman (77)
Director, Chairman and Chief Executive Officer, A I M Management Group
Inc.; Chairman of the Board of Directors, A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M
Institutional Fund Services, Inc. and Fund Management Company.
BRUCE L. CROCKETT, Trustee (52)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, MD 20817
__________________________________
* A trustee who is an "interested person" of the Trust and A I M
Advisors, Inc. as defined in the 1940 Act.
29
<PAGE> 186
Director, President and Chief Executive Officer, COMSAT Corporation
(includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT; (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Trustee (71)
6 Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly,
Director, CF & I Steel Corp., Monumental Life Insurance Company and Monumental
General Insurance Company; and Chairman of the Board of Equitable
Bancorporation.
*CARL FRISCHLING, Trustee (59)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly Partner, Reid & Priest (law firm); and prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).
**ROBERT H. GRAHAM, Trustee and President (49)
Director, President and Chief Operating Officer, A I M Management
Group Inc.; Director and President, A I M Advisors, Inc.; Director and Senior
Vice President, A I M Capital Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc., A I M Institutional Fund Services, Inc. and Fund
Management Company.
JOHN F. KROEGER, Trustee (71)
37 Pippins Way
Morristown, NJ 07960
Director, Flag Investors International Fund, Inc., Flag Investors
Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag
Investors Equity Partners Fund, Inc., Total Return U.S. Treasury Fund, Inc.,
Flag Investors Intermediate Term Income Fund, Inc., Managed Municipal Fund,
Inc., Flag Investors Value Builder Fund, Inc., Flag Investors Maryland
Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American Government
Bond Fund, Inc. (investment companies). Formerly, Consultant, Wendell &
Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Trustee (53)
6363 Woodway, Suite 825
Houston, TX 77057
Attorney in private practice in Houston, Texas.
__________________________________
* A trustee who is an interested person of the Trust as defined in the
1940 Act.
** A trustee who is an "interested person" of the Trust and A I M
Advisors, Inc. as defined in the 1940 Act.
30
<PAGE> 187
IAN W. ROBINSON, Trustee (73)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management
services to telephone companies); Executive Vice President, Bell Atlantic
Corporation (parent of seven telephone companies); and Vice President and Chief
Financial Officer, Bell Telephone Company of Pennsylvania and Diamond State
Telephone Company.
LOUIS S. SKLAR, Trustee (56)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
***JOHN J. ARTHUR, Senior Vice President and Treasurer (51)
Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice
President and Treasurer, A I M Management Group Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company.
GARY T. CRUM, Senior Vice President (48)
Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc. and A I M Advisors, Inc.;
and Director, A I M Distributors, Inc.
SCOTT G. LUCAS, Senior Vice President (36)
Director and Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Management Group Inc. and A I M Advisors, Inc.
***CAROL F. RELIHAN, Senior Vice President and Secretary (41)
Senior Vice President, General Counsel and Secretary, A I M Advisors,
Inc.; Vice President, General Counsel and Secretary, A I M Management Group
Inc.; Vice President and General Counsel, Fund Management Company; and Vice
President, A I M Capital Management, Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and A I M Institutional Fund Services, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (37)
Vice President and Fund Controller, A I M Advisors, Inc.; and
Assistant Vice President and Assistant Treasurer, Fund Management Company.
ROBERT G. ALLEY, Vice President (47)
Senior Vice President, A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc. Formerly, Senior Fixed Income Money Manager,
Waddell and Reed, Inc.
__________________________________
*** Mr. Arthur and Ms. Relihan are married to each other.
31
<PAGE> 188
STUART W. COCO, Vice President (40)
Senior Vice President, A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
MELVILLE B. COX, Vice President (52)
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc.,
A I M Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and
Assistant Vice President, A I M Distributors, Inc. and Fund Management Company.
Formerly, Vice President, Charles Schwab & Co., Inc.; Assistant Secretary,
Charles Schwab Family of Funds and Schwab Investments; Chief Compliance
Officer, Charles Schwab Investment Management, Inc.; and Vice President,
Integrated Resources Life Insurance Co. and Capitol Life Insurance Co.
KAREN DUNN KELLEY, Vice President (35)
Senior Vice President, A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
JONATHAN C. SCHOOLAR, Vice President (34)
Director and Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
The standing committees of the Board of Trustees are the Audit
Committee, the Investments Committee and the Nominating and Compensation
Committee.
The members of the Audit Committee are Messrs. Daly, Kroeger
(Chairman), Pennock and Robinson. The Audit Committee is responsible for
meeting with the Funds' auditors to review audit procedures and results and to
consider any matters arising from an audit to be brought to the attention of
the trustees as a whole with respect to the Funds' fund accounting or its
internal accounting controls, and for considering such matters as may from time
to time be set forth in a charter adopted by the Board of Trustees and such
committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly (Chairman), Kroeger and Pennock. The Investments Committee is responsible
for reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, and considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Trustees and such committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating
individuals to stand for election as trustees who are not interested persons as
long as the Trust maintains a distribution plan pursuant to Rule 12b-1 under
the 1940 Act, reviewing from time to time the compensation payable to the
dis-interested trustees, and considering such matters as may from time to time
be set forth in a charter adopted by the Board of Trustees and such committee.
Remuneration of Trustees
Each trustee is reimbursed for expenses incurred in connection with
each meeting of the Board of Trustees or any committee thereof. Each Trustee
who is not also an officer of the Trust is compensated for his or her services
according to a fee schedule which recognizes the fact that such trustee also
serves as a director or trustee of other AIM Funds. Each such trustee receives
a fee, allocated among the AIM Funds, for which he serves as a director or
trustee, which consists of an annual retainer component and a meeting fee
component.
32
<PAGE> 189
Set forth below is information regarding compensation paid or accrued for each
trustee of the Trust:
<TABLE>
<CAPTION>
===========================================================================================
RETIREMENT
BENEFITS TOTAL
AGGREGATE ACCRUED COMPENSATION
COMPENSATION BY ALL AIM FROM ALL AIM
TRUSTEE FROM TRUST(1) FUNDS(2) FUNDS(3)
- ------- ------------- ------------ -------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Charles T. Bauer $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------
Bruce L. Crockett 12,982 3,655 57,750
- -------------------------------------------------------------------------------------------
Owen Daly II 14,754 18,662 58,125
- -------------------------------------------------------------------------------------------
Carl Frischling 14,385 11,323 57,250(4)
- -------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- -------------------------------------------------------------------------------------------
John F. Kroeger 14,061 22,313 58,125
- -------------------------------------------------------------------------------------------
Lewis F. Pennock 12,857 5,067 58,125
- -------------------------------------------------------------------------------------------
Ian W. Robinson 13,073 15,381 56,750
- -------------------------------------------------------------------------------------------
Louis S. Sklar 14,507 6,632 57,250
===========================================================================================
</TABLE>
________________
(1) The total amount of compensation deferred by all Trustees of the Trust
during the fiscal year ended December 31, 1995, including amounts earned
thereon, was $54,147.
(2) During the fiscal year ended December 31, 1995, the total amount of
expenses allocated to the Trust in respect of such retirement benefits was
$16,588. Data reflects compensation estimated for the calendar year ended
December 31, 1995.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a
director or trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling,
Robinson and Sklar each serves as a director or trustee of a total of 10 AIM
Funds. Data reflect total compensation estimated for the calendar year ended
December 31, 1995.
(4) See also page 34 regarding fees earned by Mr. Frischling's former law
firm.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each trustee (who is not an employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Trustees.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible trustee has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "Applicable
AIM Funds"). Each eligible trustee is entitled to receive an annual benefit
from the AIM Funds commencing on the first day of the calendar quarter
coincident with or following his date of retirement equal to 75% of the
retainer paid or accrued by the AIM Funds for such trustee during the
twelve-month period immediately preceding the trustee's retirement (including
amounts deferred under a separate agreement between the AIM Funds and the
trustee) for the number of such
33
<PAGE> 190
Trustee's years of service (not in excess of 10 years of service) completed
with respect to any of the AIM Funds. Such benefit is payable to each eligible
trustee in quarterly installments. If an eligible trustee dies after attaining
the normal retirement date but before receipt of any benefits under the Plan
commences, the trustee's surviving spouse (if any) shall receive a quarterly
survivor's benefit equal to 50% of the amount payable to the deceased trustee,
for no more than ten years beginning the first day of the calendar quarter
following the date of the trustee's death. Payments under the Plan are not
secured or funded by any AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible trustee upon retirement assuming various compensation
and years of service classifications. The estimated credited years of service
for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock, Robinson and Sklar
are 8, 9, 18, 18, 14, 8 and 6 years, respectively.
ESTIMATED BENEFITS UPON RETIREMENT
Annual Compensation Paid By All AIM Funds
<TABLE>
<CAPTION>
$55,000 $60,000 $65,000
============================================================
<S> <C> <C> <C> <C>
10 $41,250 $45,000 $48,750
------------------------------------------------------------
Number of 9 $37,125 $40,500 $38,875
Years of ------------------------------------------------------------
Service With 8 $33,000 $36,000 $39,000
AIM Funds ------------------------------------------------------------
7 $28,875 $31,500 $34,125
------------------------------------------------------------
6 $24,750 $27,000 $29,250
------------------------------------------------------------
5 $20,625 $22,500 $24,375
============================================================
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of
this paragraph only, the "deferring trustees") have each executed a Deferred
Compensation Agreement (collectively, the "Compensation Agreements"). Pursuant
to the Agreements, the deferring trustees may elect to defer receipt of up to
100% of their compensation payable by the Trust, and such amounts are placed
into a deferral account. Currently, the deferring trustees may select various
AIM Funds in which all or part of their deferral accounts shall be deemed to be
invested. Distributions from the deferring trustees' deferral accounts will be
paid in cash, generally in equal quarterly installments over a period of ten
years beginning on the date the deferring trustee's retirement benefits
commence under the Plan. The Trust's Board of Trustees, in its sole
discretion, may accelerate or extend the distribution of such deferral accounts
after the deferring trustee's termination of service as a trustee of the Trust.
If a deferring trustee dies prior to the distribution of amounts in his
deferral account, the balance of the deferral account will be distributed to
his designated beneficiary in a single lump sum payment as soon as practicable
after such deferring trustee's death. The Compensation Agreements are not
funded and, with respect to the payments of amounts held in the deferral
accounts, the deferring trustees have the status of unsecured creditors of the
Trust and of each other AIM Fund from which they are deferring compensation.
During the year ended December 31, 1995, AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND
and AIM VALUE FUND each paid $3,091, $3,232, $3,215, $5,572, $3,278, $3,146,
$3,973, $3,370, and $14,950, respectively, in legal fees to Mr. Frischling's
law firm, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel for services
rendered.
34
<PAGE> 191
INVESTMENT ADVISORY AND OTHER SERVICES
The Trust, on behalf of each Fund, has entered into a Master Investment
Advisory Agreement and a Master Administrative Services Agreement with AIM.
AIM and the Trust have adopted a Code of Ethics which requires
investment personnel and certain other employees (a) to pre-clear personal
securities transactions subject to the Code of Ethics, (b) to file reports or
duplicate confirmations regarding such transactions, (c) to refrain from
personally engaging in (i) short-term trading of a security, (ii) transactions
involving a security within seven days of an AIM Fund transaction involving the
same security, and (iii) transactions involving securities being considered for
investment by an AIM Fund, and (d) to abide by certain other provisions under
the Code of Ethics. The Code of Ethics also prohibits investment personnel and
all other AIM employees from purchasing securities in an initial public
offering. Personal trading reports are reviewed periodically by AIM, and the
Board of Trustees reviews quarterly and annual reports (including information
on any substantial violations of the Code of Ethics). Sanctions for violations
of the Code of Ethics may include censure, monetary penalties, suspension or
termination of employment.
The Master Investment Advisory Agreement provides that it will continue
in effect from year to year only if such continuance is specifically approved
at least annually by the Trust's Board of Trustees and by the affirmative vote
of a majority of the trustees who are not parties to the agreement or
"interested persons" of any such party (the "Qualified Trustees") by votes cast
in person at a meeting called for such purpose. The Master Investment Advisory
Agreement was initially approved by the Trust's Board of Trustees (including
the affirmative vote of all the Qualified Trustees) on July 19, 1993. The
Master Investment Advisory Agreement was approved by the Funds' initial
shareholder on August 6, 1993. The agreement became effective as of
October 18, 1993 and provides that either party may terminate such agreement
on 60 days' written notice without penalty. The agreement terminates
automatically in the event of its assignment.
AIM is a direct, wholly-owned subsidiary of A I M Management Group Inc.
("AIM Management"), and is the sole shareholder of the Funds' principal
underwriter, A I M Distributors, Inc. ("AIM Distributors").
Subject to the control and periodic review of the Board of Trustees, AIM
determines what investments shall be purchased, held, sold or exchanged for the
account of the Funds and what portion, if any, of the assets of the Funds shall
be held in cash and other temporary investments. Accordingly, the role of the
trustees is not to approve specific investments, but rather to exercise a
control and review function.
Pursuant to the Master Investment Advisory Agreement, AIM receives a fee
from each of AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND and AIM
MUNICIPAL BOND FUND calculated at the following annual rates, based on the
average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $200 million 0.50%
Next $300 million 0.40%
Next $500 million 0.35%
Amount over $1 billion 0.30%
</TABLE>
35
<PAGE> 192
Pursuant to the Master Investment Advisory Agreement, AIM receives a fee
from AIM MONEY MARKET FUND calculated at the following annual rates, based on
the average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $1 billion 0.55%
Amount over $1 billion 0.50%
</TABLE>
Pursuant to the Master Investment Advisory Agreement, AIM receives a fee
from AIM BALANCED FUND calculated at the following annual rates, based on the
average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $150 million 0.75%
Amount over $150 million 0.50%
</TABLE>
Pursuant to the Master Investment Advisory Agreement, AIM receives a fee
from AIM HIGH YIELD FUND calculated at the following annual rates, based on the
average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $200 million 0.625%
Next $300 million 0.550%
Next $500 million 0.500%
Amount over $1 billion 0.450%
</TABLE>
Pursuant to the Master Investment Advisory Agreement, AIM receives a fee
from AIM GROWTH FUND and AIM VALUE FUND calculated at the following annual
rates, based on the average net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $150 million 0.80%
Amount over $150 million 0.625%
</TABLE>
Pursuant to the Master Investment Advisory Agreement, AIM receives
a fee from AIM GLOBAL UTILITIES FUND calculated at the following annual rates,
based on the average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $200 million 0.60%
Next $300 million 0.50%
Next $500 million 0.40%
Amount over $1 billion 0.30%
</TABLE>
The Master Investment Advisory Agreement provides that if, for any
fiscal year, the total of all ordinary business expenses of a Fund, including
all investment advisory fees, but excluding brokerage commissions and fees,
taxes, interest and extraordinary expenses, such as litigation costs, exceed
the applicable expense limitations imposed by state securities regulations in
any state in which the Fund's shares are qualified for sale, as such
limitations may be raised or lowered from time to time, the aggregate of all
such investment advisory fees paid by such Fund shall be reduced by the amount
of such excess. The amount of any such reduction
36
<PAGE> 193
to be borne by AIM shall be deducted from the monthly investment advisory fee
otherwise payable to AIM during such fiscal year. If required pursuant to such
state securities regulations, AIM will reimburse the Fund no later than the
last day of the first month of the next succeeding fiscal year, for any such
annual operating expenses (after reduction of all investment advisory fees in
excess of such limitation).
Each Fund (other than AIM BALANCED FUND) paid to AIM the following
management fees net of any expense limitations for the years ended December 31,
1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
AIM Global Utilities Fund . . . . . $1,256,220 $1,226,429 $ 961,659
AIM Growth Fund . . . . . . . . . . 1,715,406 1,012,632 918,416
AIM High Yield Fund . . . . . . . . 5,717,303 3,881,526 2,574,933
AIM Income Fund . . . . . . . . . . 1,176,249 1,110,855 1,157,555
AIM Intermediate Government Fund . . 996,681 734,086 686,539
AIM Money Market Fund . . . . . . . 2,589,822 2,057,756 214,124*
AIM Municipal Bond Fund . . . . . . 1,356,225 1,327,611 1,348,764
AIM Value Fund . . . . . . . . . . . 25,332,486 6,674,684 2,570,113
</TABLE>
* Fee paid by AIM MONEY MARKET FUND was for the period October
16, 1993 through December 31, 1993.
AIM BALANCED FUND paid to AIM management fees net of any expense
limitations for the years ended December 31, 1995 and 1994, in the amounts of
$666,619 and $137,235, respectively, the four-month period ended December 31,
1993 in the amount of $54,454, and for the year ended August 31, 1993, in the
amount of $112,306.
The Trust pays all expenses not specifically assumed by AIM or AIM
Distributors including compensation and expenses of trustees who are not
directors, officers or employees of AIM, AIM Distributors or any other
affiliates of AIM Management; registration, filing and other fees in connection
with filings with regulatory authorities; the fees and expenses of independent
accountants; costs of printing and mailing registration statements,
prospectuses, proxy statements, and annual and periodic reports to
shareholders; custodian and transfer agent fees; brokerage commissions and
securities transactions costs incurred by the Funds; taxes and corporate fees;
legal fees incurred in connection with the affairs of the Funds; and expenses
of meetings of shareholders and trustees.
AIM, at its own expense, furnishes to the Trust office space and
facilities. AIM furnishes to the Trust all personnel for managing the affairs
of the Trust and each of its series of shares and is reimbursed under the
Master Administrative Services Agreement for the services of a principal
financial officer of the Trust and his staff. The Master Administrative
Services Agreement between the Trust and AIM provides that AIM may perform or
arrange for the provision of certain accounting, and other administrative
services to each Fund which are not required to be performed by AIM under the
Master Investment Advisory Agreement. The Master Administrative Services
Agreement provides that such agreement will continue in effect from year to
year only if such continuance is specifically approved at least annually by the
Trust's Board of Trustees, including the Qualified Trustees, by votes cast in
person at a meeting called for such purpose. The Master Administrative
Services Agreement was initially approved by the Trust's Board of Trustees
(including the Qualified Trustees) on July 19, 1993, and became effective as of
October 18, 1993.
The Funds (other than AIM BALANCED FUND) paid AIM the following amounts,
which represented the indicated annualized percentage of average net assets for
such period, as reimbursement of administrative services costs for the years
ended December 31, 1995, 1994 and 1993:
37
<PAGE> 194
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AVERAGE AVERAGE AVERAGE
AMOUNT PAID NET ASSETS AMOUNT PAID NET ASSETS AMOUNT PAID NET ASSETS
----------- ------------ ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
AIM Global Utilities Fund . . . . . $69,813 .03% $171,972 .08% $ 91,549 .06%
AIM Growth Fund . . . . . . . . . . 67,618 .03% 134,789 .09% 97,029 .06%
AIM High Yield Fund . . . . . . . . 82,116 .01% 313,218 .04% 172,279 .04%
AIM Income Fund . . . . . . . . . . 82,185 .03% 154,517 .07% 86,396 .04%
AIM Intermediate Government Fund . 71,765 .04% 92,487 .06% 59,584 .04%
AIM Money Market Fund* . . . . . . 55,020 .01% 209,642 .05% 39,325 .06%
AIM Municipal Bond Fund . . . . . . 65,899 .02% 103,945 .04% 65,114 .02%
AIM Value Fund . . . . . . . . . . 137,307 .003% 884,123 .06% 220,898 .05%
</TABLE>
* Amount paid by AIM MONEY MARKET FUND was for period October 16, 1993
through December 31, 1993.
AIM BALANCED FUND reimbursed AIM for administrative services costs
incurred by AIM, for the years ended December 31, 1995 and 1994, in the amounts
of $67,928 and $81,734, respectively, which represented .07% and 0.18%,
respectively, of the Fund's average net assets; for the four-month period ended
December 31, 1993, in the amount of $14,083, which represented .19% of the
Fund's average net assets; and for the year ended August 31, 1993, in the
amount of $36,641, which represented .24% of the Fund's average net assets.
In addition, the Transfer Agency and Service Agreement between the
Trust and A I M Fund Services, Inc. ("AFS"), a registered transfer agent and
wholly-owned subsidiary of AIM, provides that AFS will perform certain
shareholder services for the Funds for a fee per account serviced. The
Transfer Agency and Service Agreement provides that AFS will receive a per
account fee plus out-of-pocket expenses to process orders for purchases,
redemptions and exchanges of shares; prepare and transmit payments for
dividends and distributions declared by the Funds; maintain shareholder
accounts and provide shareholders with information regarding the Funds and
their accounts. The Transfer Agency and Service Agreement became effective on
November 1, 1994.
THE DISTRIBUTION PLANS
THE CLASS A AND CLASS C PLAN. The Trust has adopted a Master
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act relating to the
Class A shares of the Funds and the Class C shares of AIM MONEY MARKET FUND
(collectively, the "Covered Classes"). Such plan (the "Class A and Class C
Plan") provides that each Covered Class pays 0.25% per annum of its average
daily net assets as compensation to AIM Distributors for the purpose of
financing any activity which is primarily intended to result in the sale of
shares of the Covered Class. Activities appropriate for financing under the
Class A and Class C Plan include, but are not limited to, the following:
printing of prospectuses and statements of additional information and reports
for other than existing shareholders; overhead; preparation and distribution of
advertising material and sales literature; expenses of organizing and
conducting sales seminars; supplemental payments to dealers and other
institutions such as asset-based sales charges or as payments of service fees
under shareholder service arrangements; and costs of administering the Class A
and Class C Plan.
THE CLASS B PLAN. The Trust has also adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to Class B shares of
the Funds (the "Class B Plan", and collectively with the Class A and Class C
Plan, the "Plans"). Under the Class B Plan, each Fund pays compensation to AIM
Distributors at an annual rate of 1.00% of the average daily net assets
attributable to Class B shares. Of such amount, each Fund pays a service fee of
0.25% of the average daily net assets attributable to Class B shares to
selected dealers and other institutions which furnish continuing personal
shareholder services to their customers who purchase and own Class B shares.
Amounts paid in accordance with the Class B Plan may be used to finance any
activity primarily intended to result in the sale of Class B shares, including
but not limited to printing of
38
<PAGE> 195
prospectuses and statements of additional information and reports for other
than existing shareholders; overhead; preparation and distribution of
advertising material and sales literature; expenses of organizing and
conducting sales seminars; supplemental payments to dealers and other
institutions such as asset-based sales charges or as payments of service fees
under shareholder service arrangements; and costs of administering the Class B
Plan. AIM Distributors may transfer and sell its rights to payments under the
Class B Plan in order to finance distribution expenditures in respect of Class
B shares.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may
enter into agreements ("Shareholder Service Agreements") with investment
dealers selected from time to time by AIM Distributors for the provision of
distribution assistance in connection with the sale of the Funds' shares to
such dealers' customers, and for the provision of continuing personal
shareholder services to customers who may from time to time directly or
beneficially own shares of the Funds. The distribution assistance and
continuing personal shareholder services to be rendered by dealers under the
Shareholder Service Agreements may include, but shall not be limited to, the
following: distributing sales literature; answering routine customer inquiries
concerning the Funds; assisting customers in changing dividend options, account
designations and addresses, and in enrolling in any of several special
investment plans offered in connection with the purchase of the Funds' shares;
assisting in the establishment and maintenance of customer accounts and records
and in the processing of purchase and redemption transactions; investing
dividends and any capital gains distributions automatically in the Funds'
shares; and providing such other information and services as the Funds or the
customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding a Fund and
the Trust; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as a Fund reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions which
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive
compensation for selling Fund shares may receive different compensation for
selling shares of one particular class over another.
Under a Shareholder Service Agreement, a Fund agrees to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement will be calculated at the end of each payment period for each
business day of the Funds during such period at the annual rate of 0.25% of the
average daily net asset value of the Funds' shares purchased or acquired
through exchange. Fees calculated in this manner shall be paid only to those
selected dealers or other institutions who are dealers or institutions of
record at the close of business on the last business day of the applicable
payment period for the account in which such Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc. ("NASD"). The Plans conform to rules of the NASD by limiting payments
made to dealers and other financial institutions who provide continuing
personal shareholder services to their customers who purchase and own shares of
the Funds to no more than 0.25% per annum of the average daily net assets of
the Funds attributable to the customers of such dealers or financial
institutions, and by imposing a cap on the total sales charges, including asset
based sales charges, that may be paid by the Funds and their respective
classes.
39
<PAGE> 196
AIM Distributors does not act as principal, but rather as agent for
the Funds, in making dealer incentive and shareholder servicing payments under
the Plans. These payments are an obligation of the Funds and not of AIM
Distributors.
For the year ended December 31, 1995, the various classes of the Funds
(other than AIM MONEY MARKET FUND) paid to AIM Distributors the following
amounts pursuant to the Plans:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- --------------
<S> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . . . . . . . . $ 134,550 $ 382,860
AIM Global Utilities Fund . . . . . . . . . . . . . . . . 393,486 538,479
AIM Growth Fund . . . . . . . . . . . . . . . . . . . . . 374,107 828,223
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . 1,805,363 3,483,665
AIM Income Fund . . . . . . . . . . . . . . . . . . . . . 550,802 237,414
AIM Intermediate Government Fund . . . . . . . . . . . . 403,858 377,931
AIM Municipal Bond Fund . . . . . . . . . . . . . . . . . 686,308 145,330
AIM Value Fund . . . . . . . . . . . . . . . . . . . . . 5,911,494 16,466,004
</TABLE>
Actual fees paid under the Class A and Class C Plan during the year
ended December 31, 1995 were allocated as follows:
<TABLE>
<CAPTION>
PRINTING COMPENSATION
ADVERTISING AND MAILING SEMINARS TO DEALERS
----------- ----------- -------- ------------
<S> <C> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . $ 6,791 $ 1,132 $ 2,264 $ 124,363
AIM Global Utilities Fund . . . . . . . . . 7,124 1,018 2,035 383,309
AIM Growth Fund . . . . . . . . . . . . . . 2,846 948 948 369,365
AIM High Yield Fund . . . . . . . . . . . . 43,238 7,039 16,089 1,738,997
AIM Income Fund . . . . . . . . . . . . . . 4,333 867 1,733 543,869
AIM Intermediate Government Fund . . . . . 4,962 992 1,985 395,919
AIM Municipal Bond Fund . . . . . . . . . . 15,581 2,921 5,843 661,963
AIM Value Fund . . . . . . . . . . . . . . 129,306 21,882 47,743 5,712,563
</TABLE>
Actual fees paid under the Class B Plan during the year ended December
31, 1995 were allocated as follows:
<TABLE>
<CAPTION>
COMPENSATION COMPENSATION
PRINTING AND TO TO
ADVERTISING MAILING SEMINARS UNDERWRITERS DEALERS
----------- ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . $ 23,552 $ 4,096 $ 7,168 $ 287,145 $ 60,899
AIM Global Utilities Fund . . . . . 50,441 8,071 21,186 403,859 54,922
AIM Growth Fund . . . . . . . . . . 44,551 7,088 17,213 621,167 138,204
AIM High Yield Fund . . . . . . . . 181,814 29,969 65,932 2,612,748 593,202
AIM Income Fund . . . . . . . . . . 13,997 2,000 4,999 178,061 38,357
AIM Intermediate Government Fund . 23,098 4,017 9,039 283,448 58,329
AIM Municipal Bond Fund . . . . . . 8,434 1,874 3,748 108,998 22,276
AIM Value Fund . . . . . . . . . . 710,527 119,088 258,191 12,349,503 3,028,695
</TABLE>
For the year ended December 31, 1995, the Class A shares of AIM MONEY
MARKET FUND paid $410,703 to AIM Distributors pursuant to the Class A and Class
C Plan, of which $8,911 was spent on advertising, $1,980 was spent on printing
and mailing, $2,970 was spent on seminars and $396,842 was spent on
compensation to Dealers. For the year ended December 31, 1995, the Class B
shares of AIM MONEY
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<PAGE> 197
MARKET FUND paid $381,405 to AIM Distributors pursuant to the Class B Plan, of
which $25,127 was spent on advertising, $4,020 was spent on printing and
mailing, $9,045 was spent on seminars, $286,054 was spent on compensation to
Underwriters and $57,159 was spent on compensation to Dealers. For the year
ended December 31, 1995, the Class C shares of AIM MONEY MARKET FUND paid
$671,137 to AIM Distributors pursuant to the Class A and Class C Plan, of which
$98,678 was spent on advertising, $16,945 was spent on printing and mailing,
$36,880 was spent on seminars and $518,635 was spent on compensation to
Dealers.
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Trustees, including a majority
of the trustees who are not "interested persons" (as defined in the 1940 Act)
of the Trust and who have no direct or indirect financial interest in the
operation of the Plans or in any agreements related to the Plans (the
"Independent Trustees"). In approving the Plans in accordance with the
requirements of Rule 12b-1, the trustees considered various factors and
determined that there is a reasonable likelihood that the Plans would benefit
each class of the Funds and its respective shareholders.
The Plans do not obligate the Funds to reimburse AIM Distributors for
the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plans. Thus, even if AIM Distributors' actual expenses exceed the
fee payable to AIM Distributors thereunder at any given time, the Funds will
not be obligated to pay more than that fee. If AIM Distributors' expenses are
less than the fee it receives, AIM Distributors will retain the full amount of
the fee.
The Plans require AIM Distributors to provide the Board of Trustees at
least quarterly with a written report of the amounts expended pursuant to the
Plans and the purposes for which such expenditures were made. The Board of
Trustees reviews these reports in connection with their decisions with respect
to the Plans.
Unless terminated earlier in accordance with their terms, the Plans
continue in effect until June 30, 1995 and thereafter, as long as such
continuance is specifically approved at least annually by the Board of
Trustees, including a majority of the Independent Trustees.
The Plans may be terminated by the vote of a majority of the
Independent Trustees, or, with respect to a particular class, by the vote of a
majority of the outstanding voting securities of that class.
Any change in the Plans that would increase materially the
distribution expenses paid by the applicable class requires shareholder
approval; otherwise, it may be amended by the trustees, including a majority of
the Independent Trustees, by votes cast in person at a meeting called for the
purpose of voting upon such amendment. As long as the Plans are in effect, the
selection or nomination of the Independent Trustees is committed to the
discretion of the Independent Trustees.
The principal differences between the Class A and Class C Plan and the
Class B Plan are: The Class A and Class C Plan allows payment to AIM
Distributors or to dealers or financial institutions of up to 0.25% of average
daily net assets of each Fund's Class A and Class C shares as compared to 1.00%
of such assets of each Fund's Class B shares; (ii) the Class B Plan obligates
Class B shares to continue to make payments to AIM Distributors following
termination of the Class B shares Distribution Agreement with respect to Class
B shares sold by or attributable to the distribution efforts of AIM
Distributors, unless there has been a complete termination of the Class B Plan
(as defined in such Plan); and (iii) the Class B Plan expressly authorizes AIM
Distributors to assign, transfer or pledge its rights to payments pursuant to
the Class B Plan.
THE DISTRIBUTOR
Information concerning AIM Distributors and the continuous offering of
the Funds' shares is set forth in the Prospectus under the headings "How to
Purchase Shares" and "Terms and Conditions of Purchase of the AIM Funds." A
Master Distribution Agreement with AIM Distributors relating to the Class A
shares of the Funds and the Class C shares of AIM MONEY MARKET FUND was
approved by the Board of Trustees on July 19,
41
<PAGE> 198
1993. A Master Distribution Agreement with AIM Distributors relating to the
Class B shares of the Funds was also approved by the Board of Trustees on July
19, 1993. Both such Master Distribution Agreements are hereinafter
collectively referred to as the "Distribution Agreements."
The Distribution Agreements provide that AIM Distributors will bear
the expenses of printing from the final proof and distributing the Funds'
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Funds), and any promotional or
sales literature used by AIM Distributors or furnished by AIM Distributors to
dealers in connection with the public offering of the Funds' shares, including
expenses of advertising in connection with such public offerings. AIM
Distributors has not undertaken to sell any specified number of shares of any
classes of the Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B shares of the Funds at
the time of such sales. Payments with respect to Class B shares will equal
4.0% of the purchase price of the Class B shares sold by the dealer or
institution, and will consist of a sales commission equal to 3.75% of the
purchase price of the Class B shares sold plus an advance of the first year
service fee of 0.25% with respect to such shares. The portions of the payments
to AIM Distributors under the Class B Plan which constitutes an asset-based
sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a
portion of such sales commissions plus financing costs. AIM Distributors
anticipates that it requires a number of years to recoup from Class B Plan
payments the sales commissions paid to dealers and institutions in connection
with sales of Class B shares. In the future, if multiple distributors serve a
Fund, each such distributor (or its assignee or transferee) would receive a
share of the payments under the Class B Plan based on the portion of the Fund's
Class B shares sold by or attributable to the distribution efforts of that
distributor.
The Trust (on behalf of any class of any Fund) or AIM Distributors may
terminate the Distribution Agreements on sixty (60) days' written notice
without penalty. The Distribution Agreements will terminate automatically in
the event of their assignment. In the event the Class B shares Distribution
Agreement is terminated, AIM Distributors would continue to receive payments of
asset-based distribution fees in respect of the outstanding Class B shares
attributable to the distribution efforts of AIM Distributors; provided,
however, that a complete termination of the Class B Plan (as defined in such
Plan) would terminate all payments to AIM Distributors. Termination of the
Class B Plan or Distribution Agreement would not affect the obligation of a
Fund and its Class B shareholders to pay Contingent Deferred Sales Charges.
The following chart reflects the total sales charges paid in
connection with the sale of Class A shares of each Fund (other than AIM
BALANCED FUND) and the amount retained by AIM Distributors for the years ended
December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AIM Global Utilities Fund . . . . . $ 745,539 $ 106,920 $ 1,198,533 $ 168,696 $ 3,474,558 $ 477,431
AIM Growth Fund . . . . . . . . . . 892,904 146,533 255,624 37,866 183,096 29,279
AIM High Yield Fund . . . . . . . . 8,338,447 1,388,106 5,149,515 808,554 6,526,992 1,062,165
AIM Income Fund . . . . . . . . . . 914,135 154,679 554,349 94,637 770,766 134,790
AIM Intermediate Government Fund . 876,411 144,669 644,604 108,048 904,645 156,795
AIM Money Market Fund . . . . . . . 2,845,276 494,184 996,876 182,129 78,035 14,644
AIM Municipal Bond Fund . . . . . . 684,242 116,667 527,008 82,774 710,819 124,164
AIM Value Fund . . . . . . . . . . 52,075,064 7,659,031 22,815,744 3,063,899 14,439,158 2,057,628
</TABLE>
The total sales charges paid in connection with the sale of Class A
shares of AIM BALANCED FUND for the years ended December 31, 1995 and 1994 were
$979,475 and $379,087, of which A I M Distributors retained $165,692 and
$63,481, and for the four-month period ended December 31, 1993 was $85,265, of
which AIM Distributors retained $14,333. For the year ended August 31, 1993,
the total sales charges paid
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<PAGE> 199
in connection with the sale of shares of ACS was $96,742, and the amounts AIM
Distributors retained for the same period was $19,211.
The following chart reflects the contingent deferred sales charges
paid by Class A and Class B shareholders for the years ended December 31, 1995
and 1994, and the period ended December 31 1993:
<TABLE>
<CAPTION>
1995 1994 1993*
---- ---- ----
<S> <C> <C> <C>
AIM Balanced Fund $ 92,409 $ 28,532 $ 6
AIM Global Utilities Fund 167,444 107,127 3,301
AIM Growth Fund 169,092 51,475 3,970
AIM High Yield Fund 655,591 391,108 1,799
AIM Income Fund 48,320 16,712 2,339
AIM Intermediate Government Fund 101,233 70,431 42
AIM Money Market Fund 256,618 81,600 37
AIM Municipal Bond Fund 31,956 18,017 -0-
AIM Value Fund 2,052,439 584,611 3,425
</TABLE>
* The inception date of the Class B shares of AIM GLOBAL
UTILITIES FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND, and AIM
MUNICIPAL BOND FUND was September 1, 1993; the inception date
of the Class B shares of AIM INCOME FUND and AIM INTERMEDIATE
GOVERNMENT FUND was September 7, 1993; the inception date of
the Class B shares of AIM MONEY MARKET FUND was October 16,
1993: and the inception date of the Class B shares of AIM
BALANCED FUND and AIM VALUE FUND was October 18, 1993.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner in which shares of the Funds may
be purchased appears in the Prospectus under the headings "How to Purchase
Shares," "Terms and Conditions of Purchase of the AIM Funds" and "Special
Plans."
The sales charge normally deducted on purchases of Class A shares is
used to compensate AIM Distributors and participating dealers for their
expenses incurred in connection with the distribution of the Funds' Class A
shares. Since there is little expense associated with unsolicited orders
placed directly with AIM Distributors by persons who, because of their
relationship with the Funds or with AIM and its affiliates, are familiar with
the Funds, or whose programs for purchase involve little expense (e.g., because
of the size of the transaction and shareholder records required), AIM
Distributors believes that it is appropriate and in the Funds' best interests
that such persons, and certain other persons whose purchases result in
relatively low expenses of distribution, be permitted to purchase Class A
shares of the Funds through AIM Distributors without payment of a sales charge.
The persons who may purchase Class A shares of the Funds without a sales charge
are set forth in the Prospectus.
Complete information concerning the method of exchanging shares of the
Funds for shares of the other AIM Funds is set forth in the Prospectus under
the heading "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in
the Prospectus under the heading "How to Redeem Shares." In addition to the
Funds' obligation to redeem shares, AIM Distributors may also repurchase shares
as an accommodation to shareholders. To effect a repurchase, those dealers who
have executed Selected Dealer Agreements with AIM Distributors must phone
orders to the order desk of the Funds at (800) 959-4246) and guarantee delivery
of all required documents in good order. A repurchase is effected at the net
asset value per share of the applicable Fund next determined after the
repurchase order is received. Such an arrangement is subject to timely receipt
by A I M Fund Services, Inc., the Funds' transfer agent, of all required
documents in good order. If such documents are not received within a
reasonable time
43
<PAGE> 200
after the order is placed, the order is subject to cancellation. While there
is no charge imposed by a Fund or by AIM Distributors (other than any
applicable contingent deferred sales charge) when shares are redeemed or
repurchased, dealers may charge a fair service fee for handling the
transaction.
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange ("NYSE") is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the NYSE is closed for other than customary weekend and holiday closings, (c)
the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of a Fund not reasonably practicable.
A Fund's net asset value is calculated by dividing the number of
outstanding shares into the net assets of the Fund. Net assets are the excess
of a Fund's assets over its liabilities.
For AIM Money Market Fund: The Fund may use the amortized cost method
to determine its net asset value so long as the Fund does not (a) purchase any
instrument with a remaining maturity greater than 397 days (for these purposes,
repurchase agreements shall not be deemed to involve the purchase by the Fund
of the securities pledged as collateral in connection with such agreements) or
(b) maintain a dollar-weighted average portfolio maturity in excess of 90 days,
and otherwise complies with the terms of rules adopted by the SEC.
Under the amortized cost method, each investment is valued at its cost
and thereafter any discount or premium is amortized on a constant basis to
maturity. While this method provides certainty of valuation, it may result in
periods in which the amortized cost value of the Fund's investments is higher
or lower than the price that would be received if the investments were sold.
During periods of declining interest rates, use by the Fund of the amortized
cost method of valuing its portfolio may result in a lower value than the
market value of the portfolio, which could be an advantage to new investors
relative to existing shareholders. The converse would apply in a period of
rising interest rates.
The Board of Trustees has established procedures designed to stabilize
at $1.00, to the extent reasonably possible, the Fund's net asset value per
share. Such procedures include review of portfolio holdings by the trustees at
such intervals as they may deem appropriate to determine whether net asset
value, calculated by using available market quotations, deviates from $1.00 per
share and, if so, whether such deviation may result in material dilution or is
otherwise unfair to investors or existing shareholders. In the event the
trustees determine that a deviation having such a result exists, they intend to
take such corrective action as they deem necessary and appropriate, including
the sale of portfolio securities prior to maturity in order to realize capital
gains or losses or to shorten average portfolio maturity; withholding
dividends; redemption of shares in kind; or establishing a net asset value per
share by using available market quotations, in which case, the net asset value
could possibly be more or less than $1.00 per share.
For all other Funds: The following formula may be used to determine
the public offering price per Class A share of an investor's investment:
Net Asset Value / (1 - Sales Charge as % of Offering Price) = Offering
Price.
For example, at the close of business on December 31, 1995, AIM VALUE
FUND - Class A shares had 127,137,684 shares outstanding, net assets of
$3,408,952,023 and a net asset value per share of $26.81. The offering price,
therefore, was $28.37.
AIM HIGH YIELD FUND
Variable Annuity Contracts--Currently, shares of AIM HIGH YIELD FUND
may be purchased at net asset value by the Life Insurance Company of North
America ("LINA") under an arrangement whereby the shares will serve as an
underlying investment medium for certain variable annuity contracts previously
issued by LINA.
44
<PAGE> 201
The basic objective of the variable annuity contracts is to provide
individuals with retirement benefits through net purchase payment accumulations
and annuity payments which are based upon the performance of AIM HIGH YIELD
FUND or other available funds. The contracts allow their owners and
participants to defer federal income tax ("FIT") payments on contract
investment accumulations until annuity payments begin. The annuity payment
options generally provide for lifetime annuity payments based upon the life of
the named annuitant (and joint annuitant, if applicable). Such payments may be
made for a guaranteed minimum number of years. Certain charges are made in
connection with the sale of the contracts.
The LINA contracts are no longer being issued except that existing
owners, participants and, in some cases, new participants under existing group
contracts under certain tax-qualified plans, may continue to make contributions
under the contract. Persons who wish to receive additional information
concerning investment in AIM HIGH YIELD FUND through LINA's variable annuity
contracts are urged to read the LINA prospectus which describes them. LINA
variable annuity information and a prospectus may be obtained by writing to INA
Security Corporation, 601 Walnut Street, Ninth Floor, Philadelphia,
Pennsylvania 19102, or by calling (215) 351-3121.
QUALIFYING FOR A REDUCED FRONT-END SALES CHARGE
As described in the Prospectus, the front-end sales charge for Class A
shares is calculated by multiplying an investor's total investment by the
applicable sales charge rate. The applicable rate varies with the amount
invested. The Funds offer programs such as Right of Accumulation and Letter of
Intent, which are described in the Prospectus, and are designed to permit
investors to aggregate purchases of different funds, or separate purchases over
time, in order to qualify for a lower sales charge rate. See "Terms and
Conditions of Purchase of the AIM Funds -- Reductions in Initial Sales Charges"
in the Prospectus.
DETERMINATION OF NET ASSET VALUE
For AIM Money Market Fund: The net asset value per share of the Fund
is determined daily as of 12:00 noon and the close of trading on the NYSE
(generally 4:00 p.m. Eastern time) on each business day of the Fund. Net asset
value per share is determined by dividing the value of the Fund's securities,
cash and other assets (including interest accrued but not collected)
attributable to a particular class, less all its liabilities (including accrued
expenses and dividends payable) attributable to that class, by the number of
shares outstanding of that Class and rounding the resulting per share net asset
value to the nearest one cent. Determination of the net asset value per share
is made in accordance with generally accepted accounting principles.
The securities of the Fund are valued on the basis of amortized cost.
This method values a security at its cost on the date of purchase and
thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the security. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if the security were
sold. During such periods, the daily yield on shares of the Fund computed as
described under "Performance Information" may differ somewhat from an identical
computation made by another investment company with identical investments
utilizing available indications as to the market value of its portfolio
securities.
The valuation of portfolio instruments based upon their amortized cost
and the concomitant maintenance of the net asset value per share of $1.00 for
the Fund is permitted in accordance with applicable rules and regulations of
the SEC which require the Fund to adhere to certain conditions. These rules
require, among other things, that the Fund maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of 397 calendar days or less and invest only in securities
determined by the Board of Trustees to be "Eligible Securities" and to present
minimal credit risk to the Fund. For the definition of "Eligible Securities"
see the caption "Description of Money Market Instruments."
45
<PAGE> 202
The Board of Trustees is required to establish procedures designed to
stabilize, to the extent reasonably practicable, the Fund's price per share at
$1.00, as computed for the purpose of sales and redemptions. Such procedures
include review of the Fund's holdings by the Board of Trustees at such
intervals as they may deem appropriate, to determine whether the net asset
value calculated by using available market quotations or other reputable
sources for the Fund deviates from $1.00 per share and, if so, whether such
deviation may result in material dilution or is otherwise unfair to existing
holders of the Fund's shares. In the event the Board of Trustees determines
that such a deviation exists for the Fund, it will take such corrective action
as the Board of Trustees deems necessary and appropriate with respect to the
Fund, including the sale of portfolio instruments prior to maturity to realize
capital gains or losses or to shorten the average portfolio maturity; the
withholding of dividends; redemption of shares in kind; or the establishment of
a net asset value per share by using available market quotations.
The Fund intends to comply with any amendments made to Rule 2a-7 which
may require corresponding changes in the Fund's procedures which are designed
to stabilize the Fund's price per share at $1.00.
For All Other Funds: The net asset value per share of each Fund is
normally determined daily as of the close of trading of the NYSE (generally
4:00 p.m. Eastern time) on each business day of the Fund. Net asset value per
share is determined by dividing the value of a Fund's securities, cash and
other assets (including interest accrued but not collected) attributable to a
particular class, less all its liabilities (including accrued expenses and
dividends payable) attributable to that class, by the total number of shares
outstanding of that class. Determination of a Fund's net asset value per share
is made in accordance with generally accepted accounting principles.
Each equity security held by a Fund is valued at its last sales price
on the exchange where the security is principally traded or, lacking any sales
on a particular day, the security is valued at the mean between the closing bid
and asked prices on that day. Exchange listed convertible debt securities are
valued at the mean between the last bid and asked prices obtained from
broker-dealers or a comparable alternative, such as Bloomberg or Telerate.
Each security traded in the over-the-counter market (but not including
securities reported on the NASDAQ National Market System) is valued at the mean
between the last bid and asked prices based upon quotes furnished by market
makers for such securities. Each security reported on the NASDAQ National
Market System is valued at the last sales price on the valuation date or absent
a last sales price, at the mean between the closing bid and asked prices on
that day. Non-convertible debt securities are valued on the basis of prices
provided by an independent pricing service. 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, developments related to special securities, yield, quality,
coupon rate, maturity, type of issue, individual trading characteristics and
other market data. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
supervision of the Trust's officers in a manner specifically authorized by the
Board of Trustees. Short-term obligations having 60 days or less to maturity
are valued on the basis of amortized cost. For purposes of determining net
asset value per share, futures and options contracts generally will be valued
15 minutes after the close of trading of the NYSE.
Generally, trading in foreign securities, corporate bonds, U.S.
Government securities and money market instruments is substantially completed
each day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of each Fund's shares are
determined at such times. Foreign currency exchange rates are also generally
determined prior the close of the NYSE. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which such values are determined and the close of the NYSE which will not be
reflected in the computation of a Fund's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by or
under the supervision of the Board of Trustees.
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<PAGE> 203
TAX MATTERS
Each Fund is treated as a separate association taxable as a
corporation. Each Fund intends to qualify under the Internal Revenue Code of
1986, as amended (the "Code"), as a regulated investment company ("RIC") for
each taxable year. Accordingly, each Fund must, among other things, meet the
following requirements: (A) each Fund must generally derive at least 90% of
its gross income from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities, foreign
currencies, or other income derived with respect to its business of investing
in such stock, securities or currencies; and (B) each Fund must derive less
than 30% of its gross income from the sale or disposition of any of the
following held less than three months: (i) stock or securities, (ii) options,
futures or forward contracts (other than options, futures or forward contracts
on foreign currencies), or (iii) foreign currencies (or options, futures or
forward contracts on foreign currencies) but only if such currencies are not
directly related to the Fund's business of investing in stock, securities or
options and futures thereon. There are exceptions to the 30% test when a Fund,
in certain circumstances, realizes gains to satisfy abnormal redemptions.
Abnormal redemptions occur on any day when net redemptions exceed one percent
of the Fund's net asset value. Accordingly, the extent to which the Funds may
engage in futures contracts and related options may be materially limited by
this 30% test, with the exception of AIM MONEY MARKET FUND which does not
engage in such transactions. Each Fund must diversify its holdings so that, at
the end of each fiscal quarter: (i) at least 50% of the market value of the
Fund's assets is represented by cash, U.S. Government securities and other
securities, with such other securities limited, with respect to any one issuer,
to an amount not greater than 5% of the Fund's assets and not more than 10% of
the outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its assets is invested in the securities of any one issuer (other
than U.S. Government securities).
As a RIC, each Fund will generally not be subject to FIT on its income
and gains distributed to shareholders if it currently distributes the sum of
(i) at least 90% of its investment company taxable income for the taxable year
and (ii) at least 90% of the excess of its tax-exempt interest income under
Code Section 103(a) over its deductions disallowed under Code Sections 265 and
171(a)(2) (the "Distribution Requirement"). Distributions made by a Fund
during its taxable year, or under certain circumstances within 12 months after
the end of its taxable year, will be considered distributions made during the
taxable year and will therefore satisfy the Distribution Requirement.
Each Fund is subject to a nondeductible 4% excise tax if it does not
meet certain distribution requirements under the Code. To avoid this excise
tax, during each calendar year, each Fund must distribute: (1) at least 98% of
its ordinary income (not taking into account any capital gains or losses) for
the calendar year (except that any foreign currency gain or loss occurring
after October 31 shall be taken into account the following year), (2) at least
98% of its capital gains in excess of its capital losses for the 12-month
period ending on October 31, and (3) all ordinary income and capital gains from
previous calendar years that were not distributed during such years. Dividends
declared to shareholders of record on a date in October, November or December
will be taxable to shareholders on December 31 in the year declared as long as
the Fund pays the dividends no later than January 31 of the following year.
All Funds except AIM MONEY MARKET FUND: Section 1092 of the Code
affects the taxation of certain transactions involving futures or options
contracts. If a futures or options contract is part of a "straddle" (which
could include another futures contract or underlying stock or securities), as
defined in Section 1092 of the Code, then, generally, losses are deferred first
to the extent that the modified "wash sale" rules of the Section 1092
regulations apply, and second to the extent of unrecognized gains on offsetting
positions. Further, the Funds may be required to capitalize, rather than
deduct currently, any interest expense on indebtedness incurred or continued to
purchase or carry any positions that are part of a straddle. Sections 1092 and
246 of the Code and the Regulations thereunder also suspend the holding periods
for straddle positions with possible adverse effects regarding long-term
capital gain treatment and the corporate dividends received deduction.
47
<PAGE> 204
Section 1256 of the Code generally requires that futures contracts and
options on future contracts be "marked-to-market" at the end of each year for
FIT purposes. Code Section 1256 further characterizes 60% of any capital gain
or loss with respect to such futures and options contracts as long-term capital
gain or loss and 40% as short-term capital gain or loss. If such a future or
option is held as an offsetting position and can be considered a straddle under
Section 1092 of the Code, such a straddle will constitute a mixed straddle. A
mixed straddle will be subject to both Section 1256 and Section 1092 unless
certain elections are made by the Fund.
The Funds may have invested in certain foreign currency transactions,
the gain or loss from which may be subject to taxation as ordinary income or
loss under Code Section 988.
AIM GLOBAL UTILITIES FUND: Pursuant to the investment objectives of
the Fund, the Fund may invest in foreign securities. Dividends and interest
received by the Fund with respect to these investments may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. If more than 50% in value of the Fund's total assets at the close of its
taxable year consists of stock or securities of foreign corporations, the Fund
will be eligible to file an election with the Internal Revenue Service pursuant
to which shareholders of the Fund will be required to include their
proportionate share of such withholding taxes in their United States income tax
returns as gross income, treat such proportionate share as taxes paid by them,
and deduct such proportionate share in computing their taxable income or,
alternatively, use them as foreign tax credits to the extent allowed against
their United States income taxes subject to certain provisions and limitations
contained in the Code. The Fund will report annually to its shareholders the
amount per share of such withholding taxes. Please note that such foreign tax
credits are non-refundable and therefore cannot be claimed by certain retirement
accounts and other persons not otherwise subject to United States income
taxation.
AIM HIGH YIELD FUND: The notes to the financial statements of the
Fund for the year ended December 31, 1995, detail the amount of capital loss
carryover for FIT purposes to which the Fund is entitled, subject to certain
limitations. To the extent losses are used to offset any future capital gains
realized during the carryover period, no capital gains tax liability will be
incurred for gains realized and not distributed.
AIM MUNICIPAL BOND FUND: With respect to interest income that is
exempt from FIT, the Fund intends to comply with Section 852(b)(5) of the Code,
which enables distributions of tax-exempt income to retain their character when
distributed to shareholders as an exempt interest dividend. Each year, the
Fund provides shareholders a statement indicating the amount of distribution
that is exempt from FIT. This statement also provides a breakdown showing the
percentage of such income that came from each state. In addition, the Fund
reports for FIT purposes any net realized capital gains and any ordinary income
from the Fund's short-term holdings. In 1995, none of the dividends paid from
income was taxable as ordinary income; however, this may change in future
periods. Further, the Fund also reports certain interest from "Qualified
Private Activity Bonds" which shareholders may be required to include in the
alternative minimum tax calculation.
The Tax Reform Act of 1986 (the "1986 Act") divided municipal debt
obligations into three categories, only one of which ("Public Purpose Bonds")
bears interest which is exempt from both the regular income tax and the
alternative minimum tax as it applies to individuals. For corporations, some
or all of the income from Public Purpose Bonds would be includable in the
corporate alternative minimum tax base. Of the other two categories
("Qualified Private Activity Bonds" and "Private Activity Bonds"), for both
individuals and corporations, Qualified Private Activity Bonds bear interest
which is excluded from income for purposes of the regular income tax but must
generally be included in the alternative minimum tax base, and Private Activity
Bonds are taxable under both the regular and alternative minimum taxes.
The 1986 Act also applied limitations on the issuance of bonds whose
proceeds are used by organizations exempt from tax under Code Section
501(c)(3), as well as general limitations on the amount of Qualified Private
Activity Bonds governmental units may issue.
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The 1986 Act limitations on tax-exempt bonds apply generally to bonds
issued after August 16, 1986. The private activity bond rules are generally
applicable to bonds issued on or after September 1, 1986, with the alternative
minimum tax rules applicable generally to bonds issued on or after August 7,
1986. AIM MUNICIPAL BOND FUND intends to limit its investments in Qualified
Private Activity Bonds and taxable securities to no more than 20% of its total
assets in any given year, consistent with its stated investment objective.
Original issue discount on tax-exempt bonds is accrued as tax-exempt
interest (except for a portion thereof in the case of certain stripped
tax-exempt bonds), and is included in the tax basis of the security for capital
gain and loss computation purposes. Any gain or loss from the sale or other
disposition of a tax-exempt security is generally treated as either long-term
or short-term capital gain or loss, depending upon its holding period, and is
fully taxable. However, gain recognized from the sale or other disposition of
a tax-exempt security purchased after April 30, 1993, will be treated as
ordinary income to the extent of the accrued market discount on such security.
Interest on indebtedness incurred by shareholders (including financial
institutions) will not be deductible for FIT purposes to the extent that the
money was used to purchase or carry tax-exempt securities. The purchase of
Fund shares may be considered to have been made with borrowed funds even though
the borrowed funds are not directly traceable to the purchase of Fund shares.
Further, persons who are "substantial users" (or persons related thereto) of
facilities financed by private activity bonds should consult their own tax
advisor before purchasing Fund shares.
The exemption of interest income for FIT purposes does not necessarily
result in exemption under state and local laws. Shareholders should consult
their tax advisors as to the treatment of such income under state and local
laws.
PROGRAMS AND SERVICES FOR SHAREHOLDERS
The Funds provide certain services for shareholders and certain
investment or redemption programs. See "Exchange Privilege" and "How to Redeem
Shares" in the Prospectus. All inquiries concerning these programs should be
made directly to A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas
77210-4739, toll free at (800) 959-4246.
DIVIDEND ORDER
Dividends may be paid to someone other than the registered owner, or
sent to an address other than the address of record. (Please note that
signature guarantees are required to effect this option). An investor also may
direct that his or her dividends be invested in one of the other Funds in the
Trust, provided however, that dividends attributable to Class A shares may not
be reinvested in Class B shares, dividends attributable to Class B shares may
only be reinvested in Class B shares and dividends attributable to Class C
shares may be reinvested in Class A shares or Class C shares. There is no
sales charge for these deposits; initial investment minimums apply. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" in
the Prospectus. To effect this option, please contact your authorized dealer.
For more information concerning AIM Funds other than those in the Trust, please
obtain a current prospectus by contacting your authorized dealer, by writing to
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, or by
calling toll free (800) 959-4246.
REDEMPTIONS PAID IN CASH
Pursuant to Rule 18f-1 under the 1940 Act, each Fund has committed to
pay in cash all requests for redemption by any shareholder of record, limited
in amount with respect to each shareholder during any 90-day period to the
lesser of $250,000 or 1% of the net assets of the Fund at the beginning of such
period. This election is irrevocable while such Rule is in effect unless the
SEC by order upon application permits the
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withdrawal of the Fund's notification of election. Redemptions by any one
shareholder during any 90-day period in excess of $250,000 or 1% of the net
assets of the Fund may be made in readily marketable securities.
DESCRIPTION OF MONEY MARKET INSTRUMENTS
U.S. Government Obligations consist of marketable securities and
instruments issued or guaranteed by the United States Government or by certain
of its agencies or instrumentalities. Direct obligations are issued by the
United States Treasury and include bills, certificates of indebtedness, notes
and bonds. Obligations of United States Government agencies and
instrumentalities ("Agencies") are issued by government-sponsored agencies and
enterprises acting under authority of Congress. Certain Agencies are backed by
the full faith and credit of the United States Government, and others are not.
MONEY MARKET OBLIGATIONS
AIM MONEY MARKET FUND will limit its investments to those securities
which at the time of purchase are "First Tier" securities as defined in Rule
2a-7 under the 1940 Act, as such Rule may be amended from time to time. Rule
2a-7 defines a "First Tier" security as any "Eligible Security" that:
(i) is rated (or that has been issued by an issuer that is
rated with respect to a class of short-term debt obligations, or any
security within that class, that is comparable in priority and
security with the security) by the Requisite NRSROs* in the highest
rating category for short-term debt obligations (within which there
may be sub-categories or gradations indicating relative standing); or
(ii) is a security described in paragraph (a)(5)(ii) of Rule
2a-7 (i.e. a security that at the time of issuance was a long-term
security but has a remaining maturity of 397 days or less) whose
issuer has received from the Requisite NRSROs a rating, with respect
to a class of short-term debt obligations (or any security within that
class) that now is comparable in priority and security with the
security, in the highest rating category for short-term debt
obligations (within which there may be sub-categories or gradations
indicating relative standing); or
(iii) is an Unrated Security** that is of comparable quality
to a security meeting the requirements of clauses (i) and (ii) above,
as determined by the Board of Trustees.
__________________________________
* "Requisite NRSRO" shall mean (a) any two nationally recognized
statistical rating organizations ("NRSROs") that have issued a rating
with respect to a security or class of debt obligations of an issuer,
or (b) if only one NRSRO has issued a rating with respect to such
security or issuer at the time the Fund purchases or rolls over the
security, that NRSRO. At present the NRSROs are: Standard & Poor's
Corp. ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Duff and
Phelps, Inc. ("Duff & Phelps"), Fitch Investors Services, Inc.
("Fitch") and, with respect to certain types of securities, IBCA
Limited and itsaffiliate, IBCA Inc. Subcategories or gradations in
ratings (such as a "+" or "") do not count as rating categories.
** An "Unrated Security" is a security (i) issued by an issuer that does
not have a current short-term rating from any NRSRO, either as to the
particular security or as to any other short-term obligations of
comparable priority and security; (ii) that was a long-term security
at the time of issuance and whose issuer has not received from any
NRSRO a rating with respect to a class of short-term obligations now
comparable in priority and security; or (iii) that is rated but which
is the subject of an external credit support agreement not in effect
when the security was assigned its rating, provided that a security is
not an unrated security if any short-term debt obligation issued by
the issuer and comparable in priority and security is rated by any
NRSRO.
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Subsequent to its purchase by AIM MONEY MARKET FUND, a security may
cease to be a First Tier security. Subject to certain exceptions set forth in
Rule 2a-7, such an event will not require the disposition of the security by
the Fund, but AIM will consider such an event to be relevant in its
determination of whether the Fund should continue to hold the security. To the
extent that the ratings applied by an NRSRO to a security may change as a
result of changes in these rating systems, the Funds will attempt to use
comparable ratings as standards for its investments in accordance with the
investment policies described herein.
Rule 2a-7 defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 days or less that
is rated (or that has been issued by an issuer that is rated
with respect to a class of short-term debt obligations, or any
security within that class, that is comparable in priority and
security with the security) by the Requisite NRSROs in one of
the two highest rating categories for short-term debt
obligations (within which there may be sub-categories or
gradations indicating relative standing); or
(ii) a security:
(A) that at the time of issuance was a long-term security
but that has a remaining maturity of 397 calendar
days or less; and
(B) whose issuer has received from the Requisite NRSROs a
rating, with respect to a class of short-term debt
obligations (or any security within that class) that
is now comparable in priority and security with the
security, in one of the two highest rating categories
for short-term debt obligations (within which there
may be sub-categories or gradations indicating
relative standing); or
(iii) an unrated security that is of comparable quality to a
security meeting the requirements of (i) or (ii) above, as
determined by the Trust's Board of Trustees; provided,
however, that:
(A) the Board of Trustees may base its determination that
a standby commitment is an Eligible Security upon a
finding that the issuer of the commitment presents a
minimal risk of default; and
(B) a security that at the time of issuance was a
long-term security but that has a remaining maturity
of 397 calendar days or less and that is an unrated
security is not an Eligible Security if the security
has a long-term rating from any NRSRO that is not
within the NRSRO's two highest categories (within
which there may be sub-categories or gradations
indicating relative standing).
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each of the Funds may engage in repurchase and reverse repurchase
agreement transactions involving the types of securities in which it is
permitted to invest.
REPURCHASE AGREEMENTS under which the purchaser (for example, a Fund)
acquires ownership of a security and the seller agrees, at the time of the
sale, to repurchase the security at a mutually agreed upon time and price,
thereby determining the yield during the purchaser's holding period. A Fund
may, however, enter into a "continuing contract" or "open" repurchase agreement
under which the seller is under a continuing obligation to repurchase the
underlying obligation from the Fund on demand and the effective interest rate
is negotiated on a daily basis. In general, a Fund will enter into repurchase
agreements only with domestic banks with total assets of at least $1 billion or
with primary dealers in U.S. Government securities; however, total assets will
not be the sole determinative factor, and a Fund may enter into repurchase
agreements with other institutions which the Board of Trustees believes present
minimal credit risks. Nevertheless, if the seller of a
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repurchase agreement fails to repurchase the debt instrument in accordance with
the terms of the agreement, the Fund which entered into the repurchase
agreement may incur a loss to the extent that the proceeds it realizes on the
sale of the underlying obligation are less than the repurchase price.
Repurchase agreements are considered to be loans by a Fund under the 1940 Act.
Rule 2a-7 under the 1940 Act provides that AIM MONEY MARKET FUND may
not invest more than 5% of its total assets in securities issued by the issuer
of that security, provided that the Fund may invest more than 5% of its total
assets in the First Tier securities of a single issuer for a period of up to
three business days after the purchase thereof; provided further, that the Fund
may not make more than one investment in accordance with the foregoing proviso
at any time. Under Rule 2a-7, for purposes of determining the percentage of
the Fund's total assets that are invested in securities of an issuer, a
repurchase agreement shall be deemed to be an acquisition of the underlying
securities, provided that the obligation of the seller to repurchase the
securities from the Fund is fully collateralized. To be fully collateralized,
the collateral must, among other things, consist entirely of U.S. Government
securities or securities that, at the time the repurchase agreement is entered
into, are rated in the highest rating category by the Requisite NRSROs.
REVERSE REPURCHASE AGREEMENTS, which involve the sale of securities
held by a Fund, with an agreement that the Fund will repurchase the securities
at an agreed upon price and date. A Fund may employ reverse repurchase
agreements for temporary or emergency purposes, such as to meet unanticipated
net redemptions so as to avoid liquidating other portfolio securities during
unfavorable market conditions. At the time it enters into a reverse repurchase
agreement, a Fund will segregate cash or high-quality debt securities having a
dollar value equal to the repurchase price. A Fund will utilize reverse
repurchase agreements only when the interest income to be earned from the
investment of the proceeds of the transaction is greater than the interest
expense of the transaction. Reverse repurchase agreements are considered
borrowings by a Fund under the 1940 Act.
MISCELLANEOUS INFORMATION
AUDIT REPORTS
The Board of Trustees will issue to shareholders at least
semi-annually the Funds' financial statements. Financial statements, audited
by independent auditors, will be issued annually. The firm of Price Waterhouse
LLP served as the auditors to the Funds other than AIM BALANCED FUND and AIM
MONEY MARKET FUND for the year ended December 31, 1992. The firm of KPMG Peat
Marwick LLP served as the auditors of ACS (the predecessor of AIM BALANCED
FUND) for the year ended August 31, 1993. The firm of KPMG Peat Marwick LLP,
700 Louisiana, NationsBank Building, Houston, Texas 77002, currently serves as
the auditors of the Funds.
LEGAL MATTERS
Legal matters for the Trust have been passed upon by Ballard Spahr
Andrews & Ingersoll, Philadelphia, Pennsylvania.
CUSTODIANS AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110 is custodian of all securities and cash
of the Funds, except for AIM MUNICIPAL BOND FUND, for which the Bank of New
York, 90 Washington Street, 11th Floor, New York, New York 10286, is the
custodian. Under its respective contract with the Trust, each Custodian
maintains the portfolio securities of the Funds, administers the purchases and
sales of portfolio securities, collects interest and dividends and other
distributions made on the securities held in the portfolios of the Funds and
performs other ministerial duties. A I M Fund Services, Inc. (a wholly-owned
subsidiary of AIM) (the "Transfer Agent"), P.O. Box 4739, Houston, Texas
77210-4739 acts as transfer and dividend disbursing agent for the Funds. These
services do not
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include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Funds pay the Custodians and
the Transfer Agent such compensation as may be agreed upon from time to time.
Texas Commerce Bank National Association, 712 Main, Houston, Texas
77002, serves as Sub-Custodian for retail purchases of the AIM Funds.
RATINGS OF SECURITIES
The following is a description of the factors underlying the
commercial paper and debt ratings of Moody's, S&P, Fitch and Duff & Phelps:
MOODY'S BOND RATINGS
--------------------
Moody's describes its ratings for corporate bonds as follows:
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. These are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime
in the future.
Baa: Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
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C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in the Aa and A
groups when assigning ratings to industrial development bonds and bonds secured
by either a letter of credit or bond insurance. The modifier 1 indicates that
the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
MOODY'S MUNICIPAL BOND RATINGS
------------------------------
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than in
Aaa securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1, Ba1 and B1.
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MOODY'S SHORT-TERM LOAN RATINGS
-------------------------------
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in bond
risk, long-term secular trends for example, may be less important over the
short run.
A short-term rating may also be assigned on an issue having a demand
feature (i.e., a variable rate demand obligation or VRDO). Such ratings will
be designated as VMIG or, if the demand feature is not rated, as NR.
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. Additionally, the source of payment may be limited to the external
liquidity with no or limited legal recourse to the issuer in the event the
demand is not met.
A VMIG rating may also be assigned to commercial paper programs. Such
programs are characterized as having variable short-term maturities but having
neither a variable rate nor demand feature.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4.
Gradations of investment quality are indicated by rating symbols, with
each symbol representing a group in which the quality characteristics are
broadly the same.
MIG 1/VMIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3/VMIG 3: This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
MIG 4/VMIG 4: This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
MOODY'S COMMERCIAL PAPER RATINGS
--------------------------------
Moody's commercial paper ratings are opinions of the ability of issues
to repay punctually promissory obligations not having an original maturity in
excess of nine months.
PRIME-1: Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return
on funds employed; conservative capitalization structures with moderate
reliance on debt and ample asset protection; broad margins in earnings coverage
of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
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PRIME-2: Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
PRIME-3: Issuers rated Prime-3 (or related supported institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime
rating categories.
S&P BOND RATINGS
----------------
S&P describes its ratings for corporate bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation and
C the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
S&P DUAL RATINGS
----------------
S&P assigns "dual" ratings to all debt issues that have, as part of
their structure, a put option or demand feature.
The first rating addresses the likelihood of repayment of principal
and interest as due, and the second rating addresses only the demand feature.
The long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (e.g.,
AAA/A-1+). With short-term demand debt, the note rating symbols are used with
the commercial paper rating symbols (e.g., SP-1+/A-1+).
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S&P MUNICIPAL NOTE RATINGS
--------------------------
An S&P note rating reflects the liquidity factors and market-access
risks unique to notes. Notes maturing in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment: amortization schedule (the larger the final maturity relative
to other maturities, the more likely the issue will be treated as a note); and
source of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols and definitions are as follows:
SP-1: Category denotes strong capacity to pay principal and interest. Those
issues determined to possess very strong characteristics are given a plus (+)
designation.
SP-2: Rating denotes satisfactory capacity to pay principal and interest,
with some vulnerability to adverse financial and economic changes over the term
of the notes.
SP-3: Speculative capacity to pay principal and interest.
S&P COMMERCIAL PAPER RATINGS
----------------------------
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
Rating categories are as follows:
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2: This rating indicates capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.
A-3: This rating indicates adequate capacity for timely payment. However,
the relative degree of safety is not as high as for issues designated A-1.
B: This rating indicates only a speculative capacity for timely payment.
C: This rating indicates, for short-term debt, a doubtful capacity for
payment.
D: This rating indicates that payment is in default. The D rating category
is used when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless it is believed
that such payments will be made during such grace period.
FITCH INVESTMENT GRADE BOND RATINGS
-----------------------------------
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
57
<PAGE> 214
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be
provided by insurance policies or financial guaranties unless otherwise
indicated.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any
security. Ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt nature
or taxability of payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA." Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
"F-1+."
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
SUSPENDED: A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or
refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
58
<PAGE> 215
FITCHALERT: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive," indicating a potential
upgrade, "Negative," for potential downgrade, or "Evolving," where ratings may
be raised or lowered. FitchAlert is relatively short-term, and should be
resolved within 12 months.
CREDIT TREND
Credit trend indicators show whether credit fundamentals are
improving, stable, declining, or uncertain, as follows:
Improving +
Stable =
Declining -
Uncertain ?
Credit trend indicators are not predictions that any rating change
will occur, and have a longer-term time frame than issues placed on FitchAlert.
FITCH SPECULATIVE GRADE BOND RATINGS
------------------------------------
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or
liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since rating categories cannot fully reflect the
differences in degrees of credit risk.
BB: Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
59
<PAGE> 216
DDD, DD, AND D: Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D"
represents the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "DDD", "DD", or "D" categories.
FITCH SHORT-TERM RATINGS
------------------------
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating
on the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as for issues assigned "F-1+" and "F-1" ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse changes could cause these securities to be rated
below investment grade.
F-S: Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are vulnerable
to near-term adverse changes in financial and economic conditions.
D: Default. Issues assigned this rating are in actual or imminent payment
default.
LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
DUFF & PHELPS LONG-TERM RATINGS
-------------------------------
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA AND AA-: High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
A+, A AND A-: Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
60
<PAGE> 217
BBB+, BBB AND BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB AND BB-: Below investment grade but deemed likely to meet obligations
when due. Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+, B AND B-: Below investment grade and possessing risk that obligations
will not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or
into a higher or lower rating grade.
CCC: Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP: Preferred stock with dividend arrearages.
DUFF & PHELPS SHORT-TERM RATINGS
--------------------------------
D - 1+: Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding and safety is just below risk-free U.S. Treasury short-term
obligations.
D - 1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
D - 1-: High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk factors are
very small.
D - 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
D - 3: Satisfactory liquidity and other protection factors qualify issue as
to investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
D - 4: Speculative investment characteristics. Liquidity is not sufficient
to insure against disruption in debt service. Operating factors and market
access may be subject to a high degree of variation.
D - 5: Issuer failed to meet scheduled principal and/or interest payments.
61
<PAGE> 218
FINANCIAL STATEMENTS
FS-1
<PAGE> 219
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Balanced Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Balanced Fund (a portfolio of AIM Funds Group), including the schedule of
investments, as of December 31, 1995, and 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 two-year period then ended, the four-month period ended
December 31, 1993, and each of the years in the seven-year period ended August
31, 1993. 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 generally accepted auditing
standards. 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
December 31, 1995, 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
Balanced Fund as of December 31, 1995, the results of its operations for the
year then ended, the 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
two-year period then ended, the four-month period ended December 31, 1993, and
each of the years in the seven-year period ended August 31, 1993, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1996
FS-2
<PAGE> 220
Financials
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
BONDS & NOTES-20.64%
ADVERTISING/BROADCASTING-0.60%
$ 925,000 Time Warner Inc., Deb., 8.18%, 08/15/07 $ 993,570
- ---------------------------------------------------------------------------------------------
AUTOMOBILE-(MANUFACTURERS)-0.90%
150,000 Chrysler Financial Corp., Deb., 8.50%, 02/01/18 161,217
- ---------------------------------------------------------------------------------------------
800,000 Ford Motor Credit Co., Notes, 6.75%, 08/15/08 821,512
- ---------------------------------------------------------------------------------------------
400,000 General Motors Corp., Putable Notes, 8.80%, 03/01/21 493,012
- ---------------------------------------------------------------------------------------------
1,475,741
- ---------------------------------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.57%
500,000 Exide Corp., Sr. Conv. Sub. Notes, 2.90%, 12/15/05(a)
(Acquired 12/11/95; Cost $362,018) 360,000
- ---------------------------------------------------------------------------------------------
300,000 Magna International Inc., Conv. Sub. Deb., 5.00%, 10/15/02 307,500
- ---------------------------------------------------------------------------------------------
200,000 Titan Wheel International Inc., Conv. Sub. Notes, 4.75%,
12/01/00 266,000
- ---------------------------------------------------------------------------------------------
933,500
- ---------------------------------------------------------------------------------------------
BANKING-1.73%
800,000 First Union Corp., Sub. Notes, 6.375%, 01/15/09 772,000
- ---------------------------------------------------------------------------------------------
500,000 MBL International Finance Bermuda, Conv. Bonds, 3.00%,
11/30/02 580,000
- ---------------------------------------------------------------------------------------------
700,000 Mercantile Bank, Sub. Notes, 6.375%, 01/15/04 702,184
- ---------------------------------------------------------------------------------------------
800,000 Wachovia Corp., Sub. Notes, 6.375%, 02/01/09 796,488
- ---------------------------------------------------------------------------------------------
2,850,672
- ---------------------------------------------------------------------------------------------
BUSINESS SERVICES-0.32%
250,000 Career Horizons Inc., Conv. Bonds, 7.00%, 11/01/02(a)
(Acquired 10/16/95; Cost $250,000) 280,000
- ---------------------------------------------------------------------------------------------
200,000 Olsten Corp., Conv. Sub. Deb., 4.875%, 05/15/03 237,940
- ---------------------------------------------------------------------------------------------
517,940
- ---------------------------------------------------------------------------------------------
CABLE TV-0.48%
750,000 Viacom, Inc., Sr. Gtd. Notes, 7.75%, 06/01/05 796,477
- ---------------------------------------------------------------------------------------------
COMPUTER NETWORKING-0.49%
500,000 3Com Corp., Conv. Sub. Notes, 10.25%, 11/01/01(a)
(Acquired 11/08/94-11/14/95; Cost $663,437) 802,500
- ---------------------------------------------------------------------------------------------
COMPUTER PERIPHERALS-0.50%
250,000 Sanmina Corp., Conv. Sub. Notes, 5.50%, 08/15/02(a)
(Acquired 08/10/95; Cost $250,000) 276,250
- ---------------------------------------------------------------------------------------------
300,000 Seagate Technology, Conv. Sub. Deb., 5.00%, 11/01/03(a)
(Acquired 04/13/94-11/7/95; Cost $383,750) 551,790
- ---------------------------------------------------------------------------------------------
828,040
- ---------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.56%
196,000 Network Equipment Technologies, Inc., Conv. Sub. Deb., 7.25%,
05/15/14 200,743
- ---------------------------------------------------------------------------------------------
950,000 SoftKey International Inc., Conv. Notes, 5.50%, 11/01/00(a)
(Acquired 10/17/95-10/20/95; Cost $943,000) 717,250
- ---------------------------------------------------------------------------------------------
917,993
- ---------------------------------------------------------------------------------------------
ELECTRIC POWER-0.36%
451,303 Indiana Michigan Power Co., Secured Lease Obligation Bonds,
9.82%, 12/07/22 596,660
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 221
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
ENERGY ALTERNATE SOURCES-0.39%
$ 630,000 California Energy Company, Inc., Conv. Sub. Deb., 5.00%,
07/31/00(a)
(Acquired 04/26/95-10/19/95; Cost $594,025) $ 634,914
- ---------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.31%
650,000 Associates Corp. of North America, Series B Sr. Deb., 7.95%,
02/15/10 739,746
- ---------------------------------------------------------------------------------------------
500,000 Countrywide Funding Corp., Sub. Notes, 8.25%, 07/15/02 546,505
- ---------------------------------------------------------------------------------------------
750,000 General Motors Acceptance Corp., Putable Step Up Notes, 9.00%,
10/15/02 867,397
- ---------------------------------------------------------------------------------------------
2,153,648
- ---------------------------------------------------------------------------------------------
FOREIGN GOVERNMENTS-1.55%
1,500,000 Manitoba (Province of), Yankee Bonds, 7.75%, 07/17/16 1,665,705
- ---------------------------------------------------------------------------------------------
CAD 500,000 New Brunswick (Province of), Deb., 8.94%, 01/15/05 380,355
- ---------------------------------------------------------------------------------------------
500,000 United Mexican States, Deb., 11.1875%, 07/21/97(a)
(Acquired 07/12/95; Cost $500,000) 512,190
- ---------------------------------------------------------------------------------------------
2,558,250
- ---------------------------------------------------------------------------------------------
HOTELS/MOTELS-0.47%
750,000 ITT Corp., Gtd. Deb., 7.375%, 11/15/15 774,844
- ---------------------------------------------------------------------------------------------
INSURANCE-LIFE & HEALTH-0.33%
400,000 American Travellers Corp., Conv. Sub. Deb., 6.50%, 10/01/05 544,000
- ---------------------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.13%
200,000 Thermo Electron Corp., Conv. Sub. Notes, 4.25%, 01/01/03(a)
(Acquired 11/28/95; Cost $200,000) 219,000
- ---------------------------------------------------------------------------------------------
MEDICAL (DRUGS)-0.47%
300,000 ICN Pharmaceuticals Inc., Conv. Sub. Notes, 8.50%, 11/15/99 335,250
- ---------------------------------------------------------------------------------------------
1,000,000 Roche Holdings Inc., Liquid Yield Option Notes, 7.00%,
04/20/10(a)(b)
(Acquired 04/12/95; Cost $356,280) 442,500
- ---------------------------------------------------------------------------------------------
777,750
- ---------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.80%
150,000 Genesis Health Ventures, Sr. Conv. Sub. Deb., 6.00%, 11/30/03 247,312
- ---------------------------------------------------------------------------------------------
300,000 Healthsouth Corp., Conv. Sub. Deb., 5.00%, 04/01/01 484,890
- ---------------------------------------------------------------------------------------------
175,000 Integrated Health Services Inc., Conv. Sub. Deb., 6.00%,
01/01/03 174,213
- ---------------------------------------------------------------------------------------------
400,000 Prime Hospitality Corp., Conv. Sub. Notes, 7.00%, 04/15/02 418,000
- ---------------------------------------------------------------------------------------------
1,324,415
- ---------------------------------------------------------------------------------------------
NATURAL GAS (PIPELINE & DISTRIBUTORS)-1.00%
800,000 Enron Corp., Sr. Sub. Deb., 6.75%, 07/01/05 817,576
- ---------------------------------------------------------------------------------------------
750,000 Panhandle Eastern Pipe Line Co., Notes, 7.875%, 08/15/04 827,197
- ---------------------------------------------------------------------------------------------
1,644,773
- ---------------------------------------------------------------------------------------------
OFFICE AUTOMATION-0.25%
300,000 Danka Business Systems, Conv. Sub. Deb., 6.75%, 04/01/02(a)
(Acquired 03/06/95; Cost $300,000) 419,250
- ---------------------------------------------------------------------------------------------
OIL & GAS-EXPLORATION & PRODUCTION-0.95%
1,500,000 Talisman Energy, Inc., Yankee Bonds, 7.125%, 06/01/07 1,574,040
- ---------------------------------------------------------------------------------------------
POLLUTION CONTROL-0.20%
280,000 U.S. Filter Corp., Conv. Sub. Notes, 6.00%, 09/15/05(a)
(Acquired 09/13/95; Cost $280,000) 323,400
- ---------------------------------------------------------------------------------------------
PUBLISHING-0.64%
900,000 News America Holdings, Sr. Gtd. Deb., 9.25%, 02/01/13 1,060,056
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 222
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
RESTAURANTS-0.26%
$ 1,500,000 Boston Chicken Inc., Liquid Yield Option Notes, 8.00%,
06/01/15(b) $ 436,875
- ---------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUGS)-0.31%
500,000 Great Atlantic & Pacific, Gtd. Notes, 7.78%, 11/01/00(a)
(Acquired 10/18/95; Cost $500,000) 507,005
- ---------------------------------------------------------------------------------------------
RETAIL (STORES)-1.20%
250,000 Baby Superstore Inc., Conv. Sub. Notes, 4.875%, 10/01/00 295,000
- ---------------------------------------------------------------------------------------------
500,000 Federated Department Stores, Conv. Notes, 5.00%, 10/01/03 502,500
- ---------------------------------------------------------------------------------------------
700,000 Office Depot Inc., Liquid Yield Option Sub. Notes, 4.00%,
11/01/08(b) 402,500
- ---------------------------------------------------------------------------------------------
300,000 Pep Boys-Manny, Moe & Jack, Conv. Sub. Notes, 4.00%, 09/01/99 288,616
- ---------------------------------------------------------------------------------------------
500,000 Staples Inc., Conv. Sub. Deb., 4.50%, 10/01/00(a)
(Acquired 09/12/95; Cost $500,000) 495,000
- ---------------------------------------------------------------------------------------------
1,983,616
- ---------------------------------------------------------------------------------------------
SEMICONDUCTORS-1.83%
600,000 Altera Corp., Conv. Sub. Notes, 5.75%, 06/15/02(a)
(Acquired 06/16/95-12/13/95; Cost $696,375) 699,000
- ---------------------------------------------------------------------------------------------
600,000 Analog Devices Inc., Conv. Sub. Notes, 3.50%, 12/01/00 639,000
- ---------------------------------------------------------------------------------------------
250,000 Cypress Semiconductor Corp., Conv. Sub. Notes, 3.15%,
03/15/01(a)
(Acquired 04/06/95; Cost $263,125) 254,063
- ---------------------------------------------------------------------------------------------
100,000 LSI Logic Corp., Conv. Sub. Notes, 5.50%, 03/15/01(a)
(Acquired 12/04/95; Cost $370,090) 275,500
- ---------------------------------------------------------------------------------------------
300,000 National Semiconductor Corp., Conv. Deb., 6.50%, 10/01/02(a)
(Acquired 09/21/95; Cost $300,000) 281,250
- ---------------------------------------------------------------------------------------------
200,000 VLSI Technology Inc., Conv. Sub. Notes, 8.25%, 10/01/05 183,000
- ---------------------------------------------------------------------------------------------
750,000 XILINX Inc., Conv. Sub. Notes, 5.25%, 11/01/02(a)
(Acquired 11/07/95; Cost $750,000) 682,500
- ---------------------------------------------------------------------------------------------
3,014,313
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-1.25%
1,000,000 TCI Communications Inc., Sr. Notes, 8.00%, 08/01/05 1,061,490
- ---------------------------------------------------------------------------------------------
1,300,000 U.S. Cellular Corp., Sub. Liquid Yield Option Notes, 6.00%,
06/15/15(b) 463,125
- ---------------------------------------------------------------------------------------------
500,000 World Communications Inc., Conv. Sub. Notes, 5.00%, 08/15/03 532,500
- ---------------------------------------------------------------------------------------------
2,057,115
- ---------------------------------------------------------------------------------------------
TRANSPORTATION (MISCELLANEOUS)-0.79%
703,835 Delta Air Lines Inc., Series 92-E Notes, 8.54%, 01/02/07 771,530
- ---------------------------------------------------------------------------------------------
500,000 Telxon Corp., Conv. Deb., 5.75%, 01/01/03(a)
(Acquired 12/07/95; Cost $501,000) 530,000
- ---------------------------------------------------------------------------------------------
1,301,530
- ---------------------------------------------------------------------------------------------
Total Bonds & Notes 34,021,887
- ---------------------------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS-42.95%
ADVERTISING/BROADCASTING-0.43%
6,500 British Sky Broadcasting Group PLC 244,564
- ---------------------------------------------------------------------------------------------
11,000 Meredith Corp. 460,625
- ---------------------------------------------------------------------------------------------
705,189
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-5
<PAGE> 223
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
AEROSPACE/DEFENSE-0.70%
4,000 Boeing Co. (The) $ 313,500
- ---------------------------------------------------------------------------------------------
7,000 Rockwell International Corp. 370,125
- ---------------------------------------------------------------------------------------------
5,000 United Technologies Corp. 474,375
- ---------------------------------------------------------------------------------------------
1,158,000
- ---------------------------------------------------------------------------------------------
APPLIANCES-0.12%
4,000 Premark International Inc. 202,500
- ---------------------------------------------------------------------------------------------
BANKING-0.39%
14,000 Bank of Boston 647,500
- ---------------------------------------------------------------------------------------------
BANKING (MONEY CENTER)-0.76%
6,000 Chase Manhattan Corp. 363,750
- ---------------------------------------------------------------------------------------------
7,000 Chemical Banking Corp. 411,250
- ---------------------------------------------------------------------------------------------
7,000 Citicorp 470,750
- ---------------------------------------------------------------------------------------------
1,245,750
- ---------------------------------------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.44%
64,349 Bass PLC 718,054
- ---------------------------------------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.49%
10,000 Pepsi-Cola Puerto Rico Bottling Co. 115,000
- ---------------------------------------------------------------------------------------------
12,500 PepsiCo Inc. 698,438
- ---------------------------------------------------------------------------------------------
813,438
- ---------------------------------------------------------------------------------------------
BUILDING MATERIALS-0.13%
6,200 Black & Decker Corp. 218,550
- ---------------------------------------------------------------------------------------------
BUSINESS SERVICES-1.53%
19,500 Corestaff, Inc.(c) 711,750
- ---------------------------------------------------------------------------------------------
9,500 Diebold, Inc. 526,064
- ---------------------------------------------------------------------------------------------
24,000 Equifax, Inc. 513,000
- ---------------------------------------------------------------------------------------------
6,000 Healthcare COMPARE Corp.(c) 261,000
- ---------------------------------------------------------------------------------------------
32,700 Learning Tree International, Inc.(c) 510,938
- ---------------------------------------------------------------------------------------------
2,522,752
- ---------------------------------------------------------------------------------------------
CHEMICALS-0.09%
10,800 Carbide/Graphite Group, Inc. (The)(c) 155,250
- ---------------------------------------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.37%
10,000 IMC Global, Inc. 408,750
- ---------------------------------------------------------------------------------------------
6,000 Praxair, Inc. 201,750
- ---------------------------------------------------------------------------------------------
610,500
- ---------------------------------------------------------------------------------------------
COMPUTER MAINFRAMES-0.83%
15,000 International Business Machines Corp. 1,376,250
- ---------------------------------------------------------------------------------------------
COMPUTER MINI/PCS-1.06%
9,000 COMPAQ Computer Corp.(c) 432,000
- ---------------------------------------------------------------------------------------------
10,000 Dell Computer Corp.(c) 346,250
- ---------------------------------------------------------------------------------------------
4,000 Hewlett-Packard Co. 335,000
- ---------------------------------------------------------------------------------------------
14,000 Sun Microsystems, Inc.(c) 638,750
- ---------------------------------------------------------------------------------------------
1,752,000
- ---------------------------------------------------------------------------------------------
COMPUTER NETWORKING-1.57%
6,900 Ascend Communications, Inc.(c) 559,764
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-6
<PAGE> 224
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMPUTER NETWORKING (continued)
15,000 Bay Networks, Inc.(c) $ 616,875
- ---------------------------------------------------------------------------------------------
4,500 Cabletron Systems, Inc.(c) 364,500
- ---------------------------------------------------------------------------------------------
7,000 Cisco Systems, Inc.(c) 522,375
- ---------------------------------------------------------------------------------------------
15,000 ECI Telecommunications Ltd. 342,186
- ---------------------------------------------------------------------------------------------
6,476 Network Equipment Technologies, Inc.(c) 177,285
- ---------------------------------------------------------------------------------------------
2,582,985
- ---------------------------------------------------------------------------------------------
COMPUTER PERIPHERALS-0.75%
6,500 Adaptec Inc.(c) 266,500
- ---------------------------------------------------------------------------------------------
34,000 EMC Corp.(c) 522,750
- ---------------------------------------------------------------------------------------------
10,500 Oracle Systems Corp.(c) 444,938
- ---------------------------------------------------------------------------------------------
1,234,188
- ---------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-4.19%
4,000 Adobe Systems, Inc. 248,000
- ---------------------------------------------------------------------------------------------
13,400 Arbor Software Corp.(c) 633,150
- ---------------------------------------------------------------------------------------------
7,000 Computer Associates International, Inc. 398,125
- ---------------------------------------------------------------------------------------------
11,800 DST Systems, Inc.(c) 336,300
- ---------------------------------------------------------------------------------------------
17,000 MetaTools Inc.(c) 442,000
- ---------------------------------------------------------------------------------------------
5,000 Microsoft Corp.(c) 438,750
- ---------------------------------------------------------------------------------------------
15,400 Objective Systems Integrators, Inc.(c) 843,150
- ---------------------------------------------------------------------------------------------
12,900 Pixar, Inc.(c) 372,487
- ---------------------------------------------------------------------------------------------
13,000 RadiSys Corp.(c) 152,750
- ---------------------------------------------------------------------------------------------
32,000 Sandisk Corp.(c) 480,000
- ---------------------------------------------------------------------------------------------
18,400 Scopus Technology, Inc.(c) 464,600
- ---------------------------------------------------------------------------------------------
8,100 Secure Computing Corp.(c) 453,600
- ---------------------------------------------------------------------------------------------
16,100 Seer Technologies, Inc.(c) 201,250
- ---------------------------------------------------------------------------------------------
6,400 Smith Micro Software, Inc.(c) 43,200
- ---------------------------------------------------------------------------------------------
18,800 Verity, Inc.(c) 831,900
- ---------------------------------------------------------------------------------------------
25,400 Visioneer, Inc.(c) 565,150
- ---------------------------------------------------------------------------------------------
6,904,412
- ---------------------------------------------------------------------------------------------
CONGLOMERATES-0.20%
7,000 Allied-Signal, Inc. 332,500
- ---------------------------------------------------------------------------------------------
CONTAINERS-0.07%
4,000 Ball Corp. 110,000
- ---------------------------------------------------------------------------------------------
COSMETICS/TOILETRIES-1.15%
10,000 Colgate-Palmolive Co. 702,500
- ---------------------------------------------------------------------------------------------
10,400 Estee Lauder Companies(c) 362,700
- ---------------------------------------------------------------------------------------------
10,000 Procter & Gamble Co. 830,000
- ---------------------------------------------------------------------------------------------
1,895,200
- ---------------------------------------------------------------------------------------------
ELECTRIC POWER-0.41%
8,000 National Power PLC 74,000
- ---------------------------------------------------------------------------------------------
11,000 PowerGen PLC 144,375
- ---------------------------------------------------------------------------------------------
10,750 Veba AG 456,378
- ---------------------------------------------------------------------------------------------
674,753
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-7
<PAGE> 225
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.73%
50,000 ElectroStar, Inc.(c) $ 431,250
- ---------------------------------------------------------------------------------------------
20,300 General Scanning, Inc.(c) 203,000
- ---------------------------------------------------------------------------------------------
5,500 Tektronix, Inc. 270,186
- ---------------------------------------------------------------------------------------------
12,000 Teradyne, Inc.(c) 300,000
- ---------------------------------------------------------------------------------------------
1,204,436
- ---------------------------------------------------------------------------------------------
ELECTRONIC/DEFENSE-0.44%
6,000 Sundstrand Corp. 422,250
- ---------------------------------------------------------------------------------------------
7,000 Watkins-Johnson Co. 306,250
- ---------------------------------------------------------------------------------------------
728,500
- ---------------------------------------------------------------------------------------------
ELECTRONIC/PC DISTRIBUTORS-0.35%
6,000 Arrow Electronics, Inc.(c) 258,750
- ---------------------------------------------------------------------------------------------
7,000 Avnet, Inc. 313,250
- ---------------------------------------------------------------------------------------------
572,000
- ---------------------------------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.41%
7,000 Merrill Lynch & Co., Inc. 357,000
- ---------------------------------------------------------------------------------------------
4,000 Morgan Stanley Group, Inc. 322,500
- ---------------------------------------------------------------------------------------------
679,500
- ---------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-2.00%
10,000 American Express Co. 413,750
- ---------------------------------------------------------------------------------------------
6,000 Federal Home Loan Mortgage Corp. 501,000
- ---------------------------------------------------------------------------------------------
7,000 Federal National Mortgage Association 868,875
- ---------------------------------------------------------------------------------------------
24,000 Green Tree Financial Corp. 633,000
- ---------------------------------------------------------------------------------------------
15,000 MBNA Corp. 553,125
- ---------------------------------------------------------------------------------------------
5,000 Student Loan Marketing Association 329,375
- ---------------------------------------------------------------------------------------------
3,299,125
- ---------------------------------------------------------------------------------------------
FOOD/PROCESSING-0.32%
4,000 IBP, Inc. 202,000
- ---------------------------------------------------------------------------------------------
10,000 Nabisco Holdings Corp. 326,250
- ---------------------------------------------------------------------------------------------
528,250
- ---------------------------------------------------------------------------------------------
HOMEBUILDING-0.15%
7,000 Centex Corp. 243,250
- ---------------------------------------------------------------------------------------------
HOTELS/MOTELS-0.40%
24,000 Extended Stay America, Inc.(c) 660,000
- ---------------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.23%
24,000 Guarantee Life Companies, Inc.(c) 378,000
- ---------------------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-2.33%
9,000 Aetna Life & Casualty Co. 623,250
- ---------------------------------------------------------------------------------------------
32,200 Amerin Corp.(c) 861,350
- ---------------------------------------------------------------------------------------------
26,200 Capmac Holdings Inc.(c) 658,275
- ---------------------------------------------------------------------------------------------
6,000 CIGNA Corp. 619,500
- ---------------------------------------------------------------------------------------------
30,000 GCR Holdings Ltd.(c) 675,000
- ---------------------------------------------------------------------------------------------
4,000 Prudential Reinsurance Holdings, Inc. 93,500
- ---------------------------------------------------------------------------------------------
5,000 Travelers Group, Inc. 314,375
- ---------------------------------------------------------------------------------------------
3,845,250
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-8
<PAGE> 226
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
LEISURE & RECREATION-0.16%
4,500 Walt Disney Co. (The) $ 265,500
- ---------------------------------------------------------------------------------------------
MACHINERY (HEAVY)-0.25%
9,000 Case Corp. 411,750
- ---------------------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.28%
9,000 Thermo Electron Corp.(c) 468,000
- ---------------------------------------------------------------------------------------------
MEDICAL (DRUGS)-3.06%
10,000 Abbott Laboratories 417,500
- ---------------------------------------------------------------------------------------------
7,000 American Home Products Corp. 679,000
- ---------------------------------------------------------------------------------------------
6,000 Cardinal Health Inc. 328,500
- ---------------------------------------------------------------------------------------------
6,000 Johnson & Johnson 513,750
- ---------------------------------------------------------------------------------------------
10,000 Lilly (Eli) & Co. 562,500
- ---------------------------------------------------------------------------------------------
4,000 Merck & Co., Inc. 263,000
- ---------------------------------------------------------------------------------------------
14,000 Pfizer Inc. 882,000
- ---------------------------------------------------------------------------------------------
10,000 Schering-Plough Corp. 547,500
- ---------------------------------------------------------------------------------------------
7,000 SmithKline Beecham PLC-ADR 388,500
- ---------------------------------------------------------------------------------------------
10,000 Teva Pharmaceutical Industries, Inc.-ADR 463,750
- ---------------------------------------------------------------------------------------------
5,046,000
- ---------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-0.44%
3,000 Medtronic, Inc. 167,625
- ---------------------------------------------------------------------------------------------
15,200 Neuromedical Systems Inc.(c) 305,900
- ---------------------------------------------------------------------------------------------
5,700 St. Jude Medical Inc.(c) 245,100
- ---------------------------------------------------------------------------------------------
718,625
- ---------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.44%
10,000 Baxter International, Inc. 418,750
- ---------------------------------------------------------------------------------------------
6,000 Columbia/HCA Healthcare Corp. 304,500
- ---------------------------------------------------------------------------------------------
723,250
- ---------------------------------------------------------------------------------------------
NATURAL GAS PIPELINE-1.58%
7,000 Columbia Gas Systems, Inc.(c) 307,125
- ---------------------------------------------------------------------------------------------
22,000 Enron Corp. 838,750
- ---------------------------------------------------------------------------------------------
13,000 KN Energy, Inc. 378,625
- ---------------------------------------------------------------------------------------------
17,000 Sonat, Inc. 605,625
- ---------------------------------------------------------------------------------------------
11,000 Williams Companies, Inc. 482,625
- ---------------------------------------------------------------------------------------------
2,612,750
- ---------------------------------------------------------------------------------------------
OFFICE AUTOMATION-0.91%
11,000 Xerox Corp. 1,507,000
- ---------------------------------------------------------------------------------------------
OFFICE PRODUCTS-0.18%
6,000 Avery-Dennison Corp. 300,750
- ---------------------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.18%
15,000 USX-Marathon Group 292,500
- ---------------------------------------------------------------------------------------------
OIL & GAS SERVICES-0.89%
4,500 Exxon Corp. 360,564
- ---------------------------------------------------------------------------------------------
8,000 Mobil Corp. 896,000
- ---------------------------------------------------------------------------------------------
1,500 Royal Dutch Petroleum Co.-ADR 211,687
- ---------------------------------------------------------------------------------------------
1,468,251
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-9
<PAGE> 227
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
PAPER & FOREST PRODUCTS-0.42%
6,000 Kimberly-Clark Corp. $ 496,500
- ---------------------------------------------------------------------------------------------
3,500 Mead Corp. (The) 182,875
- ---------------------------------------------------------------------------------------------
400 Schweitzer-Mauduit International, Inc.(c) 9,250
- ---------------------------------------------------------------------------------------------
688,625
- ---------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-1.66%
13,000 Bay Apartment Communities(c) 315,250
- ---------------------------------------------------------------------------------------------
15,000 Felcor Suite Hotels, Inc. 416,250
- ---------------------------------------------------------------------------------------------
12,000 Meditrust 418,500
- ---------------------------------------------------------------------------------------------
9,000 National Health Investors, Inc. 298,125
- ---------------------------------------------------------------------------------------------
4,500 Nationwide Health Properties, Inc. 189,000
- ---------------------------------------------------------------------------------------------
14,000 Oasis Residential Inc. 318,500
- ---------------------------------------------------------------------------------------------
16,500 Patriot American Hospitality, Inc.(c) 424,875
- ---------------------------------------------------------------------------------------------
14,000 Public Storage, Inc. 266,000
- ---------------------------------------------------------------------------------------------
5,600 RFS Hotel Investors Inc. 86,100
- ---------------------------------------------------------------------------------------------
2,732,600
- ---------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.19%
6,000 Safeway Inc.(c) 309,000
- ---------------------------------------------------------------------------------------------
RETAIL (STORES)-0.54%
35,000 Intimate Brands, Inc. 525,000
- ---------------------------------------------------------------------------------------------
15,000 Staples, Inc.(c) 365,625
- ---------------------------------------------------------------------------------------------
890,625
- ---------------------------------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.29%
10,000 Varian Associates, Inc. 477,500
- ---------------------------------------------------------------------------------------------
SEMICONDUCTORS-2.19%
20,000 Applied Materials, Inc.(c) 787,500
- ---------------------------------------------------------------------------------------------
15,000 ESS Technology, Inc.(c) 345,000
- ---------------------------------------------------------------------------------------------
9,000 Integrated Device Technology, Inc.(c) 115,875
- ---------------------------------------------------------------------------------------------
10,000 Intel Corp. 567,500
- ---------------------------------------------------------------------------------------------
7,000 LSI Logic Corp.(c) 229,250
- ---------------------------------------------------------------------------------------------
26,000 Texas Instruments, Inc. 1,345,500
- ---------------------------------------------------------------------------------------------
12,000 VLSI Technology, Inc.(c) 217,500
- ---------------------------------------------------------------------------------------------
3,608,125
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-3.34%
39,700 Amper S.A.(c) 469,658
- ---------------------------------------------------------------------------------------------
17,000 A T & T Corp. 1,100,750
- ---------------------------------------------------------------------------------------------
20,000 Frontier Corp. 600,000
- ---------------------------------------------------------------------------------------------
17,000 Nera AS-ADR(c) 552,500
- ---------------------------------------------------------------------------------------------
17,300 Nynex CableComms Group-ADR 300,588
- ---------------------------------------------------------------------------------------------
11,400 Portugal Telecom S.A.(c) 216,600
- ---------------------------------------------------------------------------------------------
5,400 Royal PTT Nederland N.V.-ADR(a)
(Acquired 06/13/94; Cost $144,442) 195,750
- ---------------------------------------------------------------------------------------------
2,500 Telecom Corp. of New Zealand Ltd.-ADR 173,438
- ---------------------------------------------------------------------------------------------
8,000 Telecomunicacoes Brasileiras S.A.-Telebras-ADR 379,000
- ---------------------------------------------------------------------------------------------
4,700 Tele Danmark A/S-ADR 129,838
- ---------------------------------------------------------------------------------------------
32,120 Telefonaktiebolaget L.M. Ericsson-ADR(c) 626,340
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-10
<PAGE> 228
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
TELECOMMUNICATIONS (continued)
1,080 Telefonaktiebolaget L.M. Ericsson Class B $ 21,145
- ---------------------------------------------------------------------------------------------
15,300 Tel-Save Holdings, Inc.(c) 212,288
- ---------------------------------------------------------------------------------------------
15,000 Vodafone Group PLC 528,750
- ---------------------------------------------------------------------------------------------
5,506,645
- ---------------------------------------------------------------------------------------------
TELEPHONE-1.22%
5,000 Ameritech Corp. 295,000
- ---------------------------------------------------------------------------------------------
7,100 Century Telephone Enterprises, Inc. 225,425
- ---------------------------------------------------------------------------------------------
10,500 NYNEX Corp.(c) 567,000
- ---------------------------------------------------------------------------------------------
5,500 SBC Communications, Inc. 316,250
- ---------------------------------------------------------------------------------------------
7,500 US West Media Group(c) 142,500
- ---------------------------------------------------------------------------------------------
13,000 US West, Inc. 464,750
- ---------------------------------------------------------------------------------------------
2,010,925
- ---------------------------------------------------------------------------------------------
TEXTILES-0.98%
34,200 Gucci Group(c) 1,329,525
- ---------------------------------------------------------------------------------------------
10,200 Liz Claiborne, Inc. 283,050
- ---------------------------------------------------------------------------------------------
1,612,575
- ---------------------------------------------------------------------------------------------
TOBACCO-0.71%
13,000 Philip Morris Companies Inc. 1,176,500
- ---------------------------------------------------------------------------------------------
Total Common Stocks 70,825,578
- ---------------------------------------------------------------------------------------------
PREFERRED STOCKS-3.10%
AUTOMOBILE (MANUFACTURERS)-0.18%
4,000 General Motors Corp., Series C, $3.25 Conv. Dep. Pfd. 293,000
- ---------------------------------------------------------------------------------------------
BANKING (MONEY CENTER)-0.17%
1,500 Citicorp, $5.375 Conv. Pfd. 276,426
- ---------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS (MISCELLANEOUS)-0.35%
11,500 Elsag Bailey Process Automation-N.V., $2.75 Conv. Pfd.(a)
(Acquired 12/14/95; Cost $575,000) 576,437
- ---------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.56%
7,000 First USA, $1.9922 Conv. Pfd. PRIDES 276,500
- ---------------------------------------------------------------------------------------------
10,000 SunAmerica, Inc.-Series E, $3.10 Conv. Dep. Pfd. 655,000
- ---------------------------------------------------------------------------------------------
931,500
- ---------------------------------------------------------------------------------------------
FUNERAL SERVICES-0.31%
7,000 SCI Financial LLC-Series A, $3.125 Conv. Pfd. 518,000
- ---------------------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-0.10%
4,000 Allstate Inc., $2.30 Conv. Pfd. 164,000
- ---------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.17%
20,000 Bally Entertainment Corp., $0.89 Conv. Pfd. PRIDES 272,500
- ---------------------------------------------------------------------------------------------
OIL & GAS SERVICES-0.29%
20,000 Enron Corp., $1.36 Conv. Pfd. 480,000
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-0.52%
17,500 MFS Communications Co., Inc., $2.68 Conv. Dep. Pfd. 852,030
- ---------------------------------------------------------------------------------------------
TELEPHONE-0.13%
4,000 Philippine Long Distance Telephone Co., $3.50 Conv. Pfd. 208,250
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-11
<PAGE> 229
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
TRANSPORTATION (MISCELLANEOUS)-0.32%
10,000 Continental Airlines Finance Trust, $4.25 Conv. Pfd.(a)
(Acquired 11/21/95-11/22/95; Cost $500,350) $ 536,250
- ---------------------------------------------------------------------------------------------
Total Preferred Stocks 5,108,393
- ---------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES-23.24%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. Treasury Notes
$ 2,500,000(d) 7.50%, 12/31/96 2,555,550
- ---------------------------------------------------------------------------------------------
12,000,000 6.50%, 04/30/99 12,441,000
- ---------------------------------------------------------------------------------------------
2,500,000 7.125%, 02/29/00 2,662,500
- ---------------------------------------------------------------------------------------------
3,000,000(d) 6.25%, 08/31/00 3,105,900
- ---------------------------------------------------------------------------------------------
2,500,000 7.25%, 08/15/04 2,782,500
- ---------------------------------------------------------------------------------------------
10,650,000(d) 6.50%, 02/15/05 11,358,012
- ---------------------------------------------------------------------------------------------
3,000,000 7.50%, 02/15/05 3,404,610
- ---------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 38,310,072
- ---------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT-6.35%(e)
10,475,294 Daiwa Securities America Inc., 5.92%, 01/02/96(f) 10,475,294
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES-96.28% 158,741,224
- ---------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-3.72% 6,133,132
- ---------------------------------------------------------------------------------------------
NET ASSETS-100.00% $164,874,356
=============================================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at December 31, 1995, was
$10,571,799, which represented 6.41% of the net assets.
(b) Zero coupon bonds. The interest rate shown represents the rate of original
issue discount.
(c) Non-income producing security.
(d) A portion of the principal balance was pledged to cover margin requirements
for open futures contracts. See Note 7.
(e) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102 percent of the sales price of
the repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the investment advisor.
(f) Joint repurchase agreement entered into 12/29/95 with a maturing value of
$646,679,181. Collateralized by $537,995,000 U.S. Treasury obligations,
7.875% to 11.25% due 11/15/07 to 02/15/15.
Investment Abbreviations:
<TABLE>
<S> <C>
ADR - American Depositary Receipt
CAD - Canadian dollars
Conv. - Convertible
Deb. - Debentures
Dep. - Depositary
Gtd. - Guaranteed
Pfd. - Preferred
PRIDES - Preferred Redeemable
Increased Dividend
Equity Securities
Sr. - Senior
Sub. - Subordinated
See Notes to Financial Statements.
</TABLE>
FS-12
<PAGE> 230
Financials
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $139,477,389) $158,741,224
- ----------------------------------------------------------------------------------------
Foreign currencies, at market value (cost $329,708) 324,194
- ----------------------------------------------------------------------------------------
Receivables for:
Investments sold 2,410,523
- ----------------------------------------------------------------------------------------
Fund shares sold 2,564,581
- ----------------------------------------------------------------------------------------
Interest and dividends 1,499,778
- ----------------------------------------------------------------------------------------
Variation margin 8,750
- ----------------------------------------------------------------------------------------
Investment for deferred compensation plan 8,020
- ----------------------------------------------------------------------------------------
Other assets 20,344
- ----------------------------------------------------------------------------------------
Total assets 165,577,414
- ----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 200,000
- ----------------------------------------------------------------------------------------
Fund shares reacquired 175,567
- ----------------------------------------------------------------------------------------
Deferred compensation plan 8,020
- ----------------------------------------------------------------------------------------
Accrued advisory fees 99,049
- ----------------------------------------------------------------------------------------
Accrued administrative service fees 9,157
- ----------------------------------------------------------------------------------------
Accrued distribution fees 111,265
- ----------------------------------------------------------------------------------------
Accrued transfer agent fees 25,100
- ----------------------------------------------------------------------------------------
Accrued trustees' fees 2,181
- ----------------------------------------------------------------------------------------
Accrued operating expenses 72,719
- ----------------------------------------------------------------------------------------
Total liabilities 703,058
- ----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $164,874,356
========================================================================================
NET ASSETS:
Class A $ 92,240,539
========================================================================================
Class B $ 72,633,817
========================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 4,799,638
========================================================================================
Class B 3,778,862
========================================================================================
Class A:
Net asset value and redemption price per share $ 19.22
========================================================================================
Offering price per share:
(Net asset value of $19.22 divided by 95.25%) $ 20.18
========================================================================================
Class B:
Net asset value and offering price per share $ 19.22
========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-13
<PAGE> 231
Financials
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 2,900,624
- ----------------------------------------------------------------------------------------
Dividends 1,006,926
- ----------------------------------------------------------------------------------------
Total investment income 3,907,550
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 690,795
- ----------------------------------------------------------------------------------------
Custodian fees 27,595
- ----------------------------------------------------------------------------------------
Distribution fees-Class A 134,550
- ----------------------------------------------------------------------------------------
Distribution fees-Class B 382,860
- ----------------------------------------------------------------------------------------
Administrative service fees 67,928
- ----------------------------------------------------------------------------------------
Trustees' fees 6,424
- ----------------------------------------------------------------------------------------
Transfer agent fees-Class A 94,851
- ----------------------------------------------------------------------------------------
Transfer agent fees-Class B 90,073
- ----------------------------------------------------------------------------------------
Other 143,276
- ----------------------------------------------------------------------------------------
Total expenses 1,638,352
- ----------------------------------------------------------------------------------------
Less advisory fees waived (24,176)
- ----------------------------------------------------------------------------------------
Net expenses 1,614,176
- ----------------------------------------------------------------------------------------
Net investment income 2,293,374
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN
CURRENCY TRANSACTIONS AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 3,763,100
- ----------------------------------------------------------------------------------------
Foreign currency transactions (2,185)
- ----------------------------------------------------------------------------------------
Futures contracts 59,049
- ----------------------------------------------------------------------------------------
3,819,964
- ----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 20,151,948
- ----------------------------------------------------------------------------------------
Foreign currencies (5,374)
- ----------------------------------------------------------------------------------------
Futures contracts 15,850
- ----------------------------------------------------------------------------------------
20,162,424
- ----------------------------------------------------------------------------------------
Net gain from investment securities, foreign currencies and futures
contracts 23,982,388
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $26,275,762
========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-14
<PAGE> 232
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,293,374 $ 1,292,749
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currency transactions and futures contracts 3,819,964 (1,546,962)
- ------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and futures contracts 20,162,424 (2,365,487)
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 26,275,762 (2,619,700)
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (1,509,535) (841,828)
- ------------------------------------------------------------------------------------------
Class B (772,889) (264,264)
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A -- (542,894)
- ------------------------------------------------------------------------------------------
Class B -- (294,134)
- ------------------------------------------------------------------------------------------
Distributions to shareholders in excess of net realized
capital gains:
Class A -- (8,772)
- ------------------------------------------------------------------------------------------
Class B -- (4,752)
- ------------------------------------------------------------------------------------------
Net equalization credits 1,435,649 516,289
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 39,846,397 17,028,360
- ------------------------------------------------------------------------------------------
Class B 41,781,556 18,575,216
- ------------------------------------------------------------------------------------------
Net increase in net assets 107,056,940 31,543,521
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 57,817,416 26,273,895
- ------------------------------------------------------------------------------------------
End of period $164,874,356 $57,817,416
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $140,831,795 $59,203,842
- ------------------------------------------------------------------------------------------
Undistributed net investment income 2,564,987 1,062,305
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currency transactions and futures
contracts 2,203,395 (1,560,486)
- ------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and futures contracts 19,274,179 (888,245)
- ------------------------------------------------------------------------------------------
$164,874,356 $57,817,416
==========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-15
<PAGE> 233
Financials
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Balanced Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class will be 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 the Fund. The Fund's objective is to achieve as high a total
return to investors as possible, consistent with preservation of capital, by
investing in a broadly diversified portfolio of high-yielding securities,
including common stocks, preferred stocks, convertible securities and bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. 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.
A. Security Valuations - Except as provided in the next sentence, a security
listed or traded on an exchange is valued at its last sales price on the
exchange where the security is principally traded, or lacking any sales on a
particular day, the security is valued at the mean between the closing bid
and asked prices on that day. If a mean is not available, as is the case in
some foreign markets, the closing bid will be used absent a last sales price.
Exchange listed convertible bonds are valued at the mean between the closing
bid and asked prices obtained from a broker-dealer. Each security traded in
the over-the-counter market (but not including securities reported on the
NASDAQ National Market System) is valued at the mean between the last bid and
asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the closing bid and asked prices. Non-convertible bonds and notes
are valued on the basis of prices provided by an independent pricing service.
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, developments
related to special securities, yield, quality, coupon rate, maturity, type of
issue, individual trading characteristics and other market data. 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 Trust's officers in a manner specifically authorized
by the Board of Trustees. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are
also generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On December 31, 1995,
undistributed net investment income was increased and undistributed net
realized gains reduced by $56,083 in order to comply with the requirements of
the American Institute of Certified Public Accountants Statement of Position
93-2. Net assets of the Fund were unaffected by the reclassification
discussed above.
C. Bond Premiums and Discounts - It is the policy of the Fund not to amortize
market discounts and premiums on bonds for financial reporting purposes.
FS-16
<PAGE> 234
Financials
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
E. Equalization - The Fund follows the accounting practice known as equalization
by which a portion of the proceeds from sales and the costs of repurchases of
Fund shares, equivalent on a per share basis to the amount of undistributed
net investment income, is credited or charged to undistributed income when
the transaction is recorded so the undistributed net investment income per
share is unaffected by sales or redemptions of Fund shares.
F. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
G. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
H. Foreign Currency Contracts - A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract to attempt to minimize the
risk to the Fund from adverse changes in the relationship between currencies.
The Fund may also enter into a forward contract for the purchase or sale of a
security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 AIM an advisory fee at an annual rate of 0.75% of the
first $150 million of the Fund's average daily net assets, plus 0.50% of the
Fund's average daily net assets in excess of $150 million. This agreement
requires AIM to reduce its fees or, if necessary, make payments to the Fund to
the extent required to satisfy any expense limitations imposed by the securities
laws or regulations thereunder of any state in which the Fund's shares are
qualified for sale. During the two months ended February 28, 1995, AIM
voluntarily waived advisory fees in the amount of $24,176. This voluntary waiver
was discontinued on February 28, 1995.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to reimburse AIM for certain administrative costs incurred in
providing accounting services to the Fund. During the year ended December 31,
1995, AIM was reimbursed $67,928 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 agency and
shareholder services to the Fund. During the year ended December 31, 1995, AFS
was paid $121,853 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
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. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more assignees, its rights to all or a designated
portion (a) compensation received by AIM Distributors from the Fund pursuant to
the Class B Plan (but not AIM Distributors' duties and obligations pursuant to
the Class B Plan) and (b) contingent deferred sales charges payable to AIM
Distributors related to the Class B shares. During the year ended December 31,
1995, the Class A shares and the Class B shares paid AIM Distributors $134,550
and $382,860, respectively, as compensation under the Plans.
FS-17
<PAGE> 235
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
AIM Distributors received commissions of $165,692 from sales of the Class A
shares of the Fund during the year ended December 31, 1995. 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 December 31, 1995,
AIM Distributors received $92,409 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1995, the Fund paid legal fees of $3,091
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3 - TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund has a $1,100,000 committed line of credit with Chemical Bank of New
York. Interest on borrowings under the line of credit is payable on maturity or
prepayment date. During the period July 20, 1995 (effective date of line of
credit agreement) through December 31, 1995, the Fund did not borrow under the
line of credit agreement. The Fund is charged an administrative fee, payable
quarterly, at the annual rate of $1,100.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1995 was
$137,730,558 and $66,445,219, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $20,639,054
- -----------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,390,240)
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $19,248,814
===========================================================================================================
</TABLE>
Cost of investments for tax purposes is $139,492,410.
NOTE 6 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------- ------------------------
SHARES VALUE SHARES VALUE
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 2,972,256 $ 52,107,491 1,622,265 $24,865,959
- ---------------------------------------------------------------------------------------------------------------------
Class B 2,739,743 47,601,025 1,362,158 20,837,893
- ---------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 76,297 1,334,447 76,775 1,081,610
- ---------------------------------------------------------------------------------------------------------------------
Class B 38,541 678,897 33,584 459,716
- ---------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (819,551) (13,595,541) (589,475) (8,919,209)
- ---------------------------------------------------------------------------------------------------------------------
Class B (384,332) (6,498,366) (181,713) (2,722,393)
- ---------------------------------------------------------------------------------------------------------------------
4,622,954 $ 81,627,953 2,323,594 $35,603,576
=====================================================================================================================
</TABLE>
FS-18
<PAGE> 236
Financials
NOTE 7 - OPEN FUTURES CONTRACTS
On December 31, 1995, $307,000 principal amount of U.S. Treasury notes were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT NO. OF CONTRACTS/MONTH/COMMITMENT APPRECIATION
<S> <C> <C>
S&P 500 Index 25 contracts/March 96/Buy $15,850
- ------------------------------------------------------------------- ------------------------------------- ------------------
</TABLE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during each of the years in the two-year period ended December 31,
1995, the four months ended December 31, 1993 and each of the years in the
seven-year period ended August 31, 1993 and for a Class B share outstanding
during each of the years in the two-year period ended December 31, 1995 and the
period October 18, 1993 (date sales commenced) through December 31, 1993. Prior
to October 15, 1993, the Fund was known as AIM Convertible Securities, Inc. and
had a different investment objective.
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
---------------------------------- --------------------------------
CLASS A: 1995 1994 1993 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.62 $ 16.10 $ 15.97 $ 12.77 $ 12.04 $ 9.73
- --------------------------------------------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.49 0.44 0.10 0.32 0.29 0.28
- --------------------------------------------------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized
and unrealized) 4.57 (1.31) 0.18 3.18 0.74 2.33
- --------------------------------------------------- -------- -------- -------- -------- -------- --------
Total from investment operations 5.06 (0.87) 0.28 3.50 1.03 2.61
- --------------------------------------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.46) (0.39) (0.15) (0.30) (0.30) (0.30)
- --------------------------------------------------- -------- -------- -------- -------- -------- --------
Distributions from net realized capital gains -- (0.22) -- -- -- --
- --------------------------------------------------- -------- -------- -------- -------- -------- --------
Total distributions (0.46) (0.61) (0.15) (0.30) (0.30) (0.30)
- --------------------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 19.22 $ 14.62 $ 16.10 $ 15.97 $ 12.77 $ 12.04
=================================================== ======== ======== ======== ======== ======== ========
Total return(a) 34.97% (5.44)% 1.76% 27.75% 8.66% 27.41%
=================================================== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $92,241 $ 37,572 $ 23,520 $ 19,497 $ 11,796 $ 11,750
=================================================== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.43%(b) 1.25%(c) 2.17%(d) 2.07% 2.12% 2.39%
=================================================== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average net
assets 2.81%(b) 3.07%(c) 1.81%(d) 2.23% 2.32% 2.74%
=================================================== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 76.63% 76.18% 233.10% 154.47% 165.53% 208.11%
=================================================== ======== ======== ======== ======== ======== ========
Borrowings for the period:
Amount of debt outstanding at end of period -- -- -- -- -- --
- --------------------------------------------------- -------- -------- -------- -------- -------- --------
Average amount of debt outstanding during the
period(e) -- -- -- -- -- --
- --------------------------------------------------- -------- -------- -------- -------- -------- --------
Average number of shares outstanding during the
period (000s omitted)(e) 3,173 2,061 1,305 1,046 939 1,051
- --------------------------------------------------- -------- -------- -------- -------- -------- --------
Average amount of debt per share during the period -- -- -- -- -- --
- --------------------------------------------------- -------- -------- -------- -------- -------- --------
<CAPTION>
AUGUST 31,
--------------------------------------------
CLASS A: 1990 1989 1988 1987
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.67 $ 9.08 $ 11.89 $ 12.89
- --------------------------------------------------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.32 0.39 0.42 0.55
- --------------------------------------------------- -------- -------- -------- --------
Net gains (losses) on securities (both realized
and unrealized) (0.91) 1.63 (2.65) 0.15
- --------------------------------------------------- -------- -------- -------- --------
Total from investment operations (0.59) 2.02 (2.23) 0.70
- --------------------------------------------------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.35) (0.43) (0.50) (0.66)
- --------------------------------------------------- -------- -------- -------- --------
Distributions from net realized capital gains -- -- (0.08) (1.04)
- --------------------------------------------------- -------- -------- -------- --------
Total distributions (0.35) (0.43) (0.58) (1.70)
- --------------------------------------------------- -------- -------- -------- --------
Net asset value, end of period $ 9.73 $ 10.67 $ 9.08 $ 11.89
=================================================== ======== ======== ======== ========
Total return(a) (5.67)% 22.96% (18.57)% 5.78%
=================================================== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10,965 $ 14,405 $ 16,789 $ 27,973
=================================================== ======== ======== ======== ========
Ratio of expenses to average net assets 2.15% 1.94% 2.31% 1.87%
=================================================== ======== ======== ======== ========
Ratio of net investment income to average net
assets 3.18% 3.99% 4.50% 4.54%
=================================================== ======== ======== ======== ========
Portfolio turnover rate 307.08% 149.42% 117.73% 249.93%
=================================================== ======== ======== ======== ========
Borrowings for the period:
Amount of debt outstanding at end of period -- $260,000 -- --
- --------------------------------------------------- -------- -------- -------- --------
Average amount of debt outstanding during the
period(e) $138,181 $ 83,195 -- --
- --------------------------------------------------- -------- -------- -------- --------
Average number of shares outstanding during the
period (000s omitted)(e) 1,238 1,589 2,131 2,010
- --------------------------------------------------- -------- -------- -------- --------
Average amount of debt per share during the period $ 0.110 $ 0.052 -- --
- --------------------------------------------------- -------- -------- -------- --------
</TABLE>
(a) Total returns do not deduct sales charges and are not annualized for periods
less than one year.
(b) Ratios are based on average daily net assets of $53,819,848. Ratios of
expenses and net investment income to average daily net assets prior to
waiver of advisory fees are 1.46% and 2.78%, respectively.
(c) After waiver of advisory fees. Ratios of expenses and net investment income
to average daily net assets prior to waiver of advisory fees are 1.68% and
2.64%, respectively.
(d) Annualized.
(e) Averages computed on a daily basis.
FS-19
<PAGE> 237
Financials
NOTE 8 - FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B: 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.62 $ 16.11 $ 16.69
- -------------------------------------------------------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income 0.31 0.31 0.04
- -------------------------------------------------------------------------------------- -------- -------- --------
Net gains (losses) on securities (both realized and unrealized) 4.61 (1.31) (0.58)
- -------------------------------------------------------------------------------------- -------- -------- --------
Total from investment operations 4.92 (1.00) (0.54)
- -------------------------------------------------------------------------------------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.32) (0.27) (0.04)
- -------------------------------------------------------------------------------------- -------- -------- --------
Distributions from net realized capital gains -- (0.22) --
- -------------------------------------------------------------------------------------- -------- -------- --------
Total distributions (0.32) (0.49) (0.04)
- -------------------------------------------------------------------------------------- -------- -------- --------
Net asset value, end of period $ 19.22 $ 14.62 $ 16.11
====================================================================================== ======== ======== ========
Total return(a) 33.93% (6.23)% (3.23)%
====================================================================================== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $72,634 $ 20,245 $ 2,754
====================================================================================== ======== ======== ========
Ratio of expenses to average net assets 2.21%(b) 1.98%(c) 2.83%(d)
====================================================================================== ======== ======== ========
Ratio of net investment income to average net assets 2.03%(b) 2.34%(c) 1.15%(d)
====================================================================================== ======== ======== ========
Portfolio turnover rate 76.63% 76.18% 233.10%
====================================================================================== ======== ======== ========
</TABLE>
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods less than one year.
(b) Ratios are based on average net assets of $38,286,051. Ratios of expenses
and net investment income prior to waiver of advisory fees are 2.23% and
2.01%, respectively.
(c) After waiver of advisory fees. Ratios of expenses and net investment income
prior to waiver of advisory fees are 2.45% and 1.87%, respectively.
(d) Annualized.
FS-20
<PAGE> 238
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Global Utilities Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Global Utilities Fund (a portfolio of AIM Funds Group), including the schedule
of investments, as of December 31, 1995, and 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 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 generally accepted auditing
standards. 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
December 31, 1995, 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
Global Utilities Fund as of December 31, 1995, the results of its operations for
the year then ended, the statement of changes in its net assets for each of the
years in the two-year period then ended and financial highlights for each of the
years in the three-year period then ended, in conformity with generally accepted
accounting principles.
Houston, Texas KPMG Peat Marwick LLP
February 7, 1996
FS-21
<PAGE> 239
Financials
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-56.32%
COMPUTER NETWORKING-0.58%
12,400 Ascend Communications, Inc.(a) $ 1,005,950
- ---------------------------------------------------------------------------------------------
14,571 Network Equipment Technologies, Inc.(a) 398,893
- ---------------------------------------------------------------------------------------------
1,404,843
- ---------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.53%
23,200 Objective Systems Integrators, Inc.(a) 1,270,200
- ---------------------------------------------------------------------------------------------
1,300 Smith Micro Software, Inc.(a) 8,776
- ---------------------------------------------------------------------------------------------
1,278,976
- ---------------------------------------------------------------------------------------------
CONGLOMERATES-0.41%
20,000 Tenneco Inc. 992,500
- ---------------------------------------------------------------------------------------------
ELECTRIC SERVICES-28.81%
45,000 Allegheny Power System, Inc. 1,288,127
- ---------------------------------------------------------------------------------------------
56,600 Boston Edison Co. 1,669,700
- ---------------------------------------------------------------------------------------------
35,000 Carolina Power & Light Co. 1,207,500
- ---------------------------------------------------------------------------------------------
16,200 CMS Energy Corp. 483,976
- ---------------------------------------------------------------------------------------------
35,400 Consolidated Edison Co. of New York, Inc. 1,132,802
- ---------------------------------------------------------------------------------------------
54,000 Detroit Edison Co. 1,863,000
- ---------------------------------------------------------------------------------------------
188,700 DPL Inc. 4,670,325
- ---------------------------------------------------------------------------------------------
129,500 DQE, Inc. 3,982,125
- ---------------------------------------------------------------------------------------------
106,400 Duke Power Co. 5,040,700
- ---------------------------------------------------------------------------------------------
147,600 FPL Group, Inc. 6,844,950
- ---------------------------------------------------------------------------------------------
136,500 General Public Utilities Corp. 4,641,000
- ---------------------------------------------------------------------------------------------
253,000 Houston Industries, Inc. 6,135,250
- ---------------------------------------------------------------------------------------------
163,500 Illinova Corp. 4,905,000
- ---------------------------------------------------------------------------------------------
10,800 LG & E Energy Corp. 456,300
- ---------------------------------------------------------------------------------------------
95,500 NIPSCO Industries, Inc. 3,652,875
- ---------------------------------------------------------------------------------------------
134,600 Northern States Power Co. 6,612,225
- ---------------------------------------------------------------------------------------------
143,000 Pinnacle West Capital Corp. 4,111,250
- ---------------------------------------------------------------------------------------------
199,700 Southern Co. (The) 4,917,613
- ---------------------------------------------------------------------------------------------
95,000 Teco Energy, Inc. 2,434,375
- ---------------------------------------------------------------------------------------------
75,000 Unicom Corp. 2,456,250
- ---------------------------------------------------------------------------------------------
33,300 Wisconsin Energy Corp. 1,019,813
- ---------------------------------------------------------------------------------------------
69,525,156
- ---------------------------------------------------------------------------------------------
GAS DISTRIBUTION-1.39%
95,200 Public Service Co. of Colorado 3,367,700
- ---------------------------------------------------------------------------------------------
NATURAL GAS PIPELINE-6.07%
36,000 Columbia Gas System, Inc.(a) 1,579,500
- ---------------------------------------------------------------------------------------------
100,000 Enron Corp. 3,812,500
- ---------------------------------------------------------------------------------------------
31,600 KN Energy, Inc. 920,350
- ---------------------------------------------------------------------------------------------
17,600 Pacific Enterprises 497,200
- ---------------------------------------------------------------------------------------------
93,300 Panhandle Eastern Corp. 2,600,738
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-22
<PAGE> 240
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
NATURAL GAS PIPELINE (continued)
35,000 Sonat Inc. $ 1,246,877
- ---------------------------------------------------------------------------------------------
91,000 Williams Companies Inc. (The) 3,992,625
- ---------------------------------------------------------------------------------------------
14,649,790
- ---------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-2.01%
44,300 Bay Apartment Communities 1,074,275
- ---------------------------------------------------------------------------------------------
21,300 Meditrust 742,839
- ---------------------------------------------------------------------------------------------
15,000 National Health Investors, Inc. 496,876
- ---------------------------------------------------------------------------------------------
5,500 Nationwide Health Properties, Inc. 231,000
- ---------------------------------------------------------------------------------------------
26,700 Oasis Residential Inc. 607,426
- ---------------------------------------------------------------------------------------------
32,000 Patriot American Hospitality, Inc. 824,000
- ---------------------------------------------------------------------------------------------
32,000 Public Storage, Inc. 608,000
- ---------------------------------------------------------------------------------------------
16,500 RFS Hotel Investors Inc. 253,688
- ---------------------------------------------------------------------------------------------
4,838,104
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-2.49%
52,000 A T & T Corp. 3,367,000
- ---------------------------------------------------------------------------------------------
84,700 Frontier Corp. 2,541,000
- ---------------------------------------------------------------------------------------------
6,800 Tel-Save Holdings, Inc.(a) 94,350
- ---------------------------------------------------------------------------------------------
6,002,350
- ---------------------------------------------------------------------------------------------
TELEPHONE-14.03%
136,700 Ameritech Corp. 8,065,300
- ---------------------------------------------------------------------------------------------
18,700 Bell Atlantic Corp. 1,250,563
- ---------------------------------------------------------------------------------------------
145,800 BellSouth Corp. 6,342,300
- ---------------------------------------------------------------------------------------------
75,700 Century Telephone Enterprises, Inc. 2,403,474
- ---------------------------------------------------------------------------------------------
117,000 Cincinnati Bell, Inc. 4,065,750
- ---------------------------------------------------------------------------------------------
25,000 GTE Corp. 1,100,000
- ---------------------------------------------------------------------------------------------
47,000 NYNEX Corp. 2,538,000
- ---------------------------------------------------------------------------------------------
91,400 SBC Communications, Inc. 5,255,500
- ---------------------------------------------------------------------------------------------
30,000 Southern New England Telecommunications Corp. 1,192,500
- ---------------------------------------------------------------------------------------------
46,000 US West, Inc. 1,644,500
- ---------------------------------------------------------------------------------------------
33,857,887
- ---------------------------------------------------------------------------------------------
Total Domestic Common Stocks 135,917,306
- ---------------------------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-0.87%
OIL & GAS-SERVICES-0.40%
40,000 Enron Corp.-$1.36 Conv. Pfd. 960,000
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-0.47%
23,500 MFS Communications Co., Inc.-$2.68 Conv. Pfd. 1,144,156
- ---------------------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 2,104,156
- ---------------------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-21.71%
ARGENTINA-1.13%
368,200 Central Costanera S.A.-Class B (Electric Services) 1,133,829
- ---------------------------------------------------------------------------------------------
98,800 Central Puerto S.A.-Class B (Electric Services) 375,364
- ---------------------------------------------------------------------------------------------
44,600 Telefonica de Argentina-ADR (Telephone) 1,215,350
- ---------------------------------------------------------------------------------------------
2,724,543
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-23
<PAGE> 241
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
AUSTRIA-0.31%
12,500 Oesterreichisch Elektrizitatswirtschafts-AG (Verbundgesellschaft)
Class A (Electric Services) $ 751,599
- ---------------------------------------------------------------------------------------------
BRAZIL-0.49%
25,000 Telecomunicacoes Brasileiras S/A-Telebras-ADR
(Telecommunications) 1,184,375
- ---------------------------------------------------------------------------------------------
CANADA-0.53%
87,800 Westcoast Energy, Inc. (Natural Gas Pipeline) 1,284,075
- ---------------------------------------------------------------------------------------------
CHILE-1.17%
17,600 Compania de Telecomunicaciones de Chile S.A.-ADR
(Telecommunications) 1,458,600
- ---------------------------------------------------------------------------------------------
47,800 Enersis S.A.-ADR (Electric Services) 1,362,300
- ---------------------------------------------------------------------------------------------
2,820,900
- ---------------------------------------------------------------------------------------------
DENMARK-0.38%
33,600 Tele Danmark A/S-ADR(a) (Telephone) 928,200
- ---------------------------------------------------------------------------------------------
GERMANY-0.82%
46,500 Veba A.G. (Electrical Services) 1,974,102
- ---------------------------------------------------------------------------------------------
HONG KONG-0.19%
25,500 Hong Kong Telecom Ltd.-ADR (Telephone) 452,625
- ---------------------------------------------------------------------------------------------
INDONESIA-0.42%
27,700 PT Indostat-ADR(a) (Telephone) 1,011,050
- ---------------------------------------------------------------------------------------------
ISRAEL-0.22%
23,200 ECI Telecom Ltd. (Telecommunications) 529,250
- ---------------------------------------------------------------------------------------------
ITALY-0.80%
578,300 Telecom Italia Mobile S.p.A.(Telephone) 1,015,950
- ---------------------------------------------------------------------------------------------
593,300 Telecom Italia S.p.A. (Telephone) 920,140
- ---------------------------------------------------------------------------------------------
1,936,090
- ---------------------------------------------------------------------------------------------
KOREA-0.55%
49,500 Korea Electric Power Corp.-ADR (Electric Services) 1,324,125
- ---------------------------------------------------------------------------------------------
NETHERLANDS-1.23%
20,000 Elsag Bailey Process Automation N.V.-ADR-$2.75 Conv. Pfd.
TOPRS(b) (Acquired 12/14/95-12/15/95; cost $1,000,250) (Electronic
Components-Miscellaneous) 1,002,500
- ---------------------------------------------------------------------------------------------
54,170 Royal PTT Nederland N.V.-ADR(b) (Acquired 06/13/94-10/23/95;
cost $1,575,432) (Telecommunications) 1,963,662
- ---------------------------------------------------------------------------------------------
2,966,162
- ---------------------------------------------------------------------------------------------
NEW ZEALAND-1.45%
50,600 Telecom Corp. of New Zealand Ltd.-ADR (Telephone) 3,510,375
- ---------------------------------------------------------------------------------------------
NORWAY-0.61%
45,000 Nera AS-ADR(a) (Telecommunications) 1,462,500
- ---------------------------------------------------------------------------------------------
PERU-0.76%
850,300 CPT Telefonica Del Peru-Class B (Telephone) 1,821,282
- ---------------------------------------------------------------------------------------------
PORTUGAL-0.52%
65,700 Portugal Telecom, S.A.-ADR(a) (Telecommunications) 1,248,300
- ---------------------------------------------------------------------------------------------
SPAIN-2.91%
86,500 Amper S.A.(Electrical Equipment)(a) 1,023,309
- ---------------------------------------------------------------------------------------------
24,000 Empresa Nacional de Electricidad S.A. (Electric Services) 1,374,000
- ---------------------------------------------------------------------------------------------
29,800 Empresa Nacional de Electricidad S.A.-ADR (Electric Services) 677,950
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-24
<PAGE> 242
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SPAIN (continued)
11,000 Gas Natural SDG-E S.A. (Natural Gas Pipeline) $ 1,713,932
- ---------------------------------------------------------------------------------------------
141,000 Iberdrola S.A. (Electric Services) 1,290,272
- ---------------------------------------------------------------------------------------------
22,200 Telefonica de Espana, S.A. (Telecommunications) 929,625
- ---------------------------------------------------------------------------------------------
7,009,088
- ---------------------------------------------------------------------------------------------
SWEDEN-1.16%
10,808 Telefonaktiebolaget L.M. Ericsson (Telecommunications) 211,611
- ---------------------------------------------------------------------------------------------
133,232 Telefonaktiebolaget L.M. Ericsson-ADR (Telecommunications) 2,598,024
- ---------------------------------------------------------------------------------------------
2,809,635
- ---------------------------------------------------------------------------------------------
UNITED KINGDOM-6.06%
265,600 British Gas PLC (Natural Gas Pipeline) 1,047,715
- ---------------------------------------------------------------------------------------------
10,000 British Sky Broadcasting Group PLC-ADR
(Advertising/Broadcasting) 376,250
- ---------------------------------------------------------------------------------------------
47,900 London Electricity PLC (Electric Services) 426,629
- ---------------------------------------------------------------------------------------------
74,700 Midlands Electricity PLC (Electric Services) 881,689
- ---------------------------------------------------------------------------------------------
205,075 National Grid Group PLC(a) (Electric Services) 635,388
- ---------------------------------------------------------------------------------------------
175,000 National Power PLC (Electric Services) 1,221,657
- ---------------------------------------------------------------------------------------------
40,000 National Power PLC-ADR (Electric Services) 370,000
- ---------------------------------------------------------------------------------------------
197,100 North West Water PLC (Water Supply) 1,885,597
- ---------------------------------------------------------------------------------------------
45,500 NYNEX CableComms Group(a) (Telecommunications) 790,562
- ---------------------------------------------------------------------------------------------
119,000 PowerGen PLC (Electric Services) 984,120
- ---------------------------------------------------------------------------------------------
40,900 PowerGen PLC-ADR (Electric Services) 536,812
- ---------------------------------------------------------------------------------------------
138,550 Scottish Power PLC (Electric Services) 796,140
- ---------------------------------------------------------------------------------------------
47,925 Seeboard PLC (Electric Services) 391,497
- ---------------------------------------------------------------------------------------------
49,775 South Wales Electricity PLC (Electric Services) 721,231
- ---------------------------------------------------------------------------------------------
40,000 Southern Electric PLC (Electric Services) 561,577
- ---------------------------------------------------------------------------------------------
20,000 Vodafone Group PLC-ADR (Telecommunications) 705,000
- ---------------------------------------------------------------------------------------------
73,750 Wessex Water PLC (Water Supply) 399,732
- ---------------------------------------------------------------------------------------------
88,500 Wessex Water Preference (Water Supply) 70,096
- ---------------------------------------------------------------------------------------------
46,730 Yorkshire Electricity PLC (Electric Services) 484,790
- ---------------------------------------------------------------------------------------------
145,800 Yorkshire Water PLC (Water Supply) 1,340,481
- ---------------------------------------------------------------------------------------------
14,626,963
- ---------------------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 52,375,239
- ---------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC CONVERTIBLE BONDS-2.64%
COMPUTER SOFTWARE/SERVICES-0.19%
$ 441,000 Network Equipment Technologies, Conv. Sub. Deb.,
7.25%, 05/15/14 451,672
- ---------------------------------------------------------------------------------------------
ELECTRIC SERVICES-0.46%
1,100,000 California Energy Co., Inc., Conv. Sub. Deb.,
5.00%, 07/31/00(b) (Acquired 04/26/95; cost $988,625) 1,108,580
- ---------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.41%
850,000 Altera Corp., Conv. Sub. Notes,
5.75%, 06/15/02(b) (Acquired 06/16/95-12/13/95; cost $870,400) 990,250
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-25
<PAGE> 243
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
SEMICONDUCTORS-0.75%
$ 750,000 Analog Devices, Conv. Sub. Notes, 3.50%, 12/01/00 $ 798,750
- ---------------------------------------------------------------------------------------------
1,125,000 Xilinx Inc., Conv. Sub. Notes,
5.25%, 11/01/02(b) (Acquired 11/07/95-11/08/95; cost
$1,125,000) 1,023,750
- ---------------------------------------------------------------------------------------------
1,822,500
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-0.83%
2,620,000 United States Cellular Corp., Conv. Liquid Yield Option Notes,
6.00%, 06/15/15(c) 933,375
- ---------------------------------------------------------------------------------------------
1,000,000 World Communications, Conv. Sub. Notes, 5.00%, 08/15/03 1,065,000
- ---------------------------------------------------------------------------------------------
1,998,375
- ---------------------------------------------------------------------------------------------
Total Domestic Convertible Bonds 6,371,377
- ---------------------------------------------------------------------------------------------
DOMESTIC NON-CONVERTIBLE BONDS-6.93%
ADVERTISING/BROADCASTING-0.51%
1,150,000 Time Warner Inc., Notes, 8.18%, 08/15/07 1,235,249
- ---------------------------------------------------------------------------------------------
ELECTRIC SERVICES-1.64%
127,000 Ohio Power Co., First Mortgage Bonds, 9.875%, 08/01/20 136,517
- ---------------------------------------------------------------------------------------------
1,750,000 Pennsylvania Power & Light Co., First Mortgage Bonds,
9.25%, 10/01/19 1,918,700
- ---------------------------------------------------------------------------------------------
1,640,000 San Diego Gas & Electric Co., First Mortgage Series JJ Bonds,
9.625%, 04/15/20 1,913,732
- ---------------------------------------------------------------------------------------------
3,968,949
- ---------------------------------------------------------------------------------------------
NATURAL GAS PIPELINE-2.60%
3,750,000 Enron Corp., Sr. Sub. Deb., 6.75%, 07/01/05 3,832,387
- ---------------------------------------------------------------------------------------------
2,205,000 Panhandle Eastern Pipeline, Deb., 7.875%, 08/15/04 2,431,960
- ---------------------------------------------------------------------------------------------
6,264,347
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-2.18%
1,850,000 A T & T Corp., Sr. Notes, 7.75%, 03/01/07 2,079,142
- ---------------------------------------------------------------------------------------------
3,000,000 TCI Communications Inc., Sr. Notes, 8.00%, 08/01/05 3,184,470
- ---------------------------------------------------------------------------------------------
5,263,612
- ---------------------------------------------------------------------------------------------
Total Domestic Non-Convertible Bonds 16,732,157
- ---------------------------------------------------------------------------------------------
FOREIGN NON-CONVERTIBLE BONDS-2.11%
CANADA-1.75%
CAD 1,800,000 Bell Canada, Deb., (Telecommunications)
8.80%, 08/17/05 753,530
- ---------------------------------------------------------------------------------------------
CAD 950,000 Bell Canada, Deb., (Telecommunications)
10.875%, 10/11/04 1,575,118
- ---------------------------------------------------------------------------------------------
CAD 2,350,000 IPL Energy, Deb. (Oil & Gas-Services)
9.67%, 02/23/00 1,882,323
- ---------------------------------------------------------------------------------------------
4,210,971
- ---------------------------------------------------------------------------------------------
MEXICO-0.36%
850,000 United Mexican States, Deb., (Foreign Government Securities)
11.1875%, 07/21/97(b) (Acquired 07/12/95; cost $850,000) 870,723
- ---------------------------------------------------------------------------------------------
Total Foreign Non-Convertible Bonds 5,081,694
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-26
<PAGE> 244
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-6.50%
U.S. TREASURY BONDS-2.84%
$ 3,000,000 7.125%, 02/29/00 $ 3,195,000
- ---------------------------------------------------------------------------------------------
3,000,000 7.625%, 02/15/25 3,666,900
- ---------------------------------------------------------------------------------------------
6,861,900
- ---------------------------------------------------------------------------------------------
U.S. TREASURY NOTES-3.66%
2,500,000 7.25%, 08/15/04 2,782,500
- ---------------------------------------------------------------------------------------------
2,500,000 7.50%, 02/15/05 2,837,175
- ---------------------------------------------------------------------------------------------
3,000,000 6.50%, 08/15/05 3,199,440
- ---------------------------------------------------------------------------------------------
8,819,115
- ---------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 15,681,015
- ---------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT-2.32%(d)
5,595,599 Daiwa Securities America Inc.,
5.92%, 01/02/96(e) 5,595,599
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-99.40% 239,858,543
- ---------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.60% 1,459,142
- ---------------------------------------------------------------------------------------------
NET ASSETS-100.00% $241,317,685
=============================================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Restricted securities. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933, as
amended. The valuation of these securities has been determined in accordance
with procedures established by the Board of Trustees. The aggregate market
value of these securities at December 31, 1995, was $6,959,465, which
represents 2.88% of net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of the
original issue discount.
(d) Collateral on repurchase agreement, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102 percent of the sales price of
the repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the investment advisor.
(e) Joint repurchase agreement entered into 12/29/95 with a maturing value of
$646,679,181. Collateralized by $537,995,000 U.S. Treasury obligations,
7.875% to 11.25% due 11/15/07 to 02/15/15.
Abbreviations:
ADR -American Depositary Receipt
CAD -Canadian Dollars
Conv. -Convertible
Deb. -Debentures
Pfd. -Preferred
Sr. -Senior
Sub. -Subordinated
TOPRS -Trust Originated Preferred Securities
See Notes to Financial Statements.
FS-27
<PAGE> 245
Financials
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $200,988,984) $239,858,543
- -----------------------------------------------------------------------------------------
Foreign currencies, at market value (cost $76,411) 78,596
- -----------------------------------------------------------------------------------------
Receivables for:
Investments sold 14,300
- -----------------------------------------------------------------------------------------
Fund shares sold 940,967
- -----------------------------------------------------------------------------------------
Dividends and interest 1,876,536
- -----------------------------------------------------------------------------------------
Investment for deferred compensation plan 6,301
- -----------------------------------------------------------------------------------------
Other assets 16,405
- -----------------------------------------------------------------------------------------
Total assets 242,791,648
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 384,923
- -----------------------------------------------------------------------------------------
Fund shares reacquired 443,166
- -----------------------------------------------------------------------------------------
Dividends 207,065
- -----------------------------------------------------------------------------------------
Deferred compensation 6,301
- -----------------------------------------------------------------------------------------
Accrued advisory fees 118,295
- -----------------------------------------------------------------------------------------
Accrued administrative service fees 6,095
- -----------------------------------------------------------------------------------------
Accrued distribution fees 180,237
- -----------------------------------------------------------------------------------------
Accrued trustees' fees 1,749
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 59,966
- -----------------------------------------------------------------------------------------
Accrued operating expenses 66,166
- -----------------------------------------------------------------------------------------
Total liabilities 1,473,963
- -----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $241,317,685
=========================================================================================
NET ASSETS:
Class A $170,624,327
=========================================================================================
Class B $ 70,693,358
=========================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 11,692,658
=========================================================================================
Class B 4,841,504
=========================================================================================
Class A:
Net asset value and redemption price per share $ 14.59
=========================================================================================
Offering price per share:
(Net asset value of $14.59 divided by 94.50%) $ 15.44
=========================================================================================
Class B:
Net asset value and offering price per share $ 14.60
=========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-28
<PAGE> 246
Financials
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $171,262 foreign withholding tax) $ 8,322,065
- ----------------------------------------------------------------------------------------
Interest 3,112,023
- ----------------------------------------------------------------------------------------
Total investment income 11,434,088
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,256,220
- ----------------------------------------------------------------------------------------
Administrative service fees 69,813
- ----------------------------------------------------------------------------------------
Custodian fees 75,497
- ----------------------------------------------------------------------------------------
Trustees' fees 6,543
- ----------------------------------------------------------------------------------------
Distribution fees -- Class A 393,486
- ----------------------------------------------------------------------------------------
Distribution fees -- Class B 538,479
- ----------------------------------------------------------------------------------------
Transfer agent fees -- Class A 372,608
- ----------------------------------------------------------------------------------------
Transfer agent fees -- Class B 136,007
- ----------------------------------------------------------------------------------------
Other 115,422
- ----------------------------------------------------------------------------------------
Total expenses 2,964,075
- ----------------------------------------------------------------------------------------
Net investment income 8,470,013
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND FOREIGN
CURRENCY TRANSACTIONS:
NET REALIZED GAIN (LOSS) FROM:
Investment securities 1,019,826
- ----------------------------------------------------------------------------------------
Foreign currency transactions (82,071)
- ----------------------------------------------------------------------------------------
937,755
- ----------------------------------------------------------------------------------------
UNREALIZED APPRECIATION OF:
Investment securities 42,915,013
- ----------------------------------------------------------------------------------------
Foreign currencies 24,897
- ----------------------------------------------------------------------------------------
42,939,910
- ----------------------------------------------------------------------------------------
Net gain from investment securities and foreign currencies 43,877,665
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $52,347,678
========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-29
<PAGE> 247
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 8,470,013 $ 9,265,901
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities and foreign currencies 937,755 (19,935,052)
- -------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities and foreign currencies 42,939,910 (15,936,523)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 52,347,678 (26,605,674)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (6,295,577) (8,024,593)
- -------------------------------------------------------------------------------------------
Class B (1,690,557) (1,429,850)
- -------------------------------------------------------------------------------------------
Returns of capital:
Class A -- (407,762)
- -------------------------------------------------------------------------------------------
Class B -- (72,656)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A (12,765,899) (18,722,360)
- -------------------------------------------------------------------------------------------
Class B 16,638,939 24,437,899
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 48,234,584 (30,824,996)
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 193,083,101 223,908,097
- -------------------------------------------------------------------------------------------
End of period $241,317,685 $193,083,101
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $221,523,475 $217,650,435
- -------------------------------------------------------------------------------------------
Undistributed net investment income 404,516 --
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities and foreign currencies (19,477,538) (20,494,656)
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies 38,867,232 (4,072,678)
- -------------------------------------------------------------------------------------------
$241,317,685 $193,083,101
===========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-30
<PAGE> 248
Financials
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Global Utilities Fund (the "Fund") is a series portfolio of AIM Funds Group
(the "Trust"). The Trust is a Delaware business trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of nine separate series
portfolios, each having an unlimited number of shares of beneficial interest.
The Fund currently offers two different classes of shares: the Class A shares
and the Class B shares. Class A shares are sold with a front-end sales charge.
Class B shares are sold with a contingent deferred sales charge. Matters
affecting each portfolio or class will be 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 the Fund. The Fund's objective is to
achieve a high level of current income, and as a secondary objective the Fund
seeks to achieve capital appreciation, by investing primarily in the common and
preferred stocks of public utility companies.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. 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.
A. Security Valuations - Equity securities listed or traded on an exchange are
valued at its last sales price on the exchange where the security is
principally traded, or lacking any sales on a particular day, the security is
valued at the mean between the closing bid and asked prices on that day. If a
mean is not available, as is the case in some foreign markets, the closing
bid will be used absent a last sales price. Exchange listed convertible bonds
are valued at the mean between the closing bid and asked prices obtained from
a broker-dealer. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued
at the mean between the last bid and asked prices based upon quotes furnished
by market makers for such securities. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the closing bid and asked prices. Non-
convertible bonds and notes are valued on the basis of prices provided by an
independent pricing service. 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, developments related to special securities, yield, quality,
coupon rate, maturity, type of issue, individual trading characteristics and
other market data. 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 Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events affecting the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during the period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Trustees.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. It is the policy of the Fund to declare daily dividends
from net investment income. Such dividends are paid monthly. Distributions
from net realized capital gains, if any, are recorded on ex-dividend date and
are paid annually. On December 31, 1995, undistributed net realized gain
(loss) was increased and undistributed net investment income reduced by
$79,363 in order to comply with the requirements of the American Institute of
Certified Public Accountants Statement of Position 93-2. Net assets of the
Fund were unaffected by the reclassification discussed above.
C. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio
FS-31
<PAGE> 249
Financials
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued)
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
D. Foreign Currency Contracts - A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract to attempt to minimize the
risk to the Fund from adverse changes in the relationship between currencies.
The Fund may also enter into a forward contract for the purchase or sale of a
security denominated in a foreign currency in order to "lock in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
E. 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 of $19,221,729 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized, in
the year 2002.
F. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 an annual rate of 0.60% of
the first $200 million of the Fund's average daily net assets, plus 0.50% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.40% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.30% of the Fund's average daily net
assets in excess of $1 billion. This agreement requires AIM to reduce its fees
or, if necessary, make payments to the Fund to the extent required to satisfy
any expense limitations imposed by the securities laws or regulations thereunder
of any state in which the Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1995, AIM
was reimbursed $69,813 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 agency and
shareholder services to the Fund. During the year ended December 31, 1995, AFS
was paid $356,054 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides for payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
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. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more assignees, its rights to all or a designated
portion of (a) compensation received by AIM Distributors from the Fund pursuant
to the Class B Plan (but not AIM Distributors' duties and obligations pursuant
to the Class B Plan) and (b) any contingent deferred sales charges payable to
AIM Distributors related to the Class B shares. During the year ended December
31, 1995, the Class A shares and the Class B shares paid AIM Distributors
$393,486 and $538,479, respectively, as compensation under the Plans.
FS-32
<PAGE> 250
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
AIM Distributors received commissions of $106,920 from sales of the Class A
shares of the Fund during the year ended December 31, 1995. 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 December 31, 1995,
AIM Distributors received $167,444 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1995, the Fund paid legal fees of $3,232
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3 - TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund has a $3,600,000 committed line of credit with a financial institution
syndicate with Chemical Bank of New York as the administrative agent. Interest
on borrowings under the line of credit is payable on maturity or prepayment
date. During the period July 20, 1995 (effective date of line of credit
agreement) through December 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's committed
line.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1995 was
$188,852,283 and $178,842,299, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $40,760,598
- -----------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,119,248)
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $38,641,350
===========================================================================================================
</TABLE>
Cost of investments for tax purposes is $201,217,193.
NOTE 6 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------ -----------------------
SHARES VALUE SHARES VALUE
--------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sold:
Class A 3,040,993 $39,908,471 4,097,001 $52,451,904
- ------------------------------------------------------------------------------------------------------------
Class B 2,223,714 29,286,592 2,720,021 34,681,563
- ------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 417,851 5,505,279 572,553 7,178,342
- ------------------------------------------------------------------------------------------------------------
Class B 106,557 1,413,598 99,414 1,232,102
- ------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (4,470,353) (58,179,649) (6,158,134) (78,352,606)
- ------------------------------------------------------------------------------------------------------------
Class B (1,083,006) (14,061,251) (921,686) (11,475,766)
- ------------------------------------------------------------------------------------------------------------
235,756 $3,873,040 409,169 $5,715,539
============================================================================================================
</TABLE>
FS-33
<PAGE> 251
Financials
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during each of the years in the seven-year period ended December 31,
1995 and the period January 18, 1988 (date operations commenced) through
December 31, 1988 and for a Class B share outstanding during each of the years
in the two-year period ended December 31, 1995 and the period September 1, 1993
(date sales commenced) through December 31, 1993.
<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------------------------------------
1995 1994 1993 1992(A) 1991 1990 1989
-------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.85 $ 14.09 $ 13.31 $ 13.75 $ 12.45 $ 13.73 $ 10.99
- ------------------------------------- -------- -------- -------- -------- -------- ------- -------
Income from investment operations:
Net investment income 0.55 0.59 0.60 0.67 0.70 0.66 0.77
- ------------------------------------- -------- -------- -------- -------- -------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 2.71 (2.20) 1.02 0.36 2.12 (1.10) 3.06
- ------------------------------------- -------- -------- -------- -------- -------- ------- -------
Total from investment operations 3.26 (1.61) 1.62 1.03 2.82 (0.44) 3.83
- ------------------------------------- -------- -------- -------- -------- -------- ------- -------
Less distributions:
Dividends from net investment income (0.52) (0.60) (0.61) (0.68) (0.66) (0.70) (0.69)
- ------------------------------------- -------- -------- -------- -------- -------- ------- -------
Distributions from net realized
capital gains -- -- (0.23) (0.79) (0.86) (0.14) (0.40)
- ------------------------------------- -------- -------- -------- -------- -------- ------- -------
Returns of capital -- (0.03) -- -- -- -- --
- ------------------------------------- -------- -------- -------- -------- -------- ------- -------
Total distributions (0.52) (0.63) (0.84) (1.47) (1.52) (0.84) (1.09)
- ------------------------------------- -------- -------- -------- -------- -------- ------- -------
Net asset value, end of period $ 14.59 $ 11.85 $ 14.09 $ 13.31 $ 13.75 $ 12.45 $ 13.73
===================================== ======== ======== ======== ======== ======== ======= =======
Total return(b) 28.07% (11.57)% 12.32% 7.92% 23.65% (2.98)% 36.11%
===================================== ======== ======== ======== ======== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $170,624 $150,515 $200,016 $111,771 $ 91,939 $69,541 $58,307
===================================== ======== ======== ======== ======== ======== ======= =======
Ratio of expenses to average net
assets 1.21%(c) 1.18% 1.16% 1.17% 1.23% 1.21%(d) 1.05%(d)
===================================== ======== ======== ======== ======== ======== ======= =======
Ratio of net investment income to
average net assets 4.20%(c) 4.67% 4.21% 4.96% 5.36% 5.21%(e) 6.13%(e)
===================================== ======== ======== ======== ======== ======== ======= =======
Portfolio turnover rate 88% 101% 76% 148% 169% 123% 115%
===================================== ======== ======== ======== ======== ======== ======= =======
<CAPTION>
CLASS B SHARES
--------------------------------
1988 1995 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 11.84 $ 14.08 $ 15.30
- ------------------------------------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.82 0.44 0.47 0.17
- ------------------------------------- ------- ------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 0.83 2.73 (2.19) (0.98)
- ------------------------------------- ------- ------- ------- -------
Total from investment operations 1.65 3.17 (1.72) (0.81)
- ------------------------------------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.66) (0.41) (0.49) (0.17)
- ------------------------------------- ------- ------- ------- -------
Distributions from net realized
capital gains -- -- -- (0.24)
- ------------------------------------- ------- ------- ------- -------
Returns of capital -- -- (0.03) --
- ------------------------------------- ------- ------- ------- -------
Total distributions (0.66) (0.41) (0.52) (0.41)
- ------------------------------------- ------- ------- ------- -------
Net asset value, end of period $ 10.99 $ 14.60 $ 11.84 $ 14.08
===================================== ======= ======= ======= =======
Total return(b) 17.03% 27.16% (12.35)% (5.32)%
===================================== ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $20,104 $70,693 $42,568 $23,892
===================================== ======= ======= ======= =======
Ratio of expenses to average net
assets 1.22%(d)(f) 1.97%(c) 2.07% 1.99%(f)
===================================== ======= ======= ======= =======
Ratio of net investment income to
average net assets 7.63%(e)(f) 3.44%(c) 3.78% 3.38%(f)
===================================== ======= ======= ======= =======
Portfolio turnover rate 87% 88% 101% 76%
===================================== ======= ======= ======= =======
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Total returns do not deduct sales charges and for periods less than one year
are not annualized.
(c) Ratios for Class A are based on average daily net assets of $157,394,436.
Ratios for Class B are based on average daily net assets of $53,847,853.
(d) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22%, 1.11% and 1.69% (annualized) for 1990-88, respectively.
(e) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 5.20%, 6.07% and 7.16% (annualized) for 1990-88,
respectively.
(f) Annualized.
FS-34
<PAGE> 252
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Growth Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Growth Fund (a portfolio of AIM Funds Group), including the schedule of
investments, as of December 31, 1995, and 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 three-year period then ended. These financial statements and
the financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the 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
December 31, 1995, 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 the financial highlights referred
to above present fairly, in all material respects, the financial position of AIM
Growth Fund as of December 31, 1995, the results of its 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 three-year period then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1996
FS-35
<PAGE> 253
Financials
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMMON STOCKS - 80.81%
ADVERTISING/BROADCASTING-0.14%
11,400 Infinity Broadcasting Corp.-Class A(a) $ 424,659
- -------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE-0.41%
10,000 Boeing Co. 783,750
- -------------------------------------------------------------------------------------------
5,000 United Technologies Corp. 474,375
- -------------------------------------------------------------------------------------------
1,258,125
- -------------------------------------------------------------------------------------------
APPLIANCES-0.34%
25,000 Newell Co. 646,875
- -------------------------------------------------------------------------------------------
8,000 Premark International Inc. 405,000
- -------------------------------------------------------------------------------------------
1,051,875
- -------------------------------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.46%
22,400 Echlin Inc. 817,600
- -------------------------------------------------------------------------------------------
30,000 Mark IV Industries, Inc. 592,500
- -------------------------------------------------------------------------------------------
1,410,100
- -------------------------------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.15%
8,500 Chrysler Corp. 470,687
- -------------------------------------------------------------------------------------------
BANKING-0.60%
12,000 Corestates Financial Corp. 454,500
- -------------------------------------------------------------------------------------------
22,000 Norwest Bank Corp. 726,000
- -------------------------------------------------------------------------------------------
24,600 Southern National Corp. 645,750
- -------------------------------------------------------------------------------------------
1,826,250
- -------------------------------------------------------------------------------------------
BANKING (MONEY CENTER)-0.72%
13,000 BankAmerica Corp. 841,750
- -------------------------------------------------------------------------------------------
22,700 Chase Manhattan Corp. 1,376,187
- -------------------------------------------------------------------------------------------
2,217,937
- -------------------------------------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.10%
9,600 Canandaigua Wine Co., Inc.-Class A(a) 313,200
- -------------------------------------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.46%
25,000 PepsiCo Inc. 1,396,875
- -------------------------------------------------------------------------------------------
BIOTECHNOLOGY-0.03%
2,300 Guidant Corp. 97,175
- -------------------------------------------------------------------------------------------
BUSINESS SERVICES-1.02%
21,400 Equifax Inc. 457,425
- -------------------------------------------------------------------------------------------
23,100 Healthcare COMPARE Corp.(a) 1,004,850
- -------------------------------------------------------------------------------------------
15,000 Manpower Inc. 421,875
- -------------------------------------------------------------------------------------------
26,000 Olsten Corp. 1,027,000
- -------------------------------------------------------------------------------------------
</TABLE>
FS-36
<PAGE> 254
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
BUSINESS SERVICES (continued)
8,225 Value Health, Inc.(a) $ 226,187
- -------------------------------------------------------------------------------------------
3,137,337
- -------------------------------------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.35%
18,600 Airgas Inc.(a) 618,450
- -------------------------------------------------------------------------------------------
7,800 W.R. Grace & Co. 461,175
- -------------------------------------------------------------------------------------------
1,079,625
- -------------------------------------------------------------------------------------------
COMPUTER MINI/PCS-2.94%
9,200 CDW Computer Centers, Inc.(a) 372,600
- -------------------------------------------------------------------------------------------
50,000 COMPAQ Computer Corp.(a) 2,400,000
- -------------------------------------------------------------------------------------------
78,400 Dell Computer Corp.(a) 2,714,600
- -------------------------------------------------------------------------------------------
12,000 Digital Equipment Corp.(a) 769,500
- -------------------------------------------------------------------------------------------
12,100 Hewlett-Packard Co. 1,013,375
- -------------------------------------------------------------------------------------------
38,000 Sun Microsystems Inc.(a) 1,733,750
- -------------------------------------------------------------------------------------------
9,003,825
- -------------------------------------------------------------------------------------------
COMPUTER NETWORKING-6.16%
13,300 ALANTEC Corp.(a) 774,725
- -------------------------------------------------------------------------------------------
11,400 Ascend Communications, Inc.(a) 924,825
- -------------------------------------------------------------------------------------------
68,550 Bay Networks, Inc.(a) 2,819,118
- -------------------------------------------------------------------------------------------
20,000 Cabletron Systems, Inc.(a) 1,620,000
- -------------------------------------------------------------------------------------------
10,600 Cascade Communications Corp. 903,650
- -------------------------------------------------------------------------------------------
33,000 Cheyenne Software, Inc.(a) 862,125
- -------------------------------------------------------------------------------------------
46,900 Cisco Systems, Inc.(a) 3,499,913
- -------------------------------------------------------------------------------------------
34,000 FORE Systems, Inc.(a) 2,023,000
- -------------------------------------------------------------------------------------------
29,140 Madge N.V.(a) 1,304,015
- -------------------------------------------------------------------------------------------
12,200 Network Equipment Technologies, Inc.(a) 333,975
- -------------------------------------------------------------------------------------------
9,800 Newbridge Networks Corp. 405,475
- -------------------------------------------------------------------------------------------
10,200 Optical Data Systems, Inc.(a) 257,550
- -------------------------------------------------------------------------------------------
7,700 Sync Research, Inc.(a) 348,425
- -------------------------------------------------------------------------------------------
59,800 3Com Corp.(a) 2,788,175
- -------------------------------------------------------------------------------------------
18,864,971
- -------------------------------------------------------------------------------------------
COMPUTER PERIPHERALS-2.99%
30,000 Adaptec, Inc.(a) 1,230,000
- -------------------------------------------------------------------------------------------
25,275 Alliance Semiconductor Corp.(a) 293,822
- -------------------------------------------------------------------------------------------
15,700 Cerner Corp. 321,850
- -------------------------------------------------------------------------------------------
12,300 Digi International, Inc.(a) 233,700
- -------------------------------------------------------------------------------------------
53,000 EMC Corp.(a) 814,875
- -------------------------------------------------------------------------------------------
5,100 Komag, Inc.(a) 235,237
- -------------------------------------------------------------------------------------------
20,300 Microchip Technology, Inc.(a) 740,950
- -------------------------------------------------------------------------------------------
6,400 Oak Technology, Inc.(a) 270,400
- -------------------------------------------------------------------------------------------
35,800 Oracle Systems Corp.(a) 1,517,025
- -------------------------------------------------------------------------------------------
16,000 Read Rite Corp.(a) 372,000
- -------------------------------------------------------------------------------------------
36,000 Seagate Technology Inc.(a) 1,710,000
- -------------------------------------------------------------------------------------------
</TABLE>
FS-37
<PAGE> 255
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMPUTER PERIPHERALS (continued)
16,000 U.S. Robotics Corp.(a) $ 1,404,000
- -------------------------------------------------------------------------------------------
9,143,859
- -------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES-8.02%
20,700 Adobe Systems, Inc. 1,283,400
- -------------------------------------------------------------------------------------------
36,800 BMC Software, Inc.(a) 1,573,200
- -------------------------------------------------------------------------------------------
15,100 Broderbund Software, Inc.(a) 917,325
- -------------------------------------------------------------------------------------------
52,200 Cadence Design Systems, Inc.(a) 2,192,400
- -------------------------------------------------------------------------------------------
15,000 Ceridian Corp.(a) 618,750
- -------------------------------------------------------------------------------------------
40,800 Computer Associates International, Inc. 2,320,500
- -------------------------------------------------------------------------------------------
40,000 Computervision Corp.(a) 615,000
- -------------------------------------------------------------------------------------------
15,300 Corel Corp.(a) 198,900
- -------------------------------------------------------------------------------------------
19,500 DST Systems Inc.(a) 555,750
- -------------------------------------------------------------------------------------------
22,800 Electronic Arts, Inc.(a) 595,650
- -------------------------------------------------------------------------------------------
12,000 Fiserv, Inc.(a) 360,000
- -------------------------------------------------------------------------------------------
18,800 FTP Software, Inc.(a) 545,200
- -------------------------------------------------------------------------------------------
13,400 HBO & Co. 1,026,775
- -------------------------------------------------------------------------------------------
28,500 Informix Corp.(a) 855,000
- -------------------------------------------------------------------------------------------
10,000 Intuit, Inc.(a) 780,000
- -------------------------------------------------------------------------------------------
16,500 Mentor Graphics Corp.(a) 301,125
- -------------------------------------------------------------------------------------------
22,500 Microsoft Corp.(a) 1,974,375
- -------------------------------------------------------------------------------------------
10,400 Network General Corp.(a) 347,100
- -------------------------------------------------------------------------------------------
13,800 Pairgain Technologies, Inc.(a) 755,550
- -------------------------------------------------------------------------------------------
20,000 Parametric Technology Corp.(a) 1,330,000
- -------------------------------------------------------------------------------------------
13,500 Policy Management Systems Corp.(a) 642,937
- -------------------------------------------------------------------------------------------
10,100 Rational Software Corp.(a) 225,988
- -------------------------------------------------------------------------------------------
10,000 S3, Inc.(a) 176,250
- -------------------------------------------------------------------------------------------
38,400 SoftKey International Inc.(a) 888,000
- -------------------------------------------------------------------------------------------
17,200 Sterling Software, Inc.(a) 1,072,850
- -------------------------------------------------------------------------------------------
60,000 Symantec Corp.(a) 1,395,000
- -------------------------------------------------------------------------------------------
26,700 Synopsys, Inc.(a) 1,014,600
- -------------------------------------------------------------------------------------------
24,561,625
- -------------------------------------------------------------------------------------------
CONGLOMERATES-0.76%
20,000 Loews Corp. 1,567,500
- -------------------------------------------------------------------------------------------
21,000 Tyco International Ltd. 748,125
- -------------------------------------------------------------------------------------------
2,315,625
- -------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES-0.07%
5,200 Department 56, Inc.(a) 199,550
- -------------------------------------------------------------------------------------------
CONTAINERS-0.15%
16,700 Ball Corp. 459,250
- -------------------------------------------------------------------------------------------
COSMETICS & TOILETRIES-0.53%
6,600 Alberto-Culver Co.-Class A 201,300
- -------------------------------------------------------------------------------------------
30,400 General Nutrition, Inc.(a) 699,200
- -------------------------------------------------------------------------------------------
</TABLE>
FS-38
<PAGE> 256
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COSMETICS & TOILETRIES (continued)
6,000 Gillette Co. (The) $ 312,750
- -------------------------------------------------------------------------------------------
5,000 Procter & Gamble Co. 415,000
- -------------------------------------------------------------------------------------------
1,628,250
- -------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-1.69%
12,500 Amphenol Corp.(a) 303,125
- -------------------------------------------------------------------------------------------
37,100 Anixter International Inc.(a) 690,988
- -------------------------------------------------------------------------------------------
2,800 AVX Corp. 74,200
- -------------------------------------------------------------------------------------------
4,687 Molex, Inc. 148,812
- -------------------------------------------------------------------------------------------
4,950 Parker-Hannifin Corp. 169,537
- -------------------------------------------------------------------------------------------
10,600 Symbol Technologies, Inc.(a) 418,700
- -------------------------------------------------------------------------------------------
17,900 Tektronix, Inc. 879,337
- -------------------------------------------------------------------------------------------
100,000 Teradyne, Inc.(a) 2,500,000
- -------------------------------------------------------------------------------------------
5,184,699
- -------------------------------------------------------------------------------------------
ELECTRONIC/DEFENSE-0.23%
10,000 Sundstrand Corp. 703,750
- -------------------------------------------------------------------------------------------
ELECTRONIC/PC DISTRIBUTERS-1.19%
36,600 Arrow Electronics, Inc.(a) 1,578,375
- -------------------------------------------------------------------------------------------
46,200 Avnet, Inc. 2,067,450
- -------------------------------------------------------------------------------------------
3,645,825
- -------------------------------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.53%
40,000 Bear Stearns Companies, Inc. (The) 795,000
- -------------------------------------------------------------------------------------------
17,200 Finova Group, Inc. 829,900
- -------------------------------------------------------------------------------------------
1,624,900
- -------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-5.26%
17,000 ADVANTA Corp.-Class A 618,375
- -------------------------------------------------------------------------------------------
6,700 ADVANTA Corp.-Class B 256,275
- -------------------------------------------------------------------------------------------
40,000 Countrywide Credit Industries, Inc. 870,000
- -------------------------------------------------------------------------------------------
26,500 Credit Acceptance Corp.(a) 549,875
- -------------------------------------------------------------------------------------------
20,000 Dean Witter Discover and Co. 940,000
- -------------------------------------------------------------------------------------------
21,000 Federal Home Loan Mortgage Corp. 1,753,500
- -------------------------------------------------------------------------------------------
3,000 Federal National Mortgage Association 372,375
- -------------------------------------------------------------------------------------------
30,000 First USA, Inc. 1,331,250
- -------------------------------------------------------------------------------------------
57,400 Green Tree Acceptance, Inc. 1,513,925
- -------------------------------------------------------------------------------------------
20,300 Household International, Inc. 1,200,238
- -------------------------------------------------------------------------------------------
82,000 MBNA Corp. 3,023,750
- -------------------------------------------------------------------------------------------
25,300 Medaphis Corp.(a) 936,100
- -------------------------------------------------------------------------------------------
112,200 Mercury Finance Co. 1,486,650
- -------------------------------------------------------------------------------------------
14,000 PMI Group, Inc. (The) 633,500
- -------------------------------------------------------------------------------------------
9,500 Student Loan Marketing Association 625,812
- -------------------------------------------------------------------------------------------
16,111,625
- -------------------------------------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-0.22%
25,000 Greenpoint Financial Corp. 668,750
- -------------------------------------------------------------------------------------------
</TABLE>
FS-39
<PAGE> 257
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
FOOD PROCESSING-0.27%
9,500 ConAgra, Inc. $ 391,875
- -------------------------------------------------------------------------------------------
11,400 Lancaster Colony Corp. 424,650
- -------------------------------------------------------------------------------------------
816,525
- -------------------------------------------------------------------------------------------
FUNERAL SERVICES-0.76%
20,100 Loewen Group, Inc. 508,781
- -------------------------------------------------------------------------------------------
36,800 Service Corp. International 1,619,200
- -------------------------------------------------------------------------------------------
5,100 Stewart Enterprises, Inc. 188,700
- -------------------------------------------------------------------------------------------
2,316,681
- -------------------------------------------------------------------------------------------
GAMING-0.26%
17,000 Mirage Resorts, Inc.(a) 586,500
- -------------------------------------------------------------------------------------------
20,800 Players International, Inc.(a) 222,300
- -------------------------------------------------------------------------------------------
808,800
- -------------------------------------------------------------------------------------------
HOMEBUILDING-0.29%
36,250 Clayton Homes, Inc. 774,843
- -------------------------------------------------------------------------------------------
3,000 Oakwood Homes Corp. 115,125
- -------------------------------------------------------------------------------------------
889,968
- -------------------------------------------------------------------------------------------
HOTELS/MOTELS-0.84%
3,100 Doubletree Corp.(a) 81,375
- -------------------------------------------------------------------------------------------
14,000 Hospitality Franchise Systems, Inc.(a) 1,144,500
- -------------------------------------------------------------------------------------------
45,500 La Quinta Inns, Inc. 1,245,562
- -------------------------------------------------------------------------------------------
4,000 Promus Hotel Corp.(a) 89,000
- -------------------------------------------------------------------------------------------
2,560,437
- -------------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.11%
13,000 United Companies Financial Corp. 342,875
- -------------------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-0.84%
29,400 Ace, Ltd. 1,168,650
- -------------------------------------------------------------------------------------------
7,000 CIGNA Corp. 722,750
- -------------------------------------------------------------------------------------------
1,900 General Re Corp. 294,500
- -------------------------------------------------------------------------------------------
16,900 Prudential Reinsurance Holdings, Inc. 395,037
- -------------------------------------------------------------------------------------------
2,580,937
- -------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.47%
29,200 Carnival Cruise Lines, Inc.-Class A 711,750
- -------------------------------------------------------------------------------------------
23,150 Mattel, Inc. 711,862
- -------------------------------------------------------------------------------------------
1,423,612
- -------------------------------------------------------------------------------------------
MACHINE TOOLS-0.09%
7,700 Kennametal Inc. 244,475
- -------------------------------------------------------------------------------------------
MACHINERY (HEAVY)-0.34%
3,000 AGCO Corp. 153,000
- -------------------------------------------------------------------------------------------
25,000 Deere & Co. 881,250
- -------------------------------------------------------------------------------------------
1,034,250
- -------------------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.94%
50,000 American Standard Companies(a) 1,400,000
- -------------------------------------------------------------------------------------------
</TABLE>
FS-40
<PAGE> 258
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
MACHINERY (MISCELLANEOUS) (continued)
28,500 Thermo Electron Corp.(a) $ 1,482,000
- -------------------------------------------------------------------------------------------
2,882,000
- -------------------------------------------------------------------------------------------
MEDICAL (DRUGS)-5.38%
49,600 Abbott Laboratories 2,070,800
- -------------------------------------------------------------------------------------------
12,500 American Home Products Corp. 1,212,500
- -------------------------------------------------------------------------------------------
12,000 AmeriSource Health Corp.(a) 396,000
- -------------------------------------------------------------------------------------------
41,200 Astra AB-A Shares 1,644,351
- -------------------------------------------------------------------------------------------
40,900 Cardinal Health, Inc. 2,239,275
- -------------------------------------------------------------------------------------------
8,000 Elan Corp. PLC-ADR(a) 389,000
- -------------------------------------------------------------------------------------------
8,000 Johnson & Johnson 685,000
- -------------------------------------------------------------------------------------------
13,000 Merck & Co., Inc. 854,750
- -------------------------------------------------------------------------------------------
39,250 Mylan Laboratories, Inc. 922,375
- -------------------------------------------------------------------------------------------
11,400 Pfizer Inc. 718,200
- -------------------------------------------------------------------------------------------
40,000 Pharmacia & Upjohn, Inc. 1,550,000
- -------------------------------------------------------------------------------------------
40,400 Schering-Plough Corp. 2,211,900
- -------------------------------------------------------------------------------------------
18,500 Teva Pharmaceutical Industries Ltd.-ADR 857,937
- -------------------------------------------------------------------------------------------
15,000 Watson Pharmaceuticals, Inc.(a) 735,000
- -------------------------------------------------------------------------------------------
16,487,088
- -------------------------------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-2.59%
9,300 Baxter International Inc. 389,437
- -------------------------------------------------------------------------------------------
6,200 Becton, Dickinson & Co. 465,000
- -------------------------------------------------------------------------------------------
41,400 Biomet, Inc.(a) 740,025
- -------------------------------------------------------------------------------------------
36,700 Boston Scientific Corp.(a) 1,798,300
- -------------------------------------------------------------------------------------------
16,800 Heart Technology, Inc.(a) 552,300
- -------------------------------------------------------------------------------------------
7,600 Idexx Laboratories, Inc.(a) 357,200
- -------------------------------------------------------------------------------------------
14,600 Invacare Corp. 368,650
- -------------------------------------------------------------------------------------------
13,000 Medtronic, Inc. 726,375
- -------------------------------------------------------------------------------------------
10,200 Nellcor, Inc.(a) 591,600
- -------------------------------------------------------------------------------------------
40,450 St. Jude Medical, Inc.(a) 1,739,350
- -------------------------------------------------------------------------------------------
4,000 Stryker Corp. 210,000
- -------------------------------------------------------------------------------------------
7,938,237
- -------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-7.27%
51,000 Apria Heathcare Group, Inc.(a) 1,440,750
- -------------------------------------------------------------------------------------------
23,320 Columbia/HCA Healthcare Corp. 1,183,490
- -------------------------------------------------------------------------------------------
14,200 Community Health Systems, Inc.(a) 505,875
- -------------------------------------------------------------------------------------------
36,000 Foundation Health Corp.(a) 1,548,000
- -------------------------------------------------------------------------------------------
14,500 Genesis Health Ventures, Inc.(a) 529,250
- -------------------------------------------------------------------------------------------
30,900 Health Care & Retirement Corp.(a) 1,081,500
- -------------------------------------------------------------------------------------------
61,950 Health Management Associates, Inc.(a) 1,618,444
- -------------------------------------------------------------------------------------------
58,800 Healthsource, Inc.(a) 2,116,800
- -------------------------------------------------------------------------------------------
105,000 Healthsouth Corp.(a) 3,058,125
- -------------------------------------------------------------------------------------------
25,700 Horizon Healthcare Corp.(a) 648,925
- -------------------------------------------------------------------------------------------
</TABLE>
FS-41
<PAGE> 259
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES) (continued)
17,300 Integrated Health Services, Inc.(a) $ 432,500
- -------------------------------------------------------------------------------------------
37,000 Lincare Holdings, Inc.(a) 925,000
- -------------------------------------------------------------------------------------------
12,000 Living Centers Of America, Inc.(a) 420,000
- -------------------------------------------------------------------------------------------
20,500 Manor Care, Inc. 717,500
- -------------------------------------------------------------------------------------------
10,000 Omnicare, Inc. 447,500
- -------------------------------------------------------------------------------------------
27,500 OrNda Healthcorp(a) 639,375
- -------------------------------------------------------------------------------------------
10,300 Oxford Health Plans, Inc.(a) 760,912
- -------------------------------------------------------------------------------------------
3,700 Pacificare Health Systems, Inc.-Class A(a) 321,900
- -------------------------------------------------------------------------------------------
3,400 Pacificare Health Systems, Inc.-Class B(a) 295,800
- -------------------------------------------------------------------------------------------
11,000 Quorum Health Group, Inc.(a) 242,000
- -------------------------------------------------------------------------------------------
64,200 Sybron International Corp.(a) 1,524,750
- -------------------------------------------------------------------------------------------
6,700 Theratx, Inc.(a) 80,400
- -------------------------------------------------------------------------------------------
52,800 Vencor, Inc.(a) 1,716,000
- -------------------------------------------------------------------------------------------
22,254,796
- -------------------------------------------------------------------------------------------
OFFICE AUTOMATION-0.98%
44,000 Danka Business Systems PLC-ADR 1,628,000
- -------------------------------------------------------------------------------------------
10,000 Xerox Corp. 1,370,000
- -------------------------------------------------------------------------------------------
2,998,000
- -------------------------------------------------------------------------------------------
OFFICE PRODUCTS-0.45%
12,100 Avery Dennison Corp. 606,512
- -------------------------------------------------------------------------------------------
19,800 Reynolds & Reynolds Co.-Class A 769,725
- -------------------------------------------------------------------------------------------
1,376,237
- -------------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.06%
8,100 Smith International, Inc.(a) 190,350
- -------------------------------------------------------------------------------------------
POLLUTION CONTROL-0.06%
5,100 Asyst Technologies, Inc.(a) 179,775
- -------------------------------------------------------------------------------------------
RESTAURANTS-0.63%
16,600 Applebee's International, Inc. 377,650
- -------------------------------------------------------------------------------------------
10,700 Lone Star Steakhouse & Saloon(a) 410,612
- -------------------------------------------------------------------------------------------
23,700 Outback Steakhouse, Inc.(a) 850,238
- -------------------------------------------------------------------------------------------
14,300 Wendy's International, Inc. 303,875
- -------------------------------------------------------------------------------------------
1,942,375
- -------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUGS)-1.48%
6,000 Casey's General Stores, Inc. 131,250
- -------------------------------------------------------------------------------------------
18,900 Eckerd (Jack) Corp.(a) 843,412
- -------------------------------------------------------------------------------------------
17,000 Hannaford Bros. Co. 418,625
- -------------------------------------------------------------------------------------------
39,300 Kroger Co. (The)(a) 1,473,750
- -------------------------------------------------------------------------------------------
32,400 Safeway Inc.(a) 1,668,600
- -------------------------------------------------------------------------------------------
4,535,637
- -------------------------------------------------------------------------------------------
RETAIL (STORES)-4.75%
29,900 AutoZone, Inc.(a) 863,362
- -------------------------------------------------------------------------------------------
6,600 Baby Superstore, Inc.(a) 376,200
- -------------------------------------------------------------------------------------------
</TABLE>
FS-42
<PAGE> 260
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
RETAIL (STORES) (continued)
19,600 Bed Bath & Beyond, Inc.(a) $ 760,725
- -------------------------------------------------------------------------------------------
4,300 Boise Cascade Office Products Corp.(a) 183,825
- -------------------------------------------------------------------------------------------
16,000 Circuit City Stores, Inc. 442,000
- -------------------------------------------------------------------------------------------
49,000 Consolidated Stores Corp.(a) 1,065,750
- -------------------------------------------------------------------------------------------
28,100 Dollar General Corp. 583,075
- -------------------------------------------------------------------------------------------
17,000 Gap, Inc. (The) 714,000
- -------------------------------------------------------------------------------------------
22,300 Gymboree Corp.(a) 459,938
- -------------------------------------------------------------------------------------------
7,000 Kohl's Corp.(a) 367,500
- -------------------------------------------------------------------------------------------
9,000 Men's Wearhouse, Inc. (The)(a) 231,750
- -------------------------------------------------------------------------------------------
16,700 Micro Warehouse, Inc.(a) 722,275
- -------------------------------------------------------------------------------------------
5,200 Oakley, Inc.(a) 176,800
- -------------------------------------------------------------------------------------------
60,700 Office Depot, Inc.(a) 1,198,825
- -------------------------------------------------------------------------------------------
12,300 PetSmart, Inc.(a) 381,300
- -------------------------------------------------------------------------------------------
25,600 Sports Authority, Inc. (The)(a) 521,600
- -------------------------------------------------------------------------------------------
59,500 Staples, Inc.(a) 1,450,312
- -------------------------------------------------------------------------------------------
36,300 Sunglass Hut International, Inc.(a) 862,125
- -------------------------------------------------------------------------------------------
16,400 Talbots, Inc. 471,500
- -------------------------------------------------------------------------------------------
8,700 Tandy Corp. 361,050
- -------------------------------------------------------------------------------------------
10,500 Tech Data Corp. 157,500
- -------------------------------------------------------------------------------------------
47,000 Viking Office Products Inc.(a) 2,185,500
- -------------------------------------------------------------------------------------------
14,536,912
- -------------------------------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.77%
19,000 Millipore Corp. 781,375
- -------------------------------------------------------------------------------------------
33,000 Varian Associates, Inc. 1,575,750
- -------------------------------------------------------------------------------------------
2,357,125
- -------------------------------------------------------------------------------------------
SEMICONDUCTORS-9.63%
34,000 Altera Corp.(a) 1,691,500
- -------------------------------------------------------------------------------------------
62,100 Analog Devices, Inc.(a) 2,196,788
- -------------------------------------------------------------------------------------------
70,000 Applied Materials, Inc.(a) 2,756,250
- -------------------------------------------------------------------------------------------
8,200 ASM Lithography Holding(a) 272,650
- -------------------------------------------------------------------------------------------
85,000 Atmel Corp.(a) 1,901,875
- -------------------------------------------------------------------------------------------
64,100 Cypress Semiconductor Corp.(a) 817,275
- -------------------------------------------------------------------------------------------
12,600 Electroglas, Inc.(a) 308,700
- -------------------------------------------------------------------------------------------
67,100 Integrated Device Technology, Inc.(a) 863,913
- -------------------------------------------------------------------------------------------
23,000 Intel Corp. 1,305,250
- -------------------------------------------------------------------------------------------
39,600 International Rectifier Corp.(a) 990,000
- -------------------------------------------------------------------------------------------
41,000 KLA Instruments Corp.(a) 1,068,562
- -------------------------------------------------------------------------------------------
41,900 LAM Research Corp.(a) 1,916,925
- -------------------------------------------------------------------------------------------
20,900 Lattice Semiconductor Corp.(a) 681,862
- -------------------------------------------------------------------------------------------
44,200 Linear Technology Corp. 1,734,850
- -------------------------------------------------------------------------------------------
60,000 LSI Logic Corp.(a) 1,965,000
- -------------------------------------------------------------------------------------------
18,900 Maxim Integrated Products, Inc.(a) 727,650
- -------------------------------------------------------------------------------------------
</TABLE>
FS-43
<PAGE> 261
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SEMICONDUCTORS (continued)
20,000 MEMC Electronic Materials, Inc.(a) $ 652,500
- -------------------------------------------------------------------------------------------
19,000 Novellus Systems, Inc.(a) 1,026,000
- -------------------------------------------------------------------------------------------
10,000 SCI Systems, Inc.(a) 310,000
- -------------------------------------------------------------------------------------------
26,200 Sierra Semiconductor Corp.(a) 363,525
- -------------------------------------------------------------------------------------------
8,100 Silicon Valley Group, Inc.(a) 204,525
- -------------------------------------------------------------------------------------------
37,800 Solectron Corp.(a) 1,667,925
- -------------------------------------------------------------------------------------------
7,400 Tencor Instruments(a) 180,375
- -------------------------------------------------------------------------------------------
23,000 Texas Instruments Inc. 1,190,250
- -------------------------------------------------------------------------------------------
12,300 Ultratech Stepper, Inc.(a) 316,725
- -------------------------------------------------------------------------------------------
30,400 Vishay Intertechnology, Inc.(a) 957,600
- -------------------------------------------------------------------------------------------
25,000 VLSI Technology, Inc.(a) 453,125
- -------------------------------------------------------------------------------------------
32,000 Xilinx, Inc.(a) 976,000
- -------------------------------------------------------------------------------------------
29,497,600
- -------------------------------------------------------------------------------------------
SHOES & RELATED APPAREL-0.21%
11,000 Nine West Group, Inc.(a) 412,500
- -------------------------------------------------------------------------------------------
7,500 Wolverine World Wide, Inc. 236,250
- -------------------------------------------------------------------------------------------
648,750
- -------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-4.62%
25,000 A T & T Corp. 1,618,750
- -------------------------------------------------------------------------------------------
10,000 ADC Telecommunications, Inc.(a) 365,000
- -------------------------------------------------------------------------------------------
16,000 Allen Group, Inc. 358,000
- -------------------------------------------------------------------------------------------
19,600 Andrew Corp.(a) 749,700
- -------------------------------------------------------------------------------------------
13,700 Aspect Telecommunications Corp.(a) 458,950
- -------------------------------------------------------------------------------------------
22,000 Glenayre Technologies, Inc.(a) 1,369,500
- -------------------------------------------------------------------------------------------
8,000 Nokia Corp.-ADR 311,000
- -------------------------------------------------------------------------------------------
20,400 Northern Telecom Ltd. 877,200
- -------------------------------------------------------------------------------------------
10,300 Octel Communications Corp.(a) 332,175
- -------------------------------------------------------------------------------------------
18,000 Premisys Communications, Inc.(a) 1,008,000
- -------------------------------------------------------------------------------------------
16,000 Scientific-Atlanta, Inc. 240,000
- -------------------------------------------------------------------------------------------
20,000 Sprint Corp. 797,500
- -------------------------------------------------------------------------------------------
12,100 StrataCom, Inc.(a) 889,350
- -------------------------------------------------------------------------------------------
130,840 Telefonaktiebolaget L.M. Ericsson-ADR 2,551,380
- -------------------------------------------------------------------------------------------
37,000 Tellabs, Inc.(a) 1,369,000
- -------------------------------------------------------------------------------------------
2,350 TransPro, Inc. 24,968
- -------------------------------------------------------------------------------------------
8,400 U.S. Long Distance Corp.(a) 117,600
- -------------------------------------------------------------------------------------------
20,000 WorldCom, Inc.(a) 705,000
- -------------------------------------------------------------------------------------------
14,143,073
- -------------------------------------------------------------------------------------------
TELEPHONE-0.02%
2,300 Century Telephone Enterprises, Inc. 73,025
- -------------------------------------------------------------------------------------------
TOBACCO-1.12%
38,000 Philip Morris Companies, Inc. 3,439,000
- -------------------------------------------------------------------------------------------
</TABLE>
FS-44
<PAGE> 262
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
TRUCKING-0.06%
8,600 TNT Freightways Corp. $ 173,075
- -------------------------------------------------------------------------------------------
Total Common Stocks 247,471,964
- -------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK-0.12%
FINANCE (CONSUMER CREDIT)-0.12%
6,000 SunAmerica Inc.-Series E, $3.10 Conv. Pfd. 393,000
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES-15.80%
U.S. Treasury Bills-15.46%(b)
$19,500,000(c) 5.38%, 04/04/96 19,252,935
- -------------------------------------------------------------------------------------------
8,700,000 5.32%, 04/11/96 8,582,811
- -------------------------------------------------------------------------------------------
20,000,000(c) 5.22%, 06/27/96 19,518,800
- -------------------------------------------------------------------------------------------
47,354,546
- -------------------------------------------------------------------------------------------
U.S. Treasury Notes-0.34%
1,030,000 4.625%, 02/29/96 1,029,454
- -------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 48,384,000
- -------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT-4.05%(d)
12,394,572 Daiwa Securities America Inc.
5.92%, 01/02/96(e) 12,394,572
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-100.78% 308,643,536
- -------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(0.78%) (2,393,472)
- -------------------------------------------------------------------------------------------
NET ASSETS-100.00% $306,250,064
- -------------------------------------------------------------------------------------------
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102 percent of the sales price of
the repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the investment advisor.
(e) Joint repurchase agreement entered into on 12/29/95 with a maturing value of
$646,679,181. Collateralized by $537,995,000 U.S. Treasury obligations,
7.875% to 11.25% due 11/15/07 to 02/15/15.
Abbreviations:
ADR-American Depositary Receipts
Conv.-Convertible
Pfd.-Preferred
See Notes to Financial Statements.
FS-45
<PAGE> 263
Financials
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $261,339,114) $308,643,536
- -----------------------------------------------------------------------------------------
Foreign currencies, at market value (cost $102,582) 102,632
- -----------------------------------------------------------------------------------------
Receivables for:
Investments sold 756,045
- -----------------------------------------------------------------------------------------
Fund shares sold 1,565,892
- -----------------------------------------------------------------------------------------
Dividends and interest 199,305
- -----------------------------------------------------------------------------------------
Variation margin 55,300
- -----------------------------------------------------------------------------------------
Investment for deferred compensation plan 64,800
- -----------------------------------------------------------------------------------------
Other assets 19,202
- -----------------------------------------------------------------------------------------
Total assets 311,406,712
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 955,719
- -----------------------------------------------------------------------------------------
Fund shares reacquired 3,558,798
- -----------------------------------------------------------------------------------------
Deferred compensation plan 64,800
- -----------------------------------------------------------------------------------------
Accrued advisory fees 183,093
- -----------------------------------------------------------------------------------------
Accrued administrative service fees 5,437
- -----------------------------------------------------------------------------------------
Accrued distribution fees 239,251
- -----------------------------------------------------------------------------------------
Accrued trustees' fees 2,041
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 65,793
- -----------------------------------------------------------------------------------------
Accrued operating expenses 81,716
- -----------------------------------------------------------------------------------------
Total liabilities 5,156,648
- -----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $306,250,064
=========================================================================================
NET ASSETS:
Class A $168,216,501
=========================================================================================
Class B $138,033,563
=========================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 12,890,025
=========================================================================================
Class B 10,805,746
=========================================================================================
Class A:
Net asset value and redemption price per share $ 13.05
=========================================================================================
Offering price per share:
(Net asset value of $13.05 divided by 94.50%) $ 13.81
=========================================================================================
Class B:
Net asset value and offering price per share $ 12.77
=========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-46
<PAGE> 264
Financials
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,763 foreign withholding tax) $ 1,135,898
- ----------------------------------------------------------------------------------------
Interest 2,307,909
- ----------------------------------------------------------------------------------------
Total investment income 3,443,807
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,715,406
- ----------------------------------------------------------------------------------------
Custodian fees 77,724
- ----------------------------------------------------------------------------------------
Transfer agent fees-Class A 225,613
- ----------------------------------------------------------------------------------------
Transfer agent fees-Class B 225,786
- ----------------------------------------------------------------------------------------
Administrative service fees 67,618
- ----------------------------------------------------------------------------------------
Trustees' fees 6,928
- ----------------------------------------------------------------------------------------
Distribution fees-Class A 374,107
- ----------------------------------------------------------------------------------------
Distribution fees-Class B 828,223
- ----------------------------------------------------------------------------------------
Other 167,548
- ----------------------------------------------------------------------------------------
Total expenses 3,688,953
- ----------------------------------------------------------------------------------------
Net investment income (loss) (245,146)
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTIONS CONTRACTS:
Net realized gain (loss) from:
Investment securities 16,472,814
- ----------------------------------------------------------------------------------------
Foreign currencies (1,357)
- ----------------------------------------------------------------------------------------
Futures contracts 6,650,615
- ----------------------------------------------------------------------------------------
Options contracts 51,299
- ----------------------------------------------------------------------------------------
23,173,371
- ----------------------------------------------------------------------------------------
Unrealized appreciation of:
Investment securities 36,431,825
- ----------------------------------------------------------------------------------------
Futures contracts 309,690
- ----------------------------------------------------------------------------------------
Foreign currencies 50
- ----------------------------------------------------------------------------------------
36,741,565
- ----------------------------------------------------------------------------------------
Net gain from investment securities, foreign currencies, futures and
options contracts 59,914,936
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $59,669,790
========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-47
<PAGE> 265
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (245,146) $ (212,386)
- ---------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and options contracts 23,173,371 2,769,880
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, foreign currencies and futures contracts 36,741,565 (10,397,965)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 59,669,790 (7,840,471)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net investment
income -- Class A -- (1,847)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities, foreign currencies, futures and
options contracts:
Class A (9,550,061) (4,927,563)
- ---------------------------------------------------------------------------------------------
Class B (7,736,264) (1,473,126)
- ---------------------------------------------------------------------------------------------
Share transactions-net:
Class A 13,074,357 (12,166,631)
- ---------------------------------------------------------------------------------------------
Class B 89,072,917 30,353,095
- ---------------------------------------------------------------------------------------------
Net increase in net assets 144,530,739 3,943,457
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 161,719,325 157,775,868
- ---------------------------------------------------------------------------------------------
End of period $306,250,064 $161,719,325
=============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $254,963,289 $152,816,015
- ---------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (58,438) (54,924)
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, futures and options
contracts 3,607,551 (2,037,863)
- ---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and futures contracts 47,737,662 10,996,097
- ---------------------------------------------------------------------------------------------
$306,250,064 $161,719,325
=============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-48
<PAGE> 266
Financials
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Growth Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. 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 the Fund. The Fund's objective is to achieve long-term growth
of capital by investing primarily in the common stocks of established medium- to
large-size companies with prospects for above-average, long-term earnings
growth. Realization of current income is an incidental consideration.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. 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.
A. Security Valuations - A security listed or traded on an exchange is valued at
its last sales price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at
the mean between the closing bid and asked prices on that day. Each security
traded in the over-the-counter market (but not including securities reported
on the NASDAQ National Market System) is valued at the mean between the last
bid and asked prices based upon quotes furnished by market makers for such
securities. If a mean is not available, as is the case in some foreign
markets, the closing bid will be used absent a last sales price. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid and asked prices. Debt obligations that are issued or guaranteed
by the U.S. Treasury are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by any of the above
methods are valued at the mean between last bid and asked prices based upon
quotes furnished by independent sources. 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
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. Generally, trading
in foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On December 31, 1995,
undistributed net investment income (loss) was increased and undistributed
net realized gains reduced by $241,632 in order to comply with the
requirements of the American Institute of Certified Public Accountants of
Position 93-2. Net assets of the Fund were unaffected by the reclassification
discussed above.
FS-49
<PAGE> 267
Financials
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued)
C. 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.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
E. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to market"
on a daily basis to reflect the market value of the contracts at the end of
each day's trading. Variation margin payments are made or received depending
upon whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and the change in the value of the contracts may not correlate with changes
in the value of the securities being hedged.
F. Covered Call Options - The Fund may write call options, but only on a covered
basis; that is, the Fund will own the underlying security. Options written by
the Fund normally will have expiration dates between three and nine months
from the date written. The exercise price of a call option may be below,
equal to, or above the current market value of the underlying security at the
time the option is written. When the Fund writes a covered call option, an
amount equal to the premium received by the Fund is recorded as an asset and
an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option written.
The current market value of a written option is the last sale price, or in
the absence of a sale, the mean between the last bid and asked prices on that
day. If a written call option expires on the stipulated expiration date, or
if the Fund enters into a closing purchase transaction, the Fund realizes a
gain (or a loss if the closing purchase transaction exceeds the premium
received when the option was written) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such option
is extinguished. If a written option is exercised, the Fund realizes a gain
or a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written. The Fund will
not write a covered call option if, immediately thereafter, the aggregate
value of the securities underlying all such options, determined as of the
dates such options were written, would exceed 5% of the net assets of the
Fund.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 an annual rate of 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $150 million. This agreement
requires AIM to reduce its fees or, if necessary, make payments to the Fund to
the extent required to satisfy any expense limitations imposed by the securities
laws or regulations thereunder of any state in which the Fund's shares are
qualified for sale.
FS-50
<PAGE> 268
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1995, AIM
was reimbursed $67,618 for such services.
The Fund, pursuant to a transfer agency and shareholder service agreement, has
agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer
agency and shareholder services to the Fund. During the year ended December 31,
1995, AFS was paid $260,147 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides for payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
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. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more assignees, its rights to all or a portion of
(a) compensation received by AIM Distributors from the Fund pursuant to the
Class B Plan (but not AIM Distributors' duties and obligations pursuant to Class
B Plan) and (b) any contingent deferred sales charges payable to AIM
Distributors related to Class B shares. During the year ended December 31, 1995,
the Class A shares and the Class B shares paid AIM Distributors $374,107 and
$828,223, respectively, as compensation under the Plans.
AIM Distributors received commissions of $146,533 from sales of the Class A
shares of the Fund during the year ended December 31, 1995. 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 December 31, 1995,
AIM Distributors received $169,092 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1995, the Fund paid legal fees of $3,215
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3 - TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund has a $3,400,000 committed line of credit with a financial institution
syndicate with Chemical Bank of New York as the administrative agent. Interest
on borrowings under the line of credit is payable on maturity or prepayment
date. During the period July 20, 1995 (effective date of line of credit
agreement) through December 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's committed
line.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1995 was
$232,913,422 and $167,303,618, respectively.
FS-51
<PAGE> 269
Financials
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $54,056,194
- ----------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (7,076,101)
- ----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $46,980,093
========================================================================================
Cost of investments for tax purposes is $261,663,443.
</TABLE>
NOTE 6 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------------ ----------------------------
SHARES VALUE SHARES VALUE
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 11,797,896 $ 152,090,445 4,669,279 $ 49,954,762
- -----------------------------------------------------------------------------------------------------
Class B 7,675,619 97,224,008 3,113,829 33,848,039
- -----------------------------------------------------------------------------------------------------
Issued as reinvestment of
dividends:
Class A 714,727 9,127,169 467,584 4,717,930
- -----------------------------------------------------------------------------------------------------
Class B 577,277 7,221,770 135,261 1,349,902
- -----------------------------------------------------------------------------------------------------
Reacquired:
Class A (11,562,734) (148,143,257) (6,154,491) (66,839,323)
- -----------------------------------------------------------------------------------------------------
Class B (1,213,971) (15,372,861) (459,392) (4,844,846)
- -----------------------------------------------------------------------------------------------------
7,988,814 $ 102,147,274 1,772,070 $ 18,186,464
=====================================================================================================
</TABLE>
NOTE 7 - OPEN FUTURES CONTRACTS
On December 31, 1995, $1,757,000 principal amount of U.S. Treasury bills were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
NO. OF UNREALIZED
CONTRACT CONTRACTS/MONTH/COMMITMENT APPRECIATION
<S> <C> <C>
S&P 500 Index 158 contracts/Mar. 96/Buy $433,190
=============================================================================================
</TABLE>
NOTE 8 - OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of period 551 $127,014
- -----------------------------------------------------------------------------------------
Written 101 19,750
- -----------------------------------------------------------------------------------------
Closed (297) (76,789)
- -----------------------------------------------------------------------------------------
Exercised (81) (12,894)
- -----------------------------------------------------------------------------------------
Expired (274) (57,081)
- -----------------------------------------------------------------------------------------
End of period 0 $ 0
=========================================================================================
</TABLE>
FS-52
<PAGE> 270
Financials
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during each of the years in the ten-year period ended December 31,
1995 and for a Class B share outstanding during each of the years in the
two-year period ended December 31, 1995 and the period September 1, 1993 (date
sales commenced) through December 31, 1993.
<TABLE>
<CAPTION>
1995 1994 1993 1992(a) 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 10.32 $ 11.32 $ 12.28 $ 14.73 $ 12.35 $ 13.92 $ 11.93
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.02 -- -- 0.06 0.11 0.21 0.25
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 3.50 (0.57) 0.41 (0.04) 4.33 (0.91) 3.16
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
Total from investment operations 3.52 (0.57) 0.41 0.02 4.44 (0.70) 3.41
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income -- -- -- (0.06) (0.13) (0.20) (0.27)
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
Distributions from capital gains (0.79) (0.43) (1.37) (2.41) (1.93) (0.67) (1.15)
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
Total distributions (0.79) (0.43) (1.37) (2.47) (2.06) (0.87) (1.42)
- ------------------------------------------ -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 13.05 $ 10.32 $ 11.32 $ 12.28 $ 14.73 $ 12.35 $ 13.92
========================================== ======== ======== ======== ======== ======== ======== ========
Total return(b) 34.31% (4.99)% 3.64% 0.19% 37.05% (5.04)% 28.87%
========================================== ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $168,217 $123,271 $146,723 $168,395 $185,461 $153,245 $187,805
========================================== ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.28%(c) 1.22% 1.17% 1.17% 1.21% 1.16% 1.00%
========================================== ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average
net assets 0.20%(c) 0.02% 0.02% 0.42% 0.73% 1.41% 1.62%
========================================== ======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 87% 201% 192% 133% 73% 61% 53%
========================================== ======== ======== ======== ======== ======== ======== ========
<CAPTION>
1988 1987 1986
-------- -------- --------
<S> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 11.04 $ 12.91 $ 14.95
- ------------------------------------------ -------- -------- --------
Income from investment operations:
Net investment income 0.23 0.24 0.26
- ------------------------------------------ -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 0.89 0.30 1.57
- ------------------------------------------ -------- -------- --------
Total from investment operations 1.12 0.54 1.83
- ------------------------------------------ -------- -------- --------
Less distributions:
Dividends from net investment income (0.23) (0.31) (0.35)
- ------------------------------------------ -------- -------- --------
Distributions from capital gains -- (2.10) (3.52)
- ------------------------------------------ -------- -------- --------
Total distributions (0.23) (2.41) (3.87)
- ------------------------------------------ -------- -------- --------
Net asset value, end of period $ 11.93 $ 11.04 $ 12.91
========================================== ======== ======== ========
Total return(b) 10.13% 3.62% 12.85%
========================================== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $180,793 $203,329 $213,346
========================================== ======== ======== ========
Ratio of expenses to average net assets 0.98% 0.84% 0.85%
========================================== ======== ======== ========
Ratio of net investment income to average
net assets 1.73% 1.51% 1.82%
========================================== ======== ======== ========
Portfolio turnover rate 38% 78% 66%
========================================== ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Total returns do not deduct sales charges.
(c) Ratios are based on average net assets of $149,642,693.
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 10.21 $ 11.31 $ 12.83
- ------------------------------------------------------------------------------------------- ------- ------- -------
Income from investment operations:
Net investment income (loss) (0.08)(a) (0.06) (0.01)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Net gains (losses) on securities (both realized and unrealized) 3.43(a) (0.61) (0.14)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Total from investment operations 3.35 (0.67) (0.15)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Less distributions:
Distributions from capital gains (0.79) (0.43) (1.37)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Total distributions (0.79) (0.43) (1.37)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Net asset value, end of period $ 12.77 $ 10.21 $ 11.31
=========================================================================================== ======= ======= =======
Total return(b) 33.00% (5.88)% (0.92)%
=========================================================================================== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $138,034 $38,448 $11,053
=========================================================================================== ======= ======= =======
Ratio of expenses to average net assets 2.13%(c) 2.18% 1.91%(d)
=========================================================================================== ======= ======= =======
Ratio of net investment income (loss) to average net assets (0.65)%(c) (0.94)% (0.72)%(d)
=========================================================================================== ======= ======= =======
Portfolio turnover rate 87% 201% 192%
=========================================================================================== ======= ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns do not reflect deduction of contingent deferred sales charges
and are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $82,822,307.
(d) Annualized.
FS-53
<PAGE> 271
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM High Yield Fund:
We have audited the accompanying statement of assets and liabilities of AIM High
Yield Fund (a portfolio of AIM Funds Group), including the schedule of
investments, as of December 31, 1995, and 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 three-year period then ended. These financial statements and
the financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the 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
December 31, 1995, 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 Yield Fund as of December 31, 1995, the results of its 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 three-year period then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1996
FS-54
<PAGE> 272
Financials
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
NON-CONVERTIBLE BONDS & NOTES-94.09%
ADVERTISING/BROADCASTING-5.35%
$ 9,500,000 Ackerley Communication Inc., Sr. Secured Series B Notes,
10.75%, 10/01/03 $10,188,750
- -------------------------------------------------------------------------------------------
30,500,000 Australis Media Ltd., Sr. Sub. Disc. Notes,
14.00%, 05/15/03(a)(b) 22,036,250
- -------------------------------------------------------------------------------------------
9,000,000 Granite Broadcasting Corp., Sr. Sub. Notes,
10.375%, 05/15/05 9,225,000
- -------------------------------------------------------------------------------------------
6,750,000 Katz Corp., Sr. Sub. Notes,
12.75%, 11/15/02 7,222,500
- -------------------------------------------------------------------------------------------
7,000,000 Lamar Advertising Co., Sr. Secured Notes,
11.00%, 05/15/03 7,280,000
- -------------------------------------------------------------------------------------------
9,500,000 Rogers Cable Systems, Sr. Secured Second Priority Notes,
10.00%, 03/15/05 10,212,500
- -------------------------------------------------------------------------------------------
Sinclair Broadcasting Group, Sr. Sub. Notes,
2,525,000 10.00%, 12/15/03 2,575,500
- -------------------------------------------------------------------------------------------
8,300,000 10.00%, 09/30/05 8,466,000
- -------------------------------------------------------------------------------------------
77,206,500
- -------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE-1.14%
15,879,000 K & F Industries Inc., Sr. Sub. Deb.,
13.75%, 08/01/01 16,474,462
- -------------------------------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-2.41%
9,000,000 Aftermarket Technology Corp., Sr. Sub. Notes,
12.00%, 08/01/04 9,540,000
- -------------------------------------------------------------------------------------------
15,000,000 Ameritruck Distribution Corp., Sr. Sub. Notes,
12.25%, 11/15/05(c) (Acquired 11/10/95; Cost $14,789,250) 14,887,500
- -------------------------------------------------------------------------------------------
8,400,000 Harvard Industries Inc., Sr. Notes,
11.125%, 08/01/05 8,400,000
- -------------------------------------------------------------------------------------------
1,950,000 JPS Automotive Products, Sr. Notes,
11.125%, 06/15/01 1,940,250
- -------------------------------------------------------------------------------------------
34,767,750
- -------------------------------------------------------------------------------------------
BUSINESS SERVICES-0.83%
13,000,000 Neodata Services Inc., Sr. Deferred Coupon Notes,
12.00%, 05/01/03(b) 11,960,000
- -------------------------------------------------------------------------------------------
CABLE TELEVISION-7.46%
8,800,000 American Media Operations, Sr. Sub. Notes,
11.625%, 11/15/04 8,888,000
- -------------------------------------------------------------------------------------------
10,900,000 Century Communications, Sr. Sub. Deb.,
11.875%, 10/15/03 11,744,750
- -------------------------------------------------------------------------------------------
Comcast Corp., Sr. Sub. Deb.,
2,200,000 10.25%, 10/15/01 2,381,500
- -------------------------------------------------------------------------------------------
6,500,000 10.625%, 07/15/12 7,280,000
- -------------------------------------------------------------------------------------------
30,100,000 Comcast UK Cable, Sr. Deb.,
11.20%, 11/15/07(b) 17,608,500
- -------------------------------------------------------------------------------------------
9,000,000 Continental Cablevision, Inc., Sr. Sub. Deb.,
11.00%, 06/01/07 10,057,500
- -------------------------------------------------------------------------------------------
</TABLE>
FS-55
<PAGE> 273
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
Cable Television-(continued)
$22,000,000 Diamond Cable Community Co., Sr. Disc. Notes,
11.75%, 12/15/05(b) $13,035,000
- -------------------------------------------------------------------------------------------
4,400,000 Fundy Cable Ltd., Sr. Secured Second Priority Notes,
11.00%, 11/15/05 4,598,000
- -------------------------------------------------------------------------------------------
10,500,000 Groupe Videotron Ltee, Sr. Notes,
10.625%, 02/15/05 11,261,250
- -------------------------------------------------------------------------------------------
8,525,000 Marcus Cable Co., Sr. Deb.,
11.875%, 10/01/05 9,164,375
- -------------------------------------------------------------------------------------------
1,000,000 Videotron Holdings PLC, Sr. Disc. Notes,
11.125%, 07/01/04(b) 697,500
- -------------------------------------------------------------------------------------------
2,300,000 Videotron Ltee, Sr. Sub. Notes,
10.25%, 10/15/02 2,412,125
- -------------------------------------------------------------------------------------------
8,160,000 Wireless One Inc., Sr. Notes,
13.00%, 10/15/03(d) 8,608,800
- -------------------------------------------------------------------------------------------
107,737,300
- -------------------------------------------------------------------------------------------
CHEMICALS-6.51%
9,600,000 Applied Extrusion Technologies, Inc., Sr. Series B Notes,
11.50%, 04/01/02 10,320,000
- -------------------------------------------------------------------------------------------
10,600,000 Arcadian Partners, L.P., Sr. Series B Notes,
10.75%, 05/01/05 11,713,000
- -------------------------------------------------------------------------------------------
9,000,000 Berry Plastics Corp., Sr. Sub. Notes,
12.25%, 04/15/04 9,652,500
- -------------------------------------------------------------------------------------------
11,000,000 Crain Industries, Inc., Sr. Sub. Notes,
13.50%, 08/15/05(c) (Acquired 08/22/95-09/21/95; Cost
$11,211,050) 11,165,000
- -------------------------------------------------------------------------------------------
2,500,000 Foamex L.P., Sr. Notes,
11.25% 10/01/02 2,500,000
- -------------------------------------------------------------------------------------------
7,180,000 Foamex L.P., Sr. Sub. Deb.,
11.875%, 10/01/04 7,036,400
- -------------------------------------------------------------------------------------------
10,235,000 Indspec Chemical, Sr. Sub. Disc. Notes,
11.50%, 12/01/03(b) 8,188,000
- -------------------------------------------------------------------------------------------
8,000,000 Laroche Industries, Inc., Sr. Sub. Notes,
13.00%, 08/15/04 8,500,000
- -------------------------------------------------------------------------------------------
13,250,000 Polymer Group, Inc., Sr. Notes,
12.75%, 07/15/02(c) (Acquired 06/17/94-07/10/95; Cost
$13,413,750) 13,713,750
- -------------------------------------------------------------------------------------------
11,370,000 RBX Corp., Sr. Sub. Notes,
11.25%, 10/15/05(c) (Acquired 10/06/95-11/07/95; Cost
$11,434,500) 11,171,025
- -------------------------------------------------------------------------------------------
93,959,675
- -------------------------------------------------------------------------------------------
CONGLOMERATES-0.37%
5,000,000 Tjiwi Kimia International Global Co., Sr. Gtd. Notes,
13.25%, 08/01/01 5,362,500
- -------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES-0.94%
12,930,000 Hines Horticulture, Sr. Sub. Notes,
11.75%, 10/15/05(c)(Acquired 10/16/95-12/06/95; Cost
$13,096,975) 13,511,850
- -------------------------------------------------------------------------------------------
CONTAINERS-3.83%
16,000,000 Ivex Holdings Corp.-Series B, Sr. Disc. Deb.,
13.25%, 03/15/05(b) 8,960,000
- -------------------------------------------------------------------------------------------
</TABLE>
FS-56
<PAGE> 274
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
CONTAINERS-(continued)
$ 6,500,000 Ivex Packaging Corp., Sr. Sub. Notes,
12.50%, 12/15/02 $ 6,890,000
- -------------------------------------------------------------------------------------------
10,000,000 MVE Inc., Sr. Notes,
12.50%, 02/15/02 9,875,000
- -------------------------------------------------------------------------------------------
1,750,000 MVE Inc., Sr. Secured Notes,
12.50%, 02/15/02(e) 1,754,375
- -------------------------------------------------------------------------------------------
15,200,000 Owens-Illinois, Inc., Sr. Deb.,
11.00% 12/01/03 17,176,000
- -------------------------------------------------------------------------------------------
11,250,000 Silgan Holdings Inc., Sr. Disc. Deb.,
13.25%, 12/15/02(b) 10,631,250
- -------------------------------------------------------------------------------------------
55,286,625
- -------------------------------------------------------------------------------------------
ENERGY (ALTERNATE SOURCES)-1.18%
15,500,000 Petroleum Heat & Power, Sub. Deb.,
12.25%, 02/01/05 17,088,750
- -------------------------------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-1.45%
13,000,000 GPA Delaware Inc., Gtd. Deb.,
8.75%, 12/15/98 12,220,000
- -------------------------------------------------------------------------------------------
9,200,000 Loehmann's Holdings, Sr. Sub. Notes,
13.75%, 02/15/99 8,648,000
- -------------------------------------------------------------------------------------------
20,868,000
- -------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.02%
13,500,000 Olympic Financial Ltd., Sr. Notes,
13.00%, 05/01/00 14,748,750
- -------------------------------------------------------------------------------------------
FINANCE (LEASING COMPANIES)-0.56%
Sea Containers Ltd., Sr. Sub. Deb.,
5,350,000 Series A, 12.50%, 12/01/04 5,778,000
- -------------------------------------------------------------------------------------------
2,250,000 Series B, 12.50%, 12/01/04 2,351,250
- -------------------------------------------------------------------------------------------
8,129,250
- -------------------------------------------------------------------------------------------
FOOD/PROCESSING-1.93%
11,263,000 American Rice Inc., Secured Mortgage Notes,
13.00%, 07/31/02 10,643,535
- -------------------------------------------------------------------------------------------
9,800,000 Curtice-Burns Foods Inc., Sr. Sub. Notes,
12.25%, 02/01/05 10,094,000
- -------------------------------------------------------------------------------------------
8,000,000 Pilgrim's Pride Corp., Sr. Sub. Notes,
10.875%, 08/01/03 7,080,000
- -------------------------------------------------------------------------------------------
27,817,535
- -------------------------------------------------------------------------------------------
GAMING-3.16%
Aztar Corp., Sr. Sub. Notes,
6,510,000 11.00%, 10/01/02 6,510,000
- -------------------------------------------------------------------------------------------
9,460,000 13.75%, 10/01/04 10,500,600
- -------------------------------------------------------------------------------------------
11,000,000 Bally's Grand Inc., First Mortgage Notes,
10.375%, 12/15/03 11,220,000
- -------------------------------------------------------------------------------------------
15,000,000 Grand Casinos Inc., First Mortgage Notes,
10.125%, 12/01/03 15,731,250
- -------------------------------------------------------------------------------------------
1,500,000 Showboat Inc., Sr. Sub. Notes,
13.00%, 08/01/09 1,687,500
- -------------------------------------------------------------------------------------------
45,649,350
- -------------------------------------------------------------------------------------------
</TABLE>
FS-57
<PAGE> 275
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
INSURANCE (LIFE & HEALTH)-0.65%
$ 8,970,000 American Life Holding Co., Sr. Sub. Notes,
11.25%, 09/15/04 $ 9,418,500
- -------------------------------------------------------------------------------------------
LEISURE & RECREATION-2.38%
10,000,000 GNF Corp., First Mortgage Notes,
10.625%, 04/01/03 9,325,000
- -------------------------------------------------------------------------------------------
15,500,000 IHF Holdings, Inc., Sr. Sub. Disc. Notes,
15.00%, 11/15/04(b) 9,803,750
- -------------------------------------------------------------------------------------------
7,250,000 Icon Health & Fitness, Sr. Sub. Notes,
13.00%, 07/15/02 7,848,125
- -------------------------------------------------------------------------------------------
6,490,000 Stratosphere Corp., First Mortgage Notes,
14.25%, 05/15/02 7,341,812
- -------------------------------------------------------------------------------------------
34,318,687
- -------------------------------------------------------------------------------------------
MACHINERY-2.98%
11,075,000 AM General Corp., Sr. Notes,
12.875%, 05/01/02 11,102,687
- -------------------------------------------------------------------------------------------
10,500,000 Calmar Spraying Systems, Sr. Sub. Notes,
11.50%, 08/15/05(c) (Acquired 08/03/95-09/11/95; Cost
$10,603,750) 10,631,250
- -------------------------------------------------------------------------------------------
8,300,000 Interlake Corp., Sr. Notes,
12.00%, 11/15/01 8,383,000
- -------------------------------------------------------------------------------------------
4,105,000 Interlake Corp., Sr. Sub. Deb.,
12.125%, 03/01/02 3,899,750
- -------------------------------------------------------------------------------------------
8,000,000 Waters Corp., Sr. Sub. Notes,
12.75%, 09/30/04 9,000,000
- -------------------------------------------------------------------------------------------
43,016,687
- -------------------------------------------------------------------------------------------
MACHINERY (HEAVY)-1.89%
13,725,000 Fairfield Manufacturing, Sr. Sub. Notes,
11.375%, 07/01/01 13,381,875
- -------------------------------------------------------------------------------------------
13,490,000 Primeco Inc., Sr. Sub Notes,
12.75%, 03/01/05 13,894,700
- -------------------------------------------------------------------------------------------
27,276,575
- -------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-0.58%
8,000,000 Graphic Controls Corp., Sr. Sub. Notes,
12.00%, 09/15/05(c) (Acquired 09/21/95; Cost $8,000,000) 8,320,000
- -------------------------------------------------------------------------------------------
MEDICAL SERVICES-1.76%
OrNda Healthcorp, Sr. Sub. Notes,
4,000,000 12.25%, 05/15/02 4,400,000
- -------------------------------------------------------------------------------------------
3,300,000 11.375%, 08/15/04 3,712,500
- -------------------------------------------------------------------------------------------
15,600,000 Tenet Healthcare Corp., Sr. Sub. Notes,
10.125%, 03/01/05 17,355,000
- -------------------------------------------------------------------------------------------
25,467,500
- -------------------------------------------------------------------------------------------
METALS-0.95%
8,525,000 GS Industries Inc., Sr. Notes,
12.25%, 10/01/05 8,509,058
- -------------------------------------------------------------------------------------------
5,250,000 GS Technologies Operation Co., Gtd. Sr. Notes,
12.00%, 09/01/04 5,210,625
- -------------------------------------------------------------------------------------------
13,719,683
- -------------------------------------------------------------------------------------------
</TABLE>
FS-58
<PAGE> 276
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
OIL & GAS (SERVICES)-3.49%
$11,650,000 HS Resources, Sr. Sub. Notes,
9.875%, 12/01/03 $11,504,375
- -------------------------------------------------------------------------------------------
12,200,000 Maxus Energy Corp., Deb.,
11.50%, 11/15/15 12,688,000
- -------------------------------------------------------------------------------------------
5,000,000 Petroleum Heat & Power Co., Sub. Deb.,
9.375%, 02/01/06 4,800,000
- -------------------------------------------------------------------------------------------
8,900,000 Plains Resources, Sr. Gtd. Sub. Notes,
12.00%, 10/01/99 9,233,750
- -------------------------------------------------------------------------------------------
1,130,000 United Meridian Corp., Sr. Sub. Notes,
10.375%, 10/15/05 1,194,975
- -------------------------------------------------------------------------------------------
11,415,000 Wainoco Oil Corp. Sr. Notes,
12.00%, 08/01/02 11,015,475
- -------------------------------------------------------------------------------------------
50,436,575
- -------------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.73%
5,055,000 Energy Ventures, Inc., Sr. Notes,
10.25%, 03/15/04 5,345,662
- -------------------------------------------------------------------------------------------
5,100,000 Falcon Drilling Co. Inc., Sr. Notes,
9.75%, 01/15/01 5,240,250
- -------------------------------------------------------------------------------------------
10,585,912
- -------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS-5.73%
4,500,000 APP International Finance, Secured Notes,
11.75%, 10/01/05 4,410,000
- -------------------------------------------------------------------------------------------
10,410,000 Pacific Lumber, Sr. Notes,
10.50%, 03/01/03 9,863,475
- -------------------------------------------------------------------------------------------
13,920,000 RAPP International Finance, Secured Notes,
11.50%, 12/15/00 13,867,800
- -------------------------------------------------------------------------------------------
13,350,000 Repap New Brunswick, Second Priority Sr. Secured Notes,
10.625%, 04/15/05 13,083,000
- -------------------------------------------------------------------------------------------
8,000,000 S.D. Warren Co., Sr. Sub. Notes,
12.00%, 12/15/04 8,820,000
- -------------------------------------------------------------------------------------------
12,000,000 Stone Container Corp., First Mortgage Notes,
10.75%, 10/02/02 12,390,000
- -------------------------------------------------------------------------------------------
12,000,000 United Stationer Supply, Sr. Sub. Notes,
12.75%, 05/01/05 13,110,000
- -------------------------------------------------------------------------------------------
6,800,000 Williamhouse-Regency, Sr. Sub. Notes,
13.00%, 11/15/05(c) (Acquired 11/20/95; Cost $6,800,000) 7,174,000
- -------------------------------------------------------------------------------------------
82,718,275
- -------------------------------------------------------------------------------------------
POLLUTION CONTROL-1.23%
9,500,000 Allied Waste Industries, Inc., Sr. Sub. Notes,
12.00%, 02/01/04 10,117,500
- -------------------------------------------------------------------------------------------
8,000,000 Mid-American Waste Systems, Inc., Sr. Sub. Notes,
12.25%, 02/15/03 7,600,000
- -------------------------------------------------------------------------------------------
17,717,500
- -------------------------------------------------------------------------------------------
PUBLISHING-1.84%
13,826,000 Affiliated Newspaper Investments Inc., Sr. Disc. Notes,
13.25%, 07/01/06(b) 8,502,990
- -------------------------------------------------------------------------------------------
8,500,000 Garden State Newspapers, Sr. Sub. Secured Notes,
12.00%, 07/01/04 8,542,500
- -------------------------------------------------------------------------------------------
</TABLE>
FS-59
<PAGE> 277
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
PUBLISHING-(continued)
$ 2,500,000 K-III Communications Corp., Sr. Notes,
10.25%, 06/01/04 $ 2,675,000
- -------------------------------------------------------------------------------------------
6,430,000 K-III Communications Corp., Sr. Secured Notes,
10.625%, 05/01/02 6,831,875
- -------------------------------------------------------------------------------------------
26,552,365
- -------------------------------------------------------------------------------------------
RAILROADS-1.24%
9,870,000 Johnstown American Industries, Inc., Sr. Sub Notes,
11.75%, 08/15/05 8,981,700
- -------------------------------------------------------------------------------------------
13,000,000 Transtar Holdings L.P., Sr. Disc. Notes,
13.375%, 12/15/03(b) 8,872,500
- -------------------------------------------------------------------------------------------
17,854,200
- -------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUGS)-5.88%
12,400,000 Carr-Gottstein Foods Co., Sr. Sub. Notes,
12.00%, 11/15/05(c) (Acquired 11/09/95; Cost $12,400,000) 12,524,000
- -------------------------------------------------------------------------------------------
11,000,000 Dominick's Finer Food, Sr. Sub. Notes,
10.875%, 05/01/05 11,687,500
- -------------------------------------------------------------------------------------------
20,520,000 Grand Union Co., Sr. Notes,
12.00%, 09/01/04 17,749,800
- -------------------------------------------------------------------------------------------
10,825,000 Penn Traffic Co., Sr. Notes,
10.65%, 11/01/04 10,337,875
- -------------------------------------------------------------------------------------------
10,500,000 Ralph's Grocery Co., Sr. Gtd. Notes,
10.45%, 06/15/04 10,657,500
- -------------------------------------------------------------------------------------------
6,400,000 Ralph's Grocery Co., Sr. Gtd. Sub. Notes,
11.00%, 06/15/05 6,336,000
- -------------------------------------------------------------------------------------------
10,000,000 Thrifty Payless Inc., Sr. Notes,
11.75%, 04/15/03 10,800,000
- -------------------------------------------------------------------------------------------
4,500,000 Thrifty Payless Inc., Sr. Sub. Notes,
12.25%, 04/15/04 4,792,500
- -------------------------------------------------------------------------------------------
84,885,175
- -------------------------------------------------------------------------------------------
RETAIL (STORES)-3.25%
11,000,000 Apparel Retailers Inc., Sr. Disc. Deb.,
12.75%, 08/15/05(b) 6,710,000
- -------------------------------------------------------------------------------------------
3,500,000 County Seat Stores, Sr. Sub. Notes,
12.00%, 10/01/02 2,625,000
- -------------------------------------------------------------------------------------------
9,500,000 Fleming Co. Inc., Sr. Gtd. Notes,
10.625%, 12/15/01 9,215,000
- -------------------------------------------------------------------------------------------
11,000,000 Pamida Inc., Sr. Sub. Notes,
11.75%, 03/15/03 8,470,000
- -------------------------------------------------------------------------------------------
13,590,000 Samsonite Corp. Sr. Sub. Notes,
11.125%, 07/15/05 13,046,400
- -------------------------------------------------------------------------------------------
7,520,000 Specialty Retailers Inc., Sr. Sub. Notes,
11.00%, 08/15/03 6,843,200
- -------------------------------------------------------------------------------------------
46,909,600
- -------------------------------------------------------------------------------------------
SCHOOLS-0.46%
6,260,000 Herff Jones Inc., Sr. Sub. Notes,
11.00%, 08/15/05 6,713,850
- -------------------------------------------------------------------------------------------
</TABLE>
FS-60
<PAGE> 278
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
SECURITY (SAFETY SERVICES)-0.55%
$ 7,500,000 Cabot Safety Corp., Sr. Sub. Notes,
12.50%, 07/15/05(c) (Acquired 06/29/95-07/07/95; Cost
$7,567,500) $ 8,006,250
- -------------------------------------------------------------------------------------------
STEEL-1.30%
8,275,000 Earle M. Jorgensen Co., Sr. Notes,
10.75%, 03/01/00 7,592,312
- -------------------------------------------------------------------------------------------
12,500,000 Gulf States Steel, First Mortgage Notes,
13.50%, 04/15/03 11,250,000
- -------------------------------------------------------------------------------------------
18,842,312
- -------------------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES-11.66%
9,740,000 A+ Network Inc., Sr. Sub. Notes,
11.875%, 11/01/05 9,861,750
- -------------------------------------------------------------------------------------------
10,480,000 CAI Wireless Systems Inc., Sr. Notes,
12.25%, 09/15/02 11,187,400
- -------------------------------------------------------------------------------------------
8,000,000 Celcaribe S.A., Sr. Secured Notes,
13.50%, 03/15/04(b)(c)(f) (Acquired 05/17/94-05/26/94; Cost
$7,050,297) 7,200,000
- -------------------------------------------------------------------------------------------
6,500,000 Cellular Inc., Sr. Sub. Disc. Notes,
11.75%, 09/01/03(b) 5,167,500
- -------------------------------------------------------------------------------------------
10,000,000 Centennial Cellular, Sr. Notes,
10.125%, 05/15/05 10,525,000
- -------------------------------------------------------------------------------------------
28,770,000 Clearnet Communications, Sr. Disc. Notes,
14.75%, 12/15/05(b)(g) 14,960,400
- -------------------------------------------------------------------------------------------
9,750,000 Dictaphone Corp., Sr. Gtd. Sub. Notes,
11.75%, 08/01/05 9,652,500
- -------------------------------------------------------------------------------------------
9,000,000 Fonorola Inc., Yankee Sr. Notes,
12.50%, 08/15/02 9,472,500
- -------------------------------------------------------------------------------------------
12,000,000 Intelcom Group (USA) Inc., Sr. Disc. Notes,
13.50%, 9/15/05(b)(c)(h) (Acquired 08/07/95-09/06/95; Cost
$6,675,674) 6,960,000
- -------------------------------------------------------------------------------------------
1,500,000 Intermedia Communication of Florida, Sr. Notes,
13.50%, 06/01/05(c)(i) (Acquired 10/25/95; Cost $1,631,250) 1,680,000
- -------------------------------------------------------------------------------------------
8,720,000 MobileMedia Communications, Inc., Sr. Sub. Notes,
10.50%, 12/01/03(b) 6,801,600
- -------------------------------------------------------------------------------------------
6,000,000 Paging Network, Sr. Sub. Notes,
10.125%, 08/01/07 6,495,000
- -------------------------------------------------------------------------------------------
14,200,000 PriCellular Wireless Corp., Sr. Disc. Notes,
14.00%, 11/15/01(b) 12,513,750
- -------------------------------------------------------------------------------------------
8,500,000 Pronet Inc., Sr. Sub. Notes,
11.875%, 06/15/05 9,392,500
- -------------------------------------------------------------------------------------------
11,555,000 Rogers Cantel Mobile Inc., Sr. Gtd. Secured Notes,
10.75%, 11/01/01 12,161,637
- -------------------------------------------------------------------------------------------
22,720,000 Telewest PLC, Sr. Deb.,
11.00%, 10/01/07(b) 13,717,200
- -------------------------------------------------------------------------------------------
8,500,000 Telex Communication Inc., Sr. Notes,
12.00%, 07/15/04 8,776,250
- -------------------------------------------------------------------------------------------
12,000,000 USA Mobile Communications, Sr. Notes,
9.50%, 02/01/04 11,880,000
- -------------------------------------------------------------------------------------------
168,404,987
- -------------------------------------------------------------------------------------------
TEXTILES-3.77%
16,500,500 Coinmach Corp., Sr. Notes,
11.75%, 11/15/05(c) (Acquired 06/20/92-11/15/95; Cost
$16,269,875) 16,830,510
- -------------------------------------------------------------------------------------------
</TABLE>
FS-61
<PAGE> 279
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
Textiles-(continued)
$13,000,000 Consoltex Group, Sr. Sub. Notes,
11.00%, 10/01/03 $11,732,500
- -------------------------------------------------------------------------------------------
10,465,000 Dan River Inc., Sr. Sub. Notes,
10.125%, 12/15/03 9,523,150
- -------------------------------------------------------------------------------------------
8,400,000 Synthetic Industries Inc., Deb.,
12.75%, 12/01/02 8,232,000
- -------------------------------------------------------------------------------------------
8,000,000 Tultex Corp., Sr. Gtd. Notes,
10.625%, 03/15/05 8,200,000
- -------------------------------------------------------------------------------------------
54,518,160
- -------------------------------------------------------------------------------------------
TRANSPORTATION-2.93%
7,000,000 Dade International Inc.-Series B, Sr. Sub. Notes,
13.00%, 02/01/05 7,945,000
- -------------------------------------------------------------------------------------------
3,000,000 Gear Bulk Holding Ltd., Sr. Notes,
11.25%, 12/01/04 3,210,000
- -------------------------------------------------------------------------------------------
18,380,000 Stena AB, Sr. Notes,
10.50%, 12/15/05 18,816,525
- -------------------------------------------------------------------------------------------
6,000,000 Trans Ocean Container, Sr. Sub. Notes,
12.25%, 07/01/04 6,240,000
- -------------------------------------------------------------------------------------------
7,000,000 US Air Inc., Sr. Notes,
10.00%, 07/01/03 6,090,000
- -------------------------------------------------------------------------------------------
42,301,525
- -------------------------------------------------------------------------------------------
WATER SUPPLY-0.70%
10,000,000 CE Casecnan Water & Energy, Series A Sr. Notes,
11.45%, 11/15/05(c) (Acquired 11/21/95; Cost $10,000,000) 10,112,500
- -------------------------------------------------------------------------------------------
Total Non-Convertible Bonds & Notes 1,358,665,115
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS-0.26%
AUTOMOBILE/TRUCK PARTS & TIRES-0.15%
72,600 Lear Seating Corp.(j) 2,105,400
- -------------------------------------------------------------------------------------------
CHEMICALS-0.00%
6,000 Berry Plastics Holdings 70,500
- -------------------------------------------------------------------------------------------
MEDICAL SERVICES-0.05%
24,000 Total Renal Care Holdings, Inc.(j) 708,000
- -------------------------------------------------------------------------------------------
PUBLISHING-0.03%
13,826 Affiliated Newspaper Investments Inc.(j) 414,780
- -------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUGS)-0.03%
123,500 Thrifty Payless Holdings-Class C(j) 524,878
- -------------------------------------------------------------------------------------------
Total Common Stocks 3,823,558
- -------------------------------------------------------------------------------------------
WARRANTS-0.06%
BUILDING MATERIALS-0.00%
3,000 Payless Cashways, Inc., expiring 11/01/96(j) 300
- -------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.06%
8,000 IHF Capital Inc.-Series H, expiring 11/14/99(j) 640,000
- -------------------------------------------------------------------------------------------
7,250 IHF Capital Inc.-Series I, expiring 11/14/99(j) 181,250
- -------------------------------------------------------------------------------------------
821,250
- -------------------------------------------------------------------------------------------
</TABLE>
FS-62
<PAGE> 280
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
RETAIL (STORES)-0.00%
3,500 County Seat Stores, expiring 10/15/98(j) $ 17,500
- ---------------------------------------------------------------------------------------------
STEEL-0.00%
9,000 Gulf States Steel Acquisition Corp., expiring 04/15/03(j) 45,000
- ---------------------------------------------------------------------------------------------
Total Warrants 884,050
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT-3.38%
$48,773,338 Daiwa Securities America Inc.,
5.92%, 01/02/96(l) 48,773,338
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 97.79% 1,412,146,061
- ---------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES -- 2.21% 31,886,511
- ---------------------------------------------------------------------------------------------
NET ASSETS -- 100.00% $1,444,032,572
=============================================================================================
</TABLE>
Notes to Schedule of Investments:
<TABLE>
<S> <C>
(a) Issued as a unit. This unit also includes 30,500 warrants to purchase 57.721
shares of common stock each at $0.01 per share.
(b) Discounted bond at purchase. Interest rate shown represents coupon rate at which
the bond will accrue at a specified future date.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of 1933, as
amended. The valuation of these securities has been determined in accordance with
procedures established by the Board of Trustees. The aggregate market value of
the securities at December 31, 1995 was $153,887,635, which represented 10.66% of
net assets.
(d) Issued as a unit. This unit also includes 24,480 warrants to purchase one share
of common stock each at $11.55 per share.
(e) Issued as a unit. This unit also includes 1,750 warrants to purchase 0.24 shares
of common stock each.
(f) Issued as a unit. This unit also includes 1,300,800 Celcaribe Ordinary Trust
Certificates.
(g) Issued as a unit. This unit also includes 949,410 warrants to purchase shares of
common stock.
(h) Issued as a unit. This unit also includes 396,000 warrants to purchase one share
of common stock each.
(i) Issued as a unit. This unit also includes 1,500 warrants to purchase 2.19 shares
of common stock each at $10.86 per share.
(j) Non-income producing security.
(k) Collateral on repurchase agreements, including the Fund's pro-rata interest in
joint repurchase agreements, is taken into possession by the Fund upon entering
into the repurchase agreement. The collateral is marked to market daily to ensure
its market value as being 102 percent of the sales price of the repurchase
agreement. The investments in some repurchase agreements are through
participation in joint accounts with other mutual funds managed by the investment
advisor.
(l) Joint repurchase agreement entered into 12/29/95 with a maturing value of
$646,679,181. Collateralized by $537,995,000 U.S. Treasury obligations, 7.875% to
11.25% due 11/15/07 to 02/15/15.
</TABLE>
Abbreviations:
Deb. -- Debentures
Disc. -- Discounted
Gtd. -- Guaranteed
Sr. -- Senior
Sub. -- Subordinated
See Notes to Financial Statements.
FS-63
<PAGE> 281
Financials
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $1,375,281,357) $1,412,146,061
- -----------------------------------------------------------------------------------------
Receivables for:
Fund shares sold 11,769,794
- -----------------------------------------------------------------------------------------
Interest 33,388,296
- -----------------------------------------------------------------------------------------
Investment for deferred compensation plan 36,255
- -----------------------------------------------------------------------------------------
Other assets 37,629
- -----------------------------------------------------------------------------------------
Total assets 1,457,378,035
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 4,290,444
- -----------------------------------------------------------------------------------------
Fund shares reacquired 2,002,088
- -----------------------------------------------------------------------------------------
Dividends 5,129,464
- -----------------------------------------------------------------------------------------
Deferred compensation plan 36,255
- -----------------------------------------------------------------------------------------
Accrued advisory fees 613,975
- -----------------------------------------------------------------------------------------
Accrued administrative service fees 6,756
- -----------------------------------------------------------------------------------------
Accrued distribution fees 1,033,189
- -----------------------------------------------------------------------------------------
Accrued trustees' fees 3,305
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 74,468
- -----------------------------------------------------------------------------------------
Accrued operating expenses 155,519
- -----------------------------------------------------------------------------------------
Total liabilities 13,345,463
- -----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $1,444,032,572
=========================================================================================
NET ASSETS:
Class A $ 886,105,932
=========================================================================================
Class B $ 557,926,640
=========================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 94,012,039
=========================================================================================
Class B 59,233,836
=========================================================================================
Class A:
Net asset value and redemption price per share $ 9.43
=========================================================================================
Offering price per share:
(Net asset value of $9.43 divided by 95.25%) $ 9.90
=========================================================================================
Class B:
Net asset value and offering price per share $ 9.42
=========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-64
<PAGE> 282
Financials
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $116,832,514
- --------------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 5,717,303
- --------------------------------------------------------------------------------------------
Custodian fees 81,271
- --------------------------------------------------------------------------------------------
Transfer agent fees -- Class A 747,381
- --------------------------------------------------------------------------------------------
Transfer agent fees -- Class B 422,056
- --------------------------------------------------------------------------------------------
Administrative service fees 82,116
- --------------------------------------------------------------------------------------------
Trustees' fees 13,069
- --------------------------------------------------------------------------------------------
Distribution fees -- Class A 1,805,363
- --------------------------------------------------------------------------------------------
Distribution fees -- Class B 3,483,665
- --------------------------------------------------------------------------------------------
Other 613,879
- --------------------------------------------------------------------------------------------
Total expenses 12,966,103
- --------------------------------------------------------------------------------------------
Net investment income 103,866,411
- --------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES:
Net realized gain (loss) on sales of investment securities (13,744,221)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 64,363,354
- --------------------------------------------------------------------------------------------
Net gain on investment securities 50,619,133
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $154,485,544
============================================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 103,866,411 $ 69,124,221
- --------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities (13,744,221) (26,898,895)
- --------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities 64,363,354 (57,089,748)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 154,485,544 (14,864,422)
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (72,863,770) (58,337,288)
- --------------------------------------------------------------------------------------------
Class B (31,951,946) (10,971,364)
- --------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A (436,906) (91,900)
- --------------------------------------------------------------------------------------------
Class B (191,590) (16,331)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 271,933,588 97,407,253
- --------------------------------------------------------------------------------------------
Class B 352,760,393 175,148,092
- --------------------------------------------------------------------------------------------
Net increase in net assets 673,735,313 188,274,040
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 770,297,259 582,023,219
- --------------------------------------------------------------------------------------------
End of period $1,444,032,572 $770,297,259
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,505,053,545 $888,574,587
- --------------------------------------------------------------------------------------------
Undistributed net investment income 1,688,456 949,305
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (99,574,133) (91,727,983)
- --------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities 36,864,704 (27,498,650)
- --------------------------------------------------------------------------------------------
$1,444,032,572 $770,297,259
============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-65
<PAGE> 283
Financials
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM High Yield Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. 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 the Fund. The Fund's objective is to achieve a high level of
current income by investing primarily in publicly traded non-investment grade
debt securities. The Fund will also consider the possibility of capital growth
when it purchases and sells securities. Debt securities of less than investment
grade are considered "high risk" securities (commonly referred to as junk
bonds). These bonds may involve special risks in addition to the risks
associated with investment in higher rated debt securities. High yield bonds may
be more susceptible to real or perceived adverse economic and competitive
industry conditions than higher grade bonds. Also, the secondary market in which
high yield bonds are traded may be less liquid than the market for higher grade
bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. 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.
A. Security Valuations - Non-convertible bonds and notes are valued on the basis
of prices provided by an independent pricing service. 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, developments related to special securities,
yield, quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Investment securities for which prices
are not provided by the pricing service and which are listed or traded on an
exchange are valued at the last sales price on the exchange where principally
traded or, lacking any sales on a particular day, at the mean between the
closing bid and asked prices on that day unless the Board of Trustees, or
persons designated by the Board of Trustees, determines that the
over-the-counter quotations more closely reflect the current market value of
the security. Securities traded in the over-the-counter market, except (i)
securities priced by the pricing service, (ii) securities for which
representative exchange prices are available, and (iii) securities reported
in the NASDAQ National Market System, are valued at the mean between
representative last bid and asked prices obtained from an electronic
quotation reporting system, if such prices are available, or from established
market makers. Each security reported in the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the mean between the closing bid and asked prices. 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 Trust's officers in a manner specifically authorized by
the Board of Trustees. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. It is the policy of the Fund to declare daily dividends
from net investment income. Such dividends are paid monthly. Distributions
from net realized capital gains, if any, are recorded on ex-dividend date and
are paid annually subject to restrictions noted in section "C" below. On
December 31, 1995, $2,316,952 was reclassified from undistributed net
realized gain (loss) to undistributed net investment income as a result of
permanent book/tax differences. In addition, paid-in capital was reduced by
$8,215,023 with an equivalent offset to undistributed gain (loss) on sales of
investment
FS-66
<PAGE> 284
Financials
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued)
securities due to the expiration of a portion of the capital loss
carryforward. Net assets of the Fund were unaffected by the reclassifications
discussed above.
C. 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 of $99,250,199 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2003.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 an annual rate of 0.625% of
the first $200 million of the Fund's average daily net assets, plus 0.55% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.50% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.45% of the Fund's average daily net
assets in excess of $1 billion. The sub-advisory agreement between AIM and CIGNA
Investments, Inc. ("CII") was terminated on September 20, 1995. Prior to the
termination, AIM paid CII 0.15% of the first $300 million of the Fund's average
daily net assets, plus 0.10% of the Fund's average daily net assets in excess of
$300 million. The advisory agreement requires AIM to reduce its fees or, if
necessary, make payments to the Fund to the extent required to satisfy any
expense limitations imposed by the securities laws or regulations thereunder of
any state in which the Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1995, AIM
was reimbursed $82,116 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 agency and
shareholder services to the Fund. During the year ended December 31, 1995, the
Fund paid AFS $724,482 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
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. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more assignees, its rights to all or a designated
portion of (a) compensation received by AIM Distributors from the Fund pursuant
to the Class B Plan (but not AIM Distributors' duties and obligations pursuant
to the Class B Plan) and (b) any contingent deferred sales charges payable to
AIM Distributors related to the Class B shares. During the year ended December
31, 1995, the Class A shares and the Class B shares paid AIM Distributors
$1,805,363 and $3,483,665, respectively, as compensation under the Plans.
FS-67
<PAGE> 285
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
AIM Distributors received commissions of $1,388,106 from sales of the Class A
shares of the Fund during the year ended December 31, 1995. 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 December 31, 1995,
AIM Distributors received $655,591 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1995, the Fund paid legal fees of $5,572
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3 - TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund has a $17,000,000 committed line of credit with a financial institution
syndicate with Chemical Bank of New York as the administrative agent. Interest
on borrowings under the line of credit is payable on maturity or prepayment
date. During the period July 20, 1995 (effective date of line of credit
agreement) through December 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's committed
line.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1995 was
$1,217,770,180 and $609,700,905, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $51,302,353
- -----------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (14,499,524)
- -----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $36,802,829
=================================================================================================================
Cost of investments for tax purposes is $1,375,343,232.
</TABLE>
NOTE 6 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------- ------------------------------
SHARES VALUE SHARES VALUE
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 49,241,443 $458,547,804 25,855,410 $ 248,478,420
- --------------------------------------------------- ----------------------------- ------------------------------
Class B 42,866,225 400,172,189 23,795,476 226,709,226
- --------------------------------------------------- ----------------------------- ------------------------------
Issued as reinvestment of dividends:
Class A 4,955,465 46,216,100 3,794,971 35,880,387
- --------------------------------------------------- ----------------------------- ------------------------------
Class B 1,597,343 14,918,822 470,871 4,424,592
- --------------------------------------------------- ----------------------------- ------------------------------
Reacquired:
Class A (25,047,265) (232,830,316) (19,578,260) (186,951,554)
- --------------------------------------------------- ----------------------------- ------------------------------
Class B (6,678,316) (62,330,618) (5,930,666) (55,985,726)
- --------------------------------------------------- ----------------------------- ------------------------------
66,934,895 $624,693,981 28,407,802 $ 272,555,345
=================================================== ============================= ==============================
</TABLE>
FS-68
<PAGE> 286
Financials
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during each of the years in the ten-year period ended December 31,
1995 and for a Class B share outstanding during each of the years in the
two-year period ended December 31, 1995 and the period September 1, 1993 (date
sales commenced) through December 31, 1993.
<TABLE>
<CAPTION>
1995 1994 1993 1992(A) 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07 $ 8.94
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.93 0.96 0.97 1.04 1.02 1.09
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 0.52 (1.12) 0.69 0.55 1.81 (1.84)
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Total from investment operations 1.45 (0.16) 1.66 1.59 2.83 (0.75)
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.95) (0.96) (1.01) (1.05) (1.04) (1.12)
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07
=========================================== ======== ======== ======== ======== ======== ========
Total return(b) 16.86% (1.67)% 18.40% 18.60% 42.18% (9.03)%
=========================================== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $886,106 $578,959 $550,760 $324,518 $259,677 $204,932
=========================================== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.96%(c) 1.00% 1.12% 1.15% 1.22% 1.21%(d)
=========================================== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average
net assets 9.95%(c) 10.07% 9.82% 11.00% 12.67% 13.59%(e)
=========================================== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 61% 53% 53% 56% 61% 27%
=========================================== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1989 1988 1987 1986
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 10.01 $ 9.67 $ 10.54 $ 10.21
- ------------------------------------------- -------- -------- -------- --------
Income from investment operations:
Net investment income 1.21 1.18 1.16 1.26
- ------------------------------------------- -------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) (1.07) 0.34 (0.83) 0.31
- ------------------------------------------- -------- -------- -------- --------
Total from investment operations 0.14 1.52 0.33 1.57
- ------------------------------------------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (1.21) (1.18) (1.20) (1.24)
- ------------------------------------------- -------- -------- -------- --------
Net asset value, end of period $ 8.94 $ 10.01 $ 9.67 $ 10.54
=========================================== ======== ======== ======== ========
Total return(b) 1.18% 16.41% 3.07% 15.97%
=========================================== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $261,920 $274,631 $242,858 $246,865
=========================================== ======== ======== ======== ========
Ratio of expenses to average net assets 0.99% 0.96%(d) 0.92% 0.92%
=========================================== ======== ======== ======== ========
Ratio of net investment income to average
net assets 12.40% 11.84%(e) 11.21% 11.84%
=========================================== ======== ======== ======== ========
Portfolio turnover rate 36% 76% 81% 86%
=========================================== ======== ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Total returns do not deduct sales charges.
(c) Ratios are based on average net assets of $722,145,319.
(d) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22% and 1.00% for years 1990 and 1988, respectively.
(e) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 13.58% and 11.80% for years 1990 and 1988, respectively.
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 8.92 $ 10.04 $ 9.96
- ----------------------------------------------------------------------------------- -------- -------- -------
Income from investment operations:
Net investment income 0.85 0.87 0.32
- ----------------------------------------------------------------------------------- -------- -------- -------
Net gains (losses) on securities (both realized and unrealized) 0.52 (1.10) 0.07
- ----------------------------------------------------------------------------------- -------- -------- -------
Total from investment operations 1.37 (0.23) 0.39
- ----------------------------------------------------------------------------------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.87) (0.89) (0.31)
- ----------------------------------------------------------------------------------- -------- -------- -------
Net asset value, end of period $ 9.42 $ 8.92 $ 10.04
=================================================================================== ======== ======== =======
Total return(a) 15.91% (2.48)% 4.00%(b)
=================================================================================== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $557,926 $191,338 $31,264
=================================================================================== ======== ======== =======
Ratio of expenses to average net assets 1.73%(c) 1.80% 1.93%(d)
=================================================================================== ======== ======== =======
Ratio of net investment income to average net assets 9.18%(c) 9.27% 8.99%(d)
=================================================================================== ======== ======== =======
Portfolio turnover rate 61% 53% 53%
=================================================================================== ======== ======== =======
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Total return is not annualized.
(c) Ratios are based on average net assets of $348,366,442.
(d) Annualized.
FS-69
<PAGE> 287
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Income Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Income Fund (a portfolio of AIM Funds Group), including the schedule of
investments, as of December 31, 1995, and 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 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 generally accepted auditing
standards. 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
December 31, 1995, by correspondence with the custodian. 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
Income Fund as of December 31, 1995, 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
three-year period then ended, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1996
FS-70
<PAGE> 288
Financials
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT(a) MARKET VALUE
<S> <C> <C> <C>
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS
& NOTES-62.30%
ADVERTISING/BROADCASTING-0.36%
Comcast Corp.,
Sr. Sub. Deb., 9.50% 01/15/08 $ 1,000,000 $ 1,060,000
- ------------------------------------------------------------------------------------------------
AIRLINES-2.77%
Delta Air Lines,
Deb., 10.375% 02/01/11 1,500,000 1,876,215
- ------------------------------------------------------------------------------------------------
Equipment Trust Certificates, 10.50% 04/30/16 5,000,000 6,303,250
- ------------------------------------------------------------------------------------------------
8,179,465
- ------------------------------------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-2.79%
General Motors Corp.,
Deb., 8.80% 03/01/21 6,700,000 8,257,951
- ------------------------------------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.21%
Harvard Industries Inc.,
Sr. Notes, 11.125% 08/01/05 610,000 610,000
- ------------------------------------------------------------------------------------------------
CABLE TELEVISION-3.77%
CAI Wireless Systems Inc.,
Sr. Notes, 12.25% 09/15/02 990,000 1,056,825
- ------------------------------------------------------------------------------------------------
Comcast UK Cable,
Sr. Unsecured Disc. Deb., 11.20%(b) 11/15/07 5,000,000 2,925,000
- ------------------------------------------------------------------------------------------------
Marcus Cable Operating Co.,
Sr. Disc. Notes, 13.50%(b) 08/01/04 1,690,000 1,271,725
- ------------------------------------------------------------------------------------------------
Viacom, Inc.,
Sr. Notes, 7.75% 06/01/05 3,650,000 3,876,191
- ------------------------------------------------------------------------------------------------
Videotron, Ltd.,
Yankee Sr. Sub. Notes, 10.625% 02/15/05 1,000,000 1,072,500
- ------------------------------------------------------------------------------------------------
Wireless One Inc.,
Units, 13.00%(c) 10/15/03 890,000 938,950
- ------------------------------------------------------------------------------------------------
11,141,191
- ------------------------------------------------------------------------------------------------
CHEMICALS-0.70%
Crain Industries,
Sr. Sub. Notes, 13.50%
(acquired 08/22/95; cost $1,070,000)(d) 08/15/05 1,070,000 1,086,050
- ------------------------------------------------------------------------------------------------
RBX Corp.,
Sr. Sub. Notes, 11.25%
(acquired 10/06/95-11/07/95; cost
$1,006,638)(d) 10/15/05 1,000,000 982,500
- ------------------------------------------------------------------------------------------------
2,068,550
- ------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES-0.30%
Hines Horticulture,
Sr. Sub. Notes, 11.75%
(acquired 10/16/95-10/20/95; cost $858,550)(d) 10/15/05 850,000 888,250
- ------------------------------------------------------------------------------------------------
CONTAINERS-1.25%
Ivex Packaging,
Sr. Sub. Notes, 12.50% 12/15/02 1,500,000 1,590,000
- ------------------------------------------------------------------------------------------------
Owens-Illinois Inc.,
Sr. Sub. Notes, 10.00% 08/01/02 2,000,000 2,100,000
- ------------------------------------------------------------------------------------------------
3,690,000
- ------------------------------------------------------------------------------------------------
</TABLE>
FS-71
<PAGE> 289
Financials
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT(a) MARKET VALUE
<S> <C> <C> <C>
FINANCE (CONSUMER CREDIT)-6.53%
Associates Corp.,
Deb., 7.95% 02/15/10 $ 6,000,000 $ 6,828,420
- ------------------------------------------------------------------------------------------------
GMAC,
Notes, 9.00% 10/15/02 3,425,000 3,961,115
- ------------------------------------------------------------------------------------------------
GPA Delaware Inc.,
Deb., 8.75% 12/15/98 1,240,000 1,165,600
- ------------------------------------------------------------------------------------------------
ITT Corp.,
Deb., 7.375% 11/15/15 3,350,000 3,460,972
- ------------------------------------------------------------------------------------------------
Loehmann's Holdings,
Sr. Sub. Deb., 13.75% 02/15/99 1,235,000 1,160,900
- ------------------------------------------------------------------------------------------------
Olympic Financial Ltd.,
Deb., 13.00% 05/01/00 700,000 764,750
- ------------------------------------------------------------------------------------------------
Sea Containers,
Sr. Sub. Deb., 12.50% 12/01/04 1,825,000 1,971,000
- ------------------------------------------------------------------------------------------------
19,312,757
- ------------------------------------------------------------------------------------------------
FOOD PROCESSING-1.34%
American Rice Inc.,
Sec. Notes, 13.00% 07/31/02 1,830,000 1,729,350
- ------------------------------------------------------------------------------------------------
Curtice-Burns Foods, Inc.,
Sr. Sub. Notes, 12.25% 02/01/05 1,300,000 1,339,000
- ------------------------------------------------------------------------------------------------
Pilgrim's Pride Corp.,
Sr. Sub. Notes, 10.875% 08/01/03 1,000,000 885,000
- ------------------------------------------------------------------------------------------------
3,953,350
- ------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT-3.16%
Province of Manitoba,
Yankee Bonds 7.75% 07/17/16 7,500,000 8,328,525
- ------------------------------------------------------------------------------------------------
United Mexican States,
Deb., 11.1875%
(acquired 07/12/95; cost $1,000,000)(d) 07/21/97 1,000,000 1,024,380
- ------------------------------------------------------------------------------------------------
9,352,905
- ------------------------------------------------------------------------------------------------
GAMING-1.59%
Aztar Corp.,
Sr. Sub. Notes, 11.00% 10/01/02 690,000 690,000
- ------------------------------------------------------------------------------------------------
Showboat, Inc.,
First Mortgage Notes, 9.25% 05/01/08 4,000,000 4,020,000
- ------------------------------------------------------------------------------------------------
4,710,000
- ------------------------------------------------------------------------------------------------
HOTELS/MOTELS-1.29%
John Q. Hammons Hotels Inc.,
Gtd. First Mortgage Notes, 9.75%
(acquired 10/06/95-11/16/95; cost
$3,808,125)(d) 10/01/05 3,800,000 3,828,500
- ------------------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.43%
American Life Holding Co.,
Sr. Sub. Notes, 11.25% 09/15/04 1,300,000 1,365,000
- ------------------------------------------------------------------------------------------------
Americo Life Inc.,
Sr. Sub. Notes, 9.25% 06/01/05 3,000,000 2,857,500
- ------------------------------------------------------------------------------------------------
4,222,500
- ------------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.70%
Icon Health & Fitness Inc.,
Sr. Sub. Notes, 13.00% 07/15/02 1,200,000 1,299,000
- ------------------------------------------------------------------------------------------------
</TABLE>
FS-72
<PAGE> 290
Financials
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT(a) MARKET VALUE
<S> <C> <C> <C>
LEISURE & RECREATION (continued)
Stratosphere Corp.,
First Mortgage Notes, 14.25% 05/15/02 $ 670,000 $ 757,938
- ------------------------------------------------------------------------------------------------
2,056,938
- ------------------------------------------------------------------------------------------------
MACHINERY (HEAVY)-2.81%
Caterpillar Inc.,
Deb., 9.375% 08/15/11 5,000,000 6,368,750
- ------------------------------------------------------------------------------------------------
Fairfield Manufacturing,
Sr. Sub. Notes, 11.375% 07/01/01 1,000,000 975,000
- ------------------------------------------------------------------------------------------------
Primeco Inc.,
Sr. Sub. Notes, 12.75% 03/01/05 940,000 968,200
- ------------------------------------------------------------------------------------------------
8,311,950
- ------------------------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-1.19%
AM General Corp.,
Sr. Notes, 12.875% 05/01/02 1,500,000 1,503,750
- ------------------------------------------------------------------------------------------------
Interlake Corp.,
Sr. Notes, 12.00% 11/15/01 1,000,000 1,010,000
- ------------------------------------------------------------------------------------------------
MVE Inc.,
Sr. Sec. Notes, 12.50% 02/15/02 1,000,000 1,002,500
- ------------------------------------------------------------------------------------------------
3,516,250
- ------------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-0.21%
Graphic Controls Corp.,
Sr. Sub. Notes, 12.00% (acquired 09/21/95;
cost $600,000)(d) 09/15/05 600,000 624,000
- ------------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.38%
OrNda Healthcorp,
Sr. Sub. Notes, 11.375% 08/15/04 1,000,000 1,125,000
- ------------------------------------------------------------------------------------------------
METALS (MISCELLANEOUS)-0.86%
Rio Algom Ltd.,
Yankee Deb., 7.05% 11/01/05 2,500,000 2,544,250
- ------------------------------------------------------------------------------------------------
NATURAL GAS PIPELINE-3.11%
Talisman Energy Inc.,
Yankee Deb., 7.125% 06/01/07 3,750,000 3,935,100
- ------------------------------------------------------------------------------------------------
Transco Energy Co.,
Deb., 9.875%, 06/15/20 4,000,000 5,254,760
- ------------------------------------------------------------------------------------------------
9,189,860
- ------------------------------------------------------------------------------------------------
OIL & GAS-2.82%
HS Resources Inc.,
Sr. Sub. Notes, 9.875% 12/01/03 1,190,000 1,175,125
- ------------------------------------------------------------------------------------------------
Petroleum Heat & Power Co. Inc.,
Sub. Deb., 12.25% 02/01/05 1,370,000 1,510,425
- ------------------------------------------------------------------------------------------------
Sun Company,
Deb., 9.00% 11/01/24 4,000,000 4,870,360
- ------------------------------------------------------------------------------------------------
United Meridian Corp.,
Gtd. Sr. Sub. Notes, 10.375% 10/15/05 270,000 285,526
- ------------------------------------------------------------------------------------------------
Wainoco Oil Corp.,
Sr. Notes, 12.00% 08/01/02 500,000 482,500
- ------------------------------------------------------------------------------------------------
8,323,936
- ------------------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.14%
Falcon Drilling Co. Inc.
Sr. Notes, 9.75% 01/15/01 410,000 421,275
- ------------------------------------------------------------------------------------------------
</TABLE>
FS-73
<PAGE> 291
Financials
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT(a) MARKET VALUE
<S> <C> <C> <C>
PAPER & FOREST PRODUCTS-0.52%
Pacific Lumber Co.,
Sr. Notes, 10.50% 03/01/03 $ 600,000 $ 568,500
- ------------------------------------------------------------------------------------------------
Rapp International Finance,
Gtd. Yankee Sec. Notes, 11.50% 12/15/00 970,000 966,363
- ------------------------------------------------------------------------------------------------
1,534,863
- ------------------------------------------------------------------------------------------------
PUBLISHING-6.09%
News America Holdings,
Gtd. Sr. Deb., 9.25% 02/01/13 7,100,000 8,362,664
- ------------------------------------------------------------------------------------------------
Time Warner Inc.,
Deb., 9.15% 02/01/23 8,500,000 9,639,340
- ------------------------------------------------------------------------------------------------
18,002,004
- ------------------------------------------------------------------------------------------------
RAILROADS-0.34%
Johnstown American Industries Inc.,
Sr. Sub. Notes, 11.75% 08/15/05 1,100,000 1,001,000
- ------------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUG)-2.61%
Grand Union Co.,
Sr. Notes, 12.00% 09/01/04 1,210,000 1,046,650
- ------------------------------------------------------------------------------------------------
Great Atlantic & Pacific,
Yankee Notes, 7.78%
(acquired 10/18/95; cost $3,900,000)(d) 11/01/00 3,900,000 3,954,639
- ------------------------------------------------------------------------------------------------
Penn Traffic Co.,
Sr. Notes, 10.65% 11/01/04 1,580,000 1,508,901
- ------------------------------------------------------------------------------------------------
Ralph's Grocery Co.,
Sr. Notes, 11.00% 06/15/05 1,210,000 1,197,900
- ------------------------------------------------------------------------------------------------
7,708,090
- ------------------------------------------------------------------------------------------------
RETAIL (STORES)-1.87%
Fleming Companies Inc.,
Sr. Notes, 10.625% 12/15/01 1,000,000 970,000
- ------------------------------------------------------------------------------------------------
Pamida Inc.,
Sr. Sub. Notes, 11.75% 03/15/03 1,000,000 770,000
- ------------------------------------------------------------------------------------------------
Samsonite Corp.,
Sr. Sub. Notes, 11.125% 07/15/05 900,000 864,000
- ------------------------------------------------------------------------------------------------
Specialty Retailers, Inc.,
Sr. Sub. Notes, 11.00% 08/15/03 2,000,000 1,820,000
- ------------------------------------------------------------------------------------------------
United Stationer Supply,
Sr. Sub. Notes, 12.75% 05/01/05 1,000,000 1,092,500
- ------------------------------------------------------------------------------------------------
5,516,500
- ------------------------------------------------------------------------------------------------
SCHOOLS-0.12%
Herff Jones Inc.,
Sr. Sub. Notes, 11.00% 08/15/05 330,000 353,925
- ------------------------------------------------------------------------------------------------
STEEL-0.75%
GS Technologies Inc.,
Sr. Notes, 12.00% 09/01/04 1,000,000 992,500
- ------------------------------------------------------------------------------------------------
Gulf States Steel Corp.,
First Mortgage Notes, 13.50% 04/15/03 1,360,000 1,224,000
- ------------------------------------------------------------------------------------------------
2,216,500
- ------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-3.50%
A+ Network Inc.,
Sr. Sub. Notes, 11.875% 11/01/05 930,000 941,625
- ------------------------------------------------------------------------------------------------
</TABLE>
FS-74
<PAGE> 292
Financials
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT(a) MARKET VALUE
<S> <C> <C> <C>
TELECOMMUNICATIONS (continued)
Clearnet Communications,
Yankee Units, 14.75%(b)(e) 12/15/05 $ 700,000 $ 364,000
- ------------------------------------------------------------------------------------------------
Dictaphone Corp.,
Gtd. Sr. Sub. Notes, 11.75% 08/01/05 610,000 603,900
- ------------------------------------------------------------------------------------------------
Pronet Inc.,
Sr. Sub. Notes, 11.875% 06/15/05 1,000,000 1,105,000
- ------------------------------------------------------------------------------------------------
TCI Communications Inc.,
Sr. Notes, 8.75% 08/01/15 6,000,000 6,652,020
- ------------------------------------------------------------------------------------------------
Telewest PLC,
Yankee Sr. Disc. Deb. 11.00%(b) 10/01/07 1,100,000 664,125
- ------------------------------------------------------------------------------------------------
10,330,670
- ------------------------------------------------------------------------------------------------
TEXTILES-1.06%
Consoltex Group,
Sr. Sub. Notes, 11.00% 10/01/03 1,700,000 1,534,250
- ------------------------------------------------------------------------------------------------
Tarkett International,
Sr. Sub. Notes, 9.00% 03/01/02 1,500,000 1,601,250
- ------------------------------------------------------------------------------------------------
3,135,500
- ------------------------------------------------------------------------------------------------
TRANSPORTATION (MISCELLANEOUS)-1.23%
Gearbulk Holdings Ltd,
Sr. Notes, 11.25% 12/01/04 1,000,000 1,070,000
- ------------------------------------------------------------------------------------------------
Stena AB,
Yankee Sr. Notes, 10.50% 12/15/05 1,500,000 1,535,625
- ------------------------------------------------------------------------------------------------
Trans Ocean Container,
Sr. Sub. Notes, 12.25% 07/01/04 1,000,000 1,040,000
- ------------------------------------------------------------------------------------------------
3,645,625
- ------------------------------------------------------------------------------------------------
UTILITIES-4.50%
California Energy Company, Inc.,
Sr. Disc. Notes, 10.25%(b) 01/15/04 1,500,000 1,417,500
- ------------------------------------------------------------------------------------------------
Indiana-Michigan Power Co.,
Sec. Lease Obligation Bonds, 9.82% 12/07/22 8,992,275 11,888,508
- ------------------------------------------------------------------------------------------------
13,306,008
- ------------------------------------------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds & Notes 184,139,563
- ------------------------------------------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS &
NOTES-1.02%
COMPUTER NETWORKING-0.43%
3COM Corp.,
Conv. Sub. Notes, 10.25%
(acquired 11/08/94; cost $800,000)(d) 11/01/01 800,000 1,284,000
- ------------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.59%
Henderson Capital,
Conv. Bonds, 4.50% 10/27/96 1,700,000 1,746,750
- ------------------------------------------------------------------------------------------------
Total U.S. Dollar Denominated Convertible
Bonds & Notes 3,030,750
- ------------------------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED NON-CONVERTIBLE
BONDS & NOTES(f)-7.19%
CANADA-3.00%
Bell Canada (Telecommunications),
Deb., 10.875% 10/11/04 CAD 3,000,000 2,625,192
- ------------------------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas),
Deb., 11.00% 10/31/00 3,200,000 2,679,047
- ------------------------------------------------------------------------------------------------
</TABLE>
FS-75
<PAGE> 293
Financials
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT(a) MARKET VALUE
<S> <C> <C> <C>
CANADA (continued)
IPL Energy Inc. (Oil Equipment & Supplies),
Deb., Series A, 9.67% 02/23/00 CAD 3,100,000 $ 2,483,065
- ------------------------------------------------------------------------------------------------
Rogers Cablesystem, Inc. (Cable Television),
Sr. Sec. 2nd Priority Deb., 9.65% 01/15/14 1,750,000 1,082,937
- ------------------------------------------------------------------------------------------------
8,870,241
- ------------------------------------------------------------------------------------------------
GERMANY-3.87%
International Bank for Reconstruction &
Development (Supranational Organization),
Unsub. Global Bonds, 5.875% 11/10/03 DEM 7,000,000 4,901,952
- ------------------------------------------------------------------------------------------------
Unsub. Global Bonds, 7.125% 04/12/05 8,800,000 6,534,821
- ------------------------------------------------------------------------------------------------
11,436,773
- ------------------------------------------------------------------------------------------------
ITALY-0.32%
KFW International Finance Inc. (Finance-Consumer
Credit), Gtd. Notes, 11.625% 11/27/98 ITL 1,430,000,000 936,225
- ------------------------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Non-Convertible Bonds & Notes 21,243,239
- ------------------------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS &
NOTES(f)-3.27%
UNITED KINGDOM-3.27%
ELF Enterprise Finance PLC (Finance-Consumer
Credit), Gtd. Conv. Bonds, 8.75% 06/27/06 BPS 2,900,000 4,481,285
- ------------------------------------------------------------------------------------------------
Lasmo PLC (Oil Equipment & Supplies),
Conv. Deb., 7.75% 10/04/05 3,700,000 5,193,159
- ------------------------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Convertible Bonds & Notes 9,674,444
- ------------------------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED GOVERNMENT BONDS &
NOTES(f)-10.36%
AUSTRALIA-3.98%
Australian Government,
Gtd. Deb., 9.00% 09/15/04 AUD 2,500,000 1,957,299
- ------------------------------------------------------------------------------------------------
Queensland Treasury Corp.,
Gtd. Notes, 6.50% 06/14/05 10,400,000 6,786,437
- ------------------------------------------------------------------------------------------------
Western Australia Treasury Corp.,
Gtd. Notes, 9.00% 04/15/99 3,900,000 3,017,470
- ------------------------------------------------------------------------------------------------
11,761,206
- ------------------------------------------------------------------------------------------------
CANADA-0.90%
New Brunswick (Province of),
Deb., 8.94% 01/15/05 CAD 3,500,000 2,662,486
- ------------------------------------------------------------------------------------------------
DENMARK-0.98%
Kingdom of Denmark,
Deb., 8.00% 11/15/01 DKK 15,000,000 2,895,722
- ------------------------------------------------------------------------------------------------
FRANCE-1.05%
French Treasury Bill,
Notes, 5.75% 11/12/98 FRF 15,000,000 3,094,649
- ------------------------------------------------------------------------------------------------
GERMANY-3.45%
Bundesrepublik Deutschland,
Deb., 6.75% 07/15/04 DEM 5,250,000 3,846,462
- ------------------------------------------------------------------------------------------------
Deb., 6.875% 05/12/05 8,600,000 6,349,731
- ------------------------------------------------------------------------------------------------
10,196,193
- ------------------------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Government Bonds & Notes 30,610,256
- ------------------------------------------------------------------------------------------------
</TABLE>
FS-76
<PAGE> 294
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
EQUITY SECURITIES-0.16%
COMMON STOCKS-0.15%
UTILITIES-0.15%
National Power PLC-ADR 24,300 $ 224,775
- ------------------------------------------------------------------------------------------------
PowerGen PLC-ADR 17,300 227,063
- ------------------------------------------------------------------------------------------------
Total Common Stocks 451,838
- ------------------------------------------------------------------------------------------------
WARRANTS-0.01%
LEISURE & RECREATION-0.01%
IHF Holdings-Wt., expiring 11/14/99(g) 1,200 30,000
- ------------------------------------------------------------------------------------------------
STEEL-0.00%
Gulf States Steel Corp.-Wt., expiring
04/15/03(g) 1,360 6,800
- ------------------------------------------------------------------------------------------------
Total Warrants 36,800
- ------------------------------------------------------------------------------------------------
Total Equity Securities 488,638
- ------------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
MATURITY AMOUNT
<S> <C> <C> <C>
U.S. TREASURY SECURITIES-13.33%
U.S. Treasury Notes, 6.50% 04/30/99 $ 38,000,000 39,396,500
- ------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 39,396,500
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT(h)-0.25%
Daiwa Securities America, Inc. 5.92%(i) 01/02/96 733,341 733,341
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-97.88% 289,316,731
- ------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.12% 6,266,965
- ------------------------------------------------------------------------------------------------
NET ASSETS-100.00% $295,583,696
================================================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by note (f).
(b) Discounted bond at purchase. Interest rate represents coupon rate at
which the bond will accrue at a specified future date.
(c) Issued as a unit. This unit consists of $1,000,000 Sr. Notes plus 3
warrants to purchase one share of common stock each at $11.55 per share.
(d) Restricted securities. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933,
as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at December 31, 1995 was
$13,672,319 which represented 4.63% of the Fund's net assets.
(e) Issued as a unit. This unit consists of ten $1,000,000 Sr. Disc. Notes
plus 33 warrants to purchase shares of common stock.
(f) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(g) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(h) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is
marked to market daily to ensure its market value as being 102% of the
sales price of the repurchase agreement. The investments in some
repurchase agreements are through participation in joint accounts with
other mutual funds managed by the investment advisor.
(i) Joint repurchase agreement entered into 12/29/95 with a maturing value of
$646,679,181. Collateralized by $537,995,000 U.S. Treasury obligations,
7.875% to 11.25% due 11/15/07 to 02/15/15.
<TABLE>
<CAPTION>
Abbreviations:
<S> <C> <C>
AUD - Australian Dollar Disc. - Discounted Sec. - Secured
BPS - British Pound Sterling DKK - Danish Krone Sr. - Senior
CAD - Canadian Dollar FRF - French Franc Sub. - Subordinated
Conv. - Convertible Gtd. - Guaranteed Unsub. - Unsubordinated
Deb. - Debentures ITL - Italian Lire Wt. - Warrant
DEM - German Deutschemark Pfd. - Preferred
</TABLE>
See Notes to Financial Statements.
FS-77
<PAGE> 295
Financials
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $277,224,608) $289,316,731
- ---------------------------------------------------------------------------------------
Foreign currencies, at market value (cost $299,615) 302,561
- ---------------------------------------------------------------------------------------
Receivables for:
Forward contracts 105,029
- ---------------------------------------------------------------------------------------
Fund shares sold 991,585
- ---------------------------------------------------------------------------------------
Interest 6,013,360
- ---------------------------------------------------------------------------------------
Investment for deferred compensation plan 67,591
- ---------------------------------------------------------------------------------------
Other assets 44,789
- ---------------------------------------------------------------------------------------
Total assets 296,841,646
- ---------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 251,222
- ---------------------------------------------------------------------------------------
Dividends to shareholders 497,048
- ---------------------------------------------------------------------------------------
Deferred compensation plan 67,591
- ---------------------------------------------------------------------------------------
Accrued advisory fees 114,823
- ---------------------------------------------------------------------------------------
Accrued distribution fees 191,505
- ---------------------------------------------------------------------------------------
Accrued administrative service fees 12,413
- ---------------------------------------------------------------------------------------
Accrued transfer agent fees 39,684
- ---------------------------------------------------------------------------------------
Accrued trustees' fees 1,800
- ---------------------------------------------------------------------------------------
Accrued operating expenses 81,864
- ---------------------------------------------------------------------------------------
Total liabilities 1,257,950
- ---------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $295,583,696
=======================================================================================
NET ASSETS:
Class A $251,279,503
=======================================================================================
Class B $44,304,193
=======================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE
Class A 30,771,741
=======================================================================================
Class B 5,434,354
=======================================================================================
CLASS A:
Net asset value and redemption price per share $ 8.17
=======================================================================================
Offering price per share:
(Net asset value of $8.17 divided by 95.25%) $ 8.58
=======================================================================================
CLASS B:
Net asset value and offering price per share $ 8.15
=======================================================================================
</TABLE>
See Notes to Financial Statements.
FS-78
<PAGE> 296
Financials
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $20,643,014
- ----------------------------------------------------------------------------------------
Dividends 112,212
- ----------------------------------------------------------------------------------------
Total investment income 20,755,226
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,176,249
- ----------------------------------------------------------------------------------------
Custodian fees 68,276
- ----------------------------------------------------------------------------------------
Distribution fees -- Class A 550,802
- ----------------------------------------------------------------------------------------
Distribution fees -- Class B 237,414
- ----------------------------------------------------------------------------------------
Trustees' fees 6,846
- ----------------------------------------------------------------------------------------
Transfer agent fees -- Class A 265,784
- ----------------------------------------------------------------------------------------
Transfer agent fees -- Class B 39,720
- ----------------------------------------------------------------------------------------
Administrative service fees 82,185
- ----------------------------------------------------------------------------------------
Other 171,661
- ----------------------------------------------------------------------------------------
Total expenses 2,598,937
- ----------------------------------------------------------------------------------------
Net investment income 18,156,289
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN
CURRENCIES AND FORWARD CONTRACT TRANSACTIONS:
Net realized gain (loss) from:
Investment securities 8,393,768
- ----------------------------------------------------------------------------------------
Foreign currencies 1,752,428
- ----------------------------------------------------------------------------------------
Forward contracts (274,598)
- ----------------------------------------------------------------------------------------
9,871,598
- ----------------------------------------------------------------------------------------
Unrealized appreciation of:
Investment securities 21,219,140
- ----------------------------------------------------------------------------------------
Foreign currencies 75,365
- ----------------------------------------------------------------------------------------
Forward contracts 140,338
- ----------------------------------------------------------------------------------------
21,434,843
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain from investment securities, foreign
currencies and forward contract transactions 31,306,441
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $49,462,730
========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-79
<PAGE> 297
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 18,156,289 $ 17,083,355
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and forward contract transactions 9,871,598 (18,454,102)
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, foreign currencies and forward contract
transactions 21,434,843 (18,072,358)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 49,462,730 (19,443,105)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (16,600,806) (14,029,228)
- ---------------------------------------------------------------------------------------------
Class B (1,555,483) (478,570)
- ---------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A (889,987) --
- ---------------------------------------------------------------------------------------------
Class B (95,903) --
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from capital:
Class A -- (3,123,648)
- ---------------------------------------------------------------------------------------------
Class B -- (122,674)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A -- (360,558)
- ---------------------------------------------------------------------------------------------
Class B -- (20,562)
- ---------------------------------------------------------------------------------------------
Share transactions-net:
Class A 22,105,318 (6,155,618)
- ---------------------------------------------------------------------------------------------
Class B 29,160,108 9,961,208
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 81,585,977 (33,772,755)
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 213,997,719 247,770,474
- ---------------------------------------------------------------------------------------------
End of period $295,583,696 $213,997,719
=============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $290,272,299 $239,006,873
- ---------------------------------------------------------------------------------------------
Undistributed net investment income 846,817 (60,059)
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from sales of
investment securities, foreign currencies and forward
contract transactions (7,799,206) (15,778,038)
- ---------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and forward contract
transactions 12,263,786 (9,171,057)
- ---------------------------------------------------------------------------------------------
$295,583,696 $213,997,719
=============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-80
<PAGE> 298
Financials
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Income Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. The Fund's investment objective is to seek to achieve
a high level of current income consistent with reasonable concern for safety of
principal by investing primarily in fixed rate corporate debt and U.S.
Government obligations. Information presented in these financial statements
pertains only to the Fund.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. 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.
A. Security Valuations - Non-convertible bonds and notes are valued on the basis
of prices provided by an independent pricing service. 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, developments related to special securities,
yield, quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Investment securities for which prices
are not provided by the pricing service and which are listed or traded on an
exchange (except convertible bonds) are valued at the last sales price on the
exchange where the security is principally traded or, lacking any sales on a
particular day, at the mean between the closing bid and asked prices on that
day unless the Board of Trustees, or persons designated by the Board of
Trustees, determines that the over-the-counter quotations more closely
reflect the current market value of the security. Exchange listed convertible
bonds are valued based at the mean between the closing bid and asked prices
obtained from a broker-dealer. Securities traded in the over-the-counter
market, except (i) securities priced by the pricing service, (ii) securities
for which representative exchange prices are available, and (iii) securities
reported in the NASDAQ National Market System, are valued at the mean between
representative last bid and asked prices obtained from an electronic
quotation reporting system, if such prices are available, or from established
market makers. Each security reported in the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the mean of the closing bid and asked prices. Securities for which
market quotations are either not readily available or are questionable are
valued at fair value as determined in good faith by or under the supervision
of the Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. Generally, trading
in foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
B. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
FS-81
<PAGE> 299
Financials
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued)
C. Foreign Currency Contracts - A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract to attempt to minimize the
risk to the Fund from adverse changes in the relationship between currencies.
The Fund may also enter into a forward contract for the purchase or sale of a
security denominated in a foreign currency in order to "lock-in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
Outstanding contracts at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Contract to
Settlement ----------------------------- Unrealized
Date Receive Deliver Appreciation
--------- -------------- ---------- ------------
<S> <C> <C> <C>
01/25/96 DEM 7,800,000 $5,443,019 $ 105,029
</TABLE>
D. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. Dividends to shareholders are declared daily and are paid
monthly. On December 31, 1995 $1,892,766 was reclassified from undistributed
net realized gain to undistributed net investment income as a result of
permanent book/tax differences due to the differing book/tax treatment for
foreign currency gains incurred by the Fund. Net assets of the Fund were
unaffected by the reclassification discussed above.
E. 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 of $7,557,727 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2003. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
F. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 AIM an advisory fee at an annual rate of 0.50% of the
first $200 million of the Fund's average daily net assets, plus 0.40% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.35% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.30% of the Fund's average daily net
assets in excess of $1 billion. This agreement requires AIM to reduce its fees
or, if necessary, make payments to the Fund to the extent required to satisfy
any expense limitations imposed by the securities laws or regulations thereunder
of any state in which the Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to reimburse AIM for certain administrative costs incurred in
providing accounting services to the Fund. During the year ended December 31,
1995, AIM was reimbursed $82,185 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 agency and
shareholder services to the Fund. During the year ended December 31, 1995, the
Fund paid AFS $193,500 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and which provides periodic payments to selected dealers and
financial
FS-82
<PAGE> 300
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
Plans would constitute an asset-based sales charge. AIM Distributors may, from
time to time, assign, transfer or pledge to one or more assignees, its rights to
all or a portion of (a) compensation received by AIM Distributors from the Fund
pursuant to the Class B Plan (but not AIM Distributors' duties and obligations
pursuant to the Class B Plan) and (b) any contingent deferred sales charges
payable to AIM Distributors related to the Class B shares. The Plans also impose
a cap on the total sales charges, including asset-based sales charges, that may
be paid by the respective classes. During the year ended December 31, 1995, the
Class A shares and the Class B shares paid AIM Distributors $550,802 and
$237,414, respectively, as compensation under the Plans.
AIM Distributors received commissions of $154,679 from sales of the Class A
shares of the Fund during the year ended December 31, 1995. 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 December 31, 1995,
AIM Distributors received $48,320 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1995 the Fund paid legal fees of $3,278
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3 - TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund has a $4,000,000 committed line of credit with a financial institution
syndicate with Chemical Bank of New York as the administrative agent. Interest
on borrowings under the line of credit is payable on maturity or prepayment
date. During the period July 20, 1995 (effective date of line of credit
agreement) through December 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's committed
line.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1995 was
$596,557,985 and $526,613,903, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $14,468,630
- ------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,376,507)
- ------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $12,092,123
====================================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
FS-83
<PAGE> 301
Financials
NOTE 6 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
SHARES VALUE SHARES VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sold:
Class A 7,497,108 $58,558,530 4,265,341 $33,272,800
- ----------------------------------------------------------------------------------- ----------------------
Class B 4,199,186 32,900,136 1,696,358 13,014,930
- ----------------------------------------------------------------------------------- ----------------------
Issued as reinvestment of dividends:
Class A 1,859,312 14,431,705 1,895,928 14,388,718
- ----------------------------------------------------------------------------------- ----------------------
Class B 131,455 1,024,904 54,029 403,397
- ----------------------------------------------------------------------------------- ----------------------
Reacquired:
Class A (6,603,107) (50,884,917) (7,025,819) (53,817,136)
- ----------------------------------------------------------------------------------- ----------------------
Class B (611,547) (4,764,932) (462,198) (3,457,119)
- ----------------------------------------------------------------------------------- ----------------------
6,472,407 $51,265,426 423,639 $ 3,805,590
=================================================================================== ======================
</TABLE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding for each of the years in the ten-year period ended December 31, 1995
and for a Class B share outstanding for each of the years in the two-year period
ended December 31, 1995, and the period September 7, 1993 (date sales commenced)
through December 31, 1993.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------------------------
CLASS A: 1995 1994 1993 1992(a) 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41 $ 7.80 $ 7.53
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income 0.58 0.58 0.60 0.60 0.61 0.65 0.66
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) 1.00 (1.22) 0.61 (0.03) 0.66 (0.39) 0.32
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations 1.58 (0.64) 1.21 0.57 1.27 0.26 0.98
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.61) (0.49) (0.60) (0.61) (0.61) (0.65) (0.71)
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Distributions from net realized
capital gains -- (0.01) (0.19) -- -- -- --
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Distributions from capital -- (0.11) -- -- -- -- --
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.61) (0.61) (0.79) (0.61) (0.61) (0.65) (0.71)
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41 $ 7.80
================================= ======== ======== ======== ======== ======== ======== ========
Total return(b) 22.77% (7.65)% 15.38% 7.42% 18.00% 3.65% 13.56%
================================= ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $251,280 $201,677 $244,168 $218,848 $231,798 $215,987 $229,222
================================= ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets 0.98%(c) 0.98% 0.98% 0.99%(d) 1.00%(d) 1.00% 0.96%
================================= ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 7.52%(c) 7.53% 7.01% 7.54%(d) 7.97%(d) 8.73% 8.56%
================================= ======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 227% 185% 99% 82% 67% 106% 222%
================================= ======== ======== ======== ======== ======== ======== ========
<CAPTION>
CLASS A: 1988 1987 1986
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of
period $ 7.55 $ 8.20 $ 7.53
- --------------------------------- -------- -------- --------
Income from investment
operations:
Net investment income 0.68 0.67 0.71
- --------------------------------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) (0.02) (0.63) 0.60
- --------------------------------- -------- -------- --------
Total from investment
operations 0.66 0.04 1.31
- --------------------------------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.68) (0.69) (0.64)
- --------------------------------- -------- -------- --------
Distributions from net realized
capital gains -- -- --
- --------------------------------- -------- -------- --------
Distributions from capital -- -- --
- --------------------------------- -------- -------- --------
Total distributions (0.68) (0.69) (0.64)
- --------------------------------- -------- -------- --------
Net asset value, end of period $ 7.53 $ 7.55 $ 8.20
================================= ======== ======== ========
Total return(b) 9.01% 0.56% 18.04%
================================= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $218,946 $237,466 $273,121
================================= ======== ======== ========
Ratio of expenses to average net
assets 0.95% 0.84% 0.82%
================================= ======== ======== ========
Ratio of net investment income to
average net assets 8.81% 8.64% 8.93%
================================= ======== ======== ========
Portfolio turnover rate 361% 195% 85%
================================= ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $220,320,889.
(d) After waiver of advisory fees and expense reimbursements. Ratios of expenses
to average net assets prior to waiver of advisory fees and expense
reimbursements were 1.00% and 1.03% for 1992-1991, respectively. Ratios of
net investment income to average net assets prior to waiver of advisory fees
and expense reimbursements were 7.53% and 7.94% for 1992-1991, respectively.
FS-84
<PAGE> 302
Financials
NOTE 7 - FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
CLASS B: 1995 1994 1993
-------- ------- ------
<S> <C> <C> <C>
Net asset value, beginning of period $ 7.18 $ 8.43 $ 8.95
- ------------------------------------------------------------------------------------------- -------- ------- ------
Income from investment operations:
Net investment income 0.53 0.52 0.19
- ------------------------------------------------------------------------------------------- -------- ------- ------
Net gains (losses) on securities (both realized and unrealized) 0.98 (1.23) (0.34)
- ------------------------------------------------------------------------------------------- -------- ------- ------
Total from investment operations 1.51 (0.71) (0.15)
- ------------------------------------------------------------------------------------------- -------- ------- ------
Less distributions:
Dividends from net investment income (0.54) (0.42) (0.18)
- ------------------------------------------------------------------------------------------- -------- ------- ------
Distributions from net realized capital gains -- (0.01) (0.19)
- ------------------------------------------------------------------------------------------- -------- ------- ------
Distributions from capital -- (0.11) --
- ------------------------------------------------------------------------------------------- -------- ------- ------
Total distributions (0.54) (0.54) (0.37)
- ------------------------------------------------------------------------------------------- -------- ------- ------
Net asset value, end of period $ 8.15 $ 7.18 $ 8.43
=========================================================================================== ======== ======= ======
Total return(a) 21.72% (8.46)% (0.75)%
=========================================================================================== ======== ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $44,304 $12,321 $3,602
=========================================================================================== ======== ======= ======
Ratio of expenses to average net assets 1.79%(b) 1.83%(c) 1.75%(c)
=========================================================================================== ======== ======= ======
Ratio of net investment income to average net assets 6.71%(b) 6.69%(c) 6.24%(c)
=========================================================================================== ======== ======= ======
Portfolio turnover rate 227 % 185% 99%
=========================================================================================== ======== ======= ======
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are based on average net assets of $23,741,406.
(c) After expense reimbursements. Ratios of expenses to average net assets prior
to expense reimbursements were 2.04% and 2.50% (annualized) for 1994 and
1993, respectively. Ratios of net investment income to average net assets
prior to expense reimbursements were 6.48% and 5.49% (annualized) for 1994
and 1993, respectively.
FS-85
<PAGE> 303
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Intermediate Government Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Intermediate Government Fund (a portfolio of AIM Funds Group), including the
schedule of investments, as of December 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in its net assets
for the two-year period then ended and the financial highlights for each of the
years in the three-year period then ended. These financial statements and the
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the 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
December 31, 1995, 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 the financial highlights referred
to above present fairly in all material respects, the financial position of AIM
Intermediate Government Fund as of December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for the
two-year period then ended and the financial highlights for each of the years in
the three-year period then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1996
FS-86
<PAGE> 304
Financials
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCIES-70.46%
FEDERAL FARM CREDIT BANK-2.81%
$ 6,000,000 11.90%, 10/20/97 $ 6,673,800
- ---------------------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK-4.27%
Medium term notes
4,000,000 7.31%, 07/06/01 4,304,200
- ---------------------------------------------------------------------------------------------
2,500,000 7.78%, 10/19/01 2,765,850
- ---------------------------------------------------------------------------------------------
2,800,000 7.36%, 07/01/04 3,074,092
- ---------------------------------------------------------------------------------------------
10,144,142
- ---------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION-15.00%
Pass through certificates
9,675,526 9.00%, 12/01/05 to 09/01/20 10,167,149
- ---------------------------------------------------------------------------------------------
46,522 8.00%, 07/01/06 to 12/01/06 48,281
- ---------------------------------------------------------------------------------------------
3,132,104 8.50%, 07/01/07 to 04/01/25 3,269,961
- ---------------------------------------------------------------------------------------------
4,732,089 10.50%, 09/01/09 to 01/01/21 5,186,750
- ---------------------------------------------------------------------------------------------
71,263 10.00%, 11/01/11 to 02/01/16 77,586
- ---------------------------------------------------------------------------------------------
39,457 12.00%, 02/01/13 44,055
- ---------------------------------------------------------------------------------------------
3,000,097 7.00%, 06/01/24 3,029,108
- ---------------------------------------------------------------------------------------------
12,974,513 9.50%, 04/01/25 13,809,552
- ---------------------------------------------------------------------------------------------
35,632,442
- ---------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION-37.27%
Debentures
3,000,000 9.35%, 02/12/96 3,014,430
- ---------------------------------------------------------------------------------------------
5,000,000 9.55%, 11/10/97 5,371,650
- ---------------------------------------------------------------------------------------------
4,000,000 8.20%, 03/10/98 4,236,920
- ---------------------------------------------------------------------------------------------
3,500,000 8.625%, 11/10/04 3,827,390
- ---------------------------------------------------------------------------------------------
4,500,000 8.50%, 02/01/05 4,926,780
- ---------------------------------------------------------------------------------------------
3,000,000 7.875%, 02/24/05 3,422,130
- ---------------------------------------------------------------------------------------------
Pass through certificates
55,403 8.50%, 01/01/07 to 03/01/07 57,844
- ---------------------------------------------------------------------------------------------
2,935,647 7.00%, 09/01/25 2,961,276
- ---------------------------------------------------------------------------------------------
2,939,425 7.50%, 06/01/25 3,013,793
- ---------------------------------------------------------------------------------------------
4,018,870 9.00%, 04/01/25 to 05/01/25 4,234,804
- ---------------------------------------------------------------------------------------------
12,652,613 10.00%, 07/01/20 to 08/01/20 13,897,883
- ---------------------------------------------------------------------------------------------
2,115,052 10.50%, 03/01/14 to 07/01/19 2,336,434
- ---------------------------------------------------------------------------------------------
4,746,563 9.50%, 07/01/16 to 08/01/22 5,086,179
- ---------------------------------------------------------------------------------------------
934,115 8.00%, 03/01/25 967,667
- ---------------------------------------------------------------------------------------------
15,000,000 8.00%, 01/16/26 TBA(a) 15,548,438
- ---------------------------------------------------------------------------------------------
15,000,000 8.50%, 01/18/26 TBA(a) 15,665,625
- ---------------------------------------------------------------------------------------------
88,569,243
- ---------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-11.11%
Pass through certificates
4,292,410 9.00%, 10/15/08 to 11/15/21 4,573,885
- ---------------------------------------------------------------------------------------------
3,169,596 9.50%, 06/15/09 to 12/15/20 3,430,149
- ---------------------------------------------------------------------------------------------
9,233,277 10.00%, 11/15/09 to 07/15/24 10,176,302
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-87
<PAGE> 305
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
Pass through certificates (continued)
$ 345,649 11.00%, 12/15/09 to 12/15/15 $ 388,095
- --------------------------------------------------------------------------------------------
585,603 13.50%, 07/15/10 to 04/15/15 681,671
- --------------------------------------------------------------------------------------------
305,460 12.50%, 11/15/10 351,654
- --------------------------------------------------------------------------------------------
637,065 13.00%, 01/15/11 to 05/15/15 738,185
- --------------------------------------------------------------------------------------------
1,074,738 12.00%, 01/15/13 to 07/15/15 1,226,523
- --------------------------------------------------------------------------------------------
2,679,547 10.50%, 07/15/13 to 10/15/21 2,977,251
- --------------------------------------------------------------------------------------------
1,784,715 8.00%, 03/15/23 1,863,885
- --------------------------------------------------------------------------------------------
26,407,600
- --------------------------------------------------------------------------------------------
Total U.S. Government Agencies 167,427,227
- --------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES-34.77%
U.S. TREASURY NOTES & BONDS-33.97%
5,000,000 9.375%, 04/15/96 5,057,600
- --------------------------------------------------------------------------------------------
1,000,000 8.625%, 08/15/97 1,052,970
- --------------------------------------------------------------------------------------------
7,000,000 8.875%, 11/15/97 7,451,080
- --------------------------------------------------------------------------------------------
6,000,000 9.25%, 08/15/98 6,581,580
- --------------------------------------------------------------------------------------------
3,000,000 7.75%, 11/30/99 3,251,580
- --------------------------------------------------------------------------------------------
10,000,000 6.50%, 05/15/05 10,653,900
- --------------------------------------------------------------------------------------------
13,500,000 7.25, 05/15/16 to 08/15/22 15,536,155
- --------------------------------------------------------------------------------------------
16,000,000 7.50%, 11/15/16 to 11/15/24 18,951,560
- --------------------------------------------------------------------------------------------
4,000,000 8.125%, 08/15/19 5,035,720
- --------------------------------------------------------------------------------------------
4,000,000 7.625%, 02/15/25 4,889,200
- --------------------------------------------------------------------------------------------
2,000,000 6.875%, 08/15/25 2,257,620
- --------------------------------------------------------------------------------------------
80,718,965
- --------------------------------------------------------------------------------------------
U.S. TREASURY STRIPS-0.80%(b)
1,000,000 6.80%, 11/15/18 241,000
- --------------------------------------------------------------------------------------------
7,000,000 6.71%, 02/15/19 1,660,400
- --------------------------------------------------------------------------------------------
1,901,400
- --------------------------------------------------------------------------------------------
Total U. S. Treasury Securities 82,620,365
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT-6.35%(c)
Daiwa Securities America Inc.
15,076,782 5.92%, 01/02/96(d) 15,076,782
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-111.58% 265,124,374
- --------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(11.58%) (27,506,669)
- --------------------------------------------------------------------------------------------
NET ASSETS-100.00% $237,617,705
============================================================================================
</TABLE>
Notes to Schedule of Investments:
(a) At 12/31/95, cost of securities purchased on a when-issued basis totalled
$31,117,969. These securities are also subject to dollar roll transactions.
See Note 1, Section C of Notes to Financial Statements.
(b) U.S. Treasury STRIPS are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the investment advisor.
(d) Joint repurchase agreement entered into 12/29/95 with a maturing value of
$646,679,181. Collateralized by $537,995,000 U.S. Treasury obligations,
7.875% to 11.25% due 11/15/07 to 02/15/15.
Abbreviations:
TBA-To Be Announced
See Notes to Financial Statements.
FS-88
<PAGE> 306
Financials
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $254,158,535) $265,124,374
- -----------------------------------------------------------------------------------------
Receivables for:
Fund shares sold 1,506,965
- -----------------------------------------------------------------------------------------
Interest 3,050,406
- -----------------------------------------------------------------------------------------
Investment for deferred compensation plan 16,279
- -----------------------------------------------------------------------------------------
Other assets 117,790
- -----------------------------------------------------------------------------------------
Total assets 269,815,814
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 31,117,969
- -----------------------------------------------------------------------------------------
Fund shares redeemed 352,050
- -----------------------------------------------------------------------------------------
Dividends 344,882
- -----------------------------------------------------------------------------------------
Deferred compensation plan 16,279
- -----------------------------------------------------------------------------------------
Accrued advisory fees 98,006
- -----------------------------------------------------------------------------------------
Accrued administrative service fees 4,767
- -----------------------------------------------------------------------------------------
Accrued distribution fees 164,601
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 38,089
- -----------------------------------------------------------------------------------------
Accrued operating expenses 61,466
- -----------------------------------------------------------------------------------------
Total liabilities 32,198,109
- -----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $237,617,705
=========================================================================================
NET ASSETS:
Class A $176,318,099
=========================================================================================
Class B $ 61,299,606
=========================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 18,174,801
=========================================================================================
Class B 6,324,677
=========================================================================================
Class A:
Net asset value and redemption price per share $ 9.70
=========================================================================================
Offering price per share:
(Net asset value of $9.70 divided by 95.25%) $ 10.18
=========================================================================================
Class B:
Net asset value and offering price per share $ 9.69
=========================================================================================
See Notes to Financial Statements.
9
</TABLE>
FS-89
<PAGE> 307
Financials
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $17,039,564
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 996,681
- ----------------------------------------------------------------------------------------
Custodian fees 62,116
- ----------------------------------------------------------------------------------------
Distribution fees -- Class A 403,858
- ----------------------------------------------------------------------------------------
Distribution fees -- Class B 377,931
- ----------------------------------------------------------------------------------------
Administrative service fees 71,765
- ----------------------------------------------------------------------------------------
Interest 215,956
- ----------------------------------------------------------------------------------------
Professional fees 98,885
- ----------------------------------------------------------------------------------------
Transfer agent fees -- Class A 251,364
- ----------------------------------------------------------------------------------------
Transfer agent fees -- Class B 66,583
- ----------------------------------------------------------------------------------------
Trustees' fees 7,461
- ----------------------------------------------------------------------------------------
Other 118,064
- ----------------------------------------------------------------------------------------
Total expenses 2,670,664
- ----------------------------------------------------------------------------------------
Net investment income 14,368,900
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES:
Net realized gain (loss) on sales of investment securities (1,382,949)
- ----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 16,712,997
- ----------------------------------------------------------------------------------------
Net gain on investment securities 15,330,048
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $29,698,948
=========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-90
<PAGE> 308
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 14,368,900 $10,649,346
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities (1,382,949) (10,486,627)
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities 16,712,997 (5,639,126)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 29,698,948 (5,476,407)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (11,460,957) (7,962,122)
- -------------------------------------------------------------------------------------------
Class B (2,319,847) (834,681)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A -- (652,519)
- -------------------------------------------------------------------------------------------
Class B -- (80,521)
- -------------------------------------------------------------------------------------------
Return of capital:
Class A (693,899) (1,369,875)
- -------------------------------------------------------------------------------------------
Class B (162,343) (165,673)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A 5,708,304 33,619,200
- -------------------------------------------------------------------------------------------
Class B 35,091,651 18,932,857
- -------------------------------------------------------------------------------------------
Net increase in net assets 55,861,857 36,010,259
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 181,755,848 145,745,589
- -------------------------------------------------------------------------------------------
End of period $237,617,705 $181,755,848
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $239,433,094 $196,716,205
- -------------------------------------------------------------------------------------------
Undistributed net investment income (12,778) 159,155
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (12,768,450) (9,372,354)
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities 10,965,839 (5,747,158)
- -------------------------------------------------------------------------------------------
$237,617,705 $181,755,848
===========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-91
<PAGE> 309
Financials
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Intermediate Government Fund (the "Fund") (formerly AIM Government
Securities Fund) is a series portfolio of AIM Funds Group (the "Trust"). The
Trust is a Delaware business trust registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end series management
investment company consisting of nine separate series portfolios, each having an
unlimited number of shares of beneficial interest. The Fund currently offers two
different classes of shares: the Class A shares and the Class B shares. Class A
shares are sold with a front-end sales charge. Class B shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. The Fund's investment objective is to seek to achieve a high level
of current income consistent with reasonable concern for safety of principal by
investing in debt securities issued, guaranteed or otherwise backed by the
United States Government. Information presented in these financial statements
pertains only to the Fund.
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 - Debt obligations that are issued or guaranteed by the
U.S. Government, its agencies, authorities, and instrumentalities are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate, maturity and seasoning differential. Securities for which
market prices are not provided by the pricing service are valued at the mean
between the last bid and asked prices based upon quotes furnished by
independent sources. Securities for which market quotations are either not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividends to shareholders are declared
daily and are paid monthly.
On December 31, 1995, $760,029 was reclassified from undistributed net
realized gain to undistributed net investment income as a result of permanent
book/tax differences due to the differing book/tax treatment for principal
paydown losses on mortgage-backed securities. In addition, $856,242 was
reclassified from undistributed net investment income to paid-in capital,
consisting of $760,029 mentioned above and $96,213 of distributions in excess
of net investment income. On December 31, 1995, undistributed net realized
loss was increased and shares of beneficial interest increased by $2,773,176
in order to comply with the requirements of the American Institute of
Certified Public Accountants Statement of Position 93-2. Net assets of the
Fund were unaffected by the reclassifications discussed above.
C. Reverse Repurchase Agreements and Dollar Roll Transactions - A reverse
repurchase agreement involves the sale of securities held by the Fund, with
an agreement that the Fund will repurchase such securities at an agreed-upon
price and date. Proceeds from reverse repurchase agreements are treated as
borrowings. The agreements are collateralized by the underlying securities
and are carried at the amount at which the securities will subsequently be
repurchased as specified in the agreements.
The Fund may also engage in dollar roll transactions with respect to
mortgage securities issued by GNMA, FNMA and FHLMC. In a dollar roll
transaction, the Fund sells a mortgage security held in the portfolio to a
financial institution such as a bank or broker-dealer, and simultaneously
agrees to repurchase a substantially similar security (same type, coupon and
maturity) from the institution at a later date at an agreed upon price. The
mortgage securities that are repurchased will bear the same interest rate as
those sold, but generally will be
FS-92
<PAGE> 310
Financials
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued)
collateralized by different pools of mortgages with different prepayment
histories. During the period between the sale and repurchase, the Fund will
not be entitled to receive interest and principal payments on the securities
sold. Proceeds of the sale will be invested in short-term instruments, and
the income from these investments, together with any additional fee income
received on the sale, could generate income for the Fund exceeding the yield
on the security sold.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement. In
the event the buyer of securities in a dollar roll transaction files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale
of the securities may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the Fund's obligation
to repurchase the securities. The Fund will limit its borrowings from banks,
reverse repurchase agreements and dollar roll transactions to an aggregate of
33-1/3% of its total assets at the time of investment. The Fund will not
purchase additional securities when any borrowings from banks exceed 5% of
the Fund's total assets.
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 of $12,521,212 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2003. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
E. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 AIM an advisory fee at an annual rate of 0.50% of the
first $200 million of the Fund's average daily net assets, plus 0.40% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.35% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.30% of the Fund's average daily net
assets in excess of $1 billion. This agreement requires AIM to reduce its fees
or, if necessary, make payments to the Fund to the extent required to satisfy
any expense limitations imposed by the securities laws or regulations thereunder
of any state in which the Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to reimburse AIM for certain administrative costs incurred in
providing accounting services to the Fund. During the year ended December 31,
1995, AIM was reimbursed $71,765 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 agency and
shareholder services to the Fund. During the year ended December 31, 1995, the
Fund paid AFS $185,603 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
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
FS-93
<PAGE> 311
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
respective classes. AIM Distributors may, from time to time, assign, transfer or
pledge to one or more designees, its rights to all or a designated portion of
(a) compensation received by AIM Distributors from the Fund pursuant to the
Class B Plan (but not AIM Distributors' duties and obligations pursuant to the
Class B Plan) and (b) any contingent deferred sales charges received by AIM
Distributors related to the Class B shares. During the year ended December 31,
1995, the Class A shares and the Class B shares paid AIM Distributors $403,858
and $377,931, respectively, as compensation under the Plans.
AIM Distributors received commissions of $144,669 from sales of the Class A
shares of the Fund during the year ended December 31, 1995. 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 December 31, 1995,
AIM Distributors received $101,233 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1995, the Fund paid legal fees of $3,146
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3 - TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund has a $3,200,000 committed line of credit with a financial institution
syndicate with Chemical Bank of New York as the administrative agent. Interest
on borrowings under the line of credit is payable on maturity or prepayment
date. During the period July 20, 1995 (effective date of line of credit
agreement) through December 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's commitment
line.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1995 was
$322,679,539 and $263,743,534, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $10,864,062
- -----------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (80,427)
- -----------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $10,783,635
===================================================================================
</TABLE>
Cost of investments for tax purposes is $254,340,739.
NOTE 6 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
SHARES VALUE SHARES VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sold:
Class A 5,766,866 $54,292,965 9,095,532 $84,555,557
- ---------------------------------- ------------------------------------------------
Class B 4,740,977 44,702,493 2,442,865 23,125,558
- ---------------------------------- ------------------------------------------------
Issued as reinvestment of
dividends:
Class A 993,993 9,337,931 815,446 7,649,630
- ---------------------------------- ------------------------------------------------
Class B 172,523 1,627,255 72,145 670,468
- ---------------------------------- ------------------------------------------------
Reacquired:
Class A (6,189,567) (57,922,592) (6,202,526) (58,585,987)
- ---------------------------------- ------------------------------------------------
Class B (1,194,246) (11,238,097) (523,327) (4,863,169)
- ---------------------------------- ------------------------------------------------
4,290,546 $40,799,955 5,700,135 $52,552,057
================================== ================================================
</TABLE>
FS-94
<PAGE> 312
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during the eight-year period ended December 31, 1995 and the period
April 28, 1987 (date operations commenced) through December 31, 1987 and for a
Class B share outstanding during the two-year period ended December 31, 1995 and
the period September 7, 1993 (date sales commenced) through December 31, 1993.
<TABLE>
<CAPTION>
CLASS A: 1995 1994 1993 1992(a) 1991 1990
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.99 $ 10.05 $ 10.19 $ 10.34 $ 9.95 $ 9.91
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income 0.69 0.68 0.74 0.77 0.82 0.87
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Net gains (losses) on securities (both
realized and unrealized) 0.73 (1.02) (0.04) (0.15) 0.41 0.01
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Total from investment operations 1.42 (0.34) 0.70 0.62 1.23 0.88
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.67) (0.58) (0.70) (0.74) (0.84) (0.84)
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Distributions from net realized capital gains -- (0.04) (0.14) (0.03) -- --
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Distributions from capital (0.04) (0.10) -- -- -- --
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Total distributions (0.71) (0.72) (0.84) (0.77) (0.84) (0.84)
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Net asset value, end of period $ 9.70 $ 8.99 $ 10.05 $ 10.19 $ 10.34 $ 9.95
============================================== ======== ======== ======== ======== ======== =======
Total return(b) 16.28% (3.44)% 7.07% 6.26% 12.98% 9.39%
============================================== ======== ======== ======== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $176,318 $158,341 $139,586 $123,484 $101,409 $61,463
============================================== ======== ======== ======== ======== ======== =======
Ratio of expenses to average net assets
(exclusive of interest expense)(d) 1.08%(c) 1.04% 1.00% 0.98% 1.00% 1.00%
============================================== ======== ======== ======== ======== ======== =======
Ratio of net investment income to average net
assets(e) 7.36%(c) 7.34% 7.08% 7.53% 8.15% 8.85%
============================================== ======== ======== ======== ======== ======== =======
Portfolio turnover rate 140% 109% 110% 42% 26% 16%
============================================== ======== ======== ======== ======== ======== =======
<CAPTION>
CLASS A: 1989 1988 1987
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.70 $ 9.92 $ 10.00
- ---------------------------------------------- ------- ------- -------
Income from investment operations:
Net investment income 0.90 0.89 0.55
- ---------------------------------------------- ------- ------- -------
Net gains (losses) on securities (both
realized and unrealized) 0.15 (0.27) (0.14)
- ---------------------------------------------- ------- ------- -------
Total from investment operations 1.05 0.62 0.41
- ---------------------------------------------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.84) (0.84) (0.49)
- ---------------------------------------------- ------- ------- -------
Distributions from net realized capital gains -- -- --
- ---------------------------------------------- ------- ------- -------
Distributions from capital -- -- --
- ---------------------------------------------- ------- ------- -------
Total distributions (0.84) (0.84) (0.49)
- ---------------------------------------------- ------- ------- -------
Net asset value, end of period $ 9.91 $ 9.70 $ 9.92
============================================== ======= ======= =======
Total return(b) 11.28% 6.43% 4.18%
============================================== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $57,077 $48,372 $28,052
============================================== ======= ======= =======
Ratio of expenses to average net assets
(exclusive of interest expense)(d) 1.00% 1.00% 1.20%(f)
============================================== ======= ======= =======
Ratio of net investment income to average net
assets(e) 9.10% 9.11% 8.64%(f)
============================================== ======= ======= =======
Portfolio turnover rate 15% 15% 35%
============================================== ======= ======= =======
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios are based on average net assets of $161,543,053.
(d) Ratios of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement were 1.05%, 1.04%, 1.04%, 1.10%, 1.13%, 1.08% and
1.08% for 1994-88, respectively.
(e) Ratios of net investment income to average net assets prior to reduction of
advisory fee and expense reimbursement were 7.32%, 7.04%, 7.48%, 8.05%,
8.72%, 9.03% and 9.03% for 1994-88, respectively.
(f) Annualized.
<TABLE>
<CAPTION>
CLASS B: 1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.99 $ 10.04 $ 10.44
- ------------------------------------------------------------------------------------------- ------- ------- -------
Income from investment operations:
Net investment income 0.63 0.61 0.21
- ------------------------------------------------------------------------------------------- ------- ------- -------
Net gains (losses) on securities (both realized and unrealized) 0.70 (1.02) (0.27)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Total from investment operations 1.33 (0.41) (0.06)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.59) (0.50) (0.20)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Distributions from net realized capital gains -- (0.04) (0.14)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Distributions from capital (0.04) (0.10) --
- ------------------------------------------------------------------------------------------- ------- ------- -------
Total distributions (0.63) (0.64) (0.34)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Net asset value, end of period $ 9.69 $ 8.99 $ 10.04
=========================================================================================== ======= ======= =======
Total return(a) 15.22% (4.13)% (0.52)%
=========================================================================================== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $61,300 $23,415 $ 6,160
=========================================================================================== ======= ======= =======
Ratio of expenses to average net assets (exclusive of interest expense)(c) 1.86%(b) 1.82% 1.71%(e)
=========================================================================================== ======= ======= =======
Ratio of net investment income to average net assets(d) 6.58%(b) 6.56% 6.37%(e)
=========================================================================================== ======= ======= =======
Portfolio turnover rate 140% 109% 110%
=========================================================================================== ======= ======= =======
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are based on average net assets of $37,793,057.
(c) Ratio of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement for the year ended December 31, 1994 and the
period ended December 31, 1993 were 1.87% and 2.18% (annualized),
respectively.
(d) Ratio of net investment income to average net assets prior to reduction of
advisory fee and expense reimbursement for the year ended December 31, 1994
and the period ended December 31, 1993 were 6.50% and 5.90% (annualized),
respectively.
(e) Annualized.
FS-95
<PAGE> 313
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Money Market Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Money Market Fund (a portfolio of AIM Funds Group), including the schedule of
investments, as of December 31, 1995, and 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 two-year period then ended and the period October 16, 1993
(date operations commenced) through December 31, 1993. 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 generally accepted auditing
standards. 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
December 31, 1995, by correspondence with the custodian. 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
Money Market Fund as of December 31, 1995, the results of its operations for the
year then ended, the changes in net assets for each of the years in the two-year
period then ended and financial highlights for each of the years in the two-year
period then ended, and the period October 16, 1993 (date operations commenced)
through December 31, 1993, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1996
FS-96
<PAGE> 314
Financials
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER-47.34%(a)
ASSET-BACKED SECURITIES-18.02%
Asset Securitization Cooperative Corp.
5.65% 02/08/96 $ 28,500 $ 28,330,029
- ----------------------------------------------------------------------------------------------
Delaware Funding Corp.
5.71% 02/07/96 26,500 26,344,482
- ----------------------------------------------------------------------------------------------
Eiger Capital Corp.
5.83% 01/30/96 29,000 28,863,805
- ----------------------------------------------------------------------------------------------
Preferred Receivables Funding Corp.
5.65% 02/26/96 22,000 21,806,644
- ----------------------------------------------------------------------------------------------
105,344,960
- ----------------------------------------------------------------------------------------------
BROKER/DEALER-4.44%
Goldman Sachs Group, L.P.(The)
6.05% 01/11/96 26,000 25,956,306
- ----------------------------------------------------------------------------------------------
FINANCE (PERSONAL CREDIT)-7.12%
Associates Corp. of North America
5.59% 03/18/96 22,000 21,736,959
- ----------------------------------------------------------------------------------------------
Transamerica Finance Corp.
5.52% 01/31/96 19,963 19,871,170
- ----------------------------------------------------------------------------------------------
41,608,129
- ----------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-2.53%
Colgate-Palmolive Co.
5.27% 06/21/96 15,200 14,817,281
- ----------------------------------------------------------------------------------------------
INSURANCE (LIFE)-3.77%
Cargill Financial Services Corp.
5.47% 01/08/96 18,000 17,980,855
- ----------------------------------------------------------------------------------------------
Lincoln National Corp.
5.62% 03/08/96 4,100 4,057,116
- ----------------------------------------------------------------------------------------------
22,037,971
- ----------------------------------------------------------------------------------------------
INSURANCE (OTHER)-2.35%
Marsh & McLennan Companies, Inc.
5.62% 04/25/96 14,000 13,748,662
- ----------------------------------------------------------------------------------------------
OIL & GAS-4.22%
ARCO Coal Australia Inc.
5.60% 03/18/96 25,000 24,700,556
- ----------------------------------------------------------------------------------------------
POLLUTION CONTROL-0.83%
WMX Technologies Inc.
5.51% 06/11/96 5,000 4,876,025
- ----------------------------------------------------------------------------------------------
TELEPHONE-4.06%
American Telephone & Telegraph Co.
5.60% 03/12/96 24,000 23,734,933
- ----------------------------------------------------------------------------------------------
Total Commercial Paper 276,824,823
- ----------------------------------------------------------------------------------------------
</TABLE>
FS-97
<PAGE> 315
Financials
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
MASTER NOTE AGREEMENT-3.59%
Citicorp Securities, Inc.(b)
6.25% 03/11/96 $ 21,000 $ 21,000,000
- ----------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES-1.00%
U.S. Treasury Bills(c)
5.04% 06/27/96 6,000 5,850,480
- ----------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-8.83%
Federal Home Loan Bank
5.90% 10/11/96 5,000 5,000,000
- ----------------------------------------------------------------------------------------------
Federal National Mortgage Association
5.26%(d) 06/02/99 32,000 32,000,000
- ----------------------------------------------------------------------------------------------
6.86% 02/28/96 2,000 2,003,021
- ----------------------------------------------------------------------------------------------
Student Loan Marketing Association
5.24%(d) 08/20/98 2,600 2,600,000
- ----------------------------------------------------------------------------------------------
5.26%(d) 02/08/99 10,000 10,005,254
- ----------------------------------------------------------------------------------------------
Total U.S. Government Agency Securities 51,608,275
- ----------------------------------------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 355,283,578
- ----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS(e)-35.91%
Daiwa Securities America Inc.(f)
5.92% 01/02/96 75,010 75,009,763
- ----------------------------------------------------------------------------------------------
Goldman Sachs & Co.(g)
5.92% 01/02/96 135,000 135,000,000
- ----------------------------------------------------------------------------------------------
Total Repurchase Agreements 210,009,763
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 96.67% 565,293,341(h)
- ----------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES -- 3.33% 19,500,339
- ----------------------------------------------------------------------------------------------
NET ASSETS -- 100.00% $584,793,680
==============================================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(b) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon notice to the issuer. Interest rate on the
master note is redetermined periodically. Rate shown is the rate in
effect on December 31, 1995.
(c) U.S. Treasury bills are traded on a discount basis. In such cases, the
interest rate shown represents the rate of discount paid or received at
the time purchase by the Fund.
(d) Interest rates are redetermined weekly. Rates shown are in effect on
December 31, 1995.
(e) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is
marked to market daily to ensure its market value as being 102 percent
of the sales price of the repurchase agreement. The investments in some
repurchase agreements are through participation in joint accounts with
other mutual funds managed by the investment advisor.
(f) Joint repurchase agreement entered into 12/29/95 with a maturing value of
$646,679,181. Collateralized by $537,995,000 U.S. Treasury obligations,
7.875% to 11.25% due 11/15/07 to 02/15/15.
(g) Joint repurchase agreement entered into 12/29/95 with a maturing value of
$1,195,786,044. Collateralized by $1,106,121,000 U.S. Treasury
obligations, 5.50% to 11.25% due 01/31/98 to 02/15/23.
(h) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-98
<PAGE> 316
Financials
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value (amortized cost) $355,283,578
- -----------------------------------------------------------------------------------------
Repurchase agreements 210,009,763
- -----------------------------------------------------------------------------------------
Receivables for:
Capital stock sold 40,213,522
- -----------------------------------------------------------------------------------------
Interest 566,974
- -----------------------------------------------------------------------------------------
Investment for deferred compensation plan 83,541
- -----------------------------------------------------------------------------------------
Other assets 74,878
- -----------------------------------------------------------------------------------------
Total assets 606,232,256
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 20,517,335
- -----------------------------------------------------------------------------------------
Dividends 168,489
- -----------------------------------------------------------------------------------------
Deferred compensation plan 83,541
- -----------------------------------------------------------------------------------------
Accrued advisory fees 267,751
- -----------------------------------------------------------------------------------------
Accrued administrative service fees 4,337
- -----------------------------------------------------------------------------------------
Accrued distribution fees 393,684
- -----------------------------------------------------------------------------------------
Accrued operating expenses 3,439
- -----------------------------------------------------------------------------------------
Total liabilities 21,438,576
- -----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $584,793,680
=========================================================================================
NET ASSETS:
Class A $221,487,213
=========================================================================================
Class B $ 69,856,594
=========================================================================================
Class C $293,449,873
=========================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 221,519,702
=========================================================================================
Class B 69,864,136
=========================================================================================
Class C 293,502,963
=========================================================================================
Class A:
Net asset value and redemption price per share $ 1.00
=========================================================================================
Offering price per share:
(Net asset value of $1.00 divided by 94.50%) $ 1.06
=========================================================================================
Class B:
Net asset value and offering price per share $ 1.00
=========================================================================================
Class C:
Net asset value, offering and redemption price per share $ 1.00
=========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-99
<PAGE> 317
Financials
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest $28,031,456
- -------------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 2,589,822
- -------------------------------------------------------------------------------------------
Custodian fees 42,019
- -------------------------------------------------------------------------------------------
Distribution fees -- Class A 410,703
- -------------------------------------------------------------------------------------------
Distribution fees -- Class B 381,405
- -------------------------------------------------------------------------------------------
Distribution fees -- Class C 671,137
- -------------------------------------------------------------------------------------------
Trustees' fees 8,896
- -------------------------------------------------------------------------------------------
Transfer agent fees -- Class A 251,325
- -------------------------------------------------------------------------------------------
Transfer agent fees -- Class B 58,270
- -------------------------------------------------------------------------------------------
Transfer agent fees -- Class C 398,344
- -------------------------------------------------------------------------------------------
Administrative service fees 55,020
- -------------------------------------------------------------------------------------------
Other 300,209
- -------------------------------------------------------------------------------------------
Total expenses 5,167,150
- -------------------------------------------------------------------------------------------
Net investment income 22,864,306
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investments (93,121)
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $22,771,185
===========================================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 22,864,306 $ 15,485,684
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities (93,121) --
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 22,771,185 15,485,684
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (8,071,868) (3,918,606)
- -------------------------------------------------------------------------------------------
Class B (1,577,348) (600,466)
- -------------------------------------------------------------------------------------------
Class C (13,215,090) (10,966,612)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A 72,633,973 67,425,582
- -------------------------------------------------------------------------------------------
Class B 35,865,178 32,709,856
- -------------------------------------------------------------------------------------------
Class C (66,448,589) 118,173,709
- -------------------------------------------------------------------------------------------
Net increase in net assets 41,957,441 218,309,147
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 542,836,239 324,527,092
- -------------------------------------------------------------------------------------------
End of period $584,793,680 $542,836,239
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $584,886,801 $542,836,239
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investments (93,121) --
- -------------------------------------------------------------------------------------------
$584,793,680 $542,836,239
===========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-100
<PAGE> 318
Financials
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Money Market Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. 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 shares are sold with a contingent deferred sales charge.
Class C shares are sold at net asset value. Matters affecting each portfolio or
class will be 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 the Fund. The Fund's objective is to provide as high a level of current
income as is consistent with preservation of capital and liquidity.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. 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.
A. Security Valuations - The Fund invests only in securities which have
maturities of 397 days or less from the date of purchase. The securities are
valued on the basis of amortized cost which approximates market value. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is recorded as earned from settlement date and is
recorded on the accrual basis. Dividends to shareholders are declared daily
and are paid monthly.
C. 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 of $93,121 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized, in
the year 2003.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to all
classes, e.g. advisory fees, are allocated among them.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 an annual rate of 0.55% of
the first $1 billion of the Fund's average daily net assets plus 0.50% of the
Fund's average daily net assets in excess of $1 billion. This agreement requires
AIM to reduce its fees or, if necessary, make payments to the Fund to the extent
required to satisfy any expense limitations imposed by the securities laws or
regulations thereunder of any state in which the Fund's shares are qualified for
sale.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to reimburse AIM for certain administrative costs incurred in
providing accounting services to the Fund. During the year ended December 31,
1995, AIM was reimbursed $55,020 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency and shareholder services to the Fund. During the year ended
December 31, 1995, the Fund paid AFS $363,275 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares, the Class B shares and the Class C shares of the Fund. The Trust
has adopted Plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C
FS-101
<PAGE> 319
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
shares (the "Class A and C Plan") and with respect to the Fund's Class B shares
(the "Class B Plan") (collectively, the "Plans"). The Fund, pursuant to the
Class A and C Plan, pays to AIM Distributors compensation at an annual rate of
0.25% of the average daily net assets attributable to the Class A shares and the
Class C shares. The Class A and C Plan is designed to compensate AIM
Distributors for certain promotional and other sales related costs and provides
periodic payments to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class A shares or Class C shares of the Fund. The Fund, pursuant to the Class B
Plan, pays AIM Distributors compensation at an annual rate of 1.00% of the
average daily net assets attributable to the Class B shares. Of this amount, the
Fund may pay a service fee of 0.25% of the average daily net assets of the Class
B shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own Class B
shares of the Fund. Any amounts not paid as a service fee under such 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. AIM Distributors may, from time to time, assign, transfer or
pledge to one or more assignees, its rights to all or a portion of (a)
compensation received by AIM Distributors from the Fund pursuant to the Class B
Plan (but not AIM Distributors' duties and obligations pursuant to the Class B
Plan) and (b) any contingent deferred sales charges payable to AIM Distributors
related to the Class B Plan. During the year ended December 31, 1995, the Class
A shares, the Class B shares and the Class C shares paid AIM Distributors
$410,703, $381,405 and $671,137, respectively, as compensation under the Plans.
AIM Distributors received commissions of $494,184 from sales of the Class A
shares of the Fund during the year ended December 31, 1995. 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 December 31, 1995,
AIM Distributors received $256,618 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1995, the Fund paid legal fees of $3,973
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3 - TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
FS-102
<PAGE> 320
Financials
NOTE 4 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 1,236,115,617 $ 1,236,115,617 607,113,357 $ 607,113,357
- ------------------------------------------------ ----------------------------------- -----------------------------------
Class B 150,618,548 150,618,548 94,699,624 94,699,624
- ------------------------------------------------ ----------------------------------- -----------------------------------
Class C 3,387,330,655 3,387,330,655 2,084,342,014 2,084,342,014
- ------------------------------------------------ ----------------------------------- -----------------------------------
Issued as reinvestment of dividends:
Class A 7,057,740 7,057,740 3,420,397 3,420,397
- ------------------------------------------------ ----------------------------------- -----------------------------------
Class B 1,412,061 1,412,061 503,240 503,240
- ------------------------------------------------ ----------------------------------- -----------------------------------
Class C 10,700,895 10,700,895 9,396,978 9,396,978
- ------------------------------------------------ ----------------------------------- -----------------------------------
Reacquired:
Class A (1,170,539,384) (1,170,539,384) (543,108,172) (543,108,172)
- ------------------------------------------------ ----------------------------------- -----------------------------------
Class B (116,165,431) (116,165,431) (62,493,008) (62,493,008)
- ------------------------------------------------ ----------------------------------- -----------------------------------
Class C (3,464,480,139) (3,464,480,139) (1,975,565,283) (1,975,565,283)
- ------------------------------------------------ ----------------------------------- -----------------------------------
42,050,562 $ 42,050,562 218,309,147 $ 218,309,147
================================================ =================================== ===================================
</TABLE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share, a Class
B share and a Class C share outstanding during each of the years in the two-year
period ended December 31, 1995 and the period October 16, 1993 (date operations
commenced) through December 31, 1993.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
------------------------------------ -----------------------------------
1995 1994 1993 1995 1994 1993
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------- -------- -------- -------- -------- ------- --------
Income from investment operations:
Net investment income 0.0495 0.0337 0.0048 0.0419 0.0259 0.0032
- -------------------------------------------- -------- -------- -------- -------- ------- --------
Less distributions:
Dividends from net investment income (0.0495) (0.0337) (0.0048) (0.0419) (0.0259) (0.0032)
- -------------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============================================ ======== ======== ======== ======== ======== ========
Total return(a) 5.06% 3.43% 2.27% 4.27% 2.62% 1.51%
============================================ ======== ======== ======== ======== ======= ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $221,487 $148,886 $ 81,460 $69,857 $33,999 $ 1,289
============================================ ======== ======== ======== ======== ======= ========
Ratio of expenses to average net assets 1.03%(b) 0.97%(c) 1.00%(c)(d) 1.78%(b) 1.78%(e) 1.75%(d)(e)
============================================ ======== ======== ======== ======== ======= ========
Ratio of net investment income to average
net assets 4.91 %(b) 3.53%(c) 2.27%(c)(d) 4.14%(b) 3.14%(e) 1.54%(d)(e)
============================================ ======== ======== ======== ======== ======= ========
<CAPTION>
CLASS C SHARES
------------------------------------
1995 1994 1993
-------- -------- --------
<S> <<C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income 0.0493 0.0337 0.0048
- -------------------------------------------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.0493) (0.0337) (0.0048)
- -------------------------------------------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
============================================ ======== ======== ========
Total return(a) 5.04% 3.42% 2.27%
============================================ ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $293,450 $359,952 $241,778
============================================ ======== ======== ========
Ratio of expenses to average net assets 1.04%(b) 0.99%(f) 1.00%(d)(f)
============================================ ======== ======== ========
Ratio of net investment income to average
net assets 4.92%(b) 3.49%(f) 2.27%(d)(f)
============================================ ======== ======== ========
</TABLE>
(a) Does not deduct sales charges or contingent deferred sales charges, where
applicable.
(b) Ratios are based on average daily net assets as follows: Class A Shares -
$164,281,243, Class B Shares - $38,140,475 and Class C Shares -
$268,454,942.
(c) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.06% and 3.44% for 1994 and 1.20%
(annualized) and 2.07% (annualized) for 1993.
(d) Annualized.
(e) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.87% and 3.05% for 1994 and 1.95%
(annualized) and 1.34% (annualized) for 1993.
(f) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.08% and 3.40% for 1994 and 1.20%
(annualized) and 2.07% (annualized) for 1993.
FS-103
<PAGE> 321
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Municipal Bond Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Municipal Bond Fund (a portfolio of AIM Funds Group), including the schedule of
investments, as of December 31, 1995, and the related statements 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 three-year period then ended. These financial statements and
the financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the 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
December 31, 1995, 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 the financial highlights
referred to above present fairly, in all material respects, the financial
position of AIM Municipal Bond Fund as of December 31, 1995, the results of
its 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 three-year period then ended, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1996
FS-104
<PAGE> 322
Financials
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ALASKA-2.36%
Alaska (State of) Housing Finance Corp.;
Collateralized First Veterans' Home Mortgage
Series A-2 RB
6.75%, 12/01/24(b) AAA Aaa $ 3,755 $ 3,948,683
- --------------------------------------------------------------------------------------------------
Alaska (State of) Housing Finance Corp.;
Collateralized Mortgage Program First Series RB
6.875%, 06/01/33 AAA Aaa 2,050 2,173,451
- --------------------------------------------------------------------------------------------------
Alaska (State of) Housing Finance Corp.; Series A RB
6.375%, 12/01/02(c)(d) A+ Aa 1,000 1,109,150
- --------------------------------------------------------------------------------------------------
7,231,284
- --------------------------------------------------------------------------------------------------
ARKANSAS-2.04%
Fayetteville (City of); Water and Sewer Refunding
and Improvement Series 1992 RB
6.15%, 08/15/12 A A 2,000 2,145,960
- --------------------------------------------------------------------------------------------------
Little Rock (City of); Sewer Improvement Series B RB
5.75%, 02/01/06 AA+ Aa 2,000 2,081,480
- --------------------------------------------------------------------------------------------------
Little Rock (City of); Solid Waste Disposal Series
1995 RB
5.80%, 05/01/16 A- A1 1,000 1,015,730
- --------------------------------------------------------------------------------------------------
Little Rock (City of); Waste Disposal Series 1995 RB
5.65%, 05/01/11 A- A1 1,000 1,011,460
- --------------------------------------------------------------------------------------------------
6,254,630
- --------------------------------------------------------------------------------------------------
ARIZONA-1.80%
Arizona (State of) Educational Loan Marketing
Corp.; RB
6.125%, 09/01/02(b) -- Aa 1,900 2,026,274
- --------------------------------------------------------------------------------------------------
Pima (County of) Unified School District #10
(Amphitheater); School Improvement Series 1992 E GO
6.50%, 07/01/05 A+ A 3,100 3,495,467
- --------------------------------------------------------------------------------------------------
5,521,741
- --------------------------------------------------------------------------------------------------
CALIFORNIA-1.22%
California (State of); GO
6.00%, 08/01/19(e) AAA Aaa 1,000 1,054,400
- --------------------------------------------------------------------------------------------------
California (State of) Housing Finance Agency; RB
7.45%, 08/01/11 AA- Aa 910 970,042
- --------------------------------------------------------------------------------------------------
Sacramento (City of) California Cogeneration
Authority Procter & Gamble Project Series 1995 RB
7.00%, 07/01/04 BBB- -- 500 556,070
- --------------------------------------------------------------------------------------------------
San Francisco (City and County of) Parking
Authority; Parking Meter Series 1994 RB
7.00%, 06/01/13(e) AAA Aaa 1,000 1,167,750
- --------------------------------------------------------------------------------------------------
3,748,262
- --------------------------------------------------------------------------------------------------
COLORADO-0.92%
Adams County School District Number 1; Unlimited
Tax Building Series 1992-A GO
6.625%, 12/01/02(d)(e) AAA Aaa 500 567,730
- --------------------------------------------------------------------------------------------------
</TABLE>
FS-105
<PAGE> 323
Financials
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
COLORADO (Continued)
Colorado (State of) Housing Finance Authority
(Single Family Residential Housing);
Series 1987 B RB
9.00%, 09/01/17 -- Aa $ 595 $ 621,561
- --------------------------------------------------------------------------------------------------
Mesa County School District #51; 1989 Series B
Certificates of Participation
6.875%, 12/01/05(e) AAA Aaa 1,465 1,635,555
- --------------------------------------------------------------------------------------------------
2,824,846
- --------------------------------------------------------------------------------------------------
CONNECTICUT-3.99%
Connecticut (State of); General Purpose Public
Improvement Series 1992-A GO
6.50%, 03/15/02(c)(d) NRR NRR 5,500 6,188,105
- --------------------------------------------------------------------------------------------------
Connecticut (State of) Development Authority
(Connecticut Power & Light); Series 1993 A RB
5.10%, 09/01/28(f)(g) A-1+ VMIG-1 2,000 2,000,000
- --------------------------------------------------------------------------------------------------
Connecticut Resource Recovery Authority (American
Ref-Fuel Co.) (Southeastern Connecticut Project);
Corporate Credit Series 1988 RB
8.10%, 11/15/15(b) A A2 925 1,031,495
- --------------------------------------------------------------------------------------------------
Connecticut Resource Recovery Authority (American
Ref-Fuel Co.) (Southeastern Connecticut Project);
Series 1988 A RB
7.875%, 11/15/06(b) AA- Baa1 1,700 1,885,113
- --------------------------------------------------------------------------------------------------
8.00%, 11/15/15(b) AA- Baa1 1,000 1,112,490
- --------------------------------------------------------------------------------------------------
12,217,203
- --------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA-0.87%
District of Columbia; Unlimited Tax Refunding
Series 1986 A GO
7.875%, 06/01/96(c)(d) AAA Aaa 1,000 1,035,960
- --------------------------------------------------------------------------------------------------
District of Columbia; Unlimited Tax Series D GO
6.60%, 06/01/96 B Ba 1,600 1,610,624
- --------------------------------------------------------------------------------------------------
2,646,584
- --------------------------------------------------------------------------------------------------
FLORIDA-2.54%
Escambia (County of) (Champion International Corp.
Project); PCR
6.90%, 08/01/22(b) BBB Baa1 1,125 1,207,001
- --------------------------------------------------------------------------------------------------
Florida (State of) Public Education Services (Board
of Education Capital Outlay); Series B RB
5.75%, 06/01/15 AA Aa 1,500 1,548,540
- --------------------------------------------------------------------------------------------------
Jacksonville (City of) (River City Renaissance
Project); Sales Tax RB
5.65%, 10/01/14(e) AAA Aaa 1,000 1,030,770
- --------------------------------------------------------------------------------------------------
Leon (County of); Certificates of Participation
Series A RB
5.875%, 01/01/98 -- Baa1 1,700 1,741,106
- --------------------------------------------------------------------------------------------------
Miami (City of) Parking System; Series 1992 A RB
6.70%, 10/01/06 A A 1,120 1,251,029
- --------------------------------------------------------------------------------------------------
Orange County Housing Authority (Smokewood/Sun Key
Apartments Project); Multi-Family Housing
Refunding Series 1992 A RB
5.25%, 12/01/22(f)(g) A-1 -- 1,000 1,000,000
- --------------------------------------------------------------------------------------------------
7,778,446
- --------------------------------------------------------------------------------------------------
</TABLE>
FS-106
<PAGE> 324
Financials
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GEORGIA-1.42%
Georgia (State of) Housing and Finance Authority
(Home Ownership Opportunity Program); Series C RB
6.50%, 12/01/11 AA+ Aa $ 1,000 $ 1,056,640
- --------------------------------------------------------------------------------------------------
Georgia Municipal Electric Authority; Series P RB
8.00%, 01/01/98(c)(d) AAA Aaa 2,000 2,188,640
- --------------------------------------------------------------------------------------------------
Savannah (City of) Economic Developement Authority
(Hershey Foods Corp. Project); IDR
6.60%, 06/01/12 AA- -- 1,000 1,092,090
- --------------------------------------------------------------------------------------------------
4,337,370
- --------------------------------------------------------------------------------------------------
ILLINOIS-7.90%
Berwyn (City of) (Macneal Memorial Hospital
Association); Hospital Series 1991 RB
7.00%, 06/01/15(e) AAA Aaa 3,250 3,566,907
- --------------------------------------------------------------------------------------------------
Cook (County of); Series 1992 B GO
5.75%, 11/15/07(e) AAA Aaa 2,000 2,104,760
- --------------------------------------------------------------------------------------------------
Illinois (State of); Sales Tax Series 1993 B RB
6.50%, 06/15/13 AAA A1 1,500 1,638,780
- --------------------------------------------------------------------------------------------------
Illinois (State of) Development Finance Authority
(CPC International Project); PCR
6.75%, 05/01/16 -- A2 2,500 2,683,575
- --------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority (Evangelical
Hospital Corp.); RB
6.25%, Series A 04/15/22 AA- -- 1,000 1,019,930
- --------------------------------------------------------------------------------------------------
6.25%, Series 1992-C 04/15/22 AA- A1 1,150 1,172,919
- --------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority (Franciscan
Sisters Health Care); Refunding Series 1992 RB
6.40%, 09/01/04(e) AAA Aaa 2,475 2,725,346
- --------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority (Ravenswood
Hospital Medical Center); Refunding Series
1987 A RB
8.80%, 06/01/06 -- Baa1 1,000 1,063,700
- --------------------------------------------------------------------------------------------------
Joliet Regional Port District (Terminal Facilities
Project - The Dow Chemical Co.); Adjustable
Tender Industrial Building Series 1995 RB
6.10%, 07/15/13(g) -- P-1 700 700,000
- --------------------------------------------------------------------------------------------------
Metropolitan Fair and Exposition Authority; Series
1986 RB
6.00%, 06/01/14(e) AAA Aaa 2,500 2,505,675
- --------------------------------------------------------------------------------------------------
Peoria and Pekin and Waukegan (Cities of); GNMA
Collateralized Mortgage Series 1990 RB
7.875%, 08/01/22(b) AAA -- 160 170,645
- --------------------------------------------------------------------------------------------------
University of Illinois Auxiliary Facilities System;
Series 1991 RB
5.75%, 04/01/22 AA- Aa 4,750 4,850,938
- --------------------------------------------------------------------------------------------------
24,203,175
- --------------------------------------------------------------------------------------------------
KENTUCKY-0.68%
Trimble (County of) (Louisville Gas & Electric); PCR
7.25%, 12/01/16 AA Aa2 2,000 2,095,340
- --------------------------------------------------------------------------------------------------
</TABLE>
FS-107
<PAGE> 325
Financials
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
LOUISIANA-1.82%
Louisiana Public Facilities Authority (Louisiana
Department of Health and Hospital Medical Center
of Louisiana at New Orleans Project);
Series 1992 RB
6.125%, 10/15/07(e) AAA -- $ 2,775 $ 2,936,061
- --------------------------------------------------------------------------------------------------
Louisiana Public Facilities Authority (Our Lady of
Lake Regional Hospital); Hospital Refunding
Series C RB
6.00%, 12/01/07(e) AAA Aaa 2,500 2,649,775
- --------------------------------------------------------------------------------------------------
5,585,836
- --------------------------------------------------------------------------------------------------
MAINE-0.37%
Maine (State of) Education Loan Authority;
Education Loan Series A-2 RB
6.95%, 12/01/07(b) -- A 1,045 1,122,894
- --------------------------------------------------------------------------------------------------
MARYLAND-0.39%
Maryland Health and Higher Education Facilities
Authority (Doctors Community Hospital Inc.);
Series 1990 RB
8.75%, 07/01/00(c)(d) AAA Aaa 1,000 1,198,800
- --------------------------------------------------------------------------------------------------
MASSACHUSETTS-6.09%
Massachusetts (State of); Consolidated Loan Series
1991 C GO
7.00%, 08/01/01(c)(d) NRR NRR 2,450 2,806,769
- --------------------------------------------------------------------------------------------------
Massachusetts Health and Education Facilities
Authority (Anna Jaques Hospital Issue);
Series B RB
6.875%, 10/01/12 -- Baa1 1,400 1,459,010
- --------------------------------------------------------------------------------------------------
Massachusetts Health and Education Facilities
Authority (Lowell General Hospital);
Series 1991 A RB
8.40%, 06/01/11 -- Baa1 3,550 4,003,868
- --------------------------------------------------------------------------------------------------
Massachusetts Health and Education Facilities
Authority (Sisters of Providence Health System);
Series A RB
6.625%, 11/15/22 BBB Baa1 3,500 3,467,100
- --------------------------------------------------------------------------------------------------
Massachusetts Health and Education Facilities
Authority (Valley Regional Health System Issue);
Series 1990 B RB
8.00%, 07/01/00(c)(d) NRR Aaa 3,000 3,505,260
- --------------------------------------------------------------------------------------------------
Massachusetts Municipal Wholesale Electric
Cooperative Power Supply; System Series 1992 A RB
6.75%, 07/01/08(e) AAA Aaa 3,000 3,408,540
- --------------------------------------------------------------------------------------------------
18,650,547
- --------------------------------------------------------------------------------------------------
MICHIGAN-2.98%
Detroit (City of) School District; School Building
and Site (Unlimited Tax) Series 1992 GO
6.00%, 05/01/05 AA Aa 1,000 1,070,760
- --------------------------------------------------------------------------------------------------
6.15%, 05/01/07 AA Aa 1,300 1,391,533
- --------------------------------------------------------------------------------------------------
Flat Rock (City of) Community School District;
Series 1995 GO
5.25%, 05/01/09(e) AAA Aaa 645 640,672
- --------------------------------------------------------------------------------------------------
Lake Orion Community School District; School
Building and Site (Unlimited Tax) Refunding
Series 1994 GO
7.00%, 05/01/05(e) AAA Aaa 2,500 2,956,500
- --------------------------------------------------------------------------------------------------
Michigan (State of) Housing Development Authority; RB
6.60%, 04/01/12 A+ -- 1,000 1,047,150
- --------------------------------------------------------------------------------------------------
</TABLE>
FS-108
<PAGE> 326
Financials
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MICHIGAN (Continued)
Michigan (State of) Hospital Finance Authority
(Sinai Hospital); Series 1995 RB
6.625%, 01/01/16 -- Baa $ 1,250 $ 1,267,013
- --------------------------------------------------------------------------------------------------
Williamston Community School District; Unlimited
Tax Series 1996 GO
5.375%, 05/01/15(e) AAA -- 750 750,270
- --------------------------------------------------------------------------------------------------
9,123,898
- --------------------------------------------------------------------------------------------------
MISSISSIPPI-2.01%
Jackson (County of) (Chevron Corp.); Series 1992 PCR
4.90%, 12/01/16(g) -- P-1 700 700,000
- --------------------------------------------------------------------------------------------------
Mississippi Higher Education Assistance Corp.;
Student Loan Series 1994 C RB
7.50%, 09/01/09(b) -- A 5,000 5,454,300
- --------------------------------------------------------------------------------------------------
6,154,300
- --------------------------------------------------------------------------------------------------
MISSOURI-1.55%
Independence (City of) Industrial Development
Authority (The Independence Ridge Apartment
Project); Multi-Family Housing Series 1985 RB
5.25%, 12/01/15(f)(g) A-1+ -- 1,000 1,000,000
- --------------------------------------------------------------------------------------------------
Kansas City Industrial Development Authority
(General Motors Corp. Project); PCR
6.05%, 04/01/06 A- A3 1,435 1,500,149
- --------------------------------------------------------------------------------------------------
Kansas City Municipal Assistance Corp. (Truman
Medical Center Charitable Foundation);
Leasehold Improvement Series 1991 A RB
7.00%, 11/01/08 A A 605 667,684
- --------------------------------------------------------------------------------------------------
Missouri (State of) Environmental Improvement and
Energy Resources; Series 1995C PCR
5.25%, Series 1995E 07/01/07 -- Aa 500 517,905
- --------------------------------------------------------------------------------------------------
5.85%, Series 1995C 01/01/10 -- Aa 1,000 1,059,160
- --------------------------------------------------------------------------------------------------
4,744,898
- --------------------------------------------------------------------------------------------------
NEVADA-1.42%
Humboldt (County of) (Sierra Pacific Project);
Series 1987 PCR
6.55%, 10/01/13(e) AAA Aaa 3,000 3,272,610
- --------------------------------------------------------------------------------------------------
Las Vegas (City of); 1992 Limited Tax GO
6.50%, 10/01/08(e) AAA Aaa 1,000 1,090,250
- --------------------------------------------------------------------------------------------------
4,362,860
- --------------------------------------------------------------------------------------------------
NEW HAMPSHIRE-1.94%
New Hampshire Housing Finance Authority; Single
Family Residential Mortgage Series 1987 B RB
8.625%, 07/01/13(b) A+ Aa 1,505 1,574,998
- --------------------------------------------------------------------------------------------------
New Hampshire State Turnpike System; Series 1990 RB
7.40%, 04/01/00(c)(d) AAA Aaa 3,850 4,380,222
- --------------------------------------------------------------------------------------------------
5,955,220
- --------------------------------------------------------------------------------------------------
NEW JERSEY-2.50%
Camden (County of) Municipal Utilities Authority;
Series 1987 RB
8.25%, 12/01/17(e) AAA Aaa 2,000 2,190,860
- --------------------------------------------------------------------------------------------------
</TABLE>
FS-109
<PAGE> 327
Financials
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW JERSEY (Continued)
Hudson County Correctional Facility; Certificate of
Participation Series 1992 RB
6.60%, 12/01/21(b) AAA Aaa $ 1,250 $ 1,354,912
- --------------------------------------------------------------------------------------------------
New Jersey City Economic Development Authority
(Atlantic City Sewer Co.); Sewer Facility Series
1991 RB
7.25%, 12/01/11(b)(h) -- -- 1,935 2,166,155
- --------------------------------------------------------------------------------------------------
New Jersey Health Care Facility Financing Authority
(St. Peters Medical Center); Series 1987 C RB
8.60%, 07/01/97(e) AAA Aaa 1,250 1,357,163
- --------------------------------------------------------------------------------------------------
New Jersey State Housing and Mortgage Finance
Agency; Home Buyer Series M RB
6.95%, 10/01/22(b)(e) AAA Aaa 550 584,144
- --------------------------------------------------------------------------------------------------
7,653,234
- --------------------------------------------------------------------------------------------------
NEW MEXICO-2.91%
Albuquerque (City of) (Albuquerque Academy
Project); Educational Facilities Series 1995 RB
5.75%, 10/15/15 AA- Aa 915 954,510
- --------------------------------------------------------------------------------------------------
Los Alamos (County of); Utility Series A RB
6.00%, 07/01/15(e) AAA Aaa 2,000 2,118,160
- --------------------------------------------------------------------------------------------------
Rio Rancho (City of); Water and Wastewater System
Series 1995 A RB
5.90%, 05/15/12(e) AAA Aaa 2,000 2,089,720
- --------------------------------------------------------------------------------------------------
Santa Fe (City of); Series 1994 A RB
6.25%, 06/01/15(e) AAA Aaa 2,100 2,238,201
- --------------------------------------------------------------------------------------------------
San Juan (County of) Central Consolidated School
District #22; School Building Series 1996 GO
5.40%, 08/15/11(e) AAA Aaa 1,500 1,512,210
- --------------------------------------------------------------------------------------------------
8,912,801
- --------------------------------------------------------------------------------------------------
NEW YORK-10.08%
New York (City of); GO
8.25%, Series 1991 F 11/15/01(c)(d) NRR Aaa 1,840 2,234,533
- --------------------------------------------------------------------------------------------------
7.65%, Series 1992 F 02/01/06 BBB+ Baa1 4,775 5,287,692
- --------------------------------------------------------------------------------------------------
7.70%, Series D 02/01/09 BBB+ Baa1 2,000 2,218,720
- --------------------------------------------------------------------------------------------------
7.20%, Series H 02/01/15 BBB+ Baa1 500 540,680
- --------------------------------------------------------------------------------------------------
8.25%, Series 1991 F 11/15/15 BBB+ Baa1 160 188,376
- --------------------------------------------------------------------------------------------------
7.00%, Series C, Sub-Series C-1 08/01/17 BBB+ Baa1 2,000 2,150,120
- --------------------------------------------------------------------------------------------------
7.00%, Series B 02/01/18(e) AAA Aaa 1,000 1,118,640
- --------------------------------------------------------------------------------------------------
7.00%, Series H 02/01/20 BBB+ Baa1 350 374,563
- --------------------------------------------------------------------------------------------------
New York City Industrial Development Agency (The
Lighthouse Inc. Project); Series 1992 RB
6.50%, 07/01/22(f) AA Aa2 1,500 1,613,130
- --------------------------------------------------------------------------------------------------
New York State Environmental Facility Corp.; Water
Revenue Series E PCR
6.875%, 06/15/10 A Aa 3,400 3,839,518
- --------------------------------------------------------------------------------------------------
New York State Medical Care Facilities Authority
(Mental Health Services); Refunding Series
1987 A RB
8.875%, 08/15/97(c)(d) AAA Aaa 940 1,030,832
- --------------------------------------------------------------------------------------------------
</TABLE>
FS-110
<PAGE> 328
Financials
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW YORK (Continued)
New York State Urban Development Corp.; Capital
Facilities 1991 Series 3 RB
7.375%, 01/01/02(c)(d) NRR Aaa $ 7,850 $ 9,211,975
- --------------------------------------------------------------------------------------------------
New York State Urban Development Corp.; Higher
Education Technology Grants RB
5.90%, 04/01/09(e) AAA Aaa 1,000 1,070,370
- --------------------------------------------------------------------------------------------------
30,879,149
- --------------------------------------------------------------------------------------------------
NORTH CAROLINA-3.10%
North Carolina Eastern Municipal Power Agency;
Series 1988 A RB
8.00%, 01/01/98(c)(d) NRR Aaa 3,000 3,282,960
- --------------------------------------------------------------------------------------------------
North Carolina Eastern Municipal Power Agency;
Series A RB
6.125%, 01/01/10(e) AAA Aaa 1,500 1,594,200
- --------------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency (No. 1
Catawba Electric Project); Refunding RB
7.25%, 01/01/07 A A 2,750 3,140,555
- --------------------------------------------------------------------------------------------------
North Carolina Municipal Power Agency (No. 1
Catawba Electric Project); Series 1990 RB
6.50%, 01/01/10(e) AAA Aaa 1,115 1,179,826
- --------------------------------------------------------------------------------------------------
6.50%, 01/01/10(c) AAA Aaa 260 300,908
- --------------------------------------------------------------------------------------------------
9,498,449
- --------------------------------------------------------------------------------------------------
OHIO-2.84%
Akron Bath Copley Joint Township (Akron City
Hospital); Series 1987 RB
8.875%, 11/15/97(c)(d) NRR Aaa 1,610 1,780,934
- --------------------------------------------------------------------------------------------------
Butler (County of) Fairfield City School District;
Unlimited Tax Series 1995 GO
6.10%, 12/01/15(e) AAA Aaa 1,000 1,071,600
- --------------------------------------------------------------------------------------------------
Hamilton (County of); Electric System Mortgage RB
8.00%, Series 1998 B 10/15/98(c)(d) AAA Aaa 1,000 1,119,270
- --------------------------------------------------------------------------------------------------
6.00%, Series A 10/15/12(e) AAA Aaa 1,000 1,057,890
- --------------------------------------------------------------------------------------------------
Mason (City of) Health Care Facilities (MCV Health
Care Facilities, Inc.); Series 1990 RB
7.625%, 02/01/40 AAA -- 2,190 2,465,283
- --------------------------------------------------------------------------------------------------
Ohio Department of Transportation (Panhandle Rail
Line Project); Series 1992 Certificates of
Participation
6.50%, 04/15/12(e) AAA Aaa 1,100 1,194,699
- --------------------------------------------------------------------------------------------------
8,689,676
- --------------------------------------------------------------------------------------------------
OKLAHOMA-2.30%
McAlester (City of) Public Works Authority;
Refunding and Improvement Series 1995 RB
5.50%, 12/01/10(e) AAA Aaa 975 986,836
- --------------------------------------------------------------------------------------------------
Southern Oklahoma Memorial Hospital Authority;
Series 1993 A RB
5.60%, 02/01/00 A A 2,500 2,595,575
- --------------------------------------------------------------------------------------------------
Tulsa (City of) Industrial Authority (Medical
Center Project - St. Johns Hospital); RB
6.25%, 02/15/14 AA Aa 2,000 2,094,480
- --------------------------------------------------------------------------------------------------
</TABLE>
FS-111
<PAGE> 329
Financials
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
OKLAHOMA (Continued)
Tulsa Public Facilities Authority - Capital
Improvements - Water System; Series 1988 B RB
6.00%, 03/01/08 A+ -- $ 1,305 $ 1,370,485
- --------------------------------------------------------------------------------------------------
7,047,376
- --------------------------------------------------------------------------------------------------
OREGON-0.78%
Portland (City of) Sewer System; Series 1994 A RB
6.20%, 06/01/12 A+ A1 1,200 1,303,992
- --------------------------------------------------------------------------------------------------
6.25%, 06/01/15 A+ A1 1,000 1,082,900
- --------------------------------------------------------------------------------------------------
2,386,892
- --------------------------------------------------------------------------------------------------
PENNSYLVANIA-2.72%
Lancaster (County of) Solid Waste Management
Authority; Resource Recovery System Series
1988 A RB
8.50%, 12/15/10(b) BBB A 3,500 3,803,520
- --------------------------------------------------------------------------------------------------
Pennsylvania (State of); Third Series GO
6.75%, 11/15/13(e) AAA Aaa 1,250 1,401,788
- --------------------------------------------------------------------------------------------------
Pennsylvania Economic Development Finance Authority
(Colver Project); Resource Recovery Series
1994 D RB
7.05%, 12/01/10(b) BBB- -- 2,900 3,121,705
- --------------------------------------------------------------------------------------------------
8,327,013
- --------------------------------------------------------------------------------------------------
PUERTO RICO-1.83%
Puerto Rico (Commonwealth of) Electric Power
Authority; RB
7.00%, Series 1991 P 07/01/01(c)(d) A- Baa1 1,325 1,519,311
- --------------------------------------------------------------------------------------------------
6.00%, Series 1989 07/01/10 A- Baa1 4,000 4,088,160
- --------------------------------------------------------------------------------------------------
5,607,471
- --------------------------------------------------------------------------------------------------
RHODE ISLAND-0.82%
Rhode Island Depositors Economic Protection Corp.;
Special Obligation Series 1992 A RB
6.95%, 08/01/02(c)(d) AAA Aaa 1,250 1,445,100
- --------------------------------------------------------------------------------------------------
Rhode Island Housing and Mortgage Finance Agency;
Homeownership Opportunity Series 15 B RB
6.00%, 10/01/04 AA+ Aa 1,000 1,056,970
- --------------------------------------------------------------------------------------------------
2,502,070
- --------------------------------------------------------------------------------------------------
SOUTH CAROLINA-0.69%
South Carolina State Education Assistance
Authority; Guaranteed Student Loan Series 1990 RB
6.60%, 09/01/01(b) AA -- 500 531,980
- --------------------------------------------------------------------------------------------------
South Carolina State Housing Finance and
Development Authority; Homeownership Mortgage
Series 1990 C RB
7.50%, 07/01/05(b) AA Aa 500 541,335
- --------------------------------------------------------------------------------------------------
South Carolina (State of) Public Service Authority;
Electric Revenue & Electric System Series C RB
7.20%, 07/01/06 AA- Aa 1,000 1,037,970
- --------------------------------------------------------------------------------------------------
2,111,285
- --------------------------------------------------------------------------------------------------
</TABLE>
FS-112
<PAGE> 330
Financials
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TENNESSEE-2.35%
Davidson (County of) Madison Suburban Utility
District; Water Refunding RB
5.70%, 02/01/11(e) AAA Aaa $ 1,180 $ 1,245,372
- --------------------------------------------------------------------------------------------------
Nashville and Davidson (Counties of) Metropolitan
Government; Water and Sewer Refunding
Series 1986 RB
7.25%, 01/01/96 A A1 325 333,899
- --------------------------------------------------------------------------------------------------
Shelby (County of); School Series 1994 GO
5.95%, 03/01/17 AA+ Aa 2,675 2,787,350
- --------------------------------------------------------------------------------------------------
Shelby (County of); Unlimited Tax School GO
6.00%, 03/01/17 AA+ Aa 2,695 2,816,652
- --------------------------------------------------------------------------------------------------
7,183,273
- --------------------------------------------------------------------------------------------------
TEXAS-15.64%
Arlington Independent School District; Refunding
Series 1995 GO
5.75%, 02/15/21(e) -- Aaa 1,000 1,026,310
- --------------------------------------------------------------------------------------------------
Austin (City of); Utility System RB
6.50%, 05/15/11(e) AAA Aaa 1,380 1,480,519
- --------------------------------------------------------------------------------------------------
Austin Community College District; Combined Fee
Revenue Building and Refunding Series 1995 RB
6.10%, 02/01/13(e) AAA Aaa 1,115 1,180,194
- --------------------------------------------------------------------------------------------------
Bellville Independent School District; Unlimited
Tax School Building and Refunding Series 1995 GO
6.125%, 02/01/20(e) -- Aaa 830 862,511
- --------------------------------------------------------------------------------------------------
Brazos Higher Education Loan Authority Inc.;
Student Loan Refunding RB
6.45%, Series 1992 C-1 11/01/02(b) -- Aa 1,150 1,254,328
- --------------------------------------------------------------------------------------------------
6.50%, Series 1994 B-1 06/01/04(b) -- A 700 751,443
- --------------------------------------------------------------------------------------------------
Brazos River Authority (Houston Lighting and Power
Project); Collateralized Series 1986 A RB
7.875%, 11/01/18(b)(e) AAA Aaa 2,825 2,955,543
- --------------------------------------------------------------------------------------------------
Brazos River Harbor Navigation District (Dow
Chemical Co.); Series 1993 PCR
5.25%, 05/01/23(b)(g) A-1 P-1 200 200,000
- --------------------------------------------------------------------------------------------------
Comal County Industrial Development Authority (The
Coleman Co., Inc. Project); Industrial
Development Series 1980 RB
9.25%, 08/01/00(c) NRR NRR 1,415 1,615,293
- --------------------------------------------------------------------------------------------------
Dallas (City of); Unlimited Tax GO
5.625%, 08/15/11 AAA Aaa 680 689,581
- --------------------------------------------------------------------------------------------------
Dallas (City of); Waterworks and Sewer System
Series 1994 A RB
6.00%, 10/01/14 AA Aa 2,030 2,145,669
- --------------------------------------------------------------------------------------------------
Dallas-Fort Worth Regional Airport Authority;
Airport Series 1985 RB
6.10%, 11/01/07(e) AAA Aaa 430 432,851
6.10%, 11/01/07 A A1 200 200,326
- --------------------------------------------------------------------------------------------------
Dallas Independent School District; Series 1995 GO
5.70%, 08/15/12(e) AAA Aaa 500 517,925
- --------------------------------------------------------------------------------------------------
Denison Hospital Authority (Texoma Medical Center
Project); Refunding RB
8.00%, 09/01/96 BBB -- 1,000 1,036,850
- --------------------------------------------------------------------------------------------------
</TABLE>
FS-113
<PAGE> 331
Financials
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS (Continued)
Farmers Branch; Assessment and Utility System
Certificates of Obligation RB
5.40%, 11/01/14 A- A $ 1,000 $ 968,910
- --------------------------------------------------------------------------------------------------
Georgetown (City of); Utility System Series
1995 A RB
6.20%, 08/15/15(e) AAA Aaa 1,500 1,577,475
- --------------------------------------------------------------------------------------------------
Harris County; Toll Road Unlimited Tax General
Obligation and Subordinate Lien Refunding Series
1991 RB
6.75%, 08/01/14 AA Aa 3,850 4,232,690
- --------------------------------------------------------------------------------------------------
Harris County Health Facilities Development Corp.
(Saint Luke's Episcopal Hospital Project); Series
1991 RB
6.70%, 02/15/03 AA Aa 1,000 1,106,160
- --------------------------------------------------------------------------------------------------
Harris County Mental Health and Mental Retardation
Authority; Refunding Series 1992 RB
6.25%, 9/15/10(e) AAA Aaa 4,500 4,714,695
- --------------------------------------------------------------------------------------------------
Harris County Municipal Utility District #208;
Water & Sewer System Unlimited Tax Refunding
Series 1995 RB
5.50%, 11/01/14(e) AAA Aaa 905 899,679
- --------------------------------------------------------------------------------------------------
Houston (City of); Refunding Series 1992 C GO
6.25%, 03/01/02(c)(d) NRR NRR 1,470 1,606,916
- --------------------------------------------------------------------------------------------------
Hurst, Euless, Bedford, Texas Independent School
District; Refunding RB
6.50%, 08/15/24(e) AAA Aaa 1,000 1,070,630
- --------------------------------------------------------------------------------------------------
Hurst, Euless, Bedford, Texas Independent School
District; Series 1987 GO
5.80%, 08/15/96 AA- A1 645 653,817
- --------------------------------------------------------------------------------------------------
Keller (City of) Independent School District;
Series 1994 Certificates of Participation
6.00%, 08/15/05(e) AAA Aaa 1,000 1,089,890
- --------------------------------------------------------------------------------------------------
North Central Texas Health Facilities Development
Corp. (Baylor Health Care Systems); Project A RB
6.00%, 05/15/13 AA Aa 500 515,525
- --------------------------------------------------------------------------------------------------
Plano (City of) Independent School District;
Unlimited Tax Series 1991 B GO
5.625%, 02/15/01(c)(d) AAA Aaa 2,500 2,644,600
- --------------------------------------------------------------------------------------------------
Richardson (City of) Hospital Authority (Richardson
Medical Center); Refunding RB
6.50%, 12/01/12 BBB- Baa 1,925 1,940,208
- --------------------------------------------------------------------------------------------------
Round Rock Independent School District; Series A GO
6.10%, 08/01/09(e) AAA Aaa 1,760 1,872,746
- --------------------------------------------------------------------------------------------------
Texas (State of) Housing Agency; Residential
Development Mortgage Series 1987 D RB
8.40%, 07/01/20(b) A+ Aa 3,615 3,818,163
- --------------------------------------------------------------------------------------------------
Texas National Research Laboratory Community
Financing Corp. (Superconducting Super Collider);
Lease RB
7.10%, 12/01/01(c)(d) AAA Aaa 600 694,428
- --------------------------------------------------------------------------------------------------
Victoria (County of) Texas Hospital Citizens
Medical Center; RB
6.20%, 01/01/10(e) AAA Aaa 1,000 1,067,510
- --------------------------------------------------------------------------------------------------
</TABLE>
FS-114
<PAGE> 332
Financials
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS (Continued)
Weatherford (City of) Independent School District;
Refunding Series 1994 GO
6.40%, 02/15/12(e) AAA Aaa $ 1,000 $ 1,086,910
- --------------------------------------------------------------------------------------------------
47,910,295
- --------------------------------------------------------------------------------------------------
UTAH-2.38%
Salt Lake (County of) (Service Station Holdings
Inc. Project - The British Petroleum Co. PLC,
Guarantor); Refunding Series 1994 PCR
5.00%, 02/01/08(g) A-1+ Aa3 2,100 2,100,000
- --------------------------------------------------------------------------------------------------
Utah (State of) Housing Finance Agency; Federally
Insured Term Subordinate Single Family Mortgage RB
6.30%, Series 1994 E-1, 07/01/06 A+ A1 975 1,036,542
- --------------------------------------------------------------------------------------------------
7.15%, Series 1994 G-1, 07/01/06 A+ A1 1,105 1,241,313
- --------------------------------------------------------------------------------------------------
Utah (State of) Housing Finance Agency; Series
1994 C RB
6.05%, 07/01/06 -- A1 975 1,017,305
- --------------------------------------------------------------------------------------------------
Utah (State of) Housing Finance Agency; Single
Family Mortgage RB
6.30%, Series 1995 G, 07/01/16 AAA Aaa 500 519,630
- --------------------------------------------------------------------------------------------------
6.45%, Series G2, 07/01/27(b) AAA Aaa 1,330 1,381,790
- --------------------------------------------------------------------------------------------------
7,296,580
- --------------------------------------------------------------------------------------------------
VIRGIN ISLANDS-1.07%
Virgin Islands Territory (Hugo Insurance Claims
Fund); Special Tax Bond Series 1991 GO
7.75%, 10/01/06(h) -- -- 2,905 3,262,199
- --------------------------------------------------------------------------------------------------
VIRGINIA-1.01%
Peninsula Ports Authority of Virginia (Shell Coal
and Terminal Co. Project); Unit Priced Demand
Adjustable Port Facility Refunding Series 1987 RB
4.95%, 12/01/05(g) AAA Aa2 500 500,000
- --------------------------------------------------------------------------------------------------
Richmond (City of); Public Improvement Refunding
Series B GO
6.25%, 01/15/18 AA A1 2,500 2,588,925
- --------------------------------------------------------------------------------------------------
3,088,925
- --------------------------------------------------------------------------------------------------
WASHINGTON-1.31%
Clark (County of) Gamas School District #117; GO
6.00%, 12/01/14(e) AAA Aaa 1,000 1,055,720
- --------------------------------------------------------------------------------------------------
King (County of); Unlimited Tax GO
6.50%, 12/01/11 AA+ Aa1 500 504,460
- --------------------------------------------------------------------------------------------------
Seattle (City of) Metropolitan Sewer District;
Series T RB
6.80%, 01/01/11 AA- A1 1,780 1,950,310
- --------------------------------------------------------------------------------------------------
Washington (State of) Health Care Facility
Authority (Sisters of Providence); Series 1995 RB
5.50%, 10/01/12(e) AAA Aaa 500 495,635
- --------------------------------------------------------------------------------------------------
4,006,125
- --------------------------------------------------------------------------------------------------
WISCONSIN-0.30%
Wisconsin Housing and Economic Development
Authority; Home Ownership Series 1990 E RB
8.00%, 03/01/21(b) A+ Aa 865 918,967
- --------------------------------------------------------------------------------------------------
</TABLE>
FS-115
<PAGE> 333
Financials
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WYOMING-0.54%
Lincoln (County of) (Exxon Project); Series
1984 C PCR
4.85%, 11/01/14(g) A-1+ -- $ 600 $ 600,000
- --------------------------------------------------------------------------------------------------
Natrona (County of) Wyoming Medical Center; RB
6.00%, 09/15/11(e) AAA Aaa 1,000 1,059,560
- --------------------------------------------------------------------------------------------------
1,659,560
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-99.48% 304,699,474
- --------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.52% 1,580,855
- --------------------------------------------------------------------------------------------------
NET ASSETS-100.00% $ 306,280,329
==================================================================================================
</TABLE>
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) Security subject to alternative minimum tax.
(c) Secured by an escrow fund of U.S. Treasury obligations.
(d) Security has an irrevocable call or mandatory put by the issuer. Maturity
date reflects such call or put.
(e) Secured by bond insurance.
(f) Secured by a letter of credit.
(g) Demand security; payable upon demand by the Fund with usually no more than
seven calendar days' notice. Interest rates are redetermined periodically.
Rates shown are the rates in effect on December 31, 1995.
(h) Unrated security; determined by the investment advisor to be of comparable
quality to the rated securities in which the Fund may invest, pursuant to
guidelines of quality adopted by the Board of Trustees and followed by the
investment advisor.
ABBREVIATIONS:
GO - General Obligation Bonds
IDR - Industrial Development Revenue Bonds
NRR - Not Re-Rated
PCR - Pollution Control Revenue Bonds
RB - Revenue Bonds
See Notes to Financial Statements.
FS-116
<PAGE> 334
Financials
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (amortized cost $282,622,016) $304,699,474
- -----------------------------------------------------------------------------------------
Receivables for:
Investments sold 1,333,981
- -----------------------------------------------------------------------------------------
Fund shares sold 468,495
- -----------------------------------------------------------------------------------------
Interest 5,414,913
- -----------------------------------------------------------------------------------------
Investment for deferred compensation plan 59,754
- -----------------------------------------------------------------------------------------
Other assets 121,846
- -----------------------------------------------------------------------------------------
Total assets 312,098,463
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 4,206,124
- -----------------------------------------------------------------------------------------
Fund shares reacquired 510,689
- -----------------------------------------------------------------------------------------
Deferred compensation plan 59,754
- -----------------------------------------------------------------------------------------
Dividends 591,917
- -----------------------------------------------------------------------------------------
Accrued advisory fees 120,625
- -----------------------------------------------------------------------------------------
Accrued administrative service fees 5,437
- -----------------------------------------------------------------------------------------
Accrued distribution fees 213,534
- -----------------------------------------------------------------------------------------
Accrued trustees' fees 2,096
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 39,926
- -----------------------------------------------------------------------------------------
Accrued operating expenses 68,032
- -----------------------------------------------------------------------------------------
Total liabilities 5,818,134
- -----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $306,280,329
=========================================================================================
NET ASSETS:
Class A $284,802,514
=========================================================================================
Class B $ 21,477,815
=========================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 34,274,253
=========================================================================================
Class B 2,584,697
=========================================================================================
Class A:
Net asset value and redemption price per share $ 8.31
=========================================================================================
Offering price per share:
(Net asset value of $8.31 plus 95.25%) $ 8.72
=========================================================================================
Class B:
Net asset value and offering price per share $ 8.31
=========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-117
<PAGE> 335
Financials
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $17,741,573
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,356,225
- ----------------------------------------------------------------------------------------
Custodian fees 53,826
- ----------------------------------------------------------------------------------------
Transfer agent fees - Class A 190,280
- ----------------------------------------------------------------------------------------
Transfer agent fees - Class B 22,920
- ----------------------------------------------------------------------------------------
Administrative service fees 65,899
- ----------------------------------------------------------------------------------------
Trustees' fees 10,069
- ----------------------------------------------------------------------------------------
Distribution fees - Class A 686,308
- ----------------------------------------------------------------------------------------
Distribution fees - Class B 145,330
- ----------------------------------------------------------------------------------------
Other 132,607
- ----------------------------------------------------------------------------------------
Total expenses 2,663,464
- ----------------------------------------------------------------------------------------
Less expenses assumed by advisor (13,200)
- ----------------------------------------------------------------------------------------
Net expenses 2,650,264
- ----------------------------------------------------------------------------------------
Net investment income 15,091,309
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT SECURITIES:
Realized gain on sales of investment securities 674,681
- ----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 19,230,259
- ----------------------------------------------------------------------------------------
Net gain on investment securities 19,904,940
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $34,996,249
========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-118
<PAGE> 336
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 15,091,309 $ 15,777,347
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities 674,681 (2,668,737)
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities 19,230,259 (24,480,672)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 34,996,249 (11,372,062)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (14,621,874) (15,315,671)
- ---------------------------------------------------------------------------------------------
Class B (654,391) (269,520)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A -- (934,223)
- ---------------------------------------------------------------------------------------------
Class B -- (30,963)
- ---------------------------------------------------------------------------------------------
Return of capital:
Class A (1,011,782) (969,892)
- ---------------------------------------------------------------------------------------------
Class B (45,282) (17,068)
- ---------------------------------------------------------------------------------------------
Share transactions-net:
Class A 9,550,157 (8,364,063)
- ---------------------------------------------------------------------------------------------
Class B 11,436,172 7,376,340
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 39,649,249 (29,897,122)
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 266,631,080 296,528,202
- ---------------------------------------------------------------------------------------------
End of period $306,280,329 $266,631,080
=============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $285,976,665 $266,770,610
- ---------------------------------------------------------------------------------------------
Undistributed net investment income (61,021) (380,687)
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on investment
securities (1,712,773) (2,606,042)
- ---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 22,077,458 2,847,199
- ---------------------------------------------------------------------------------------------
$306,280,329 $266,631,080
=============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-119
<PAGE> 337
Financials
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Municipal Bond Fund (the "Fund") is a series portfolio of AIM Funds Group
(the "Trust"). The Trust is a Delaware business trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of nine separate series
portfolios, each having an unlimited number of shares of beneficial interest.
The Fund currently offers two different classes of shares: the Class A shares
and the Class B shares. Class A shares are sold with a front-end sales charge.
Class B shares are sold with a contingent deferred sales charge. 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 the Fund. The Fund's objective is to achieve a high
level of current income exempt from federal income taxes consistent with the
preservation of principal by investing in a diversified portfolio of municipal
bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. 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.
A. Security Valuations - Portfolio securities are valued based on market
quotations or at fair value determined by a pricing service approved by the
Board of Trustees, 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 Trustees, or persons designated by the Board of Trustees,
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 Trust's officers in a manner specifically authorized
by the Board of Trustees. Notwithstanding the above, short-term obligations
with maturities of 60 days or less are valued at amortized cost.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. It is the policy of the Fund to declare
daily dividends from net investment income. Such dividends are paid monthly.
Distributions from net realized capital gains, if any, are recorded on
ex-dividend date and are paid annually. On January 1, 1995, the Fund adopted
the policy of amortizing premiums for book purposes. The cumulative effect of
the adjustment to prior periods was a decrease to ending undistributed net
investment income of $780,679 with an offsetting increase to unrealized
appreciation of investment securities. On December 31, 1995, undistributed
net investment income was increased by $504,622, undistributed net realized
gain (loss) increased by $218,588 and paid-in capital reduced by $723,210 in
order to comply with the requirements of the American Institute of Certified
Public Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
C. 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 of $1,712,774 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized, in
the year 2002.
D. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 an annual rate of 0.50% of
the first $200 million of the Fund's average daily net assets, plus 0.40% of the
Fund's average daily net
FS-120
<PAGE> 338
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
assets in excess of $200 million to and including $500 million, plus 0.35% of
the Fund's average daily net assets in excess of $500 million to and including
$1 billion, plus 0.30% of the Fund's average daily net assets in excess of $1
billion. This agreement requires AIM to reduce its fees or, if necessary, make
payments to the Fund to the extent required to satisfy any expense limitations
imposed by the securities laws or regulations thereunder of any state in which
the Fund's shares are qualified for sale. During the year ended December 31,
1995, AIM reimbursed expenses of $13,200 with respect to the Class B shares.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to reimburse AIM for certain administrative costs incurred in
providing accounting services to the Fund. During the year ended December 31,
1995, AIM was reimbursed $65,899 for such services.
The Fund, pursuant to a transfer agent and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended December 31, 1995, AFS
was paid $141,963 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A 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 Class A shares of the Fund. The Fund,
pursuant to the Class B Plan, pays AIM Distributors compensation at an annual
rate of 1.00% of the average daily net assets attributable to the Class B
shares. Of this amount, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class B shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class B shares of the Fund. Any amounts not paid
as a service fee under such 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. AIM Distributors may,
from time to time, assign, transfer or pledge to one or more assignees, its
rights to all or a designated portion of (a) compensation payable to AIM
Distributors from the Fund pursuant to the Class B Plan (but not AIM
Distributors' duties and obligations pursuant to the Class B Plan) and (b) any
contingent deferred sales charges received by AIM Distributors related to the
Class B shares. During the year ended December 31, 1995, the Class A shares and
the Class B shares paid AIM Distributors $686,308 and $145,330, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $116,667 from sales of the Class A
shares of the Fund during the year ended December 31, 1995. 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 December 31, 1995,
AIM Distributors received $31,956 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1995, the Fund paid legal fees of $3,370
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3 - TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund has a $4,900,000 committed line of credit with a financial institution
syndicate with Chemical Bank of New York as the administrative agent. Interest
on borrowings under the line of credit is payable on maturity or prepayment
date. During the period July 20, 1995 (effective date of line of credit
agreement) through December 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's committed
line.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1995 was
$120,288,332 and $97,620,202, respectively.
FS-121
<PAGE> 339
Financials
NOTE 5 - INVESTMENT SECURITIES (continued)
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $22,089,054
- ------------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (11,596)
- ------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $22,077,458
==================================================================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 6 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------- ----------------------------
SHARES VALUE SHARES VALUE
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 6,038,257 $ 48,938,165 3,774,110 $ 30,827,309
- ----------------------------------------------------------- ----------------------------- ----------------------------
Class B 1,963,653 15,985,997 1,031,724 8,351,056
- ----------------------------------------------------------- ----------------------------- ----------------------------
Issued as reinvestment of dividends:
Class A 1,117,182 9,074,834 1,275,719 10,304,397
- ----------------------------------------------------------- ----------------------------- ----------------------------
Class B 50,725 412,983 24,242 193,390
- ----------------------------------------------------------- ----------------------------- ----------------------------
Reacquired:
Class A (5,965,522) (48,462,842) (6,125,144) (49,495,769)
- ----------------------------------------------------------- ----------------------------- ----------------------------
Class B (608,842) (4,962,808) (146,039) (1,168,106)
- ----------------------------------------------------------- ----------------------------- ----------------------------
2,595,453 $ 20,986,329 (165,388) $ (987,723)
=========================================================== ============================= ============================
</TABLE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during each of the years in the ten-year period ended December 31,
1995 and for a Class B share outstanding during each of the years in the
two-year period ended December 31, 1995 and the period September 1, 1993 (date
sales commenced) through December 31, 1993.
<TABLE>
<CAPTION>
1995 1994 1993 1992(a) 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 7.78 $ 8.61 $ 8.27 $ 8.13 $ 7.66 $ 7.81
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.43 0.46 0.48 0.51 0.52 0.53
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) 0.56 (0.78) 0.46 0.21 0.46 (0.14)
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Total from investment operations 0.99 (0.32) 0.94 0.72 0.98 0.39
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.43) (0.45) (0.48) (0.51) (0.51) (0.53)
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Distributions from net realized
capital gains -- (0.03) (0.11) (0.07) -- --
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Returns of capital (0.03) (0.03) (0.01) -- -- (0.01)
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Total distributions (0.46) (0.51) (0.60) (0.58) (0.51) (0.54)
- ------------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 8.31 $ 7.78 $ 8.61 $ 8.27 $ 8.13 $ 7.66
=========================================== ======== ======== ======== ======== ======== ========
Total return(b) 13.05% (3.79)% 11.66% 9.10% 13.30% 5.27%
=========================================== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $284,803 $257,456 $294,209 $271,205 $273,037 $258,194
=========================================== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.88%(c) 0.89% 0.91% 0.90% 0.94% 0.91%
=========================================== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average
net assets 5.26%(c) 5.61% 5.65% 6.15% 6.58% 6.91%
=========================================== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 36% 43% 24% 160% 289% 230%
=========================================== ======== ======== ======== ======== ======== ========
<CAPTION>
1989 1988 1987 1986
-------- -------- -------- --------
CLASS A:
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.64 $ 7.32 $ 8.41 $ 7.69
- ------------------------------------------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.54 0.53 0.51 0.58
- ------------------------------------------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) 0.18 0.34 (0.65) 1.00
- ------------------------------------------- -------- -------- -------- --------
Total from investment operations 0.72 0.87 (0.14) 1.58
- ------------------------------------------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.55) (0.55) (0.49) (0.60)
- ------------------------------------------- -------- -------- -------- --------
Distributions from net realized
capital gains -- -- (0.46) (0.26)
- ------------------------------------------- -------- -------- -------- --------
Returns of capital -- -- -- --
- ------------------------------------------- -------- -------- -------- --------
Total distributions (0.55) (0.55) (0.95) (0.86)
- ------------------------------------------- -------- -------- -------- --------
Net asset value, end of period $ 7.81 $ 7.64 $ 7.32 $ 8.41
=========================================== ======== ======== ======== ========
Total return(b) 9.70% 12.33% (1.88)% 21.19%
=========================================== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $262,997 $243,480 $237,225 $281,575
=========================================== ======== ======== ======== ========
Ratio of expenses to average net assets 0.89% 0.87% 0.80% 0.78%
=========================================== ======== ======== ======== ========
Ratio of net investment income to average
net assets 6.97% 7.11% 6.71% 6.99%
=========================================== ======== ======== ======== ========
Portfolio turnover rate 305% 381% 392% 249%
=========================================== ======== ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Total returns do not deduct sales charges.
(c) Ratios are based on average daily net assets of $274,523,268.
FS-122
<PAGE> 340
Financials
NOTE 7 - FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------ ------
<S> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 7.78 $ 8.61 $ 8.71
- --------------------------------------------------------------------------------- -------- ------ ------
Income from investment operations:
Net investment income 0.39 0.39 0.14
- --------------------------------------------------------------------------------- -------- ------ ------
Net gains (losses) on securities (both realized and unrealized) 0.54 (0.78) 0.01
- --------------------------------------------------------------------------------- -------- ------ ------
Total from investment operations 0.93 (0.39) 0.15
- --------------------------------------------------------------------------------- -------- ------ ------
Less distributions:
Dividends from net investment income (0.37 ) (0.38) (0.13)
- --------------------------------------------------------------------------------- -------- ------ ------
Distributions from net realized capital gains -- (0.03) (0.11)
- --------------------------------------------------------------------------------- -------- ------ ------
Returns of capital (0.03 ) (0.03) (0.01)
- --------------------------------------------------------------------------------- -------- ------ ------
Total distributions (0.40 ) (0.44) (0.25)
- --------------------------------------------------------------------------------- -------- ------ ------
Net asset value, end of period $ 8.31 $ 7.78 $ 8.61
================================================================================= ======= ====== ======
Total return(a) 12.14 % (4.57)% 1.95%
================================================================================= ======= ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $21,478 $9,175 $2,319
================================================================================= ======= ====== ======
Ratio of expenses to average net assets(b) 1.68 %(d) 1.67% 1.65%(e)
================================================================================= ======= ====== ======
Ratio of net investment income to average net assets(c) 4.46 %(d) 4.83% 4.91%(e)
================================================================================= ======= ====== ======
Portfolio turnover rate 36 % 43% 24%
================================================================================= ======= ====== ======
</TABLE>
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods less than one year.
(b) Ratios of expenses to average daily net assets prior to expense
reimbursements are 1.77%, 1.84% and 3.08% (annualized) for the period
1995-1993, respectively.
(c) Ratios of net investment income to average daily net assets prior to expense
reimbursements are 4.37%, 4.66% and 3.48% (annualized) for the period
1995-1993, respectively.
(d) Ratios are based on average daily net assets of $14,533,031.
(e) Annualized.
FS-123
<PAGE> 341
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Value Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Value Fund, (a portfolio of AIM Funds Group), including the schedule of
investments, as of December 31, 1995, and 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 financial highlights for each of the
years 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 generally accepted auditing
standards. 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
December 31, 1995, 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
Value Fund as of December 31, 1995, the results of its operations for the year
then ended, the 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
three-year period then ended, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1996
FS-124
<PAGE> 342
Financials
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-63.59%
ADVERTISING/BROADCASTING-0.08%
200,000 Heritage Media Corp.(a) $ 5,125,000
- ---------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE-1.74%
861,300 Boeing Co. 67,504,388
- ---------------------------------------------------------------------------------------------
300,000 General Dynamics Corp. 17,737,500
- ---------------------------------------------------------------------------------------------
250,000 United Technologies Corp. 23,718,750
- ---------------------------------------------------------------------------------------------
108,960,638
- ---------------------------------------------------------------------------------------------
APPLIANCES-0.12%
150,400 Premark International Inc. 7,614,000
- ---------------------------------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.51%
1,000,000 Borg-Warner Automotive, Inc. 32,000,000
- ---------------------------------------------------------------------------------------------
BANKING-2.34%
400,000 BankAmerica Corp. 25,900,000
- ---------------------------------------------------------------------------------------------
1,800,000 Citicorp 121,050,000
- ---------------------------------------------------------------------------------------------
146,950,000
- ---------------------------------------------------------------------------------------------
BIOTECHNOLOGY-0.34%
500,000 Guidant Corp. 21,125,000
- ---------------------------------------------------------------------------------------------
BUILDING MATERIALS-0.26%
358,800 Snap-On, Inc. 16,235,700
- ---------------------------------------------------------------------------------------------
CHEMICALS-0.23%
1,000,000 Terra Industries, Inc. 14,125,000
- ---------------------------------------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.44%
400,000 Cabot Corp. 21,550,000
- ---------------------------------------------------------------------------------------------
800,000 IMC Global, Inc. 32,700,000
- ---------------------------------------------------------------------------------------------
270,000 OM Group Inc. 8,943,750
- ---------------------------------------------------------------------------------------------
800,000 Praxair, Inc. 26,900,000
- ---------------------------------------------------------------------------------------------
90,093,750
- ---------------------------------------------------------------------------------------------
COMPUTER MINI/PCS-3.48%
2,000,000 COMPAQ Computer Corp.(a) 96,000,000
- ---------------------------------------------------------------------------------------------
920,000 Dell Computer Corp.(a) 31,855,000
- ---------------------------------------------------------------------------------------------
500,000 Digital Equipment Corp.(a) 32,062,500
- ---------------------------------------------------------------------------------------------
500,000 Hewlett-Packard Co. 41,875,000
- ---------------------------------------------------------------------------------------------
1,000,000 Wang Laboratories, Inc.(a) 16,625,000
- ---------------------------------------------------------------------------------------------
218,417,500
- ---------------------------------------------------------------------------------------------
COMPUTER NETWORKING-2.37%
300,000 Bay Networks, Inc.(a) 12,337,500
- ---------------------------------------------------------------------------------------------
450,000 Belden Inc. 11,587,500
- ---------------------------------------------------------------------------------------------
1,400,000 Cheyenne Software, Inc.(a) 36,575,000
- ---------------------------------------------------------------------------------------------
600,000 Cisco Systems, Inc.(a) 44,775,000
- ---------------------------------------------------------------------------------------------
330,000 Comverse Technology, Inc. 6,600,000
- ---------------------------------------------------------------------------------------------
500,000 Network Equipment Technologies, Inc.(a) 13,687,500
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-125
<PAGE> 343
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMPUTER NETWORKING (continued)
500,000 3Com Corp.(a) $ 23,312,500
- ---------------------------------------------------------------------------------------------
148,875,000
- ---------------------------------------------------------------------------------------------
COMPUTER PERIPHERALS-3.25%
1,400,000 Adaptec, Inc.(a) 57,400,000
- ---------------------------------------------------------------------------------------------
302,900 Alliance Semiconductor Corp.(a) 3,521,213
- ---------------------------------------------------------------------------------------------
1,400,000 EMC Corp.(a) 21,525,000
- ---------------------------------------------------------------------------------------------
300,000 Lexmark International Group, Inc.(a) 5,475,000
- ---------------------------------------------------------------------------------------------
400,000 Read-Rite Corp.-Class A(a) 9,300,000
- ---------------------------------------------------------------------------------------------
1,600,000 Seagate Technology(a) 76,000,000
- ---------------------------------------------------------------------------------------------
200,000 U.S. Robotics, Inc.(a) 17,550,000
- ---------------------------------------------------------------------------------------------
700,000 Western Digital Corp.(a) 12,512,500
- ---------------------------------------------------------------------------------------------
203,283,713
- ---------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES-4.85%
220,000 Adobe Systems, Inc. 13,640,000
- ---------------------------------------------------------------------------------------------
400,000 BMC Software, Inc.(a) 17,100,000
- ---------------------------------------------------------------------------------------------
2,500,000 Computer Associates International, Inc. 142,187,500
- ---------------------------------------------------------------------------------------------
492,000 Computervision Corp.(a) 7,564,500
- ---------------------------------------------------------------------------------------------
100,000 Electronics for Imaging, Inc.(a) 4,375,000
- ---------------------------------------------------------------------------------------------
350,000 First Data Corp. 23,406,250
- ---------------------------------------------------------------------------------------------
383,200 FTP Software, Inc.(a) 11,112,800
- ---------------------------------------------------------------------------------------------
500,000 National Data Corp. 12,375,000
- ---------------------------------------------------------------------------------------------
523,000 NetManage, Inc.(a) 12,159,750
- ---------------------------------------------------------------------------------------------
400,000 Network General Corp.(a) 13,350,000
- ---------------------------------------------------------------------------------------------
680,000 SoftKey International, Inc.(a) 15,725,000
- ---------------------------------------------------------------------------------------------
150,000 Sterling Software, Inc.(a) 9,356,250
- ---------------------------------------------------------------------------------------------
1,200,000 S3, Inc.(a) 21,150,000
- ---------------------------------------------------------------------------------------------
303,502,050
- ---------------------------------------------------------------------------------------------
CONGLOMERATES-0.53%
200,000 Allied Products Corp. 4,800,000
- ---------------------------------------------------------------------------------------------
360,000 Loews Corp. 28,215,000
- ---------------------------------------------------------------------------------------------
33,015,000
- ---------------------------------------------------------------------------------------------
COSMETICS & TOILETRIES-0.45%
256,900 McKesson Corp. 13,005,563
- ---------------------------------------------------------------------------------------------
180,000 Procter & Gamble Co. 14,940,000
- ---------------------------------------------------------------------------------------------
27,945,563
- ---------------------------------------------------------------------------------------------
ELECTRIC SERVICES-1.42%
212,100 Allegheny Power System, Inc. 6,071,363
- ---------------------------------------------------------------------------------------------
168,000 American Electric Power Co. 6,804,000
- ---------------------------------------------------------------------------------------------
212,100 Consolidated Edison Co. of New York, Inc. 6,787,200
- ---------------------------------------------------------------------------------------------
358,800 Dominion Resources, Inc. 14,800,500
- ---------------------------------------------------------------------------------------------
268,900 DQE, Inc. 8,268,675
- ---------------------------------------------------------------------------------------------
500,000 Entergy Corp. 14,625,000
- ---------------------------------------------------------------------------------------------
169,200 FPL Group, Inc. 7,846,650
- ---------------------------------------------------------------------------------------------
459,900 Houston Industries, Inc. 11,152,575
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-126
<PAGE> 344
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
ELECTRIC SERVICES (continued)
415,200 Illinova Corp. $ 12,456,000
- ---------------------------------------------------------------------------------------------
88,811,963
- ---------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-2.27%
400,000 Amphenol Corp.(a) 9,700,000
- ---------------------------------------------------------------------------------------------
2,468,700 Anixter International, Inc.(a) 45,979,537
- ---------------------------------------------------------------------------------------------
117,000 AVX Corp. 3,100,500
- ---------------------------------------------------------------------------------------------
630,000 Harman International Industries, Inc. 25,278,750
- ---------------------------------------------------------------------------------------------
500,000 Parker-Hannifin Corp. 17,125,000
- ---------------------------------------------------------------------------------------------
66,500 Raychem Corp. 3,782,188
- ---------------------------------------------------------------------------------------------
300,000 Tektronix, Inc. 14,737,500
- ---------------------------------------------------------------------------------------------
900,000 Teradyne Inc.(a) 22,500,000
- ---------------------------------------------------------------------------------------------
142,203,475
- ---------------------------------------------------------------------------------------------
ELECTRONIC/PC DISTRIBUTORS-0.94%
700,000 Arrow Electronics, Inc.(a) 30,187,500
- ---------------------------------------------------------------------------------------------
253,500 Avnet, Inc. 11,344,125
- ---------------------------------------------------------------------------------------------
500,000 Wyle Electronics 17,562,500
- ---------------------------------------------------------------------------------------------
59,094,125
- ---------------------------------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.23%
300,000 Finova Group, Inc. 14,475,000
- ---------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-3.28%
200,000 ADVANTA Corp.-Class A 7,650,000
- ---------------------------------------------------------------------------------------------
200,000 ADVANTA Corp.-Class B 7,275,000
- ---------------------------------------------------------------------------------------------
240,000 A T & T Capital Corp. 9,180,000
- ---------------------------------------------------------------------------------------------
235,700 CMAC Investment Corp. 10,370,800
- ---------------------------------------------------------------------------------------------
300,000 Countrywide Credit Industries, Inc. 6,525,000
- ---------------------------------------------------------------------------------------------
500,000 Federal Home Loan Mortgage Corp. 41,750,000
- ---------------------------------------------------------------------------------------------
300,000 Federal National Mortgage Association 37,237,500
- ---------------------------------------------------------------------------------------------
400,000 Green Tree Financial Corp. 10,550,000
- ---------------------------------------------------------------------------------------------
1,200,000 MBNA Corp. 44,250,000
- ---------------------------------------------------------------------------------------------
400,000 PMI Group, Inc. (The) 18,100,000
- ---------------------------------------------------------------------------------------------
144,200 Student Loan Marketing Association 9,499,175
- ---------------------------------------------------------------------------------------------
69,150 SunAmerica, Inc. 3,284,625
- ---------------------------------------------------------------------------------------------
205,672,100
- ---------------------------------------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-0.21%
500,000 Ahmanson (H. F.) & Co. 13,250,000
- ---------------------------------------------------------------------------------------------
FOOD PROCESSING-1.21%
500,000 ConAgra, Inc. 20,625,000
- ---------------------------------------------------------------------------------------------
750,000 Hudson Foods, Inc.-Class A 12,937,500
- ---------------------------------------------------------------------------------------------
649,400 IBP, Inc. 32,794,700
- ---------------------------------------------------------------------------------------------
416,500 Interstate Bakeries Corp. 9,319,188
- ---------------------------------------------------------------------------------------------
75,676,388
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-127
<PAGE> 345
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
FUNERAL SERVICES-0.94%
1,128,200 Service Corp. International $ 49,640,800
- ---------------------------------------------------------------------------------------------
258,300 Stewart Enterprises, Inc. 9,557,100
- ---------------------------------------------------------------------------------------------
59,197,900
- ---------------------------------------------------------------------------------------------
GAMING-0.33%
600,000 Mirage Resorts, Inc.(a) 20,700,000
- ---------------------------------------------------------------------------------------------
HOMEBUILDING-0.17%
504,750 Clayton Homes, Inc. 10,789,032
- ---------------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.10%
97,500 Conseco Inc. 6,105,938
- ---------------------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-1.80%
900,000 Allstate Corp. 37,012,500
- ---------------------------------------------------------------------------------------------
300,000 CIGNA Corp. 30,975,000
- ---------------------------------------------------------------------------------------------
400,000 ITT Hartford Group, Inc.(a) 19,350,000
- ---------------------------------------------------------------------------------------------
900,000 TIG Holdings, Inc. 25,650,000
- ---------------------------------------------------------------------------------------------
112,987,500
- ---------------------------------------------------------------------------------------------
MACHINE TOOLS-0.05%
100,000 Applied Power Inc.-Class A 3,000,000
- ---------------------------------------------------------------------------------------------
MACHINERY (HEAVY)-0.36%
500,000 Case Corp. 22,875,000
- ---------------------------------------------------------------------------------------------
MEDICAL (DRUGS)-4.26%
300,000 American Home Products Corp. 29,100,000
- ---------------------------------------------------------------------------------------------
800,000 Bergen Brunswig Corp. 19,900,000
- ---------------------------------------------------------------------------------------------
1,198,359 ICN Pharmaceuticals, Inc. 23,068,425
- ---------------------------------------------------------------------------------------------
150,000 Johnson & Johnson 12,843,750
- ---------------------------------------------------------------------------------------------
700,000 Mylan Laboratories 16,450,000
- ---------------------------------------------------------------------------------------------
500,000 Pfizer Inc. 31,500,000
- ---------------------------------------------------------------------------------------------
500,000 R.P. Scherer Corp.(a) 24,562,500
- ---------------------------------------------------------------------------------------------
2,000,000 Schering-Plough Corp. 109,500,000
- ---------------------------------------------------------------------------------------------
266,924,675
- ---------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-1.50%
160,000 Bausch & Lomb, Inc. 6,340,000
- ---------------------------------------------------------------------------------------------
1,500,000 Baxter International, Inc. 62,812,500
- ---------------------------------------------------------------------------------------------
250,300 Cordis Corp.(a) 25,155,150
- ---------------------------------------------------------------------------------------------
94,307,650
- ---------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-2.33%
250,000 Genesis Health Ventures, Inc.(a) 9,125,000
- ---------------------------------------------------------------------------------------------
550,000 Health Care and Retirement Corp.(a) 19,250,000
- ---------------------------------------------------------------------------------------------
530,000 Integrated Health Services, Inc. 13,250,000
- ---------------------------------------------------------------------------------------------
300,000 Living Centers of America, Inc.(a) 10,500,000
- ---------------------------------------------------------------------------------------------
640,000 Manor Care, Inc. 22,400,000
- ---------------------------------------------------------------------------------------------
750,000 OrNda Healthcorp(a) 17,437,500
- ---------------------------------------------------------------------------------------------
700,000 Quorum Health Group, Inc.(a) 15,400,000
- ---------------------------------------------------------------------------------------------
660,000 Sybron International Corp.(a) 15,675,000
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-128
<PAGE> 346
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES) (continued)
500,000 U.S. Healthcare, Inc. $ 23,250,000
- ---------------------------------------------------------------------------------------------
146,287,500
- ---------------------------------------------------------------------------------------------
METALS-0.08%
90,400 Harsco Corp. 5,254,500
- ---------------------------------------------------------------------------------------------
OFFICE AUTOMATION-2.21%
429,400 In Focus Systems, Inc.(a) 15,512,075
- ---------------------------------------------------------------------------------------------
900,000 Xerox Corp. 123,300,000
- ---------------------------------------------------------------------------------------------
138,812,075
- ---------------------------------------------------------------------------------------------
OFFICE PRODUCTS-0.12%
200,000 Reynolds & Reynolds Co.-Class A 7,775,000
- ---------------------------------------------------------------------------------------------
OIL & GAS-0.51%
1,500,000 Occidental Petroleum Corp. 32,062,500
- ---------------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.03%
520,000 BJ Services Co.(a) 15,080,000
- ---------------------------------------------------------------------------------------------
300,000 Diamond Offshore Drilling, Inc.(a) 10,125,000
- ---------------------------------------------------------------------------------------------
400,000 Halliburton Co. 20,250,000
- ---------------------------------------------------------------------------------------------
600,000 Tidewater, Inc. 18,900,000
- ---------------------------------------------------------------------------------------------
64,355,000
- ---------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.56%
96,000 Bowater, Inc. 3,408,000
- ---------------------------------------------------------------------------------------------
455,800 James River Corp. of Virginia 10,996,175
- ---------------------------------------------------------------------------------------------
400,000 Mead Corp. 20,900,000
- ---------------------------------------------------------------------------------------------
35,304,175
- ---------------------------------------------------------------------------------------------
POLLUTION CONTROL-0.38%
800,000 WMX Technologies, Inc. 23,900,000
- ---------------------------------------------------------------------------------------------
PUBLISHING-0.25%
400,000 Scripps (E.W.) Co. 15,750,000
- ---------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.27%
667,100 Circle K Corp.(a) 16,927,663
- ---------------------------------------------------------------------------------------------
RETAIL STORES-0.07%
288,500 Intimate Brands, Inc. 4,327,500
- ---------------------------------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.88%
1,000,000 Millipore Corp. 41,125,000
- ---------------------------------------------------------------------------------------------
300,000 Varian Associates, Inc. 14,325,000
- ---------------------------------------------------------------------------------------------
55,450,000
- ---------------------------------------------------------------------------------------------
SEMICONDUCTORS-5.26%
700,000 Analog Devices, Inc.(a) 24,762,500
- ---------------------------------------------------------------------------------------------
1,800,000 Applied Materials, Inc.(a) 70,875,000
- ---------------------------------------------------------------------------------------------
1,400,000 Cypress Semiconductor Corp.(a) 17,850,000
- ---------------------------------------------------------------------------------------------
574,000 Electroglas, Inc.(a) 14,063,000
- ---------------------------------------------------------------------------------------------
350,000 Kemet Corp.(a) 8,356,250
- ---------------------------------------------------------------------------------------------
100,000 LAM Research Corp.(a) 4,575,000
- ---------------------------------------------------------------------------------------------
600,000 LSI Logic Corp.(a) 19,650,000
- ---------------------------------------------------------------------------------------------
360,000 Novellus Systems, Inc.(a) 19,440,000
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-129
<PAGE> 347
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SEMICONDUCTORS (continued)
360,000 Sierra Semiconductor Corp.(a) $ 4,995,000
- ---------------------------------------------------------------------------------------------
2,800,000 Texas Instruments Inc. 144,900,000
- ---------------------------------------------------------------------------------------------
329,466,750
- ---------------------------------------------------------------------------------------------
SHOES & RELATED APPAREL-0.06%
50,000 Nike, Inc.-Class B 3,481,250
- ---------------------------------------------------------------------------------------------
STEEL-0.09%
121,900 J&L Specialty Steel, Inc. 2,285,625
- ---------------------------------------------------------------------------------------------
403,700 UNR Industries, Inc. 3,481,913
- ---------------------------------------------------------------------------------------------
5,767,538
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-2.85%
1,200,000 A T & T Corp. 77,700,000
- ---------------------------------------------------------------------------------------------
1,551,900 MFS Communications Co., Inc.(a) 82,638,675
- ---------------------------------------------------------------------------------------------
500,000 Tellabs, Inc.(a) 18,500,000
- ---------------------------------------------------------------------------------------------
178,838,675
- ---------------------------------------------------------------------------------------------
TELEPHONE-1.29%
1,000,000 Ameritech Corp. 59,000,000
- ---------------------------------------------------------------------------------------------
496,500 BellSouth Corp. 21,597,750
- ---------------------------------------------------------------------------------------------
80,597,750
- ---------------------------------------------------------------------------------------------
TOBACCO-3.82%
225,600 Dimon, Inc. 3,976,200
- ---------------------------------------------------------------------------------------------
2,600,000 Philip Morris Companies, Inc. 235,300,000
- ---------------------------------------------------------------------------------------------
239,276,200
- ---------------------------------------------------------------------------------------------
TRANSPORTATION-0.47%
647,600 CSX Corp. 29,546,750
- ---------------------------------------------------------------------------------------------
Total Domestic Common Stocks 3,986,519,486
- ---------------------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-6.88%
AUSTRALIA-0.35%
202,776 Broken Hill Proprietary Co. Ltd. (Conglomerates) 2,863,643
- ---------------------------------------------------------------------------------------------
1,000,000 News Corp. Ltd.-Preference Shares-ADR (Publishing) 19,250,000
- ---------------------------------------------------------------------------------------------
22,113,643
- ---------------------------------------------------------------------------------------------
CANADA-0.38%
500,000 Corel Corp. (Computer Software & Services)(a) 6,500,000
- ---------------------------------------------------------------------------------------------
402,100 Northern Telecom Ltd. (Telecommunications) 17,290,300
- ---------------------------------------------------------------------------------------------
23,790,300
- ---------------------------------------------------------------------------------------------
DENMARK-0.18%
233,000 Danisco A/S (Food Processing) 11,246,106
- ---------------------------------------------------------------------------------------------
FINLAND-0.06%
103,000 Nokia Corp.-Class A-ADR (Telecommuncations) 4,004,126
- ---------------------------------------------------------------------------------------------
FRANCE-0.94%
15,200 Docks De France S.A. (Retail-Food & Drug) 2,309,333
- ---------------------------------------------------------------------------------------------
4,800 Essilor International-Compagnie Generale d'Optique (Medical
Services) 917,459
- ---------------------------------------------------------------------------------------------
13,000 LVMH-Moet Hennessy Louis Vuitton (Beverages) 2,707,780
- ---------------------------------------------------------------------------------------------
7,260 Promodes S.A. (Retail Stores) 1,706,403
- ---------------------------------------------------------------------------------------------
16,900 Roussel Uclaf (Medical-Drugs) 2,864,406
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-130
<PAGE> 348
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
FRANCE (continued)
1,200,000 SGS-Thomson Microelectronic N.V. (Semiconductors)(a) $ 48,300,000
- ---------------------------------------------------------------------------------------------
58,805,381
- ---------------------------------------------------------------------------------------------
GERMANY-0.06%
8,300 Mannesmann AG (Machinery-Heavy) 2,642,460
- ---------------------------------------------------------------------------------------------
31,500 VEBA A.G. (Electric Services) 1,337,296
- ---------------------------------------------------------------------------------------------
3,979,756
- ---------------------------------------------------------------------------------------------
HONG KONG-0.39%
1,080,000 HSBC Holdings PLC (Banking) 16,341,416
- ---------------------------------------------------------------------------------------------
700,000 Hutchison Whampoa Ltd.(Conglomerates) 4,263,821
- ---------------------------------------------------------------------------------------------
440,000 Sun Hung Kai Properties Ltd. (Real Estate) 3,599,094
- ---------------------------------------------------------------------------------------------
24,204,331
- ---------------------------------------------------------------------------------------------
ITALY-0.50%
156,800 Fila Holding S.p.A.-ADR (Retail Stores) 7,134,400
- ---------------------------------------------------------------------------------------------
7,620,000 Telecom Italia Mobile S.p.A. (Telecommunications)(a) 13,386,729
- ---------------------------------------------------------------------------------------------
7,020,000 Telecom Italia S.p.A. (Telecommunications) 10,887,216
- ---------------------------------------------------------------------------------------------
31,408,345
- ---------------------------------------------------------------------------------------------
MALAYSIA-0.05%
301,000 Leader Universal Holdings (Electronic
Components/Miscellaneous) 687,404
- ---------------------------------------------------------------------------------------------
272,000 Malayan Banking Berhad (Banking) 2,291,924
- ---------------------------------------------------------------------------------------------
2,979,328
- ---------------------------------------------------------------------------------------------
NETHERLANDS-0.44%
500,000 Madge Networks N.V. (Computer Networking)(a) 22,375,000
- ---------------------------------------------------------------------------------------------
10,900 Verenigde Nederlandse Utgevbedri Verigd Bezit (Publishing) 1,496,398
- ---------------------------------------------------------------------------------------------
40,000 Wolters Kluwer N.V. (Publishing) 3,783,884
- ---------------------------------------------------------------------------------------------
27,655,282
- ---------------------------------------------------------------------------------------------
NEW ZEALAND-0.44%
6,115,300 Telecom Corp. of New Zealand Ltd. (Telecommunications) 25,666,988
- ---------------------------------------------------------------------------------------------
29,800 Telecom Corp. of New Zealand Ltd.-ADR (Telecommunications) 2,067,375
- ---------------------------------------------------------------------------------------------
27,734,363
- ---------------------------------------------------------------------------------------------
NORWAY-0.34%
3,835,000 UNI Storebrand A/S-Class A (Insurance-Multi-Line
Property)(a) 21,190,855
- ---------------------------------------------------------------------------------------------
SWEDEN-1.56%
1,020,000 ASTRA AB "A" (Medical-Drugs) 40,709,670
- ---------------------------------------------------------------------------------------------
100,000 ASTRA AB "B" Free(Medical-Drugs) 3,961,022
- ---------------------------------------------------------------------------------------------
800,000 Skandia Forsakring AB (Insurance-Multi-Line Property) 21,627,484
- ---------------------------------------------------------------------------------------------
1,600,000 Telefonaktiebolaget L.M. Ericsson-ADR
(Telecommunications)(a) 31,200,000
- ---------------------------------------------------------------------------------------------
97,498,176
- ---------------------------------------------------------------------------------------------
SWITZERLAND-0.04%
2,350 BBC Brown Boveri A.G. (Conglomerates) 2,729,952
- ---------------------------------------------------------------------------------------------
UNITED KINGDOM-1.15%
93,400 BOC Group PLC (Chemicals-Specialty) 1,306,932
- ---------------------------------------------------------------------------------------------
1,800,000 Burton Group PLC (Retail-Stores) 3,759,900
- ---------------------------------------------------------------------------------------------
721,200 Invesco PLC (Finance-Asset Management) 2,839,325
- ---------------------------------------------------------------------------------------------
54,800 Invesco PLC-ADR (Finance-Asset Management) 2,123,500
- ---------------------------------------------------------------------------------------------
</TABLE>
FS-131
<PAGE> 349
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
UNITED KINGDOM (continued)
125,400 Orthofix International N.V. (Medical Services)(a) $ 924,825
- ---------------------------------------------------------------------------------------------
320,000 SmithKline Beecham-ADR (Medical-Drugs) 17,760,000
- ---------------------------------------------------------------------------------------------
3,982,300 Standard Chartered PLC (Finance-Asset Management) 33,891,914
- ---------------------------------------------------------------------------------------------
67,420 Thorn EMI PLC (Leisure & Recreation) 1,587,863
- ---------------------------------------------------------------------------------------------
720,100 Waste Management International PLC-ADR (Pollution
Control)(a) 7,741,075
- ---------------------------------------------------------------------------------------------
71,935,334
- ---------------------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 431,275,278
- ---------------------------------------------------------------------------------------------
PREFERRED STOCKS-0.07%
PUBLISHING-0.07%
150,000 Time Warner Financing-$1.24 Convertible Pfd. 4,687,500
- ---------------------------------------------------------------------------------------------
Total Preferred Stocks 4,687,500
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
U.S. TREASURY SECURITIES-13.91%
U.S. Treasury Bills-10.69%(b)
$189,000,000(c) 5.46%, 01/04/96 189,007,560
- ---------------------------------------------------------------------------------------------
94,000,000 5.41%, 01/11/96 93,955,820
- ---------------------------------------------------------------------------------------------
340,945,000(c) 5.38%, 04/04/96 336,625,226
- ---------------------------------------------------------------------------------------------
52,000,000 5.195%, 06/06/96 50,891,880
- ---------------------------------------------------------------------------------------------
Total U.S. Treasury Bills 670,480,486
- ---------------------------------------------------------------------------------------------
U.S. Treasury Notes-3.22%
193,000,000 6.75%, 05/31/99 201,594,531
- ---------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 872,075,017
- ---------------------------------------------------------------------------------------------
Total Investments (excluding Repurchase Agreements) 5,294,557,281
- ---------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-14.57%(d)
158,540,664 Daiwa Securities America Inc., 5.92% 01/02/96(e) 158,540,664
- ---------------------------------------------------------------------------------------------
615,000,000 Goldman, Sachs & Co., 5.92% 01/02/96(f) 615,000,000
- ---------------------------------------------------------------------------------------------
140,000,000 Morgan Stanley Group, Inc., 5.90% 01/02/96(g) 140,000,000
- ---------------------------------------------------------------------------------------------
Total Repurchase Agreements 913,540,664
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-99.02% 6,208,097,945
- ---------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.98% 61,385,301
- ---------------------------------------------------------------------------------------------
NET ASSETS-100.00% $6,269,483,246
=============================================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) U.S. Treasury Bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the investment advisor.
(e) Joint repurchase agreement entered into 12/29/95 with a maturing value of
$646,679,181. Collateralized by $537,995,000 U.S. Treasury obligations,
7.875% to 11.25% due 11/15/07 to 02/15/15.
(f) Joint repurchase agreement entered into 12/29/95 with a maturing value of
$1,195,786,044. Collateralized by $1,106,121,000 U.S. Treasury obligations,
5.50% to 11.25% due 01/31/98 to 02/15/23.
(g) Entered into 12/29/95 with a maturing value of $140,091,778. Collateralized
by $111,455,000 U.S. Treasury obligations, 8.125% due 08/15/19.
Abbreviations:
ADR - American Depositary Receipt
Pfd. - Preferred
See Notes to Financial Statements.
FS-132
<PAGE> 350
Financials
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $4,631,096,859) $5,294,557,281
- -----------------------------------------------------------------------------------------
Repurchase agreements (cost $913,540,664) 913,540,664
- -----------------------------------------------------------------------------------------
Foreign currencies, at market value (cost $7,114,663) 7,150,218
- -----------------------------------------------------------------------------------------
Receivables for:
Investments sold 14,437,942
- -----------------------------------------------------------------------------------------
Fund shares sold 66,767,804
- -----------------------------------------------------------------------------------------
Dividends and interest 9,096,834
- -----------------------------------------------------------------------------------------
Variation margin 525,000
- -----------------------------------------------------------------------------------------
Investment for deferred compensation plan 34,041
- -----------------------------------------------------------------------------------------
Other assets 249,239
- -----------------------------------------------------------------------------------------
Total assets 6,306,359,023
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 16,472,174
- -----------------------------------------------------------------------------------------
Fund shares reacquired 8,226,996
- -----------------------------------------------------------------------------------------
Deferred compensation plan 34,041
- -----------------------------------------------------------------------------------------
Options written 1,875,000
- -----------------------------------------------------------------------------------------
Accrued advisory fees 3,162,715
- -----------------------------------------------------------------------------------------
Accrued administrative service fees 11,268
- -----------------------------------------------------------------------------------------
Accrued distribution fees 4,682,938
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 1,098,699
- -----------------------------------------------------------------------------------------
Accrued trustees' fees 8,295
- -----------------------------------------------------------------------------------------
Accrued operating expenses 1,303,651
- -----------------------------------------------------------------------------------------
Total liabilities 36,875,777
- -----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $6,269,483,246
=========================================================================================
NET ASSETS:
Class A $3,408,952,023
=========================================================================================
Class B $2,860,531,223
=========================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 127,137,684
=========================================================================================
Class B 107,329,577
=========================================================================================
Class A:
Net asset value and redemption price per share $ 26.81
=========================================================================================
Offering price per share:
(Net asset value of $26.81 divided by 94.50%) $ 28.37
=========================================================================================
Class B:
Net asset value and offering price per share $ 26.65
=========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-133
<PAGE> 351
Financials
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $504,254 foreign withholding tax) $ 41,169,729
- -----------------------------------------------------------------------------------------
Interest 33,567,137
- -----------------------------------------------------------------------------------------
Total investment income 74,736,866
- -----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 25,332,486
- -----------------------------------------------------------------------------------------
Custodian fees 412,698
- -----------------------------------------------------------------------------------------
Distribution fees -- Class A 5,911,494
- -----------------------------------------------------------------------------------------
Distribution fees -- Class B 16,466,004
- -----------------------------------------------------------------------------------------
Administrative service fees 137,307
- -----------------------------------------------------------------------------------------
Trustees' fees 30,524
- -----------------------------------------------------------------------------------------
Transfer agent fees -- Class A 4,038,205
- -----------------------------------------------------------------------------------------
Transfer agent fees -- Class B 4,161,427
- -----------------------------------------------------------------------------------------
Other 2,456,489
- -----------------------------------------------------------------------------------------
Total expenses 58,946,634
- -----------------------------------------------------------------------------------------
Less fees waived by advisor (502,799)
- -----------------------------------------------------------------------------------------
Net expenses 58,443,835
- -----------------------------------------------------------------------------------------
Net investment income 16,293,031
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTIONS TRANSACTIONS:
Net realized gain (loss) from:
Investment securities 349,881,906
- -----------------------------------------------------------------------------------------
Foreign currencies 162,118
- -----------------------------------------------------------------------------------------
Futures contracts 61,002,538
- -----------------------------------------------------------------------------------------
Options contracts 1,111,099
- -----------------------------------------------------------------------------------------
412,157,661
- -----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 554,511,731
- -----------------------------------------------------------------------------------------
Foreign currencies 84,524
- -----------------------------------------------------------------------------------------
Futures contracts 7,417,297
- -----------------------------------------------------------------------------------------
Options contracts (143,308)
- -----------------------------------------------------------------------------------------
561,870,244
- -----------------------------------------------------------------------------------------
Net gain from investment securities, foreign currencies, futures and
options transactions 974,027,905
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $990,320,936
=========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-134
<PAGE> 352
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 16,293,031 $ 9,941,431
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures and options transactions 412,157,661 (14,172,848)
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and options contracts 561,870,244 36,857,970
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 990,320,936 32,626,553
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment
income:
Class A (10,460,381) (9,726,386)
- ----------------------------------------------------------------------------------------------
Class B -- --
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains
on investment securities:
Class A (183,638,497) (12,282,372)
- ----------------------------------------------------------------------------------------------
Class B (154,081,759) (6,028,782)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 1,629,870,392 585,993,203
- ----------------------------------------------------------------------------------------------
Class B 1,958,628,734 619,742,029
- ----------------------------------------------------------------------------------------------
Net increase in net assets 4,230,639,425 1,210,324,245
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,038,843,821 828,519,576
- ----------------------------------------------------------------------------------------------
End of period $6,269,483,246 $2,038,843,821
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $5,534,813,265 $1,946,314,139
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 6,075,815 243,165
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, futures and options
transactions 53,872,233 (20,565,172)
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, and futures and options
contracts 674,721,933 112,851,689
- ----------------------------------------------------------------------------------------------
$6,269,483,246 $2,038,843,821
==============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-135
<PAGE> 353
Financials
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Value Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class will be 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 the Fund. The Fund's investment objective is to seek to achieve
long-term growth of capital by investing primarily in equity securities judged
by the Fund's investment advisor to be undervalued relative to the investment
advisor's appraisal of the current or projected earnings of the companies
issuing the securities, or relative to current market values of assets owned by
the companies issuing the securities or relative to the equity market generally.
Income is a secondary objective.
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 - A security listed or traded on an exchange is valued at
its last sales price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at
the mean between the closing bid and asked prices on that day. Each security
traded in the over-the-counter market (but not including securities reported
on the NASDAQ National Market System) is valued at the mean between the last
bid and asked prices based upon quotes furnished by market makers for such
securities. If a mean is not available, as is the case in some foreign
markets, the closing bid will be used absent a last sales price. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the mean
of the closing bid and asked prices. Debt obligations that are issued or
guaranteed by the U.S. Treasury are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by any of the above
methods are valued at the mean between last bid and asked prices based upon
quotes furnished by independent sources. 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
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. Generally, trading
in foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
B. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts - A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract to attempt to minimize the
risk to the Fund from adverse changes in the relationship between currencies.
The Fund may also
FS-136
<PAGE> 354
Financials
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued)
enter into a forward contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. dollar price
of that security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value of
the foreign currency changes unfavorably.
D. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
E. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking to market"
on a daily basis to reflect the market value of the contract at the end of
each day's trading. Variation margin payments are made or received depending
upon whether unrealized gains or losses are incurred. When the contract is
closed, the Fund records a realized gain or loss equal to the difference
between the proceeds from (or cost of) the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and the change in the value of the contract may not correlate with changes in
the securities being hedged.
F. Covered Call Options - The Fund may write call options, but only on a covered
basis; that is, the Fund will own the underlying security. Options written by
the Fund normally will have expiration dates between three and nine months
from the date written. The exercise price of a call option may be below,
equal to, or above the current market value of the underlying security at the
time the option is written. When the Fund writes a covered call option, an
amount equal to the premium received by the Fund is recorded as an asset and
an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option written.
The current market value of a written option is the last sale price, or in
the absence of a sale, the mean between the last bid and asked prices on that
day. If a written call option expires on the stipulated expiration date, or
if the Fund enters into a closing purchase transaction, the Fund realizes a
gain (or a loss if the closing purchase transaction exceeds the premium
received when the option was written) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such option
is extinguished. If a written option is exercised, the Fund realizes a gain
or a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written. The Fund will
not write a covered call option if, immediately thereafter, the aggregate
value of the securities underlying all such options, determined as of the
dates such options were written, would exceed 5% of the net assets of the
Fund.
G. 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.
H. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
FS-137
<PAGE> 355
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 an annual rate of 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $150 million. AIM is currently
voluntarily waiving a portion of its advisory fees payable by the Fund to AIM to
the extent necessary to reduce the fees paid by the Fund at net asset levels
higher than those currently incorporated in the present advisory fee schedule.
AIM will receive a fee calculated at 0.80% of the first $150 million of the
Fund's average daily net assets, plus 0.625% of the Fund's average daily net
assets in excess of $150 million to and including $2 billion, plus 0.60% of the
Fund's average daily net assets in excess of $2 billion. The waiver of fees is
entirely voluntary and the Board of Trustees would be advised of any decision by
AIM to discontinue the waiver. During the year ended December 31, 1995, AIM
voluntarily waived advisory fees in the amount of $502,799. The master
investment advisory agreement requires AIM to reduce its fees or, if necessary,
make payments to the Fund to the extent required to satisfy any expense
limitations imposed by the securities laws or regulations thereunder of any
state in which the Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1995, AIM
was reimbursed $137,307 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 agency
services to the Fund. During the year ended December 31, 1995, AFS was paid
$4,741,201 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
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. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more assignees, its rights to all or a portion of
(a) compensation received by AIM Distributors from the Fund pursuant to the
Class B Plan (but not AIM Distributors' duties and obligations pursuant to the
Class B Plan) and (b) any contingent deferred sales charges payable to AIM
Distributors related to the Class B shares. During the year ended December 31,
1995, the Class A shares and the Class B shares paid AIM Distributors $5,911,494
and $16,466,004, respectively, as compensation pursuant to the Plans.
AIM Distributors received commissions of $7,659,031 from sales of the Class A
shares of the Fund during the year ended December 31, 1995. 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 December 31, 1995,
AIM Distributors received $2,052,439 in contingent deferred sales charges
imposed on redemptions of Fund shares. Certain officers and trustees of the
Trust are officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1995, the Fund paid legal fees of $14,950
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3 - TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
FS-138
<PAGE> 356
Financials
NOTE 4 - BANK BORROWINGS
The Fund has a $56,800,000 committed line of credit with a financial institution
syndicate with Chemical Bank of New York as the administrative agent. Interest
on borrowings under the line of credit is payable on maturity or prepayment
date. During the period July 20, 1995 (effective date of line of credit
agreement) through December 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's committed
line.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1995 was
$7,344,684,429 and $5,108,145,003, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $724,875,156
- ------------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (68,891,499)
- ------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $655,983,657
==================================================================================================================
Cost of investments for tax purposes is $5,552,114,288.
</TABLE>
NOTE 6 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------------- -------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold:
Class A 79,351,992 $2,054,533,413 44,842,263 $ 956,547,274
- ------------------------------------------------------- ------------------------------- -------------------------------
Class B 75,466,438 1,966,370,940 30,585,526 650,657,626
- ------------------------------------------------------- ------------------------------- -------------------------------
Issued as reinvestment of dividends:
Class A 6,956,211 184,199,771 1,002,453 20,670,601
- ------------------------------------------------------- ------------------------------- -------------------------------
Class B 5,526,910 145,522,539 289,906 5,707,603
- ------------------------------------------------------- ------------------------------- -------------------------------
Reacquired:
Class A (23,428,920) (608,862,792) (18,339,133) (391,224,672)
- ------------------------------------------------------- ------------------------------- -------------------------------
Class B (5,847,788) (153,264,745) (1,727,299) (36,623,200)
- ------------------------------------------------------- ------------------------------- -------------------------------
138,024,843 $3,588,499,126 56,653,716 $1,205,735,232
======================================================= =========== ============== =========== ==============
</TABLE>
NOTE 7 - OPEN FUTURES CONTRACTS
At December 31, 1995, $16,669,000 principal amount of U.S. Treasury securities
were pledged as collateral to cover margin requirements for open futures
contracts:
Open futures contracts at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
NUMBER
OF UNREALIZED
CONTRACT CONTRACTS MONTH/COMMITMENT APPRECIATION
- ------- ---------- --------------------- --------------
<S> <C> <C> <C>
S&P 500 Index 1500 contracts/March 96/Buy $ 11,292,015
================================================================================================================================
</TABLE>
NOTE 8 - OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
-------------------------
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
---------- -----------
<S> <C> <C>
Beginning of period -- --
- --------------------------------------------------------------------------------------------------------------------------
Written 27,850 $ 8,137,410
- --------------------------------------------------------------------------------------------------------------------------
Closed (2,000) (608,920)
- --------------------------------------------------------------------------------------------------------------------------
Exercised (18,250) (5,190,119)
- --------------------------------------------------------------------------------------------------------------------------
Expired (3,600) (606,679)
- --------------------------------------------------------------------------------------------------------------------------
End of period 4,000 $ 1,731,692
==========================================================================================================================
</TABLE>
FS-139
<PAGE> 357
Financials
Open call option contracts written at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1995 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Boeing Co. Feb 70 2,000 $ 968,968 $(1,800,000) $ (831,032)
Computer Associates International, Inc. Jan 65 2,000 762,724 (75,000) 687,724
- ---------------------------------------------------------------------------------------------------------------------------------
4,000 $1,731,692 $(1,875,000) $ (143,308)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during each of the years in the ten-year period ended December 31,
1995 and for a Class B share outstanding during each of the years in the
two-year period ended December 31, 1995 and the period October 18, 1993 (date
sales commenced) through December 31, 1993.
<TABLE>
<CAPTION>
1995 1994 1993 1992(a) 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 21.14 $ 20.82 $ 18.24 $ 17.55 $ 13.75
- ----------------------------------------------------- ---------- ---------- --------- --------- ---------
Income from investment operations:
Net investment income 0.14 0.16 0.04 0.12 0.13
- ----------------------------------------------------- ---------- ---------- --------- --------- ---------
Net gains on securities (both realized and
unrealized) 7.21 0.52 3.34 2.68 5.73
- ----------------------------------------------------- ---------- ---------- --------- --------- ---------
Total from investment operations 7.35 0.68 3.38 2.80 5.86
- ----------------------------------------------------- ---------- ---------- --------- --------- ---------
Less distributions:
Dividends from net investment income (0.09) (0.16) (0.03) (0.12) (0.14)
- ----------------------------------------------------- ---------- ---------- --------- --------- ---------
Distributions from net realized capital gains (1.59) (0.20) (0.77) (1.99) (1.92)
- ----------------------------------------------------- ---------- ---------- --------- --------- ---------
Total distributions (1.68) (0.36) (0.80) (2.11) (2.06)
- ----------------------------------------------------- ---------- ---------- --------- --------- ---------
Net asset value, end of period $ 26.81 $ 21.14 $ 20.82 $ 18.24 $ 17.55
===================================================== ========== ========== ========= ========= =========
Total return(b) 34.85% 3.28% 18.71% 16.39% 43.45%
===================================================== ========== ========== ========= ========= =========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,408,952 $1,358,725 $ 765,305 $ 239,663 $ 152,149
===================================================== ========== ========== ========= ========= =========
Ratio of expenses to average net assets 1.12%(c)(d) 0.98% 1.09% 1.16% 1.22%
===================================================== ========== ========== ========= ========= =========
Ratio of net investment income to average net assets 0.74%(c)(e) 0.92% 0.30% 0.75% 0.89%
===================================================== ========== ========== ========= ========= =========
Portfolio turnover rate 151% 127% 177% 170% 135%
===================================================== ========== ========== ========= ========= =========
<CAPTION>
1990 1989 1988 1987 1986
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 14.53 $ 12.79 $ 11.47 $ 12.26 $ 12.90
- ---------------------------------------------------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.26 0.40 0.26 0.25 0.36
- ---------------------------------------------------- -------- -------- -------- -------- --------
Net gains on securities (both realized and
unrealized) 0.01 3.58 2.07 0.53 0.75
- ---------------------------------------------------- -------- -------- -------- -------- --------
Total from investment operations 0.27 3.98 2.33 0.78 1.11
- ---------------------------------------------------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.26) (0.43) (0.26) (0.39) (0.43)
- ---------------------------------------------------- -------- -------- -------- -------- --------
Distributions from net realized capital gains (0.79) (1.81) (0.75) (1.18) (1.32)
- ---------------------------------------------------- -------- -------- -------- -------- --------
Total distributions (1.05) (2.24) (1.01) (1.57) (1.75)
- ---------------------------------------------------- -------- -------- -------- -------- --------
Net asset value, end of period $ 13.75 $ 14.53 $ 12.79 $ 11.47 $ 12.26
==================================================== ======== ======== ======== ======== ========
Total return(b) 1.88% 31.54% 20.61% 5.96% 8.80%
==================================================== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 86,565 $ 76,444 $ 60,076 $ 55,527 $ 46,642
==================================================== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.21%(d) 1.00%(d) 1.00%(d) 1.00% 1.00%(d)
==================================================== ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 1.87%(e) 2.65%(e) 1.98%(e) 1.91% 3.15%(e)
==================================================== ======== ======== ======== ======== ========
Portfolio turnover rate 131% 152% 124% 219% 134%
==================================================== ======== ======== ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Total returns do not deduct sales charges.
(c) Ratios are based on average net assets of $2,364,597,465.
(d) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.13%, 1.23%, 1.09%, 1.08% and 1.05% for 1995, 1990-88 and 1986,
respectively.
(e) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 0.73%, 1.85%, 2.56%, 1.90% and 3.14% for 1995, 1990-88
and 1986, respectively.
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 21.13 $ 20.82 $ 21.80
- ---------------------------------------------------------------- ---------- -------- -------
Income from investment operations:
Net investment income (loss) (0.01) -- 0.02
- ---------------------------------------------------------------- ---------- -------- -------
Net gains (losses) on securities (both realized and unrealized) 7.12 0.51 (0.21)
- ---------------------------------------------------------------- ---------- -------- -------
Total from investment operations 7.11 0.51 (0.19)
- ---------------------------------------------------------------- ---------- -------- -------
Less distributions:
Dividends from net investment income -- -- (0.02)
- ---------------------------------------------------------------- ---------- -------- -------
Distributions from net realized capital gains (1.59) (0.20) (0.77)
- ---------------------------------------------------------------- ---------- -------- -------
Total distributions (1.59) (0.20) (0.79)
- ---------------------------------------------------------------- ---------- -------- -------
Net asset value, end of period $ 26.65 $ 21.13 $ 20.82
================================================================ ========== ======== =======
Total return(a) 33.73% 2.46% (0.74)%
================================================================ ========== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,860,531 $680,119 $63,215
================================================================ ========== ======== =======
Ratio of expenses to average net assets 1.94%(b) 1.90% 1.85%(c)
================================================================ ========== ======== =======
Ratio of net investment income (loss) to average net assets (0.08)%(b) 0.00% (0.46)%(c)
================================================================ ========== ======== =======
Portfolio turnover rate 151% 127% 177%
================================================================ ========== ======== =======
</TABLE>
(a) Total returns do not deduct contingent deferred sales charges and for
periods less than one year are not annualized.
(b) The ratios of expenses and net investment income to average net assets prior
to reduction of advisory fees were 1.96% and (0.09)% for 1995, respectively.
Ratios are based on average net assets of $1,646,600,430.
(c) Annualized.
FS-140
<PAGE> 358
APPENDIX II
[AIM LOGO APPEARS HERE]
[GRAPHIC COLLAGE APPEARS HERE]
AIM STRATEGIC INCOME FUND, INC.
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE> 359
AIM STRATEGIC INCOME FUND, INC.
For shareholders who seek high current income consistent with stability of
principal. The Fund invests primarily in convertible securities and employs
short-selling to enhance income and hedge against market risk.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Strategic Income Fund, Inc. performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
o In 1995, the Fund paid distributions of $0.60 per share.
o The Fund's investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
o The Fund's portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any one particular security.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Standard & Poor's Composite Index of 500 stocks (S&P 500)
is considered by investors to be most representative of the stock market
in general.
o The Dow Jones Industrial Average (DJIA) is an unmanaged composite of
the performance of 30 large-company stocks.
o Government securities, such as U.S. Treasury bills and bonds, offer a
high degree of safety and are guaranteed as to the timely payment of
principal and interest. Fund shares are not insured and their value will
vary with market conditions.
o Barron's Best-Grade Corporate Bond index is an unmanaged composite of
the performance of 10 high-grade corporate bonds. Barron's Interim-Grade
Corporate Bond index is an unmanaged composite of the performance of 10
medium-grade corporate bonds.
o An investment cannot be made in any indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
<PAGE> 360
-------------
AIM Strategic
Income Fund, Inc.
delivered one of
the strongest
performances in its
six-year history
-------------
A Message from the Chairman
Dear Fellow Shareholder:
In one of the best years for financial markets on record,
[PHOTO OF AIM Strategic Income Fund, Inc. delivered one of the
Charles T. Bauer, strongest performances in its six-year history. The Fund
Chairman of logged a total return of 13.51% for the year ended
the Board of December 31, 1995, based on reinvestment of all
the Fund, distributions and changes in net asset value.
APPEARS HERE] The Fund managed its strong showing in a record-breaking
market that, for much of 1995, was favored by declining
interest rates, strong corporate profits, and mild
inflation. A complete discussion of market conditions during the reporting
period and the Fund's investment strategy appears on page 2 of this report.
The Fund also provided an annualized ratio of net portfolio income to average
net assets of 5.98%, which compares favorably to the 5.08% yield posted by the
90-day U.S. Treasury bill as of December 31, 1995.
Net assets in the Fund increased during the year to $67.7 million as of
December 31, 1995. Net asset value per share increased to $9.70 from $9.18.
Market value per share increased to $8.38 from $8.00. As a closed-end fund, AIM
Strategic Income Fund, Inc. has a limited number of shares that trade on the
American Stock Exchange under the symbol AST.
Although it has been a good year for AIM Strategic Income Fund, Inc., it is
but one year. From a historic perspective, a repeat of 1995's strong
performance in financial markets is unlikely. Therefore, even as we relish the
success of a good year, we are already looking ahead.
On a personal level, the year to come has important investment implications
for all of us. Clouds on the horizon in the form of the budget debate over
retirement benefits such as Medicare and Social Security programs accentuate the
need to build your own retirement nest egg, independent of any benefits which
may--or may not--be available to you when the time comes. For many in the baby
boomer generation, that's just 10 years away.
Thank you for continuing to rely on AIM Strategic Income Fund, Inc. to help
build your financial future. We are ready to respond to any questions or
comments you may have about this report. Please call the Investor Relations
Department at 800-426-5523 during normal business hours, 7:30 am-5:00 pm EST.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE> 361
===============================================================================
TOP 10 INDUSTRIES (As of 12/31/95)
===============================================================================
1. Semiconductors
2. Medical (Drugs)
3. Computer Software &
Services
4. Telecommunications
5. Tobacco
6. Computer MINIs/PCs
7. Finance (Consumer Credit)
8. Computer Peripherals
9. Computer Networking
10. Medical (Patient Services)
===============================================================================
Management's
Discussion & Analysis
MARKETS STAGE A DRAMATIC RECOVERY IN 1995
Sharply declining interest rates, mild inflation, and healthy corporate profits
mixed the powerful recipe that launched one of the strongest rallies for
stocks and bonds on record. The strength of the rally surprised many investors,
coming on the heels of the disappointing performance of financial markets in
1994.
The strength in stock markets was broad-based, resuscitating large-
capitalization stocks that had been out of favor for three years. The
popular Dow Jones Industrial Average (DJIA) breached two milestones--sailing
past 4000 in February and 5000 in November--shattering 69 record levels in its
wake by year-end. Not to be outdone, the S&P 500 sprinted ahead of the DJIA to
deliver its best one-year performance since 1958.
The record advance also netted only modest relative volatility--the largest
correction in the DJIA has been no more than 3.3% since its trough in 1990--
thanks to more frequent group rotations within the market. Evolving market
leadership carried various sectors into and out of favor, yet left the major
averages virtually unscathed.
The bond market's rally was paced by a sharp drop in long-term yields, which
saw the benchmark 30-year U.S. Treasury fall to 5.95% by year-end, from 7.88%
at the close of 1994. Yields on one-year and five-year U.S. Treasury securities
followed suit by declining more than 200 basis points to 5.132% and 5.150%,
respectively. (A basis point is 1/100 of a percentage point.) The yield on the
90-day U.S. Treasury bill ended the year at 5.08%, and the 30-year U.S.
Treasury bond yield was pushed below 6% for the first time since late 1993.
As the year drew to a close, economic conditions continued to favor bonds.
However, end-of-year profit taking and seasonal tax selling slowed the stock
market's remarkable advance, and most major averages peaked for the year. On
the whole, 1995 ended triumphantly for investors with stocks at historic highs,
bond yields the lowest since 1993, and the U.S. dollar on solid ground.
YOUR INVESTMENT PORTFOLIO
AIM Strategic Income Fund, Inc. delivered a solid performance during 1995
thanks to its unique investment strategy. The Fund invests primarily in
convertible securities, which tend to participate in the appreciation of the
underlying common stocks while providing a higher level of current income.
Convertible securities also tend to decline less in falling markets than the
underlying common stocks. The Fund seeks to generate income from the interest
and dividends paid on the convertible securities, and from the proceeds
generated on "short sales."
In a short sale, the investor first sells the stock at the current market
value, and later repurchases the stock. As a result of short
===============================================================================
THE PASSING OF MILLENIA ON THE DOW
===============================================================================
It took 15 years, from 1972 to 1987, for
the DJIA to climb to its next 1000
mark. It took only nine months in 1995.
After breaking 5000, the DJIA sailed past [LINE CHART]
5100 and then 5200 before year-end DJIA Rise
logging its largest one-year point 11/14/72 1000
gain ever: 1282.68 1/8/87 2000
4/17/91 3000
2/23/95 4000
11/21/95 5000
Source: Barron's
===============================================================================
See important Fund disclosure on inside front cover.
2
<PAGE> 362
Management's
Discussion & Analysis
sales, the Fund creates a credit balance in the portfolio--and may earn
additional income for the shareholder. Short selling also helps the Fund to
cushion the portfolio against market risk.
Remember to keep in mind, the Fund's portfolio composition is subject to
change and there is no guarantee the Fund will continue to hold any particular
security mentioned in this report.
1995 was the strongest year in recent memory for the technology sector.
Semiconductor stocks led the group for much of the year, thanks to surging
demand for PCs from consumer and business systems markets. The Fund benefited
from its positions in such market leaders as LAM Research Corp. and LSI Logic
Corp., which reported record revenues during the year. While the group
retreated late in the year, the Fund maintained a core position in a number of
issues which appeared to offer solid value over the longer term. Worldwide
revenues from the semiconductor market are expected to grow by approximately
20% in 1996.
The phenomenal rise in Internet-related companies later in the year boosted
prices for computer networking stocks, including Bay Networks and 3Com Corp.
Software publishers also reported record profits in 1995.
Approximately 18% of the Fund's portfolio was invested in the health-care
sector. The continuing profit drivers for the health-care sector are three: an
aging baby-boomer population, improving cost containment, and anticipation of
universal coverage for all. Health maintenance organizations, hospitals, and
medical services distributors are beginning to reap benefits from ongoing
cost-containment campaigns. The Fund chose to address these themes by
emphasizing those companies most likely to benefit, including Genesis Health
Ventures and Multicare Companies, which posted strong gains during 1995.
The Fund increased its weighting in selected specialty retailers,
particularly "super-stores" which have attracted significant business away from
community malls, and the emerging niche retailers which target mail order
customers by offering attractive pricing, better selection, superior
distribution systems, and the convenience of catalogue shopping.
OUTLOOK FOR THE FUTURE
Most analysts and market watchers agree: 1995 will be a hard act to follow. Yet
some maintain that this aging bull market--the Dow has gone more than five years
without experiencing a 10% correction--may have plenty of steam left. Barron's
recently reported analysts' estimates that projected the Dow well past 5500
during the coming year. Of course, a significant complement of market
strategists also believe a correction is due.
At this writing, the bond market appears to be extending its rally into the
new year. The central bank recently lowered short-term interest rates by 0.25%,
a move apparently anticipated by investors given current slope of the U.S.
Treasury yield curve. Lower interest rates could help extend the positive
growth cycle for corporate earnings, a boost for stocks.
Rather than make any projections of future market performance, AIM Strategic
Income Fund, Inc. remains focused on a disciplined investment strategy which
endeavors to reduce volatility and generate above-average income. The Fund
selects convertible securities on a company-by-company basis to determine which
issues to own and which to sell--without the guesswork of market timing. We
believe our commitment to this time-tested strategy will provide the best
opportunity for growth for our shareholders over the long term.
PORTFOLIO COMPOSITION
(As of 12/31/95)
[PIE CHART]
Convertible Bonds 85.27%
Convertible Preferred Stocks 12.82%
Common Stocks .0082%
===============================================================================
BOND MARKETS AT A GLANCE
===============================================================================
Comparison of yields at year-end
12/95 12/94
U.S. Treasury Securities
90-Day 5.072% 5.682%
1-Year 5.132 7.162
5-Year 5.374 7.827
10-Year 5.570 7.827
Barron's Corporate Bond Indexes
Best Grade* 6.70% 8.34%
Interim Grade** 6.85 8.97
*Barron's index of 10 high-grade corporate bonds. **Barron's Index of 10
medium-grade corporate bonds.
===============================================================================
Source: Barron's
See important Fund disclosure on inside front cover.
3
<PAGE> 363
Long-term
Performance
GROWTH OF A $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURNS
Based on net asset value as of December 31, 1995
1 Year 13.51%
5 Years 10.44
Inception (3/23/89) 9.76
AIM STRATEGIC INCOME FUND 3-MONTH U.S. TREASURY BILLS
3/89 $10,000 $10,000
12/89 10,720 10,843
12/90 11,430 11,657
12/91 13,360 12,259
12/92 14,777 12,680
12/93 16,451 13,064
12/94 16,549 13,664
12/95 18,784 14,397
Source: Towers Data Systems HYPO(R)
An investment cannot be made in any indexes listed. Unless otherwise indicated,
index results include reinvested dividends and do not reflect sales charges.
For Fund performance calculations and a description of any indexes cited on
this page, please refer to the inside front cover of this report.
4
<PAGE> 364
----------------
Your financial
consultant can
assist you in
developing an asset
allocation strategy
and select the
appropriate invest-
ments to help you
meet your
long-term
investment goals.
----------------
ASSET ALLOCATION HELPS YOU MANAGE
YOUR INVESTMENTS IN CHANGING MARKETS
Every mutual fund investor would like to invest in a market that only goes up--a
tide that floats all ships. The truth is, markets also decline. But market
changes do not affect all investments the same way--some investments may benefit
from a market trend when others do not.
And market changes are not the only factors an investor must manage. There
are a number of important considerations with every investment including
investment risk, and investment risk takes many forms:
o MARKET RISK. The prices of some investments will fluctuate according to
changes in the market.
o INTEREST RATE RISK. The value of some investments, such as fixed-income
securities, will rise and fall as interest rates change.
o REINVESTMENT RISK. When interest rates fall, investors face the
possibility that investment income cannot be reinvested at higher rates
previously available.
o INFLATION RISK. Inflation can cause the value of some investments to
erode as the cost of living increases.
o CURRENCY RATE RISK. Investments valued in U.S. dollars will rise and fall
according to the dollar's value against other world currencies.
To manage these changing conditions, investors have learned to diversify
their assets across a wide variety of investments. For most investors, mutual
funds offer convenient and affordable methods to diversify their assets. For as
little as $500, an investor has access to a portfolio of hundreds of
professionally selected securities.
When you invest in more than one fund, you increase the level of
diversification. You also gain another important benefit. Since mutual funds are
managed according to specific investment objectives, such as growth or income,
you can invest in mutual funds with different investment objectives to create a
personalized investment plan which suits your unique financial objectives. This
investment strategy is called asset allocation.
Mutual fund investors tend to seek growth, or current income, or some
combination of both. Generally, investors who choose to assume more investment
risk get the potential for a higher return. With asset allocation, you can
fine-tune your investment plan to be more conservative, or more aggressive,
depending on your personal financial goals and risk tolerances.
Your financial consultant can assist you in developing an asset allocation
strategy and select the appropriate investments to help you meet your long-term
investment goals.
5
<PAGE> 365
<TABLE>
<CAPTION>
RELATIVELY
AGGRESSIVE OBJECTIVE FUND
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
Aggressive Growth AIM Aggressive Growth Fund*
AIM Constellation Fund
AIM Global Aggressive Growth Fund
- -----------------------------------------------------------------------------------------------
Growth AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
- -----------------------------------------------------------------------------------------------
Growth and Income AIM Balanced Fund
AIM Charter Fund
- -----------------------------------------------------------------------------------------------
Income and Growth AIM Global Utilities Fund**
- -----------------------------------------------------------------------------------------------
High Current Income AIM High Yield Fund
- -----------------------------------------------------------------------------------------------
Current Income AIM Global Income Fund
AIM Income Fund
- -----------------------------------------------------------------------------------------------
Current Tax-Free Income AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of CT
AIM Tax-Free Intermediate Shares
- -----------------------------------------------------------------------------------------------
Current Income AIM Intermediate Government Fund***
and High Degree of Safety
- -----------------------------------------------------------------------------------------------
High Degree of Safety AIM Limited Maturity Treasury Shares
and Current Income
- -----------------------------------------------------------------------------------------------
Stability, Liquidity AIM Money Market Fund
and Current Income
- -----------------------------------------------------------------------------------------------
Stability, Liquidity AIM Tax-Exempt Cash Fund
and Current Tax-Free Income
- -----------------------------------------------------------------------------------------------
RELATIVELY
CONSERVATIVE
</TABLE>
*AIM Aggressive Growth Fund was closed to new investors on
July 18, 1995. **May 1, 1995, AIM Utilities Fund broadened
its investment strategy to permit up to 80% of its total assets
to be invested in foreign securities, and was renamed AIM Global
Utilities Fund. ***On September 25, 1995 AIM Government Securities
Fund was renamed AIM Intermediate Government Fund. For more
complete information about any AIM Fund(s), including sales charges
and expenses, ask your financial consultant or securities dealer
for a free prospectus(es). Please read the prospectus(es) carefully
before you invest or send money.
6
<PAGE> 366
Financials
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
CONVERTIBLE BONDS & NOTES-85.27%(a)
AIRLINES-0.73%
$ 500,000 Alaska Air Group Inc., Conv. Sub. Deb., ($258,001) 6.50%,
06/15/05 $ 493,750
- -------------------------------------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-2.83%
3,000,000 J Seagram & Sons, Inc., Liquid Yield Option Notes,
($2,060,738) 4.45%(b), 03/05/06 1,916,250
- -------------------------------------------------------------------------------------------
BIOTECHNOLOGY-2.15%
1,200,000 Genzyme Corp., Sub. Deb., ($559,545) 6.75%, 10/01/01 1,454,400
- -------------------------------------------------------------------------------------------
BUSINESS SERVICES-0.88%
500,000 Olsten Corp., Conv. Sub. Deb., ($278,401) 4.875%, 05/15/03 594,850
- -------------------------------------------------------------------------------------------
COMPUTER MAINFRAMES-1.12%
850,000 Unisys Corp., Conv. Sub. Notes, ($716,625) 8.25%, 08/01/00 760,750
- -------------------------------------------------------------------------------------------
COMPUTER NETWORKING-9.01%
1,000,000 Aspect Telecommunications Corp., Conv. Sub. Deb., ($622,001)
5.00%, 10/15/03(c) (acquired 07/18/95-07/20/95; cost
$1,234,672) 1,755,000
- -------------------------------------------------------------------------------------------
1,500,000 Bay Networks, Inc., Conv. Sub. Deb., ($681,760) 5.25%,
05/15/03(c)
(acquired 10/03/95-11/15/95; cost $1,611,250) 1,627,500
- -------------------------------------------------------------------------------------------
612,000 Network Equipment Technologies, Inc., Conv. Deb., ($365,401)
7.25%, 05/15/14 626,810
- -------------------------------------------------------------------------------------------
1,300,000 3Com Corp., Conv. Sub. Notes, ($725,815) 10.25%, 11/01/01(c)
(acquired 11/08/94-01/04/95; cost $1,314,250) 2,086,500
- -------------------------------------------------------------------------------------------
6,095,810
- -------------------------------------------------------------------------------------------
COMPUTER PERIPHERALS-5.29%
1,000,000 EMC Corp., Conv. Deb., ($555,512) 4.25%, 01/01/01 1,010,000
- -------------------------------------------------------------------------------------------
1,000,000 Sanmina Corporation, Conv. Sub. Notes, ($608,966) 5.50%,
08/15/02(c)
(acquired 08/10/95; cost $1,000,000) 1,105,000
- -------------------------------------------------------------------------------------------
1,500,000 Storage Technology Corp., Conv. Sub. Deb., ($775,500) 8.00%,
05/31/15 1,462,500
- -------------------------------------------------------------------------------------------
3,577,500
- -------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.72%
650,000 SoftKey International, Inc., Conv. Sr. Notes, ($318,001)
5.50%, 11/01/00(c)
(acquired 10/18/95-10/30/95; cost $644,875) 490,750
- -------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-5.31%
1,000,000 Altera Corp., Conv. Sub. Notes, ($716,381) 5.75%, 06/15/02(c)
(acquired 06/16/95; cost $1,000,000) 1,165,000
- -------------------------------------------------------------------------------------------
1,000,000 Dovatron International, Conv. Sub. Notes, ($525,000) 6.00%,
10/15/02(c)
(acquired 10/05/95-10/10/95; cost $998,750) 1,075,000
- -------------------------------------------------------------------------------------------
1,000,000 Integrated Device Technology Inc., Conv. Sub. Notes,
($744,253) 5.50%, 06/01/02 825,000
- -------------------------------------------------------------------------------------------
500,000 Telxon Corp., Conv. Deb., ($247,501) 5.75%, 01/01/03(c)
(acquired 12/07/95; cost $513,125) 530,000
- -------------------------------------------------------------------------------------------
3,595,000
- -------------------------------------------------------------------------------------------
HOTELS/MOTELS-4.43%
750,000 Hospitality Franchise Systems, Inc., Conv. Sr. Notes,
($616,993) 4.50%, 10/01/99 1,743,750
- -------------------------------------------------------------------------------------------
1,200,000 Prime Hospitality Corp., Conv. Sub. Notes, ($660,001) 7.00%,
04/15/02 1,254,000
- -------------------------------------------------------------------------------------------
2,997,750
- -------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 367
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
MACHINERY-3.75%
$ 1,500,000 Thermo Electron Corp., Conv. Deb., ($1,102,502) 5.00%,
04/15/01(c)
(acquired 04/07/94; cost $1,508,000) $ 2,536,800
- -------------------------------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-4.62%
1,000,000 Omnicare, Inc., Conv. Sub. Notes, ($742,088) 5.75%, 10/01/03 3,125,000
- -------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-12.00%
1,750,000 Beverly Enterprises, Inc., Conv. Sub. Deb., ($1,419,660)
5.50%, 08/01/18 1,680,000
- -------------------------------------------------------------------------------------------
1,300,000 Genesis Health Ventures, Inc., Conv. Sr. Sub. Deb.,
($951,553) 6.00%, 11/30/03 2,143,375
- -------------------------------------------------------------------------------------------
1,700,000 Healthsouth Rehabilitation Corp., Conv. Sub. Deb.,
($1,109,939) 5.00%, 04/01/01 2,747,710
- -------------------------------------------------------------------------------------------
1,000,000 Integrated Health Services, Inc., Conv. Sub. Deb., ($481,882)
6.00%, 01/01/03 995,500
- -------------------------------------------------------------------------------------------
500,000 Multicare Companies, Inc., Conv. Sub. Deb., ($260,001) 7.00%,
03/15/03(c)
(acquired 03/09/95; cost $500,000) 550,900
- -------------------------------------------------------------------------------------------
8,117,485
- -------------------------------------------------------------------------------------------
METALS-2.91%
1,500,000 Inco Ltd., Sub. Deb., ($1,200,002) 5.75%, 07/01/04 1,972,500
- -------------------------------------------------------------------------------------------
OFFICE AUTOMATION-3.10%
1,500,000 Danka Business Systems PLC, Yankee Conv. Sub. Notes,
($757,250) 6.75%, 04/01/02 2,096,250
- -------------------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-2.46%
1,200,000 Pogo Producing Co., Conv. Sub. Notes, ($931,897) 5.50%,
03/15/04 1,662,000
- -------------------------------------------------------------------------------------------
POLLUTION CONTROL-1.49%
1,000,000 Browning-Ferris Industries, Conv. Sub. Deb. ($779,008) 6.25%,
08/15/12 1,005,000
- -------------------------------------------------------------------------------------------
RESTAURANTS-2.83%
Starbucks Corp., Conv. Sub. Deb., ($480,005)
500,000 4.25%, 11/01/02 530,000
- -------------------------------------------------------------------------------------------
1,000,000 4.50%, 08/01/03 1,385,000
- -------------------------------------------------------------------------------------------
1,915,000
- -------------------------------------------------------------------------------------------
RETAIL STORES-7.68%
1,300,000 Baby Superstore, Inc., Conv. Sub. Notes, ($646,500) 4.875%,
10/01/00 1,534,000
- -------------------------------------------------------------------------------------------
4,000,000 Office Depot, Inc., Liquid Yield Option Notes, ($2,597,092)
5.00%(b), 12/11/07 2,670,000
- -------------------------------------------------------------------------------------------
1,000,000 Staples, Inc., Conv. Notes, ($495,001) 4.50%, 10/01/00(c)
(acquired 09/12/95; cost $1,000,000) 990,000
- -------------------------------------------------------------------------------------------
5,194,000
- -------------------------------------------------------------------------------------------
SEMICONDUCTORS-10.91%
1,000,000 LAM Research Corp., Conv. Sub. Deb., ($650,000) 6.00%,
05/01/03 1,855,000
- -------------------------------------------------------------------------------------------
1,000,000 LSI Logic Corp., Conv. Sub. Notes, ($735,001) 5.50%,
03/15/01(c)
(acquired 03/18/94 - 05/04/94; cost $1,075,000) 2,755,000
- -------------------------------------------------------------------------------------------
3,000,000 Solectron Corp., Liquid Yield Option Notes, ($2,020,008)
7.00%(b), 05/05/12 2,775,000
- -------------------------------------------------------------------------------------------
7,385,000
- -------------------------------------------------------------------------------------------
TRANSPORTATION (MISCELLANEOUS)-1.05%
700,000 Varlen Corp., Conv. Sub. Deb., ($481,059) 6.50%, 06/01/03 710,500
- -------------------------------------------------------------------------------------------
Total Convertible Bonds & Notes 57,696,345
- -------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 368
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS-12.82%(a)
AUTOMOBILE (MANUFACTURERS)-4.33%
40,000 General Motors Corp., $3.25 Series C Conv. Pfd.,
(28,414 shares) $ 2,930,000
- -------------------------------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-2.19%
20,000 SCI Finance LLC, $3.125 Series A Conv. Pfd. (13,120 shares) 1,480,000
- -------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.06%
10,000 Penncorp Financial Group, $3.375 Conv. Pfd. (6,328 shares) 713,750
- -------------------------------------------------------------------------------------------
OIL & GAS (DRILLING)-1.66%
25,000 Reading & Bates Corp., $1.625 Conv. Pfd. (14,833 shares) 1,125,000
- -------------------------------------------------------------------------------------------
OIL & GAS (SERVICES)-1.06%
30,000 Enron Corp., $1.36 Conv. Pfd. (9,681 shares) 720,000
- -------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-2.52%
35,000 MFS Communications, Inc., $2.68 Conv. Pfd. (18,300 shares) 1,704,063
- -------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks 8,672,813
- -------------------------------------------------------------------------------------------
COMMON STOCKS-0.82%
COMPUTER NETWORKING-0.82%
20,254 Network Equipment Technologies, Inc. 554,454
- -------------------------------------------------------------------------------------------
HOTELS/MOTELS-0.00%
13 Prime Hospitality Corp. 130
- -------------------------------------------------------------------------------------------
Total Common Stocks 554,584
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT-5.70%(d)
$ 3,854,052 Daiwa Securities America, Inc., 5.92%, 01/02/96(e) 3,854,052
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES-104.61% 70,777,794
- -------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(4.61)% (3,116,830)
- -------------------------------------------------------------------------------------------
NET ASSETS-100.00% $67,660,964
===========================================================================================
</TABLE>
(a) Amount in parentheses represents principal amount or number of shares
deposited in escrow with custodian as collateral for securities sold
short.
(b) Zero-coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(c) Restricted securities. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at December 31, 1995 was
$16,667,450 which represents 24.63% of the net assets.
(d) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is
marked-to-market daily to ensure its market value as being 102% of the
sales price of the repurchase agreement. The investments in some
repurchase agreements are through participation in joint accounts with
other mutual funds managed by the investment advisor.
(e) Joint repurchase agreement entered into 12/29/95 with a maturing value of
$646,679,181. Collateralized by $537,995,000 U.S. Treasury obligations,
7.875% to 11.25% due 11/15/07 to 02/15/15.
Abbreviations:
Conv. - Convertible
Deb. - Debenture
Pfd. - Preferred
Sr. - Senior
Sub. - Subordinated
See Notes to Financial Statements
9
<PAGE> 369
Financials
SECURITIES SOLD SHORT
December 31, 1995
<TABLE>
<CAPTION>
COMMON SHARES
(OR
EQUIVALENT SHARES MARKET
IN ESCROW) SOLD SHORT SECURITIES SOLD SHORT VALUE
<S> <C> <C> <C>
12,000 12,000 Alaska Air Group Inc. $ 195,000
- -------------------------------------------------------------------------------------------------------
14,000 14,000 Altera Corp. 696,500
- -------------------------------------------------------------------------------------------------------
32,000 32,000 Aspect Telecommunications Corp. 1,072,000
- -------------------------------------------------------------------------------------------------------
12,000 12,000 Baby Superstore, Inc. 684,000
- -------------------------------------------------------------------------------------------------------
16,000 16,000 Bay Networks, Inc. 658,000
- -------------------------------------------------------------------------------------------------------
106,500 106,500 Beverly Enterprises, Inc. 1,131,563
- -------------------------------------------------------------------------------------------------------
19,000 19,000 Browning-Ferris Industries 560,500
- -------------------------------------------------------------------------------------------------------
26,000 26,000 Danka Business Systems PLC 962,000
- -------------------------------------------------------------------------------------------------------
14,000 14,000 Dovatron International 472,500
- -------------------------------------------------------------------------------------------------------
28,000 28,000 EMC Corp. 430,500
- -------------------------------------------------------------------------------------------------------
8,000 8,000 Enron Corp. 192,000
- -------------------------------------------------------------------------------------------------------
40,001 40,000 General Motors Corp. 2,080,000
- -------------------------------------------------------------------------------------------------------
42,000 42,000 Genesis Health Ventures, Inc. 1,533,000
- -------------------------------------------------------------------------------------------------------
12,000 12,000 Genzyme Corp. 748,500
- -------------------------------------------------------------------------------------------------------
59,000 59,000 Healthsouth Rehabilitation Corp. 1,718,375
- -------------------------------------------------------------------------------------------------------
17,000 17,000 Hospitality Franchise Systems, Inc. 1,389,750
- -------------------------------------------------------------------------------------------------------
40,000 40,000 Inco Ltd. 1,330,000
- -------------------------------------------------------------------------------------------------------
26,000 26,000 Integrated Device Technology, Inc. 334,750
- -------------------------------------------------------------------------------------------------------
15,000 15,000 Integrated Health Services, Inc. 375,000
- -------------------------------------------------------------------------------------------------------
26,000 26,000 LAM Research Corp. 1,189,500
- -------------------------------------------------------------------------------------------------------
60,000 60,000 LSI Logic Corp. 1,965,000
- -------------------------------------------------------------------------------------------------------
17,000 17,000 MFS Communications, Inc. 905,250
- -------------------------------------------------------------------------------------------------------
10,000 10,000 Multicare Companies, Inc. 240,000
- -------------------------------------------------------------------------------------------------------
11,600 11,600 Network Equipment Technology, Inc. 317,550
- -------------------------------------------------------------------------------------------------------
76,000 76,000 Office Depot, Inc. 1,501,000
- -------------------------------------------------------------------------------------------------------
8,000 8,000 Olsten Corp. 316,000
- -------------------------------------------------------------------------------------------------------
51,400 51,400 Omnicare, Inc. 2,300,150
- -------------------------------------------------------------------------------------------------------
14,000 14,000 Penncorp Financial Group 411,250
- -------------------------------------------------------------------------------------------------------
42,000 42,000 Pogo Producing Co. 1,186,500
- -------------------------------------------------------------------------------------------------------
55,000 55,000 Prime Hospitality Corp. 550,000
- -------------------------------------------------------------------------------------------------------
43,001 43,000 Reading & Bates Corp. 645,000
- -------------------------------------------------------------------------------------------------------
10,800 10,800 Sanmina Corporation 560,250
- -------------------------------------------------------------------------------------------------------
38,000 38,000 J Seagram & Sons, Inc. 1,315,750
- -------------------------------------------------------------------------------------------------------
21,802 21,800 Service Corp. International 959,200
- -------------------------------------------------------------------------------------------------------
6,000 6,000 SoftKey International, Inc. 138,750
- -------------------------------------------------------------------------------------------------------
42,000 42,000 Solectron Corp. 1,853,250
- -------------------------------------------------------------------------------------------------------
15,000 15,000 Staples, Inc. 365,625
- -------------------------------------------------------------------------------------------------------
32,000 32,000 Starbucks Corp. 672,000
- -------------------------------------------------------------------------------------------------------
22,000 22,000 Storage Technology Corp. 525,250
- -------------------------------------------------------------------------------------------------------
9,000 9,000 Telxon Corp. 203,625
- -------------------------------------------------------------------------------------------------------
35,000 35,000 Thermo Electron Corp. 1,820,000
- -------------------------------------------------------------------------------------------------------
21,000 21,000 3Com Corp. 979,125
- -------------------------------------------------------------------------------------------------------
70,000 70,000 Unisys Corp. 393,750
- -------------------------------------------------------------------------------------------------------
17,600 17,600 Varlen Corp. 378,400
- -------------------------------------------------------------------------------------------------------
$38,256,113
- -------------------------------------------------------------------------------------------------------
</TABLE>
As indicated in the Schedule of Investments, securities which are convertible
into at least the number of shares sold short have been deposited in escrow with
the custodian.
See Notes to Financial Statements.
10
<PAGE> 370
Financials
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (cost $56,405,981) $ 70,777,794
- -----------------------------------------------------------------------------------------
Cash 5,738,211
- -----------------------------------------------------------------------------------------
Receivables for:
Investments sold short 28,991,655
- -----------------------------------------------------------------------------------------
Interest and dividends 594,175
- -----------------------------------------------------------------------------------------
Other assets 9,147
- -----------------------------------------------------------------------------------------
Total assets 106,110,982
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Dividends to shareholders 60,871
- -----------------------------------------------------------------------------------------
Dividends on short sales 5,748
- -----------------------------------------------------------------------------------------
Short positions covered 24,199
- -----------------------------------------------------------------------------------------
Market value of securities sold short (proceeds from sales $28,991,655) 38,256,113
- -----------------------------------------------------------------------------------------
Accrued advisory fees 45,661
- -----------------------------------------------------------------------------------------
Accrued accounting service fees 5,325
- -----------------------------------------------------------------------------------------
Accrued operating expenses 52,101
- -----------------------------------------------------------------------------------------
Total liabilities 38,450,018
- -----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 67,660,964
=========================================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Authorized 200,000,000
- -----------------------------------------------------------------------------------------
Outstanding 6,976,644
=========================================================================================
Net asset value per share $ 9.70
=========================================================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 371
Financials
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 4,224,085
- ----------------------------------------------------------------------------------------
Dividends 609,051
- ----------------------------------------------------------------------------------------
Total investment income 4,833,136
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 529,080
- ----------------------------------------------------------------------------------------
Custodian fees 28,156
- ----------------------------------------------------------------------------------------
Transfer agent fees 22,849
- ----------------------------------------------------------------------------------------
Accounting service fees 52,934
- ----------------------------------------------------------------------------------------
Printing fees 54,535
- ----------------------------------------------------------------------------------------
Directors' fees and expenses 2,362
- ----------------------------------------------------------------------------------------
Dividends on short sales (net of $2,721 foreign withholding tax) 131,068
- ----------------------------------------------------------------------------------------
Other 52,849
- ----------------------------------------------------------------------------------------
Total expenses 873,833
- ----------------------------------------------------------------------------------------
Net investment income 3,959,303
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND OPTIONS
TRANSACTIONS:
Net realized gain on sales of investment securities 1,086,491
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on options contracts (110,905)
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on securities sold short (1,545,287)
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on investment securities and options
transactions (569,701)
- ----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 4,434,483
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 7,824,085
========================================================================================
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 372
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,959,303 $ 3,559,322
- ------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities and options transactions (569,701) (521,935)
- ------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities 4,434,483 (3,118,038)
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 7,824,085 (80,651)
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (4,185,673 ) (3,191,511)
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains
(losses) on investment securities -- (771,455)
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 3,638,412 (4,043,617)
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period $64,022,552 $68,066,169
- ------------------------------------------------------------------------------------------
End of period $67,660,964 $64,022,552
==========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $64,411,350 $64,411,350
- ------------------------------------------------------------------------------------------
Undistributed net investment income 141,441 367,811
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities and options transactions (1,999,182) (1,429,481)
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 5,107,355 672,872
- ------------------------------------------------------------------------------------------
$67,660,964 $64,022,552
==========================================================================================
</TABLE>
See Notes to Financial Statements.
13
<PAGE> 373
Financials
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Strategic Income Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified, closed-end
management investment company. The Fund was incorporated under the laws of the
State of Maryland on December 22, 1988 and commenced trading on the American
Stock Exchange on March 23, 1989 under the symbol "AST". The Fund's investment
objective is to seek high current income consistent with stability of principal.
The Fund will seek to achieve its objective primarily by pursuing a strategy of
investing in convertible securities and by employing short selling to enhance
income and hedge against market risk. 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 - Investments in securities, including options and
securities sold short (but excluding convertible bonds), that are traded on a
national securities exchange or on the NASDAQ National Market System are
valued at market using the last reported sales price. Exchange listed
convertible bonds are valued at the mean between the closing bid and asked
prices obtained from a broker-dealer. Securities traded in the
over-the-counter market and listed securities for which no sales were
reported are valued at the mean of the most recently quoted bid and asked
prices. When market quotations are not readily available from the above
sources for the Fund's debt securities, such securities are valued based upon
appraisals received from a pricing service using a computerized matrix
system, or based upon appraisals derived from information concerning the
securities or similar securities received from recognized dealers in those
securities. Securities for which market quotations are either not readily
available or are questionable are valued at fair value as determined in good
faith by or under the supervision of the Fund's officers in accordance with
methods which are specifically authorized by the Board of Directors of the
Fund. Short-term obligations with maturities of 60 days or less are valued at
amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income, dividend expense on
short sales and distributions to shareholders are recorded on the ex-dividend
date.
C. Accounting for Securities Sold Short - When the Fund sells common stock
short, an amount equal to the proceeds of the sale is recorded as an asset.
This asset is offset by a liability (representing the borrowed security)
recorded on the books of the Fund at the market value of the common stock
determined each day in accordance with the procedures for security valuations
discussed in "A" above. The Fund's risk is that the value of the security
will increase rather than decline and thus an unrealized loss will be
recorded. When the Fund closes out a short position by delivering the stock
sold short, the Fund will realize a gain or loss and the liability related to
such short position will be eliminated. The Fund will attempt to hedge
against market risk by entering into short sales of securities that it
currently owns or has the right to acquire through the conversion or exchange
of other securities that it owns. Such short sales may protect the Fund
against the risk of losses in the value of its portfolio securities because
any unrealized losses with respect to such securities may be wholly or
partially offset by a corresponding gain in the short position. However, any
potential gains in such portfolio securities may be wholly or partially
offset by a corresponding loss in the short position. The Fund will attempt
to enhance income by entering into arrangements with the broker-dealers,
through which securities are sold short, to receive income with respect to
the proceeds of short sales during the period the Fund's short positions
remain open. During the year ended December 31, 1995, the Fund accrued
$1,527,804 of interest income with respect to such arrangements.
D. Covered Call Options - The Fund may write call options, but only on a covered
basis; that is, the Fund will own the underlying security or has the
immediate right to acquire, without additional consideration, through
conversion or exchange of other securities. Options written by the Fund
normally will have expiration dates between three and nine months from the
date written. The Fund may write only call options listed on national
14
<PAGE> 374
Financials
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued)
securities exchanges. The exercise price of a call option may be below, equal
to, or above the current market value of the underlying security at the time
the option is written. When the Fund writes a covered call option, an amount
equal to the premium received by the Fund is recorded as an asset and an
equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option written.
The current market value of a written option is the last sale price, or in
the absence of a sale, the mean between the last bid and asked prices on that
day. If a written call option expires on the stipulated expiration date, or
if the Fund enters into a closing purchase transaction, the Fund realizes a
gain (or a loss if the closing purchase transaction exceeds the premium
received when the option was written) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such option
is extinguished. If a written option is exercised, the Fund realizes a gain
or a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written. The Fund will
not write a covered call option if, immediately thereafter, the aggregate
value of the securities underlying all such options, determined as of the
dates such options were written, would exceed 5% of the net assets of the
Fund.
E. Bond Premiums and Discounts - It is the policy of the Fund not to amortize
market premiums and discounts on bonds for financial reporting purposes.
Original issue discounts are amortized to interest income over the life of
the security.
F. 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 of $1,281,552 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2003. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into an investment advisory agreement with A I M Advisors,
Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund
will pay AIM a fee, calculated and paid monthly, in an amount equal to an
annualized rate of 0.80% of the Fund's average weekly net assets.
The Fund, pursuant to its investment advisory agreement with AIM, has agreed
to reimburse AIM for certain costs incurred in providing accounting services to
the Fund. During the year ended December 31, 1995, the Fund reimbursed AIM
$52,934 for such services.
Certain officers and directors of the Fund are officers of AIM.
Shareholders' Meeting
An annual meeting of shareholders of the Fund was held on April 25, 1995 (the
"Meeting"). The following two items were approved by the 3,918,466 shares
represented at the Meeting, with the following vote totals cast with respect to
each item:
(1) Election of Directors - At the Meeting, Messrs. Gary T. Crum and Owen Daly
II were reelected as Directors of the Fund. 3,849,757 shares voted for the
election of Messrs. Crum and Daly, respectively, while 68,709 shares
withheld authority, respectively. The other members of the Board, Messrs.
Charles T. Bauer, John F. Kroeger, Robert H. Graham, and Lewis F. Pennock,
continued in office.
15
<PAGE> 375
Financials
(2) Ratification of Appointment of Independent Auditors -- 3,764,921 shares
voted for ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors for the Fund for the Fund's fiscal year ending
December 31, 1995. 108,815 shares voted against such ratification, and
44,730 shares abstained.
Rule 144A Securities
At its February 1996 meeting, the Board of Directors of the Fund clarified
the investment policies of the Fund regarding investments in securities that are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933 (the "1933 Act"). These securities are sometimes
referred to as private placements. Although securities which may be resold only
to "qualified institutional buyers" in accordance with the provisions of Rule
144A under the 1933 Act are unregistered securities, the Fund may purchase Rule
144A securities without regard to the limitation on investments in illiquid
securities, provided that a determination is made that such securities have a
readily available trading market. AIM will determine the liquidity of Rule 144A
securities under the supervision of the Fund's Board of Directors, and will
consider whether securities purchased under Rule 144A are illiquid and thus
subject to the Fund's restriction of investing no more than 33-1/3 of its assets
in illiquid securities. Determination of whether a Rule 144A security is liquid
or not is a question of fact. In making this determination AIM will consider the
trading markets for the specific security taking into account the unregistered
nature of a Rule 144A security. In addition, AIM will consider the (i) frequency
of trades and quotes, (ii) number of dealers and potential purchasers, (iii)
dealer undertakings to make a market, and (iv) nature of the security and or
market place trades (for example, the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer). The liquidity of
Rule 144A securities will also be monitored by AIM and if it is determined that
a Rule 144A security is no longer liquid as a result of changed conditions, the
Fund's holdings of illiquid securities will be reviewed to determine what, if
any, action is required to assure that the Fund does not invest more than 33-1/3
of its assets in illiquid securities. Investing in Rule 144A securities could
have the effect of increasing the amount of the Fund's investments in illiquid
securities if qualified institutional buyers are unwilling to purchase such
securities.
NOTE 3 - DIVIDENDS
On December 27, 1995, the Board of Directors of the Fund declared a dividend of
$.05 per share of net investment income payable January 23, 1996 to shareholders
of record on January 12, 1996. On January 26, 1996 the Board of Directors
declared a dividend of $.05 per share of net investment income payable February
23, 1996 to shareholders of record on February 12, 1996.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the year ended December 31, 1995, was $67,911,597 and
$71,396,334, respectively.
The amount of unrealized appreciation (depreciation) of investments on a tax
basis as of December 31, 1995, is as follow:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of:
Investment securities $15,640,586
- ----------------------------------------------------------------------------------------------------------------
Securities sold short 1,325,069
- ----------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of:
Investment securities (1,268,773)
- ----------------------------------------------------------------------------------------------------------------
Securities sold short (10,358,064)
- ----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 5,338,818
================================================================================================================
</TABLE>
Cost of investment securities for tax purposes is $56,405,981. Proceeds from
securities sold short for tax purposes is $29,223,118.
NOTE 5 - OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
----------------------
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
-------- -------
<S> <C> <C>
Beginning of year -- --
- ------------------------------------------------------------------------------------------------------------------
Written 390 $66,382
- ------------------------------------------------------------------------------------------------------------------
Closed (340) (59,974)
- ------------------------------------------------------------------------------------------------------------------
Exercised -- --
- ------------------------------------------------------------------------------------------------------------------
Expired (50) (6,408)
- ------------------------------------------------------------------------------------------------------------------
End of year -- $ --
==================================================================================================================
</TABLE>
16
<PAGE> 376
Financials
NOTE 6 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued in each director who is
not an "interested person" of AIM. The Fund may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 7 - QUARTERLY DATA
The following is a summary of quarterly results of operations for the year ended
December 31, 1995.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
3/31/95 6/30/95 9/30/95 12/31/95
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net realized and unrealized gain (loss) on investments $ 535,525 $1,877,126 $2,205,653 $(753,522)
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments per share 0.08 0.27 0.32 (0.11)
- -------------------------------------------------------------------------------------------------------------------------
Net investment income 1,004,880 1,020,763 968,548 965,112
- -------------------------------------------------------------------------------------------------------------------------
Net investment income per share 0.14 0.15 0.14 0.14
=========================================================================================================================
</TABLE>
Pursuant to Section 23 of the Investment Company Act of 1940, notice is hereby
given that the Fund may in the future purchase shares of A I M Strategic Income
Fund, Inc. common stock from time to time, at such times, and in such amounts as
may be deemed advantageous to the Fund. Nothing herein shall be considered a
commitment to purchase such shares.
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share outstanding
during each of the years in the six-year period ended December 31, 1995 and the
period March 23, 1989 (date operations commenced) through December 31, 1989.
<TABLE>
<CAPTION>
1995 1994 1993 1992
------- -------- ------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.18 $ 9.76 $ 9.29 $ 9.15
- -------------------------------------------------------------------- ------- -------- ------- --------
Income from investment operations:
Net investment income 0.57 0.51 0.50 0.60
- -------------------------------------------------------------------- ------- -------- ------- --------
Net gains (losses) on investment securities (both realized and
unrealized) 0.55 (0.52) 0.51 0.32
- -------------------------------------------------------------------- ------- -------- ------- --------
Total from investment operations 1.12 (0.01) 1.01 0.92
- -------------------------------------------------------------------- ------- -------- ------- --------
Less distributions:
Dividends from net investment income (0.60) (0.46) (0.50) (0.60)
- -------------------------------------------------------------------- ------- -------- ------- --------
Distributions from net realized capital gains -- (0.11) (0.04) (0.18)
- -------------------------------------------------------------------- ------- -------- ------- --------
Total distributions (0.60) (0.57) (0.54) (0.78)
- -------------------------------------------------------------------- ------- -------- ------- --------
Net asset value, end of period $ 9.70 $ 9.18 $ 9.76 $ 9.29
==================================================================== ======= ======== ======= ========
Per share market value, end of period $ 8.38 $ 8.00 $ 9.00 $ 9.13
==================================================================== ======= ======== ======= ========
Total investment return, based on market value(a) 12.46% (4.94)% 4.47% 17.03%
==================================================================== ======= ======== ======= ========
Total investment return, based on net asset value(b) 13.51% 0.59% 11.34% 10.62%
==================================================================== ======= ======== ======= ========
Net assets, end of period (000s omitted) $67,661 $ 64,023 $68,066 $ 64,700
==================================================================== ======= ======== ======= ========
Significant ratios for the period:
Investment income 7.30%(d) 6.80% 6.68% 8.16%
- -------------------------------------------------------------------- ------- -------- ------- --------
Operating expenses (1.12)(d) (1.15) (1.16) (1.15)
- -------------------------------------------------------------------- ------- -------- ------- --------
Dividends on short sales (0.20)(d) (0.27) (0.34) (0.51)
- -------------------------------------------------------------------- ------- -------- ------- --------
Tax expense -- -- (0.01) --
- -------------------------------------------------------------------- ------- -------- ------- --------
Net investment income 5.98%(d) 5.38% 5.17% 6.50%
==================================================================== ======= ======== ======= ========
Portfolio turnover rate 99.97% 89.96% 117.45% 89.70%
==================================================================== ======= ======== ======= ========
<CAPTION>
1991 1990 1989
------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.64 $ 9.12 $ 9.23
- -------------------------------------------------------------------- ------- -------- --------
Income from investment operations:
Net investment income 0.80 0.98 0.77
- -------------------------------------------------------------------- ------- -------- --------
Net gains (losses) on investment securities (both realized and
unrealized) 0.56 (0.44) (0.11)
- -------------------------------------------------------------------- ------- -------- --------
Total from investment operations 1.36 0.54 0.66
- -------------------------------------------------------------------- ------- -------- --------
Less distributions:
Dividends from net investment income (0.80) (0.98) (0.77)
- -------------------------------------------------------------------- ------- -------- --------
Distributions from net realized capital gains (0.05) (0.04) --
- -------------------------------------------------------------------- ------- -------- --------
Total distributions (0.85) (1.02) (0.77)
- -------------------------------------------------------------------- ------- -------- --------
Net asset value, end of period $ 9.15 $ 8.64 $ 9.12
==================================================================== ======= ======== ========
Per share market value, end of period $ 8.50 $ 7.88 $ 9.75
==================================================================== ======= ======== ========
Total investment return, based on market value(a) 19.05% (9.04)% 5.78%
==================================================================== ======= ======== ========
Total investment return, based on net asset value(b) 16.89% 6.62% 7.20%
==================================================================== ======= ======== ========
Net assets, end of period (000s omitted) $63,068 $ 59,585 $ 62,141
==================================================================== ======= ======== ========
Significant ratios for the period:
Investment income 10.64% 12.54% 12.26%(c)
- -------------------------------------------------------------------- ------- -------- --------
Operating expenses (1.17) (1.16)(e) (0.97)(c)(e)
- -------------------------------------------------------------------- ------- -------- --------
Dividends on short sales (0.40) (0.40) (0.43)(c)
- -------------------------------------------------------------------- ------- -------- --------
Tax expense (0.03) (0.02) --
- -------------------------------------------------------------------- ------- -------- --------
Net investment income 9.04% 10.96%(e) 10.86%(c)(e)
==================================================================== ======= ======== ========
Portfolio turnover rate 89.40% 91.73% 161.82%
==================================================================== ======= ======== ========
</TABLE>
(a) Assumes shares purchased at market value at the beginning of the year,
dividends reinvested at market value on payable date, and all shares sold at
market value at the end of the period.
(b) Assumes shares purchased at net asset value at the beginning of the year,
dividends reinvested at market value and all shares sold at net asset value
at the end of the period.
(c) Annualized.
(d) Based on average weekly net assets of $66,176,041.
(e) After partial waiver of advisory and administrative fees.
17
<PAGE> 377
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Strategic Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of AIM
Strategic Income Fund, Inc., including the schedule of investments, as of
December 31, 1995, and 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 six-year period then ended and for the period March 23, 1989 (date
operations commenced) through December 31, 1989. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the 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
December 31, 1995, 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
Strategic Income Fund, Inc. as of December 31, 1995, 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 six-year period then ended and the period March 23,
1989 (date operations commenced) through December 31, 1989, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
February 7, 1996
Houston, Texas
18
<PAGE> 378
DIVIDEND REINVESTMENT PLAN
The following information provides a detailed summary of the Dividend
Reinvestment Plan of AIM Strategic Income Fund, Inc.
Pursuant to AIM Strategic Income Fund, Inc.'s (the "Fund") Dividend Reinvestment
Plan (the "Plan"), shareholders whose shares are registered in their own names
will have their dividends and capital gain distributions reinvested in
additional shares of the Fund unless they elect to receive such distributions in
cash. State Street Bank and Trust Company (the "Plan Agent") will act as agent
for participants under the Plan. Shareholders whose shares are held in the name
of a broker or nominee should contact such broker or nominee to determine
whether or how they may participate in the Plan.
Shareholders who elect not to participate in the Plan will receive all
distributions in cash paid by check mailed directly to the shareholder of record
(or, if the shares are held in street or other nominee name, then to the
nominee) by State Street Bank and Trust Company as dividend disbursing agent.
Such election must be made by written notification to State Street Bank and
Trust Company.
A shareholder may withdraw from the Plan at any time. There will be no penalty
for withdrawal from the Plan, and shareholders who have previously withdrawn
from the Plan may rejoin it at any time. Changes in elections must be in
writing, addressed to State Street Bank and Trust Company, P.O. Box 8200,
Boston, Massachusetts 02266-8200, and should include the shareholder's name and
address as they appear on the share certificate. An election to withdraw from
the Plan will, until such election is changed, be deemed to be an election by a
shareholder to take all subsequent distributions in cash. An election will be
effective only for a distribution declared and having a record date of at least
10 days after the date on which the election is received by the Plan Agent.
The Plan Agent serves as agent for the shareholders in administering the Plan.
Shareholders may receive more detailed instructions on the Plan from the Fund by
calling the Fund at (800) 959-4246. Shareholders whose shares are held in the
name of a broker or nominee other than the selling agent should contact such
broker or nominee to determine their rights with respect to the Plan.
If the Board of Directors of the Fund declares an income dividend or capital
gain distribution payable to shareholders either in the Fund's shares or in cash
(as such shareholders may have elected), nonparticipants in the Plan will
receive cash and participants in the Plan will receive the equivalent in shares
valued on the valuation date at the lower of the market price or the net asset
value of such shares, as specified below. The valuation date will generally be
the dividend or distribution payment date, or, if that date is not a trading day
on the American Stock Exchange, the next preceding trading day. If the market
price per share on the valuation date equals or exceeds the net asset value per
share on that date (i.e., the shares are trading at a premium to net asset
value), the Fund will issue new shares to participants valued at the higher of
net asset value or 95% of their market price on the valuation date. If net asset
value per share on the valuation date exceeds the market price per share on that
date (i.e., the shares are trading at a discount from net asset value), or if
the Board of Directors, should declare a dividend or capital gain distribution
payable to shareholders only in cash, participants in the Plan will be deemed to
have elected to receive shares of the Fund valued at the market price on that
date. The Fund will not issue shares under the Plan below net asset value.
Accordingly, in this circumstance, the Plan Agent, as agent for the
participants, will use the amount of the distribution to buy the Fund's shares
in the open market, on the American Stock Exchange or elsewhere, for the
participants; accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share, the average per share purchase price paid by the Plan Agent may
exceed the net asset value per share, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund.
The Plan Agent will maintain all shareholders' accounts in the Plan and
furnish written confirmation of all transactions in the account, including
information needed by shareholders for tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each shareholder's proxy will include those
shares purchased or received pursuant to the Plan.
In the case of shareholders such as banks, broker-dealers or nominees which
hold shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of shares certified from time to
time by the record shareholders as representing the total amount registered in
the record shareholder's
19
<PAGE> 379
name and held for the account of beneficial owners who are participating in the
Plan. Beneficial owners of shares who participate in the Plan and who change
brokers should have their new broker instruct the Plan Agent to transfer shares
held by the Plan Agent to the name of the new broker.
There will be no brokerage charges with respect to shares issued directly by
the Fund to satisfy the dividend reinvestment requirements of the Plan. However,
each participant will pay a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's open market purchases of shares. In each cash,
the cost per share of shares purchased for each shareholder's account will be
the average cost, including brokerage commissions, of any shares purchased in
the open market plus the cost of any shares issued by the Fund. Shares will be
purchased through various broker-dealers.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
In the case of foreign participants whose dividends are subject to U.S. income
tax withholding and in the case of any participants subject to 20% federal
backup withholding, the Plan Agent will reinvest dividends after deduction of
the amount required to be withheld.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to participants in the Plan
at least 90 days before the record date for such dividend or distribution. Also
the Plan Agent may terminate its agency status under the Plan on at least 90
days' prior written notice to the Fund and to shareholder participants in the
Plan.
20
<PAGE> 380
Directors &
Officers
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman and Chief Executive Officer Chairman Suite 1919
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Gary T. Crum President INVESTMENT ADVISOR
President
A I M Capital Management, Inc. John J. Arthur A I M Advisors, Inc.
Senior Vice President and Treasurer 11 Greenway Plaza
Owen Daly II Suite 1919
Director Gary T. Crum Houston, TX 77046
Cortland Trust Inc. Senior Vice President
CUSTODIAN/TRANSFER AGENT
Robert H. Graham Carol F. Relihan
President and Chief Operating Vice President and Secretary State Street Bank and Trust Co.
Officer P.O. Box 8200
A I M Management Group Inc. Dana R. Sutton Boston, MA 02266-8200
Vice President
John F. Kroeger and Assistant Treasurer COUNSEL TO THE FUND
Formerly, Consultant
Wendell & Stockel Associates, Inc. Melville B. Cox Ballard Spahr
Vice President Andrews & Ingersoll
Lewis F. Pennock 1735 Market Street
Attorney P. Michelle Grace Philadelphia, PA 19103
Assistant Secretary
COUNSEL TO THE DIRECTORS
David L. Kite
Assistant Secretary Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel
Nancy L. Martin 919 Third Avenue
Assistant Secretary New York, NY 10022
Ofelia M. Mayo AUDITORS
Assistant Secretary
KPMG Peat Marwick LLP
Kathleen J. Pflueger 700 Louisiana
Assistant Secretary NationsBank Bldg.
Houston, TX 77002
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Strategic Income Fund, Inc. paid ordinary dividends in the amount of $0.60
per share to shareholders during the Fund's tax year ended December 31, 1995. Of
this amount, 16% is eligible for the dividends received deduction for
corporations.
<PAGE> 381
<TABLE>
<S> <C>
[PHOTO OF 11 GREENWAY PLAZA] THE AIM FAMILY OF FUNDS(R)
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund**
HIGH CURRENT INCOME
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of CT
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE
OF SAFETY
AIM Intermediate Government Fund***
HIGH DEGREE OF SAFETY AND
CURRENT INCOME
AIM Limited Maturity Treasury Shares
STABILITY, LIQUIDITY, AND
CURRENT INCOME
AIM Money Market Fund
STABILITY, LIQUIDITY, AND
CURRENT TAX-FREE INCOME
AIM Tax-Exempt Cash Fund
*AIM Aggressive Growth Fund was closed to new investors
on July 18, 1995. **On May 1, 1995, AIM Utilities Fund
broadened its investment strategy to permit up to 80%
AIM Management Group has provided leadership in the of its total assets to be invested in foreign
mutual fund industry since 1976 and currently manages securities, and was renamed AIM Global Utilities Fund.
approximately $42 billion in assets for more than 2 ***On September 25, 1995, AIM Government Securities
million shareholders, including individual investors, Fund was renamed AIM Intermediate Government Fund. For
corporate clients, and financial institutions. The AIM more complete information about any AIM Fund(s),
Family of Funds(R) is distributed nationwide, and AIM including sales charges and expenses, ask your
today ranks among the nation's top 20 mutual fund financial consultant or securities dealer for a free
companies in assets under management, according to prospectus(es). Please read the prospectus(es)
Lipper Analytical Services, Inc. carefully before you invest or send money.
</TABLE>
[AIM LOGO APPEARS HERE]
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046
<PAGE> 382
AIM FUNDS GROUP
REGISTRATION STATEMENT ON FORM N-14
PART C
ITEM 15: Indemnification
The Registrant's Agreement and Declaration of Trust, dated May 5, 1993, as
amended, provides, among other things, (i) that trustees shall not be liable
for any act or omission or any conduct whatsoever (except for liabilities to
the Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of duty); (ii) for the indemnification
by the Registrant of the trustees and officers to the fullest extent permitted
by the Delaware Business Trust Act; and (iii) that the shareholders and former
shareholders of the Registrant are held harmless by the Registrant (or
applicable portfolio or class) from personal liability arising from their
status as such, and are indemnified by the Registrant (or applicable portfolio
or class) against all loss and expense arising from such personal liability in
accordance with the Registrant's By-Laws and applicable law.
A I M Advisors, Inc., the Registrant and other investment companies
managed by A I M Advisors, Inc., their respective officers, trustees, directors
and employees are insured under an Investment Advisory Professional and
Directors and Officers Liability Policy, issued by ICI Mutual Insurance
Company, with a $15,000,000 limit of liability.
ITEM 16: Exhibits
(1) - (a) Agreement and Declaration of Trust of Registrant was filed
electronically as Exhibit 1(a) to Post-Effective Amendment No.
70 to Registrant's Registration Statement on Form N-1A, File No.
2-27334 (the "Registration Statement") on November 17, 1995, and
is hereby incorporated by reference.
- (b) First Amendment to Agreement and Declaration of Trust of
Registrant was filed electronically as Exhibit 1(b) to
Post-Effective Amendment No. 70 to Registrant's Registration
Statement on November 17, 1995, and is hereby incorporated by
reference.
- (c) Second Amendment to the Agreement and Declaration of Trust of
Registrant was filed electronically as Exhibit 1(c) to
Post-Effective Amendment No. 70 to Registrant's Registration
Statement on November 17, 1995, and is hereby incorporated by
reference.
- (d) Third Amendment to the Agreement and Declaration of Trust of
Registrant was filed electronically as Exhibit 1(d) to
Post-Effective Amendment No. 70 to Registrant's Registration
Statement on November 17, 1995, and is hereby incorporated by
reference.
(2) - (a) By-Laws of Registrant were filed electronically as Exhibit 2(a)
to Post-Effective Amendment No. 70 to Registrant's Registration
Statement on November 17, 1995, and are hereby incorporated by
reference.
- (b) Amendment to By-Laws of Registrant was filed electronically as
Exhibit 2(b) to Post-Effective Amendment No. 70 to Registrant's
Registration Statement November 17, 1995, and is hereby
incorporated by reference.
C-1
<PAGE> 383
- (c) Second Amendment to By-Laws of Registrant was filed
electronically as Exhibit 2(c) to Post-Effective Amendment No.
70 to Registrant's Registration Statement on November 17, 1995,
and is hereby incorporated by reference.
(3) - Voting Trust Agreements - None.
(4) - Agreement and Plan of Reorganization between Registrant and AIM
Strategic Income Fund, Inc. is included in this Registration
Statement as Appendix I to the Combined Proxy Statement and
Prospectus.
(5) - Specimen Certificate for Class A shares of Registrant's AIM High
Yield Fund was filed as Exhibit 4(a) to Post-Effective Amendment No.
69 to Registrant's Registration Statement on February 28, 1995, and
is hereby incorporated by reference.
(6) - (a) Master Investment Advisory Agreement, dated October 18, 1993,
between Registrant and A I M Advisors, Inc. was filed
electronically as Exhibit 5(a)(2) to Post-Effective Amendment
No. 71 to Registrant's Registration Statement on April 26, 1996,
and is hereby incorporated by reference.
- (b) Amendment No. 1, dated as of September 28, 1994, to the Master
Investment Advisory Agreement between Registrant and A I M
Advisors, Inc. was filed electronically as Exhibit 5(a)(3) to
Post-Effective Amendment No. 71 to Registrant's Registration
Statement on April 26, 1996, and is hereby incorporated by
reference.
- (c) Amendment No. 2, dated as of November 14, 1994, to the Master
Investment Advisory Agreement between Registrant and A I M
Advisors, Inc. was filed electronically as Exhibit 5(a)(4) to
Post-Effective Amendment No. 71 to Registrant's Registration
Statement on April 26, 1996, and is hereby incorporated by
reference.
(7) - (a) Master Distribution Agreement, dated October 18, 1993,
between Registrant, on behalf of its Class A and Class C shares,
and A I M Distributors, Inc. was filed electronically as Exhibit
6(a)(3) to Post-Effective Amendment No. 71 to Registrant's
Registration Statement on April 26, 1996, and is hereby
incorporated by reference.
- (b) Amended and Restated Master Distribution Agreement, dated May 2,
1995, between Registrant (on behalf of its Class B Shares) and
A I M Distributors, Inc. was filed as Exhibit 6(a)(5) to
Post-Effective Amendment No. 70 to Registrant's Registration
Statement on November 17, 1995, and is hereby incorporated by
reference.
- (c) (1) Form of Selected Dealer Agreement between A I M
Distributors, Inc. and selected dealers was filed
electronically as Exhibit 6(b)(1) to Post-Effective Amendment
No. 71 to Registrant's Registration Statement on April 26, 1996,
and is hereby incorporated by reference.
(2) Form of Selected Dealer Agreement between A I M
Distributors, Inc. and selected dealers was filed electronically
as Exhibit 6(b)(2) to Post-Effective Amendment No. 71 to
Registrant's Registration Statement on April 26, 1996, and is
hereby incorporated by reference.
(8) - (a) AIM Funds Retirement Plan for Eligible Directors/Trustees
effective as of March 8, 1994, as restated September 18, 1995
was filed electronically as Exhibit 7(a) to Post-Effective
Amendment No. 71 to Registrant's Registration Statement on April
26, 1996, and is hereby incorporated by reference.
C-2
<PAGE> 384
- (b) Form Deferred Compensation Plan as approved on December 5, 1995,
was filed electronically as Exhibit 7(c) to Post-Effective
Amendment No. 71 to Registrant's Registration Statement on
April 29, 1996, and is hereby incorporated by reference.
(9) - (a) Custodian Agreement, dated October 15, 1993, between Registrant
and State Street Bank and Trust Company, and applicable
fee schedule was filed electronically as Exhibit 8(a) to
Post-Effective Amendment No. 71 to Registrant's Registration
Statement on April 26, 1996, and is hereby incorporated by
reference.
- (b) Amendment No. 1, dated as of September 19, 1995, to the
Custodian Agreement between the Registrant and State Street Bank
and Trust Company was filed electronically as Exhibit 8(b) to
Post-Effective Amendment No. 71 to Registrant's Registration
Statement on April 26, 1996, and is hereby incorporated by
reference.
- (c) Subcustodian Agreement, dated September 9, 1994, among the
Registrant, Texas Commerce Bank National Association, State
Street Bank and Trust Company and A I M Fund Services, Inc. was
filed electronically as Exhibit 8(c) to Post-Effective Amendment
No. 71 to Registrant's Registration Statement on April 26, 1996,
and is hereby incorporated by reference.
- (d) Custody Agreement, dated October 19, 1995, between
Registrant and The Bank of New York was filed electronically as
Exhibit 8(c) to Post-Effective Amendment No. 70 to Registrant's
Registration Statement on November 17, 1995, and is hereby
incorporated by reference.
(10) - (a) Master Distribution Plan for Registrant's Class A and
Class C shares and related forms were filed as Exhibit 15(a) to
Post-Effective Amendment No. 68 to Registrant's Registration
Statement on April 11, 1994.
- (b) Amended Master Distribution Plan for Registrant's Class A
shares and Class C shares, and related forms, were filed
electronically as Exhibit 15(b) to Post-Effective Amendment No.
71 to Registrant's Registration Statement on April 26, 1996, and
is hereby incorporated by reference.
- (c) Amended and Restated Master Distribution Plan for Registrant's
Class B Shares, and related forms, were filed electronically as
Exhibit 15(c) to Post-Effective Amendment No. 70 to Registrant's
Registration Statement on November 17, 1995, and are hereby
incorporated by reference.
(11) - Opinion of Ballard Spahr Andrews & Ingersoll and consent to its
use is filed herewith as Exhibit 11.
(12) - Tax opinion or ruling - None (see Item 17).
(13) - (a) Form of Transfer Agency and Registrar Agreement, dated as of
June 7, 1993, between the Registrant and The Shareholder
Services Group, Inc. was filed as Exhibit 9(n) to Post-Effective
Amendment No. 65 to Registrant's Registration Statement on July
16, 1993 and is hereby incorporated by reference.
- (b) Transfer Agency and Service Agreement, dated as of November
1, 1994, between the Registrant and A I M Fund Services, Inc.
was filed electronically as Exhibit 9(a)(2) to Post-Effective
Amendment No. 70 to Registrant's Registration Statement on
November 17, 1995, and is hereby incorporated by reference.
- (c) (1) Remote Access and Related Service Agreement dated as of
December 23, 1994, between the Registrant and First Data
Investor Services Group (formerly, The Shareholder Services
Group, Inc.)
C-3
<PAGE> 385
was filed electronically as Exhibit 9(b)(1) to Post-Effective
Amendment No. 71 to Registrant's Regsitration Statement on
April 26, 1996, and is hereby incorporated by reference.
- (2) Amendment No. 1, effective October 4, 1995, to the
Remote Access and Related Services Agreement, dated as of
December 23, 1994, between the Registrant and First Data
Investor Services Group (formerly, The Shareholder Services
Group, Inc.) was filed electronically as Exhibit 9(b)(2) to
Registrant's Registration Statement No. 71 on April 26, 1996,
and is hereby incorporated by reference.
- (3) Addendum No. 2, effective October 12, 1995, to the
Remote Access and Related Services Agreement dated as of
December 23, 1994, between the Registrant and First Data
Investor Services Group (formerly, The Shareholder Services
Group, Inc.) was filed electronically as Exhibit 9(b)(4) to
Registrant's Registration Statement No. 71 on April 26, 1996,
and is hereby incorporated by reference.
- (4) Shareholder Sup-Accounting Services Agreement, dated
as of October 1, 1993, between the Registrant and First Date
Investor Services Group (formerly, The Shareholder Services
Group, Inc.), Financial Data Services, Inc. and Merrill, Lynch,
Pierce, Fenner & Smith Incorporated was filed electronically as
Exhibit 9(b)(4) to Registrant's Registration Statement No. 71
on April 26, 1996, and is hereby incorporated by reference.
- (d) Master Administrative Services Agreement, dated October 18, 1993,
between the Registrant and A I M Advisors, Inc. was filed
electronically as Exhibit 9(c)(2) to Post-Effective Amendment
No. 71 to Registrant's Registration Statement on April 26, 1996,
and is hereby incorporated by reference.
- (e) Administrative Services Agreement, dated October 18, 1993,
between A I M Advisors, Inc., on behalf of the
Registrant's portfolios and A I M Fund Services, Inc. was filed
as Exhibit 9(b)(3) to Post-Effective Amendment No. 68 to
Registrant's Registration Statement on April 11, 1994.
- (f) Amendment No. 1 to Administrative Services Agreement,
dated May 11, 1994, between A I M Advisors, Inc., on behalf of
Registrant's portfolios, and A I M Funds Services, Inc. was filed
as Exhibit 9(b)(4) to Post-Effective Amendment No. 69 to
Registrant's Registration Statement on February 28, 1995.
- (g) Amendment No. 2 to Administrative Services Agreement,
dated July 1, 1994, between A I M Advisors, Inc., on behalf of
Registrant's portfolios, and A I M Funds Services, Inc. was filed
as Exhibit 9(b)(5) to Post-Effective Amendment No. 69 to
Registrant's Registration Statement on February 28, 1995.
- (h) Amendment No. 3 to Administrative Services Agreement, dated
September 16, 1994, between A I M Advisors, Inc., on behalf of
Registrant's portfolios, and A I M Funds Services, Inc.
was filed as Exhibit 9(b)(6) to Post-Effective Amendment No. 69
to Registrant's Registration Statement on February 28, 1995.
(14) - (a) Consent of KPMG Peat Marwick LLP is filed herewith as Exhibit
14(a).
- (b) Consent of Price Waterhouse LLP's filed herewith as
Exhibit 14(b).
- (c) Consent of Ballard Spahr Andrews & Ingersoll is included in its
opinion filed herewith as Exhibits 11.
C-4
<PAGE> 386
(15) - Financial Statements - None.
(16) - Powers of attorney are included on the signature page hereof.
(17) - (a) Form of Proxy is filed herewith as Exhibit 17(a).
(b) Copy of Registrant's Declaration under Rule 24f-2 is filed
herewith as Exhibit 17(b).
ITEM 17: Undertakings
(1) The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act, as amended
(the "Securities Act"), the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons who
may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act, each
post-effective amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
(3) The Registrant undertakes to furnish each person to whom a Proxy
Statement/Prospectus is delivered a copy of each of AIM Strategic Income Fund,
Inc. and AIM High Yield Fund's latest annual report to shareholders, upon
request and without charge.
(4) The Registrant undertakes to file, by post-effective amendment, an
opinion of counsel supporting the tax consequences of the reorganization within
a reasonable time after receipt of such opinion.
C-5
<PAGE> 387
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant, in the City of Houston and State of
Texas, on the 3rd day of May, 1996.
AIM FUNDS GROUP
By: /s/ Robert H. Graham
--------------------------------
Robert H. Graham , President and
Trustee
As required by the Securities Act of 1933, this Registration has been
signed by the following persons in the capacities and on the dates indicated.
Each person whose signature appears below in so signing also makes,
constitutes and appoints Robert H. Graham his true and lawful attorney-in-fact,
with full power of substitution, for him in any and all capacities, to execute
and cause to be filed with the Securities and Exchange Commission any and all
amendments and post-effective amendments to this Registration Statement, with
exhibits thereto and other documentation in connection therewith, and hereby
ratifies and confirms all that said attorney-in-fact or his substitute or
substitutes may do or cause to be done by virtue hereof.
Signature Title Date
--------- ----- ----
/s/ Charles T. Bauer Chairman and Trustee May 3, 1996
--------------------
Charles T. Bauer
/s/ Robert H. Graham President and Trustee May 3, 1996
--------------------- (Principal Executive
Robert H. Graham Officer)
/s/ Bruce L. Crockett Trustee May 3, 1996
---------------------
Bruce L. Crockett
/s/ Owen Daly II Trustee May 3, 1996
---------------------
Owen Daly II
/s/ Carl Frischling Trustee May 3, 1996
---------------------
Carl Frischling
/s/ John F. Kroeger Trustee May 3, 1996
---------------------
John F. Kroeger
/s/ Lewis F. Pennock Trustee May 3, 1996
---------------------
Lewis F. Pennock
/s/ Ian W. Robinson Trustee May 3, 1996
---------------------
Ian W. Robinson
/s/ Louis S. Sklar Trustee May 3, 1996
---------------------
Louis S. Sklar
/s/ John J. Arthur Senior Vice President May 3, 1996
---------------------- and Treasurer
John J. Arthur (Principal Financial
and Accounting Officer)
<PAGE> 388
EXHIBIT INDEX
Exhibit No. Document
- ----------- --------
11 Opinion of Ballard Spahr Andrews & Ingersoll and
consent to its use
14(a) Consent of KPMG Peat Marwick LLP
14(b) Consent of Price Waterhouse LLP
17(a) Form of Proxy
17(b) Copy of Registrant's Declaration under Rule 24f-2
<PAGE> 1
EXHIBIT 11
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL]
May 3, 1996
AIM Funds Group
11 Greenway Plaza
Suite 1919
Houston, TX 77046
Re: Shares of Beneficial Interest
AIM Funds Group
-----------------------------
Gentlemen:
We have acted as counsel to AIM Funds Group, a Delaware business trust
(the "Trust"), in connection with the proposed Agreement and Plan of
Reorganization (the "Agreement") between the Trust and AIM Strategic Income
Fund, Inc., a Maryland corporation ("ASIF"), and the consummation of the
transactions contemplated therein. The Agreement contemplates the acquisition
of substantially all of the assets of ASIF by AIM High Yield Fund ("AIM High
Yield"), a portfolio of the Trust, in exchange for Class A shares of AIM High
Yield, which shares will be issued directly by the Trust to the shareholders of
ASIF (the "Transaction"). Each shareholder of ASIF will receive that number of
shares of beneficial interest of AIM High Yield (the "Shares") representing
interests with an aggregate net asset value equal to the aggregate net asset
value of his or her shares of ASIF.
The opinion expressed below is based on the assumption that a Registration
Statement on Form N-14 with respect to the Shares will have been filed by the
Trust with the Securities and Exchange Commission and will have become
effective before the Transaction occurs.
Based on the foregoing, we are of the opinion that the Shares, when issued
by the Trust directly to the shareholders of ASIF in accordance with the terms
and conditions of the Agreement, will be legally issued, fully paid and
nonassessable.
<PAGE> 2
AIM Funds Group
May 3, 1996
Page 2
Both the Delaware Business Trust Act and the Trust's Agreement and
Declaration of Trust, as amended (the "Trust Agreement"), provide that
shareholders of the Trust shall be entitled to the same limitation on personal
liability as is extended under the Delaware General Corporation Law to
stockholders of private corporations for profit. There is a remote
possibility, however, that, under certain circumstances, shareholders of a
Delaware business trust may be held personally liable for that trust's
obligations to the extent that the courts of another state which does not
recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. The Trust Agreement also requires that
notice of such disclaimer of shareholder liability be given in each note, bond,
contract or other undertaking made or issued by the Trustees or Officers of the
Trust. Such disclaimer is contained in the Agreement. The Trust Agreement
also provides for indemnification out of Trust property for all loss and
expense of any shareholder held personally liable for the obligations of the
Trust. Therefore, the risk of any shareholder incurring financial loss beyond
his or her investment due to shareholder liability is limited to circumstances
in which the Trust is unable to meet its obligations and the express disclaimer
of shareholder liabilities is determined not to be effective.
We consent to the filing of this opinion as Exhibit 11 to the Trust's
Registration Statement on Form N-14 and to the references to this firm in such
Registration Statement.
Very truly yours,
/s/ BALLARD SPAHR ANDREWS & INGERSOLL
Ballard Spahr Andrews & Ingersoll
<PAGE> 1
EXHIBIT 14(a)
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors and Trustees
AIM Funds Group
AIM Strategic Income Fund, Inc.
We consent to the use of our reports on AIM High Yield Fund (a portfolio
of AIM Funds Group) and AIM Strategic Income Fund, Inc., dated February
7, 1996 included herein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Houston, Texas
April 23, 1996
<PAGE> 1
EXHIBIT 14(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the registration statement of AIM Funds Group on Form N-14
(the "Registration Statement") of the our report dated February 16, 1993,
relating to the selected per-share data and ratios appearing in the December 31,
1992 Annual Report to Shareholders of AIM High Yield Fund which constitutes part
of AIM Funds Group. We also consent to the reference to us under the heading
"Financial Highlights" in the Prospectus which is incorporated by reference into
the Registration Statement.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Houston, Texas
April 30, 1996
<PAGE> 1
EXHIBIT 17(a)
AIM STRATEGIC INCOME FUND, INC.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Proxy for Annual Meeting of Shareholders to be Held July 19, 1996
The shareholder hereby appoints Charles T. Bauer and Gary T. Crum and each
of them (with full power of substitution) as proxies to vote for the shareholder
all shares of AIM Strategic Income Fund, Inc. ("ASIF") which the shareholder
would be entitled to vote if personally present at the Annual Meeting of
Shareholders to be held on July 19, 1996 at 3:00 p.m. Central time, or any
adjournments thereof, upon the matters described in the accompanying Combined
Proxy Statement and Prospectus (the "Proxy Statement/Prospectus") and upon any
other business that may properly come before the Meeting or any adjournments
thereof. Said proxies are directed to vote or to refrain from voting pursuant
to the Proxy Statement/Prospectus as checked on the reverse side upon the
matters indicated.
If any other matters should come before the Meeting, the persons named in this
Proxy will vote, act and consent with respect thereto in accordance with the
views of management. The shareholder acknowledges receipt with this Proxy of
the Notice of Annual Meeting of Shareholders and the Proxy Statement/
Prospectus of the Board of Directors.
________________________________________________________________________________
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.
Please sign this Proxy exactly as your name appears on the books of ASIF. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
________________________________________________________________________________
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_____________________________________ _____________________________________
_____________________________________ _____________________________________
_____________________________________ _____________________________________
<PAGE> 2
/X/ PLEASE MARK VOTES AS IN
THIS EXAMPLE
1. Proposal to approve an Agreement and Plan of Reorganization (the
"Agreement") between AIM Strategic Income Fund, Inc. ("ASIF") and AIM
Funds Group ("AFG") and the consummation of the transactions contemplated
therein (the "Transaction"). Pursuant to the Agreement, ASIF will
transfer substantially all of its assets to AIM High Yield Fund
("AIM High Yield"), a portfolio of AFG. Upon such transfer, AIM High
Yield will assume substantially all the liabilities of ASIF and AFG
will issue Class A shares of AIM High Yield directly to the shareholders
of ASIF. Each shareholder of ASIF will receive a number of AIM High
Yield shares with an aggregate net asset value of his or her shares of
ASIF. The Transaction has been structured as a tax-free reorganization.
No sales charge will be imposed in connection with the Transaction.
For / / Against / / Abstain / /
2. The election of two Directors for the terms set forth in the
Proxy Statement/Prospectus.
For / / Withhold / / For All Except / /
ROBERT H. GRAHAM LEWIS F. PENNOCK
If you do not wish your shares voted "FOR" a particular
nominee, mark the "For All Except" box and strike a line through the
nominee(s) name. Your shares will be voted for the remaining
nominee(s).
3. Ratification of appointment of KPMG Peat Marwick LLP as independent
auditors for ASIF for its fiscal year ending December 31, 1996.
For / / Against / / Abstain / /
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
Please be sure to sign and date this Proxy. Date _____________________________
____________________________________ ____________________________________
Shareholder sign here Co-owner sign here
Mark box at right if comments or address change have been made on the reverse
side of this card. / /
RECORD DATE SHARES:
<PAGE> 1
EXHIBIT 17(b)
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 24F-2
ANNUAL NOTICE OF SECURITIES SOLD
PURSUANT TO RULE 24F-2
READ INSTRUCTIONS AT END OF FORM BEFORE PREPARING FORM.
PLEASE PRINT OR TYPE.
________________________________________________________________________________
1. Name and address of issuer:
AIM FUNDS GROUP
11 GREENWAY PLAZA, SUITE 1919
HOUSTON, TEXAS 77046
________________________________________________________________________________
2. Name of each series or class of funds for which this notice is filed:
AIM BALANCED FUND - CLASS A SHARES
AIM BALANCED FUND - CLASS B SHARES
AIM GLOBAL UTILITIES FUND - CLASS A SHARES
AIM GLOBAL UTILITIES FUND - CLASS B SHARES
AIM GROWTH FUND - CLASS A SHARES
AIM GROWTH FUND - CLASS B SHARES
AIM INCOME FUND - CLASS A SHARES
AIM INCOME FUND - CLASS B SHARES
AIM INTERMEDIATE GOVERNMENT FUND - CLASS A SHARES
AIM INTERMEDIATE GOVERNMENT FUND - CLASS B SHARES
AIM HIGH YIELD FUND - CLASS A SHARES
AIM HIGH YIELD FUND - CLASS B SHARES
AIM MONEY MARKET FUND - CLASS A SHARES
AIM MONEY MARKET FUND - CLASS B SHARES
AIM MONEY MARKET FUND - CLASS C SHARES
AIM MUNICIPAL BOND FUND - CLASS A SHARES
AIM MUNICIPAL BOND FUND - CLASS B SHARES
AIM VALUE FUND - CLASS A SHARES
AIM VALUE FUND - CLASS B SHARES
________________________________________________________________________________
3. Investment Company Act File Number: 811-1540
Securities Act File Number: 2-27334
________________________________________________________________________________
4. Last day of fiscal year for which this notice is filed: DECEMBER 31, 1995
________________________________________________________________________________
5. Check box if this notice is being filed more than 180 days after the close
of the issuer's fiscal year for purposes of reporting securities sold
after the close of the fiscal year but before termination of the issuer's
24f-2 declaration: [ ]
________________________________________________________________________________
6. Date of termination of issuer's declaration under rule 24f-2(a)(1), if
applicable (see Instruction A.6):
________________________________________________________________________________
7. Number and amount of securities of the same class or series which had been
registered under the Securities Act of 1933 other than pursuant to rule
24f-2 in a prior fiscal year, but which remained unsold at the beginning
of the fiscal year:
2,548,380 $32,721,199
________________________________________________________________________________
8. Number and amount of securities registered during the fiscal year other
than pursuant to rule 24f-2:
0
________________________________________________________________________________
<PAGE> 2
9. Number and aggregate sale price of securities sold during the fiscal year:
5,126,110,251 $10,873,855,680
________________________________________________________________________________
10. Number and aggregate sale price of securities sold during the fiscal year
in reliance upon registration pursuant to rule 24f-2:
5,123,561,871 $10,841,134,481
________________________________________________________________________________
11. Number and aggregate sale price of securities issued during the fiscal
year in connection with dividend reinvestment plans, if applicable (see
Instruction B.7):
________________________________________________________________________________
12. Calculation of registration fee:
<TABLE>
<S> <C>
(i) Aggregate sale price of securities sold during the fiscal
year in reliance of rule 24f-2 (from Item 10): $10,841,134,481
---------------
(ii) Aggregate price of shares issued in connection with dividend
reinvestment plan (from Item 11, if applicable): +
---------------
(iii) Aggregate price of shares redeemed or repurchased during The
fiscal year (if applicable): - 6,242,560,538
---------------
(iv) Aggregate price of shares redeemed or repurchased and
previously applied as a reduction to filing fees pursuant to
rule 24e-2 (if applicable):
+
---------------
(v) Net aggregate price of securities sold and issued during the
fiscal year in reliance on rule 24f-2 [line (i), plus line
(ii), less line (iii), plus line (iv)] (if applicable):
$ 4,598,573,943
---------------
(vi) Multiplier prescribed by Section 6(b) of the Securities Act of
1933 or other applicable law or regulation (see Instruction
C.6): x 1/2900
---------------
(vii) Fee due [line (i) or line (v) multiplied by line (vi)]: $ 1,585,715.15
===============
</TABLE>
Instruction: Issuers should complete lines (ii), (iii), (iv), and (v) only if
the form is being filed within 60 days after the close of the
issuer's fiscal year. See Instruction C.3.
________________________________________________________________________________
13. Check box if fees are being remitted to the Commission's lockbox
depository as described in section 3a of the Commission's Rules of
Informal and Other Procedures (17 CFR 202.3a).
[ XX ]
Date of mailing or wire transfer of filing fees to the Commission's
lockbox depository: 02-23-96
________________________________________________________________________________
SIGNATURES
This report has been signed below by the following persons on behalf of
the issuer and in the capacities and on the dates indicated.
By (Signature and Title)* /s/ DANA R. SUTTON
-----------------------------------
Vice President & Assistant Treasurer
------------------------------------
Date: February 26, 1996
---------------------
* Please print the name and title of the signing officer below the
signature.
