<PAGE> 1
[AIM LOGO APPEARS HERE]
[GRAPHIC COLLAGE APPEARS HERE]
AIM MUNICIPAL BOND FUND
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE> 2
AIM MUNICIPAL BOND FUND
For shareholders who seek a high level of current income exempt from federal
income taxes by investing in a diversified portfolio of municipal bonds.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Municipal Bond Fund's performance figures are historical and
reflect reinvestment of all distributions and changes in net asset
value. Unless otherwise indicated, the Fund's performance is computed
without a sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the 4.75% maximum sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines
from 5% to 0% at the beginning of the seventh year. The performance
of the Fund's Class B shares will differ from that of Class A shares.
o In 1995, the Fund paid distributions of $0.462 and $0.396 for Class A
and Class B shares, respectively.
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 annualized distribution rate reflects the Fund's most
recent monthly dividend distribution multiplied by 12 and divided by
the most recent month-end maximum offering price.
o The Fund's 30-day SEC yield is calculated on the basis of a 30-day
period according to the SEC formula. The formula is based on the
portfolio's potential earnings from dividends, interest,
yield-to-maturity or yield-to-call of its holdings, net of all
expenses and expressed on an annualized basis.
o The Fund's portfolio composition may 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 Lipper General Municipal Debt Funds Index represents an
average of the performance of the 30 largest municipal debt funds
charted by Lipper Analytical Services, Inc., an independent mutual
funds performance monitor.
o The Lehman Brothers Municipal Bond Index is an unmanaged composite
representing an approximation of the performance of investment-grade
municipal bonds.
o The Lehman Brothers Long-Term Treasury Bond Index is an unmanaged
composite generally considered representative of long-term U.S.
Treasury issues (maturities of 20 to 30 years). The index's SEC yield
is calculated on the basis of a 30-day period according to the SEC
formula, which reflects the yield to maturity of the bonds in the
index and includes both and interest and amortization of any discount
or premium to the face value of the bonds.
o An investment cannot be made in any of the 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> 3
A Message from
the Chairman
Dear Fellow Shareholder:
In an environment of declining interest rates and rising
debate about the shape of the U.S. tax code, AIM Municipal
[PHOTO Bond Fund delivered excellent total returns for the fiscal
Charles T. year ended December 31, 1995. Shareholders enjoyed a total
Bauer, return of 13.05% for Class A shares, and 12.14% for Class B
Chairman shares. The Fund's assets under management grew to $306.3
of the Board million from $266.6 million during the fiscal year.
APPEARS HERE] The Fund offered very attractive tax-free income. At
fiscal year-end, the 30-day SEC yield for Class A shares was
4.22% at maximum offering price. Adjusted for the highest
marginal federal income tax rate of 39.6%, that translates
into taxable equivalent yield of 6.99%. For Class B shares, the 30-day SEC
yield was 3.61%, a tax-equivalent 5.98% yield. The 30-day distribution rate of
A shares was 5.23% at maximum offering price. Adjusted for the highest marginal
federal income tax rate of 39.6%, that equals a taxable equivalent yield of
8.66%. For Class B shares the 30-day distribution rate at fiscal year-end was
4.69%, equivalent to a taxable 7.76%. By comparison, taxable U.S. Treasury
30-year bonds yielded 5.95% at year-end.
Indeed, 1995 was a memorable year for your Fund and for AIM overall.
AIM's net assets under management grew from $27 billion to approximately $42
billion. We now serve more than 2 million shareholders like you who continue to
count on our expertise and diligence in investment management.
While we enjoy the success of such a good year, we are reminded that
market cycles come and go. Many analysts are cautioning that it would be
unrealistic to expect another year of double-digit growth in bond markets. That
is why AIM always cautions investors to keep in mind that those who have
retained a long-term perspective have generally enjoyed the greatest returns on
their investment. Our more detailed discussion of the year's markets, your
Fund's strategies, and our outlook for the future appears in the Management's
Discussion & Analysis that begins on the following page.
We appreciate your confidence in AIM Municipal Bond Fund to provide
income and to help build your financial future. As always, we are ready to
respond to your questions or comments about this report. Please call Client
Services at 800-959-4246 during normal business hours. For automated account
information 24 hours a day, dial the AIM Investor Line toll-free at
800-246-5463.
Respectfully submitted,
/S/ CHARLES T. BAUER
Charles T. Bauer
Chairman
GROWTH IN ASSETS
12/31/95 $306.3
million
12/31/94 $266.6
million
<PAGE> 4
Management's
Discussion & Analysis
- ---------------------
. . . tax-exempt
municipal securities
were providing
90% or more
of the yield of a
30-year taxable
Treasury bond,
the highest ratio
since 1989. . .
- ---------------------
PORTFOLIO COMPOSITION
(As of 12/31/95)
General Obligations 24%
Revenue Bonds 76%
DECLINING INTEREST RATES, TAX REFORM DISCUSSION SHAPE MUNICIPAL BOND MARKET
IN 1995
1995 was a dramatic year in financial markets. Continued strong earnings
reports by U.S. corporations, moderate economic growth, restrained inflation,
and declining interest rates fueled a bull market for both equities and bonds.
While stock markets repeatedly pushed such benchmarks as the Dow Jones
Industrial Average to new highs, bonds also thrived. The yield on a 30-year
Treasury dropped almost 2% during the year, from 7.88% to 5.95%, thereby
boosting the value of outstanding Treasuries. One benchmark of bond
performance, the Lehman Brothers Aggregate Bond Index, produced total return of
18.47%, the kind of double-digit return thought more typical of equities
markets. Municipal bonds shared this bounty; the Lipper General Municipal Debt
Funds Index delivered a total return of 16.98%.
Contradictory forces affected the municipal bond market. On the one hand,
current yields on municipal bonds were constrained by falling interest rates,
which puts upward pressure on the price of existing debt securities. Additional
upward price pressure resulted from a continued lack of supply as issues of new
bonds dropped below even 1994's relatively slow pace.
On the other hand, with talk of federal tax reform widespread, the market
tried to anticipate the level of yield investors would demand should municipal
bonds lose their tax advantage. By the fall of 1995, tax-exempt municipal
securities were providing 90% or more of the yield of a 30-year taxable
Treasury bond, the highest ratio since 1989, according to The Bond Buyer.
YOUR INVESTMENT PORTFOLIO
AIM Municipal Bond Fund continued to emphasize quality in its portfolio as a
way to provide solid current income while controlling potential volatility. For
example, 53% of the portfolio's holdings were rated AAA at the close of the
reporting period, up from 43% when it opened. AA-rated securities were raised
from 18% to 21% of the portfolio, and 44% of the securities were credit
enhanced, that is, backed by insurance or escrowed with U.S. Treasuries or
letters of credit. The Fund continued to provide attractive current yield.
Standard & Poor's Corporation, a widely known credit-rating agency,
reaffirmed the Fund's above-average credit quality rating of Af. S&P ratings
are historical and are based on an annual analysis of the Fund's portfolio
credit quality, composition, and management. As the fiscal year closed, the
Fund's portfolio was well diversified to minimize volatility, having been
expanded to 168 holdings, up from 136 as the year began.
OUTLOOK FOR THE FUTURE
As the fiscal year closed, it was the consensus of economists and other market
watchers that interest rates should remain stable or decline and that inflation
should remain under control during 1996. Lagging Christmas sales, continued
restructurings and layoffs by U.S. corporations, and flat wages were fostering
concern that economic growth could be more sluggish than desired.
In terms of market pressures, 1996 may be very similar to 1995. Most bond
specialists consider moderate, noninflationary growth a likely scenario, and at
the end of January 1996, the Federal Reserve Board provided the 0.25% reduction
in short-term interest rates many had anticipated. The Public Securities
Association, a trade group, has predicted 1996 new issuance of municipal
securities at roughly the same level as during 1995, so the forces that
- --------------------------------------------------------------------------------
TOP 5 HOLDINGS
(As of 12/31/95)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COUPON MATURITY
ISSUER RATE DATE
<S> <C> <C> <C>
1. New York State
Urban Development Corp. 7.375% 1/1/18
2. Connecticut (State of) 6.50% 1/15/12
3. Mississippi Higher
Education Assistance Corp. 7.50% 3/1/09
4. New York (City of) 7.65% 2/1/06
5. University of Illinois
Auxiliary Facilities System 5.75% 4/1/22
</TABLE>
================================================================================
See important Fund disclosure on inside front cover.
2
<PAGE> 5
Long-Term
Performance
hold down yield are still in place.
However, as the Presidential election year develops, and especially if tax
reform or simplification becomes a serious political issue, concern about the
relative advantages of tax-free municipal bonds will continue to put pressure
on yields.
Rather than basing decisions on educated guesses about the shape of future
markets, AIM remains committed to its disciplined investment strategy, which
examines the merits of each security it may buy or sell. In municipal bond
investing, management carefully scrutinizes the credit and structure of each
issue and its potential impact on the portfolio. Given the tax system in place
at the close of the fiscal year, tax-free investments like AIM Municipal Bond
Fund remain an important component of a diversified investment portfolio for
investors who wish to shelter some income from federal taxation.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -------------------------------------------------------------------------------------------------------------------------
AIM Municipal Bond Fund AIM Municipal Bond Fund Lehman Bros. Lipper General
Class A Shares (w/o sales charge) Class A Shares (w/sales charge) Municipal Bond Index Municipal Debt Index
<S> <C> <C> <C> <C>
12/85 $10,000 $9,529 $10,000 10,000
12/86 12,119 11,549 11,932 11,961
12/87 11,892 11,332 12,111 11,885
12/88 13,358 12,729 13,342 13,260
12/89 14,654 13,964 14,782 14,526
12/90 15,425 14,700 15,859 15,465
12/91 17,478 16,655 17,734 17,364
12/92 19,069 18,171 19,352 18,910
12/93 21,292 20,289 21,729 21,259
12/94 20,485 19,520 20,606 19,974
12/95 23,157 22,067 24,203 23,367
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Past performance cannot guarantee comparable future results.
Source: Towers Data Systems HYPO(R) and Lipper Analytical Services.
An investment cannot be made in any indexes listed. Unless otherwise indicated,
index results include reinvested dividends and do not reflect sales charges.
Source: Towers Data Systems HYPO(R).
The performance of Class B shares will differ from that of Class A shares
due to differing fees and expenses.
For Fund performance calculations and descriptions of the indexes cited on
this page, please refer to the inside front cover of this report.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
A HISTORY OF ATTRACTIVE TAX-FREE INCOME
- -------------------------------------------------------------------------------------------------------------------------
AIM Municipal Bond Fund vs. Lehman Brothers Long-Term Treasury Bond Index;
12/85 through 12/95
AIM Municipal Bond Fund Lehman Bros. Long-Term
Class A Shares Treasury Bond Index After-Tax Yields
<S> <C> <C>
12/85 8.58% 5.58%
12/86 6.78 4.20
12/87 6.56 6.10
12/88 7.30 6.11
12/89 6.91 5.76
12/90 7.05 6.27
12/91 6.27 5.82
12/92 6.14 5.38
12/93 5.57 4.06
12/94 6.17 4.82
12/95 5.49 3.64
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Past performance cannot guarantee comparable future results.
The Lehman Brothers Long-Term Treasury Bond Index is an unmanaged composite
generally considered representative of long-term U.S. Treasury issues
(maturities of 20 to 30 years). Yields for the index are shown after tax. AIM
Municipal Bond Fund 30-day distribution rates are shown at net asset value.
- --------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------
For periods ended December 31, 1995
<TABLE>
<CAPTION>
Without With
Sales charge Sales charge
<S> <C> <C>
CLASS A SHARES
1 Year 13.05% 7.65%
5 Years 8.46 7.42
10 Years 8.76 8.24
CLASS B SHARES
1 Year 12.14% 7.14%
Inception (9/1/93) 3.81 2.63
- --------------------------------------------------------------
</TABLE>
See important Fund disclosure on inside front cover.
3
<PAGE> 6
HOW LIKELY IS TAX REFORM?
Tax reform may be a major issue in the upcoming Presidential
[Graphic of election.
capitol A radical overhaul of the federal tax code that eliminated
building] the tax exemption for municipal bonds would surely affect such
investments as AIM Municipal Bond Fund. The value of existing
municipal debt securities and the yields on new issues would
necessarily change until the return on such investments became sufficiently
attractive in the absence of a tax break.
For this reason, many foresee havoc in the municipal debt markets if tax
reform does indeed take place, and, as discussed in this report's Management's
Discussion & Analysis, the speculation concerning tax reform has already
affected the markets.
But as commentators speculate about potential effects of tax reform, AIM
Municipal Bond Fund management makes the following observations:
o As of this writing, there is no tax bill before Congress. Washington
tweaks the tax code annually, so there are always minor adjustments
being made. However, the kind of major legislation it would take to
revamp the federal tax system has not been formally proposed. The
current conversation concerning flat taxes and total system overhauls
consists mostly of philosophical discussion and of speculation about
the possible contents of such major legislation.
If and when specific legislation is proposed, the political process is
likely to lead to numerous modifications of the simplification ideas being
discussed. Two political facts come to mind:
1) Many of the changes regularly mentioned in the press would raise most
people's taxes to avoid reducing tax receipts. Research by John Nuveen
& Co., a specialist in tax-exempt investments, showed that in 1993,
approximately 13% of personal income went to the Internal Revenue
Service in the form of personal income taxes (excluding Social
Security taxes). Flat-tax proponents typically talk of income tax
rates in the 17 to 23% range. How likely is it that raising rates that
significantly for most people will pass political muster?
2) As of early 1996, momentum in Washington seems to be behind the idea
of transferring responsibilities back to the state and/or local level,
as shown by proposals concerning Medicare, Medicaid, and welfare
reform especially. Since the tax exemption for municipal bonds is
designed to enhance state and local government access to the capital
markets, there is bound to be widespread and forceful opposition to
limiting that exemption just as the responsibilities of states and
municipalities are being expanded.
WHAT TO DO?
A wise investor will stay informed and stay in touch with his or her tax
adviser to keep up with changes to the tax code. Despite all the publicity
surrounding tax reform, for the foreseeable future, tax-exempt investments such
as AIM Municipal Bond Fund will continue to be useful in providing shareholders
an opportunity to earn a steady stream of tax-free income.
4
<PAGE> 7
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>
5
<PAGE> 8
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>
6
<PAGE> 9
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>
7
<PAGE> 10
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>
8
<PAGE> 11
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>
9
<PAGE> 12
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>
10
<PAGE> 13
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>
11
<PAGE> 14
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>
12
<PAGE> 15
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>
13
<PAGE> 16
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>
14
<PAGE> 17
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>
15
<PAGE> 18
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.
16
<PAGE> 19
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.
17
<PAGE> 20
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.
18
<PAGE> 21
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.
19
<PAGE> 22
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
20
<PAGE> 23
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.
21
<PAGE> 24
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.
22
<PAGE> 25
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.
23
<PAGE> 26
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
24
<PAGE> 27
Trustees
& Officers
<TABLE>
<CAPTION>
TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
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
Bruce L. Crockett President INVESTMENT ADVISOR
Director, President and
Chief Executive Officer John J. Arthur A I M Advisors, Inc.
COMSAT Corporation Senior Vice President & Treasurer 11 Greenway Plaza
Suite 1919
Owen Daly II Gary T. Crum Houston, TX 77046
Director Senior Vice President
Cortland Trust Inc. TRANSFER AGENT
Carol F. Relihan
Carl Frischling Vice President & Secretary A I M Fund Services, Inc.
Partner P.O. Box 4739
Kramer, Levin, Naftalis, Nessen, Dana R. Sutton Houston, TX 77210-4739
Kamin & Frankel Vice President & Assistant Treasurer
CUSTODIAN
Robert H. Graham Robert G. Alley
President and Chief Operating Officer Vice President The Bank of New York
A I M Management Group Inc. 110 Washington St.
Stuart W. Coco New York, NY 10286
John F. Kroeger Vice President
Formerly, Consultant LEGAL COUNSEL TO FUND
Wendell & Stockel Associates, Inc. Melville B. Cox
Vice President Ballard Spahr Andrews & Ingersoll
Lewis F. Pennock 1735 Market Street
Attorney Karen Dunn Kelley Philadelphia, PA 19103
Vice President
Ian W. Robinson LEGAL COUNSEL TO TRUSTEES
Consultant; Former Executive Vice Jonathan C. Schoolar
President and Chief Financial Officer Vice President Kramer, Levin, Naftalis, Nessen,
Bell Atlantic Management Services, Inc. Kamin & Frankel
P. Michelle Grace 919 Third Avenue
Louis S. Sklar Assistant Secretary New York, NY 10022
Executive Vice President
Hines Interests David L. Kite DISTRIBUTOR
Limited Partnership Assistant Secretary
A I M Distributors, Inc.
Nancy L. Martin 11 Greenway Plaza
Assistant Secretary Suite 1919
Houston, TX 77046
Ofelia M. Mayo
Assistant Secretary AUDITORS
Kathleen J. Pflueger KPMG Peat Marwick LLP
Assistant Secretary 700 Louisiana
NationsBank Bldg.
Samuel D. Sirko Houston, TX 77002
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Municipal Bond Fund Class A and Class B shares paid ordinary dividends in
the amount of $0.462 and $0.396 per share, respectively, to shareholders during
its tax year ended December 31, 1995. Of this amount, 100% is qualified as
exempt-interest dividends for federal income tax purposes.
<PAGE> 28
<TABLE>
<CAPTION>
[PHOTO OF 11 GREENWAY PLAZA] THE AIM FAMILY OF FUNDS(R)
<S> <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 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% of its total
AIM Management Group has provided leadership in the assets to be invested in foreign securities,
mutual fund industry since 1976 and currently manages and was renamed AIM Global Utilities Fund.
approximately $42 billion in assets for more than 2 ***On September 25, 1995, AIM Government
million shareholders, including individual investors, Securities Fund was renamed AIM Intermediate
corporate clients, and financial institutions. The Government Fund. For more complete
AIM Family of Funds(R) is distributed nationwide, and information about any AIM Fund(s), including
AIM today ranks among the nation's top 20 mutual sales charges and expenses, ask your
fund companies in assets under management, according financial consultant or securities dealer for
to Lipper Analytical Services, Inc. a free prospectus(es). Please read the
prospectus(es) carefully before you invest or
send money.
[AIM LOGO APPEARS HERE] -----------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE PAID
11 Greenway Plaza, Suite 1919 HOUSTON, TX
Houston, TX 77046 Permit No. 1919
-----------------
</TABLE>
