AIM FUNDS GROUP/DE, DEF 14A, 1996-12-18

AIM FUNDS GROUP/DE
DEF 14A, 1996-12-18

Previous: CASTLE CONVERTIBLE FUND INC, N-30D, 1996-12-18

Next: AIM FUNDS GROUP/DE, DEF 14A, 1996-12-18

<PAGE> 1
SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement

[ ] Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))

[X] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12

_______________________________________________________________________________

AIM FUNDS GROUP
(For its Series Portfolios:
AIM Balanced Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund)

AIM INVESTMENT SECURITIES FUNDS
(For its Series Portfolio:
Limited Maturity Treasury Portfolio)
_______________________________________________________________________________

(Name of Registrant as Specified In Its Declaration of Trust)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

_______________________________________________________________________________

2) Aggregate number of securities to which transaction applies:

_______________________________________________________________________________

3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):

_______________________________________________________________________________

4) Proposed maximum aggregate value of transaction:

_______________________________________________________________________________

5) Total fee paid:

_______________________________________________________________________________

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

_______________________________________________________________________________

2) Form, Schedule or Registration Statement No.:

_______________________________________________________________________________

3) Filing Party:

_______________________________________________________________________________

4) Date Filed:

_______________________________________________________________________________
<PAGE> 2

AIM FUNDS GROUP
AIM INVESTMENT SECURITIES FUNDS
11 GREENWAY PLAZA, SUITE 1919
HOUSTON, TX 77046

December 20, 1996

Dear Shareholder:
As you may know, A I M Management Group Inc. ("AIM Management"), the parent
company of A I M Advisors, Inc. ("AIM"), the investment advisor to The AIM
Family of Funds--Registered Trademark--, has entered into an agreement under
which AIM Management will merge with a subsidiary of INVESCO plc. As a result
of this merger, it is necessary for the shareholders of each of the AIM Funds
to approve a new investment advisory agreement (and in some cases, a new
sub-advisory agreement).

The following important facts about the transaction are outlined below:

- The merger has no effect on the number of shares you own or the value of
those shares.

- The advisory fees and expenses charged to your Fund will not change as a
result of this merger.

- The investment objectives of the Fund will remain the same and key
employees of AIM will continue to manage your Funds as they have in the
past.

- The merger will not change the quality of the investment management and
shareholder services that you have received over the years.

Shareholders are also being asked to approve Trustees, to approve certain
proposed changes in fundamental policies and to ratify the selection of
independent accountants. After careful consideration, the Board of Trustees of
your Fund has unanimously approved these proposals and recommends that you read
the enclosed materials carefully and then vote FOR all proposals.

Since all of the AIM Funds are required to conduct shareholder meetings, you
will receive at least one statement and a proxy card for each Fund you own.
PLEASE VOTE EACH PROXY CARD YOU RECEIVE.

Your vote is important. Please take a moment now to sign and return your proxy
cards in the enclosed postage paid return envelope. If we do not hear from you
after a reasonable amount of time you may receive a telephone call from our
proxy solicitor, Shareholder Communications Corporation, reminding you to vote
your shares.

Thank you for your cooperation and continued support.

Sincerely,

/s/ CHARLES T. BAUER

Charles T. Bauer
Chairman
- ---------------

GROUP E
<PAGE> 3

YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN

ENCLOSED YOU WILL FIND ONE OR MORE PROXY CARDS RELATING TO EACH OF THE
FUNDS FOR WHICH YOU ARE ENTITLED TO VOTE. PLEASE INDICATE YOUR VOTING
INSTRUCTIONS ON EACH OF THE ENCLOSED PROXY CARDS, DATE AND SIGN THEM, AND RETURN
THEM IN THE ENVELOPE PROVIDED. IF YOU SIGN, DATE AND RETURN A PROXY CARD BUT
GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR" THE NOMINEES FOR
TRUSTEE OR DIRECTOR NAMED IN THE ATTACHED PROXY STATEMENT AND "FOR" ALL OTHER
PROPOSALS INDICATED ON THE CARDS. IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF
FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN YOUR PROXY CARDS
PROMPTLY. UNLESS PROXY CARDS ARE SIGNED BY THE APPROPRIATE PERSONS AS INDICATED
IN THE INSTRUCTIONS BELOW, THEY WILL NOT BE VOTED.

INSTRUCTIONS FOR SIGNING PROXY CARDS

The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense involved in validating your vote if you fail
to sign your proxy card properly.

1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.

2. Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to the name shown in the registration on the proxy card.

3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:

<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
- ------------------------------------------------------------ ------------------------------
<S> <C>
Trust Accounts
(1) ABC Trust Account.................................. Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78................ Jane B. Doe
Partnership Accounts
(1) The XYZ Partnership................................ Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership............... Jane B. Smith, General Partner
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o John B. Smith, Jr.
UGMA/UTMA......................................... John B. Smith
(2) Estate of John B. Smith............................ John B. Smith, Jr., Executor
Corporate Accounts
(1) ABC Corp. ......................................... ABC Corp.
John Doe, Treasurer
(2) ABC Corp. ......................................... John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer.................. John Doe
(4) ABC Corp. Profit Sharing Plan...................... John Doe, Trustee
</TABLE>
<PAGE> 4

AIM FUNDS GROUP
AIM Balanced Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund

AIM INVESTMENT SECURITIES FUNDS
Limited Maturity Treasury Portfolio

11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173

------------------------------

NOTICE OF JOINT ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 7, 1997

------------------------------

TO THE SHAREHOLDERS:

A joint annual meeting of shareholders of AIM Funds Group ("AFG") and AIM
Investment Securities Funds ("AISF") will be held on Friday, February 7, 1997 at
2:00 p.m. local time at 11 Greenway Plaza, Suite 1919, Houston, Texas, with
respect to each of the investment companies and their series portfolios listed
above (such portfolios are collectively referred to as the "Funds"), for the
following purposes:

(1) For each of AFG and AISF, to elect nine Trustees, each of whom will
serve until his successor is elected and qualified.

(2) For each of the Funds, to approve a new Investment Advisory Agreement
with A I M Advisors, Inc.

(3) For each of the Funds, to eliminate the fundamental investment policy
prohibiting investments in other investment companies and/or to amend
certain related fundamental investment policies.

(4) For each of AFG and AISF, to ratify the selection of KPMG Peat Marwick
LLP as independent accountants for the fiscal years ending in 1997.

(5) To transact such other business as may properly come before the
meeting.

Shareholders of record at the close of business on December 3, 1996 are
entitled to vote at the annual meeting and any adjournments. If you attend the
annual meeting, you may vote your shares in person. If you expect to attend the
annual meeting in person, please notify the Funds by calling 1-800-952-3502. If
you do not expect to attend the annual meeting, please fill in, date, sign and
return the proxy card in the enclosed envelope which requires no postage if
mailed in the United States.

It is important that you return your signed proxy card promptly so that a
quorum may be assured.

December 20, 1996

Charles T. Bauer
Chairman of the Boards of Trustees
<PAGE> 5

AIM FUNDS GROUP
AIM Balanced Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund

AIM INVESTMENT SECURITIES FUNDS
Limited Maturity Treasury Portfolio

11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173

------------------------------

JOINT PROXY STATEMENT

------------------------------

JOINT ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 7, 1997

------------------------------

The accompanying proxy is solicited by the Board of Trustees of each of AIM
Funds Group ("AFG") and AIM Investment Securities Funds ("AISF") (collectively
referred to as the "Companies") on behalf of the series portfolios listed above
(collectively referred to as the "Funds"), in connection with the joint annual
meeting of shareholders of the Companies to be held at the offices of A I M
Advisors, Inc. ("AIM"), 11 Greenway Plaza, Suite 1919, Houston, Texas at 2:00
p.m. local time on Friday, February 7, 1997 (the "Annual Meeting"). A
shareholder can revoke the proxy prior to its use by appearing at the Annual
Meeting and voting in person, by giving written notice of such revocation to the
Secretary of the applicable Company, or by returning a subsequently dated proxy.
If you expect to attend the Annual Meeting in person, please notify the Funds by
calling 1-800-952-3502.

The following table summarizes each proposal to be presented at the Annual
Meeting and the Funds to be solicited pursuant to this joint proxy statement
with respect to such proposal:

<TABLE>
<CAPTION>
PROPOSAL AFFECTED COMPANIES OR FUNDS
- -------- ---------------------------
<S> <C> <C>
1. Election of Trustees All Companies
2. Approval of New Advisory Agreement All Funds
3. Elimination of Fundamental Investment Policy All Funds
Prohibiting Investments in Other Investment
Companies and/or Amendment of Certain Related
Fundamental Investment Policies
4. Ratification of KPMG Peat Marwick LLP as All Companies
Independent Accountants
</TABLE>

Upon the request of any shareholder, each of the Funds will furnish,
without charge, a copy of such Fund's annual report for its most recent fiscal
year together with any subsequent semi-annual report. All such requests should
be directed to AIM at 1-800-347-4246.
<PAGE> 6

VOTING

At the Annual Meeting, shareholders of record at the close of business on
December 3, 1996 (the "Record Date") will be entitled to one vote per share on
the applicable proposals set forth in the table above, with proportional votes
for fractional shares. AFG had 1,407,256,857.007 shares and AISF had
42,498,777.665 shares outstanding on the Record Date. The number of shares
outstanding on the Record Date for each series portfolio of AFG and AISF is set
forth in Annex A. It is expected that this joint proxy statement (the "proxy
statement") and the accompanying proxy will be first sent to shareholders on or
about December 20, 1996.

The affirmative vote of a plurality of votes cast is necessary to elect
each Company's Board of Trustees (i.e., the nominees receiving the most votes
will be elected) (Proposal 1). The affirmative vote of the holders of a
"majority of the outstanding voting securities" of each Fund, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), is required to
approve each Fund's new Investment Advisory Agreement (Proposal 2), and to
approve the elimination of each Fund's fundamental investment policy prohibiting
investments in other investment companies and/or to amend certain related
fundamental investment policies (Proposal 3). The 1940 Act defines a "majority
of the outstanding voting securities" of a Fund to mean the lesser of (a) the
vote of holders of 67% or more of the voting shares of the Fund present in
person or by proxy at the Annual Meeting, if the holders of more than 50% of the
outstanding voting shares of the Fund are present in person or by proxy, or (b)
the vote of the holders of more than 50% of the outstanding voting shares of the
Fund. The affirmative vote of a majority of votes cast is necessary to ratify
the selection of KPMG Peat Marwick LLP as independent accountants for each
Company (Proposal 4).

The Board of Trustees of each of the Companies has named Charles T. Bauer,
Chairman, Robert H. Graham, President, and Carol F. Relihan, Secretary, of each
of the Companies, as proxies. Unless specific instructions are given to the
contrary in the accompanying proxy, the proxies will vote FOR the election of
each Trustee named in the proxy statement, FOR the approval of the new
Investment Advisory Agreement for each of the Funds, FOR the proposal to
eliminate each applicable Fund's fundamental investment policy prohibiting
investments in other investment companies and to amend certain related
fundamental investment policies, and FOR the ratification of the selection of
KPMG Peat Marwick LLP as independent accountants for the Companies.

Abstentions and broker non-votes (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other person entitled to vote shares on a particular matter with
respect to which the broker or nominee does not have discretionary power) with
respect to any proposal will be counted for purposes of determining whether a
quorum is present at the Annual Meeting. Abstentions and broker non-votes do not
count as votes cast but have the same effect as casting a vote against proposals
that require the vote of a majority of the shares present at the Annual Meeting,
provided a quorum exists. A quorum will be deemed present with respect to a Fund
if the holders of more than 50% of the outstanding voting securities of such
Fund are present in person or voting by proxy.

The Board of Trustees of each of the Companies currently knows of no other
matters to be presented at the Annual Meeting. If any other matters properly
come before the Annual Meeting, the proxies will vote in accordance with their
best judgment. The proxies may propose to adjourn the meeting to permit further
solicitation of proxies or for other purposes. Any such adjournment will require
the affirmative vote of a majority of the votes cast.

2
<PAGE> 7

PROPOSAL 1 --

ELECTION OF TRUSTEES

For election of Trustees at the Annual Meeting, the Board of Trustees of
each of the Companies has approved the nomination of Charles T. Bauer, Bruce L.
Crockett, Owen Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger,
Lewis F. Pennock, Ian W. Robinson, and Louis S. Sklar, each of whom is currently
a Trustee of each of the Companies, each to serve as Trustee until his successor
is elected and qualified. All of the nominees presently serve as Directors,
Trustees or officers of the ten open-end management investment companies advised
by AIM (all such investment companies and their series portfolios, if any, are
referred to collectively as the "AIM Funds").

The proxies will vote for the election of the nominees named below unless
authority to vote for any or all of the nominees is withheld in the proxy. Each
of the nominees has indicated that he is willing to serve as a Trustee. If any
or all of the nominees should become unavailable for election due to events not
now known or anticipated, the persons named as proxies will vote for such other
nominee or nominees as the Trustees who are not "interested persons" of the
Companies, as defined in the 1940 Act, may recommend.

The following table sets forth certain information concerning the Trustees:
<TABLE>
<CAPTION>
(1) PRINCIPAL OCCUPATION/AFFILIATIONS DURING PAST
NAME (AGE) TRUSTEE SINCE FIVE YEARS AND (2) CURRENT DIRECTORSHIPS
- --------------------------- --------------------- --------------------------------------------------
<S> <C> <C>
Charles T. Bauer (77)* AFG 05/05/93 (1) Director, Chairman and Chief Executive
(and of its Officer, A I M Management Group Inc.; and Chairman
predecessor since of the Board of Directors, A I M Advisors, Inc.,
1992); A I M Capital Management, Inc., A I M Distributors,
AISF 05/05/93 Inc., A I M Fund Services, Inc., A I M
(and of its Institutional Fund Services, Inc. and Fund
predecessor since Management Company. (2) Director/Trustee of the
1988) AIM Funds.
Bruce L. Crockett (52) AFG 05/05/93 (1) Formerly, Director, President and Chief
(and of its Executive Officer, COMSAT Corporation (includes
predecessor since COMSAT World Systems, COMSAT Mobile
1987); Communications, COMSAT Video Enterprises, COMSAT
AISF 05/05/93 RSI and COMSAT International Ventures); President
(and of its and Chief Operating Officer, COMSAT Corporation;
predecessor since President, World Systems Division, COMSAT
1992) Corporation; and Chairman, Board of Governors of
INTELSAT (each of the COMSAT companies listed
above is an international communication,
information and entertainment- distribution
services company). (2) Director/Trustee of the AIM
Funds.
</TABLE>

- ------------------------------

* Mr. Bauer is an "interested person" of each Company, as defined in the 1940
Act, primarily because of his positions with AIM, and its affiliated
companies, as set forth above, and through his ownership of stock of A I M
Management Group Inc., which owns all of the outstanding stock of AIM.

3
<PAGE> 8

<TABLE>
<CAPTION>
(1) PRINCIPAL OCCUPATION/AFFILIATIONS DURING PAST
NAME (AGE) TRUSTEE SINCE FIVE YEARS AND (2) CURRENT DIRECTORSHIPS
- --------------------------- --------------------- --------------------------------------------------
<S> <C> <C>
Owen Daly II (72) AFG 05/05/93 (1) Formerly, Director, CF&I Steel Corp.,
(and of its Monumental Life Insurance Company and Monumental
predecessor since General Insurance Company; and Chairman of the
1992); Board of Equitable Bancorporation. (2)
AISF 05/05/93 Director/Trustee of the AIM Funds; and Director,
(and of its Cortland Trust Inc. (investment company).
predecessor since
1988)
Carl Frischling (59)** AFG 05/05/93; AISF (1) Partner, Kramer, Levin, Naftalis & Frankel
05/05/93 (law firm). Formerly, Partner, Reid & Priest (law
(and of its firm); and prior thereto, Partner, Spengler
predecessor since Carlson Gubar Brodsky & Frischling (law firm). (2)
1990) Director/Trustee of the AIM Funds.
Robert H. Graham (50)*** AFG 05/10/94; AISF (1) Director, President and Chief Operating
05/10/94 Officer, A I M Management Group Inc.; Director and
President, A I M Advisors, Inc.; and Director and
Senior Vice President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc., A I M Institutional Fund Services,
Inc. and Fund Management Company. (2)
Director/Trustee of the AIM Funds.
John F. Kroeger (72) AFG 05/05/93; (1) Formerly, Consultant, Wendell & Stockel
(and of its Associates, Inc. (consulting firm). (2)
predecessor since Director/Trustee of the AIM Funds; and Director,
1992); Flag Investors International Fund, Inc., Flag
AISF 05/05/93 Investors Emerging Growth Fund, Inc., Flag
(and of its Investors Telephone Income Fund, Inc., Flag
predecessor since Investors Equity Partners Fund, Inc., Total Return
1988) U.S. Treasury Fund, Inc., Flag Investors
Intermediate Term Income Fund, Inc., Managed
Municipal Fund, Inc., Flag Investors Value Builder
Fund, Inc., Flag Investors Maryland Intermediate
Tax-Free Income Fund, Inc., Flag Investors Real
Estate Securities Fund, Inc., Alex Brown Cash
Reserve Fund, Inc. and North American Government
Bond Fund, Inc. (investment companies).
</TABLE>

- ------------------------------

** Mr. Frischling is an "interested person" of each Company, as defined in the
1940 Act, primarily because of payments received by his law firm for
services to the AIM Funds.

*** Mr. Graham is an "interested person" of each Company, as defined in the 1940
Act, primarily because of his positions with AIM and its affiliated
companies, as set forth above, and through his ownership of stock of A I M
Management Group Inc., which owns all of the outstanding stock of AIM.

4
<PAGE> 9

------------------------------

The Companies do not hold regular annual meetings at which Trustees are
elected.

During the year ending December 31, 1996, the Companies' Boards of Trustees
met eight times. Each Company has three standing committees of its Board of
Trustees: the Audit Committee, the Investments Committee and the Nominating and
Compensation Committee. During the year ending December 31, 1996, each Company's
Audit Committee met four times, Investments Committee met four times, and
Nominating and Compensation Committee met two times. During such year, all of
the Companies' Trustees attended at least 75% of the aggregate of the number of
meetings of the Boards of Trustees and all committees.

The members of the Audit Committee of each Company are Messrs. Daly,
Kroeger (Chairman), Pennock and Robinson. The Audit Committee for each Company
is responsible for meeting with the Company's auditors to review audit
procedures and results and to consider any matters arising from an audit to be
brought to the attention of the Trustees as a whole with respect to each
Company's fund accounting or its internal accounting controls, and for
considering such other matters as the Board of Trustees may determine. None of
the members of the Audit Committees is an "interested person" of any Company, as
defined by the 1940 Act.

The members of the Investments Committee of each Company are Messrs. Bauer,
Crockett, Daly (Chairman), Kroeger and Pennock. The Investments Committee is
responsible for reviewing portfolio compliance, brokerage allocation, portfolio
investment pricing issues, interim dividend and distribution issues, and
considering such other matters as the Board of Trustees may determine. Mr. Bauer
is an "interested person" of the Companies, as defined by the 1940 Act.

5
<PAGE> 10

The members of the Nominating and Compensation Committee of each Company
are Messrs. Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The
Nominating and Compensation Committee is responsible for considering and
nominating individuals to stand for election as Trustees, reviewing from time to
time the compensation payable to the Trustees who are not "interested persons"
of the Companies, as defined by the 1940 Act, and considering such other matters
as the Board of Trustees may from time to time determine. The Nominating and
Compensation Committee of each Company has sole authority to nominate persons
for Trustees of such Company, but shareholders may submit names of individuals
for the Committee's consideration. None of the members of the Nominating and
Compensation Committees is an "interested person" of any Company, as defined by
the 1940 Act.

COMPENSATION OF TRUSTEES

Each Trustee is reimbursed for expenses incurred in attending each meeting
of the Boards of Trustees or any committee thereof. Each Trustee who is not also
an officer of the Companies is compensated for his services according to a fee
schedule which recognizes the fact that such Trustee also serves as a Director
or Trustee of other AIM Funds. Each such Trustee receives a fee, allocated among
the AIM Funds, which consists of an annual retainer component and a meeting fee
component.

Set forth below is information regarding compensation paid or accrued
estimated for the calendar year ending December 31, 1996 for each Trustee of the
Companies:

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION FROM RETIREMENT TOTAL
THE COMPANIES(1) BENEFITS ACCRUED COMPENSATION
-------------------- BY ALL AIM FROM ALL AIM
TRUSTEE AFG AISF FUNDS(2) FUNDS(3)
- ----------------------------------------- ------- ------ ---------------- ------------
<S> <C> <C> <C> <C>
Charles T. Bauer......................... -0- -0- -0- -0-
Bruce L. Crockett........................ $16,266 $1,219 $ 38,621 $ 67,000
Owen Daly II............................. 16,162 1,206 82,607 67,000
Carl Frischling.......................... 16,266 1,219 56,683 67,000
Robert H. Graham......................... -0- -0- -0- -0-
John F. Kroeger.......................... 15,683 1,168 83,654 65,000
Lewis F. Pennock......................... 15,922 1,187 33,702 66,000
Ian W. Robinson.......................... 16,266 1,219 64,973 67,000
Louis S. Sklar........................... 16,025 1,201 47,593 65,500
</TABLE>

- ------------------------------

(1) The total amount of compensation deferred by all Trustees of the Companies
estimated for the year ending December 31, 1996, including interest earned
thereon, is $67,337 for AFG and $5,258 for AISF.

(2) During the year ending December 31, 1996, the total amount of expenses
allocated to the Companies in respect of such retirement benefits is $98,998
for AFG and $3,700 for AISF.

(3) Each Trustee serves as a Director or Trustee of a total of ten AIM Funds.
Data reflect estimated total compensation earned during the calendar year
ending December 31, 1996. Does not include accrued retirement benefits or
earnings on deferred compensation.

------------------------------

6
<PAGE> 11

AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES

Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Retirement Plan"), each Trustee who is an "Eligible
Trustee" (as defined in the Retirement Plan) may be entitled to certain benefits
upon retirement from the Boards of Trustees. Pursuant to the Retirement Plan,
the normal retirement date is the date on which the Eligible Trustee has
attained age 65 and has completed at least five years of continuous service with
one or more of the AIM Funds. Each Eligible Trustee is entitled to receive an
annual benefit from the AIM Funds commencing on the first day of the calendar
quarter coincident with or following his date of retirement equal to 75% of the
retainer paid or accrued by the AIM Funds for such Eligible Trustee during the
twelve-month period immediately preceding the Eligible Trustee's retirement
(including amounts deferred under a separate agreement between the AIM Funds and
the Eligible Trustee) for the number of such Eligible Trustee's years of service
(not in excess of ten years of service) completed with respect to any of the AIM
Funds. If an Eligible Trustee dies after attaining the normal retirement date
but before receipt of any benefits under the Retirement Plan commences, the
Eligible Trustee's surviving spouse (if any) shall receive a quarterly
survivor's benefit equal to 50% of the amount payable to the deceased Eligible
Trustee for no more than ten years beginning the first day of the calendar
quarter following the date of the Eligible Trustee's death. Payments under the
Retirement Plan are not secured or funded by any AIM Fund.

Set forth below is a table that shows the estimated annual benefits payable
to an Eligible Trustee upon retirement assuming various final annual
compensation and years of service classifications. The estimated credited years
of service for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock, Robinson
and Sklar are 9, 10, 19, 19, 15, 9, and 7, respectively, although, as noted
above, the benefits payable are based on no more than ten years of service.

ESTIMATED BENEFITS UPON RETIREMENT

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
PAID BY ALL AIM FUNDS
NUMBER OF YEARS OF -------------------------------
SERVICE WITH THE AIM FUNDS $55,000 $60,000 $65,000
- -------------------------- ------- ------- -------
<S> <C> <C> <C> <C>
10......................................... $41,250 $45,000 $48,750
9......................................... 37,125 40,500 43,875
8......................................... 33,000 36,000 39,000
7......................................... 28,875 31,500 34,125
6......................................... 24,750 27,000 29,250
5......................................... 20,625 22,500 24,375
</TABLE>

DEFERRED COMPENSATION AGREEMENTS

Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this
paragraph only, the "Deferring Trustees") have each executed a Deferred
Compensation Agreement (collectively, the "DC Agreements"). Pursuant to the DC
Agreements, the Deferring Trustees may elect to defer receipt of up to 100% of
their compensation payable by the Companies, and such amounts are placed into a
deferral account. Currently, the Deferring Trustees may select various AIM Funds
in which all or part of their deferral accounts shall be deemed to be invested.
Distributions from the Deferring Trustees' deferral accounts will be paid in
cash generally in equal quarterly installments over a period of ten

7
<PAGE> 12

years beginning on the date the Deferring Trustee's retirement benefits commence
under the Retirement Plan. The Companies' Boards of Trustees, in their sole
discretion, may accelerate or extend the distribution of such deferral accounts
after a Deferring Trustee's termination of service as a Trustee of a Company. If
a Deferring Trustee dies prior to the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a single lump sum payment as soon as practicable after
such Deferring Trustee's death. The DC Agreements are not funded and, with
respect to the payments of amounts held in the deferral accounts, the Deferring
Trustees have the status of unsecured creditors of the Companies and of each
other AIM Fund from which they are deferring compensation.

PROPOSAL 2 --

APPROVAL OF INVESTMENT ADVISORY AGREEMENTS

INTRODUCTION

Shareholders are being asked to approve new Investment Advisory Agreements
(collectively, the "New Advisory Agreements") that have no material changes in
their terms and conditions, no changes in fees, and no material changes in the
way the Funds are managed, advised or operated.

AIM has served as investment advisor to each of the Funds from the dates
set forth in Annex B and currently serves pursuant to advisory agreements
(collectively, the "Current Advisory Agreements") executed on various dates, as
set forth in Annex B. On May 14, 1996, the Boards of Trustees of AFG and AISF,
including a majority of the Trustees who are not interested persons of each such
Company or AIM (the "Independent Trustees"), voted to continue the Current
Advisory Agreements for an additional year until June 30, 1997.

The Funds are seeking shareholder approval of the New Advisory Agreements
because of the technical requirements of the 1940 Act that apply to the merger
(the "Merger") described below under "Merger of AIM Management and INVESCO."
Because the Merger will result in a transfer of more than 25% of the outstanding
voting shares of A I M Management Group Inc. ("AIM Management"), the direct
parent of AIM, an "assignment" of the Current Advisory Agreements will occur
under the 1940 Act. The Current Advisory Agreements provide that they will
terminate automatically upon their assignment, as required by the 1940 Act. As
discussed below, the Merger will not cause any change in the operation of AIM's
business.

At a meeting held on December 10 and 11, 1996, the Boards of Trustees of
AFG and AISF, including a majority of the Independent Trustees, approved,
subject to shareholder approval, the New Advisory Agreements. A copy of a form
of the New Advisory Agreements is attached hereto as Annex C. In approving the
New Advisory Agreements, the Boards of Trustees took into account the terms of
the Merger. There are no material differences between the provisions of the
Current Advisory Agreements and the New Advisory Agreements. A description of
such agreements is provided below under "Terms of the Advisory Agreements." Such
description is only a summary and is qualified by reference to the attached
Annex C.

If the conditions to the Merger are not met or waived or if the merger
agreement between AIM Management and INVESCO is terminated, the Merger will not
be consummated, and the Current Advisory Agreements will remain in effect. If
the New Advisory Agreements are approved, and the

8
<PAGE> 13

Merger is thereafter consummated, the New Advisory Agreements will be executed
and become effective on the Closing Date, as defined below. In the event that
any of the New Advisory Agreements are not approved with respect to any Fund and
the Merger is consummated, the Board of Trustees of the applicable Company will
determine what action to take, in any event subject to the approval of
shareholders of such Fund.

MERGER OF AIM MANAGEMENT AND INVESCO

On November 4, 1996, AIM Management (the parent of AIM) entered into an
agreement and plan of merger (the "Merger Agreement") with INVESCO plc
("INVESCO"). The Merger Agreement provides for the merger of AIM Management into
INVESCO Group Services, Inc., a wholly owned U.S. subsidiary of INVESCO, or into
another wholly owned U.S. subsidiary of INVESCO (in either case, "INVESCO Sub").

INVESCO is an English holding company whose shares are publicly traded on
the London Stock Exchange. American Depositary Shares evidencing such shares are
traded on the New York Stock Exchange. INVESCO and its subsidiaries are an
independent investment management group with a major presence in the
institutional investment management and retail mutual fund businesses in the
United States and Europe, and a growing presence in the Pacific. INVESCO's U.S.
subsidiaries manage individualized investment portfolios of equity, fixed income
and real estate securities for institutional clients through five business
units. Each unit utilizes a particular investment style in managing assets, and
most of these units also serve as advisor or sub-advisor to one or more of
INVESCO's U.S. mutual funds. INVESCO's European region serves both institutional
and individual investors through six major business units with facilities in the
United Kingdom, the Channel Islands, Luxembourg and France. INVESCO has also
established relationships with substantial financial organizations in Italy, the
Netherlands, Spain and Portugal. INVESCO's Pacific region manages assets of
clients based in Asia and Australia on a local, regional or global basis. It
also manages investments in the region for INVESCO clients based outside the
region. At September 30, 1996, INVESCO's assets under management were in excess
of $90 billion.

Following the Merger, INVESCO will be renamed AMVESCO, plc ("AMVESCO")
AMVESCO will consist of two major complementary businesses, one comprising
principally its United States institutional and international businesses, and
the other comprising principally its United States retail mutual fund and
defined contribution plan businesses. Each of these businesses will be directed
by a separate management committee. Charles W. Brady, the Chairman of INVESCO,
will head the management committee for AMVESCO's U.S. institutional and
international businesses. Robert H. Graham, President and Chief Operating
Officer of AIM Management, will become President and Chief Executive Officer of
AIM Management's successor and will head the management committee directing
AMVESCO's United States retail businesses. Charles T. Bauer, currently Chairman
and Chief Executive Officer of AIM Management, will become Vice Chairman of
AMVESCO and Chairman of AIM Management's successor. AIM Management and INVESCO
believe that their businesses are highly complementary and that the expected
benefits resulting from the Merger include broader product range, expanded
distribution capability, increased globalization, greater capacity in defined
contribution plans, and increased financial strength and independence.

AIM has advised the AIM Funds that the Merger is not expected to have a
material effect on the operations of the AIM Funds or on their shareholders. No
material change in investment philosophy, policies or strategies is currently
envisioned. Following the Merger, AIM will continue to be a wholly

9
<PAGE> 14

owned subsidiary of the successor to AIM Management. The Merger Agreement does
not, by its terms, contemplate any changes, other than changes in the ordinary
course of business, in the management or operation of AIM relating to the AIM
Funds, the personnel managing the AIM Funds or other services provided to and
business activities of the AIM Funds. The Merger also is not expected to result
in material changes in the business, corporate structure or composition of the
senior management or personnel of AIM. Based on the foregoing, AIM does not
anticipate that the Merger will cause a reduction in the quality of services
provided to the AIM Funds, or have any adverse effect either on AIM's ability to
fulfill its respective obligations under the New Advisory Agreements, or on its
ability to operate its businesses in a manner consistent with its current
practices.

Under the Merger Agreement, each of INVESCO and INVESCO Sub has covenanted
and agreed that it will comply, and use all reasonable efforts to cause
compliance on behalf of its affiliates, with the provisions of Section 15(f) of
the 1940 Act. Section 15(f) provides, in pertinent part, that an investment
advisor and its affiliates may receive any amount of benefit in connection with
a sale of securities of, or a sale of any other interest in, such investment
advisor that results in an "assignment" of an investment advisory contract as
long as two conditions are met. First, no "unfair burden" may be imposed on the
investment company as a result of the Merger. The term "unfair burden," as
defined in the 1940 Act, includes any arrangement during the two-year period
after the transaction whereby the investment advisor (or predecessor or
successor investment advisor) or any interested person of any such advisor
receives or is entitled to receive any compensation directly or indirectly from
the investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any person in connection with the
purchase or sale of securities or other property to, from, or on behalf of the
investment company (other than fees for bona fide principal underwriting
services). No such compensation arrangements are contemplated in connection with
the Merger.

The second condition is that, for a period of three years after the
transaction occurs, at least 75% of the members of the board of directors of the
investment company advised by such advisor are not "interested persons" (as
defined in the 1940 Act) of the new or the old investment advisor. The Board of
Trustees that you are being asked to elect in Proposal No. 1 meets this 75%
requirement.

BOARDS OF TRUSTEES EVALUATION

At meetings with the Boards of Directors/Trustees of the AIM Funds
beginning in September, 1996, representatives of AIM Management began discussing
with the Boards the possibility of a merger between AIM Management and INVESCO.
At a meeting in person held on September 27 and 28, 1996, the Boards of
Directors/Trustees of the AIM Funds appointed a special committee (the "Special
Committee") consisting of the Directors/Trustees of the AIM Funds who are not
interested persons of AIM or INVESCO, to review the proposed Merger, consider
its potential impact on the AIM Funds and their shareholders, and make
recommendations to the Boards of Directors/Trustees of the AIM Funds with
respect to the approval of the New Advisory Agreements in view of the proposed
Merger. Directors/Trustees of the AIM Funds who are members of the Special
Committee are Messrs. Crockett, Daly, Frischling, Kroeger, Pennock, Robinson and
Sklar. The Special Committee met with its legal counsel ("Special Counsel"), who
assisted it in its deliberations concerning approval of the New Advisory
Agreements. At a meeting in person held on November 19, 1996, representatives of
AIM Management and INVESCO discussed with the Boards of Directors/Trustees of
the AIM Funds the specific terms of the Merger Agreement.

10
<PAGE> 15

The Special Committee met separately with Special Counsel on November 8,
1996, November 19, 1996 and December 2, 1996 to consider and review the
Directors'/Trustees' fiduciary obligations and the nature and extent of
additional information to be requested by them to evaluate the New Advisory
Agreements and the potential impact of the Merger on the AIM Funds and their
shareholders. Between November 8, 1996 and December 10, 1996, the Special
Committee and Special Counsel requested and received additional information from
AIM Management, INVESCO and their counsel, and held telephone conferences,
regarding the proposed Merger and its potential impact on the AIM Funds and
their shareholders. On December 10, 1996, the Special Committee and Special
Counsel met separately with representatives of AIM Management and INVESCO to
review various aspects of the proposed Merger, and to review additional
information regarding INVESCO and the future plans for AIM Management and AIM.

In connection with its review, the Special Committee possessed or obtained
substantial information regarding: the management, financial position and
business of INVESCO and its subsidiaries; the history of INVESCO's and its
subsidiaries' business and operations; the performance of the investment
companies and private accounts advised by INVESCO and its subsidiaries; the
impact of the Merger on the AIM Funds and their shareholders; future plans of
AMVESCO with respect to AIM and the AIM Funds; performance and financial
information about each of the AIM Funds; and information about other funds and
their fees and expenses.

The Special Committee also received information regarding the terms of the
Merger and comprehensive financial information including: INVESCO's plans for
financing the Merger; the impact of the financing on AIM Management and AIM;
AMVESCO's plans for the compensation of executives and investment and other
staff of AIM Management and AIM; information concerning employment contracts
with senior management of AIM Management and AIM; and AMVESCO's access to
capital markets to meet the capital needs of AIM Management and its
subsidiaries.

In connection with its deliberations, the Special Committee obtained
assurances from INVESCO that: the separate identity of AIM Management and AIM
would be maintained for the foreseeable future; AMVESCO did not intend to change
executive management or staff of AIM Management or AIM (other than to appoint
Robert H. Graham Chief Executive Officer of the successor to AIM Management),
and has entered into employment agreements with key personnel; AMVESCO will
consult with the Boards of Directors/Trustees of the AIM Funds prior to making
material changes to AIM, including its financial and personnel resources, that
could adversely affect the ability of AIM or its subsidiaries to render high
quality services to the AIM Funds; AMVESCO will appoint a general counsel for
AMVESCO who will have responsibility for overall compliance systems; neither
AMVESCO nor its affiliates will impose an "unfair burden" within the meaning of
Section 15(f) of the 1940 Act for a period of two years following the
consummation of the Merger; AMVESCO has not planned any major changes to the
operations and capabilities of AIM or its subsidiaries, except those intended to
enhance the capabilities of those entities to provide improved services to the
AIM Funds; and AMVESCO and its affiliates will use reasonable best efforts to
assure that for a period of three years following consummation of the Merger at
least 75% of the members of the Boards of Directors/Trustees of the AIM Funds
will not be interested persons of either AIM or INVESCO Group Services, Inc. The
Special Committee determined that it was not in a position to rank the foregoing
in order of importance.

The Special Committee also evaluated each New Advisory Agreement. The
Special Committee assured itself that the New Advisory Agreement for each of the
Funds, including the terms relating to

11
<PAGE> 16

the services to be provided and the fees and expenses payable by each such Fund,
is not materially different from the Current Advisory Agreement for each such
Fund.

Based on the Special Committee's review and analysis of the material
provided and the assurance received, the Special Committee unanimously
recommended to the Boards of Trustees of each of the Companies that the New
Advisory Agreements be approved.

At the Boards of Directors/Trustees meetings of the AIM Funds held on
December 10 and 11, 1996, the Boards received presentations by INVESCO and AIM.
The Directors/Trustees were supplied with the information given to the Special
Committee in advance of the meeting. The Special Committee discussed with the
Boards of Trustees the materials it reviewed, the issues it studied and the
reasons for its recommendation. Based upon the foregoing, the Board of Trustees
of each of the Companies unanimously approved the New Advisory Agreement for the
applicable Funds and recommended approval by the shareholders.

ADDITIONAL TERMS OF THE MERGER AGREEMENT

AIM Management will merge into INVESCO Sub for consideration valued at
November 4, 1996 at approximately $1.6 billion, plus the amount of AIM
Management net income from September 1, 1996 through the date on which the
Merger is consummated (the "Closing Date"), minus dividends paid during such
period and subject to adjustments for certain balance sheet items and
transaction expenses. The consideration will include 290 million new Ordinary
Shares (including Ordinary Shares issuable in respect of vested and unvested AIM
Management options) of INVESCO valued at November 4, 1996 at approximately $1.1
billion. The balance of the consideration will be paid in cash.

The directors of AIM Management's successor will be Charles T. Bauer,
Robert H. Graham, Gary T. Crum and Michael J. Cemo, all of whom are currently
officers and directors of AIM Management. Although Charles T. Bauer will remain
Chairman of AIM Management's successor, Robert H. Graham will become President
and Chief Executive Officer of such successor. Mr. Graham currently serves as
AIM Management's President and Chief Operating Officer.

Upon consummation of the Merger, the AIM Management stockholders will own
approximately 45% of AMVESCO's total outstanding capital stock on a fully
diluted basis. INVESCO's shareholders approved the Merger at a meeting on
November 27, 1996, and on December 4, 1996 approved changing INVESCO's name upon
consummation of the Merger. AIM Management's stockholders have also approved the
Merger. The name of AIM will not change.

The closing is presently expected to occur on February 28, 1997, subject to
the satisfaction of conditions to closing that include, among other things: (a)
INVESCO having consummated one or more financings and having received net
proceeds of not less than $500 million; (b) the respective aggregate annualized
asset management fees of INVESCO and AIM Management (based on assets under
management, excluding the effects of market movements) in respect of which
consents to the Merger have been obtained being equal to or greater than 87.5%
of all such fees at October 31, 1996; (c) INVESCO and AIM Management having
received certain consents from regulators, lenders and/or other third parties;
(d) AIM Management not having received from the holder or holders of more than
2% of the outstanding AIM Management shares notices that they intend to exercise
dissenters' rights; (e) a Voting Agreement, Standstill Agreement, Transfer
Administration Agreement, Registration Rights Agreement and Indemnification
Agreement, and Transfer Restriction Agreement and Employment Agreements with
certain AIM Management employees having been

12
<PAGE> 17

executed and delivered; (f) AIM Management having received an opinion from its
U.S. counsel that the Merger will be treated as a tax-free reorganization; and
(g) shareholder resolutions to appoint to INVESCO's Board of Directors six AIM
Management designees and a Board resolution to appoint the seventh AIM
Management designee having been passed and not revoked.

The Merger Agreement may be terminated at any time prior to the Closing
Date (a) by written agreement of INVESCO and AIM Management, (b) by written
notice by AIM Management or INVESCO to the other after June 1, 1997 or (c) under
other circumstances set forth in the Merger Agreement. In certain circumstances
occurring on or before September 30, 1997, a termination fee will be payable by
the party in respect of which such circumstances have occurred.

In connection with the Merger, the following agreements, each to be
effective upon the closing of the Merger, have been or will be executed:

Employment Agreements. Following the Merger, the current officers of
AIM Management will be the officers of the successor to AIM Management and
the directors of the successor to AIM Management will be four of the
current directors of AIM Management. Senior management and key employees of
AIM Management have entered into employment agreements which will commence
when the Merger is consummated and will continue for initial terms ranging
from one year to four years. All of the employment agreements contain
covenants not to compete extending for at least one year after termination
of employment. Approximately thirty current employees of AIM Management are
expected to enter into such employment agreements with INVESCO.

Voting Agreement. Certain AIM Management stockholders and their
spouses, the current directors of INVESCO and proposed directors of AMVESCO
(all of whom are expected to hold in the aggregate approximately 25% of the
Ordinary Shares outstanding immediately following the consummation of the
Merger) have agreed to vote as directors and as shareholders to ensure
that: (a) the AMVESCO Board will have fifteen members, consisting of four
executive directors and three non-executive directors designated by
INVESCO's current senior management, four executive directors and three
non-executive directors designated by AIM Management's current senior
management and a Chairman; (b) the initial Chairman will be Charles W.
Brady (INVESCO's current Chairman) and the initial Vice Chairman will be
Charles T. Bauer (AIM Management's current Chairman); (c) the parties will
vote at any AMVESCO shareholder meeting on resolutions (other than those in
respect of the election of directors) supported by two-thirds of the Board
in the same proportion as votes are cast by unaffiliated shareholders. The
Voting Agreement will terminate on the earlier of the fourth anniversary of
the Closing Date and the date on which a resolution proposed by an
INVESCO-designated Board member is approved by the AMVESCO Board despite
being voted against by each AIM Management-designated Board member present
at such Board meeting.

Standstill Agreement and Transfer Restriction Agreements. Certain AIM
Management stockholders and their spouses and certain other significant
shareholders of INVESCO have agreed under certain circumstances for a
maximum of five years not to engage in a number of specified activities
that might result in a change of the ownership or control positions of
AMVESCO existing as of the Closing Date. AIM Management stockholders and
INVESCO's current chairman will be restricted in their ability to transfer
their shares of AMVESCO for a period of up to five years.

13
<PAGE> 18

TERMS OF THE ADVISORY AGREEMENTS

Although the Current Advisory Agreements have not terminated and the New
Advisory Agreements have not become effective, such Agreements (collectively,
the "Advisory Agreements") are described below as if they were both in effect.

Under the Advisory Agreements, AIM

(a) supervises all aspects of the operations of the Funds;

(b) obtains and evaluates pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Funds, and whether
concerning the individual issuers whose securities are included in the assets of
the Funds or the activities in which such issuers engage, or with respect to
securities which AIM considers desirable for inclusion in the Funds' assets;

(c) determines which issuers and securities shall be represented in the
Funds' investment portfolios and regularly reports thereon to the Companies'
Boards of Trustees;

(d) formulates and implements continuing programs for the purchases and
sales of the securities of such issuers and regularly reports thereon to the
Companies' Boards of Trustees; and

(e) takes, on behalf of the Companies and the Funds, all actions which
appear to the Companies and the Funds necessary to carry into effect such
purchase and sale programs and supervisory functions stated above, including but
not limited to the placing of orders for the purchase and sale of securities for
the Funds.

The Advisory Agreements provide that any investment program undertaken by
AIM, as well as any other actions taken by AIM on behalf of each Fund, shall at
all times be subject to any directives of the Board of Trustees of the
applicable Company.

In performing its obligations under the Advisory Agreements, AIM is
required to comply with all applicable laws. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties under the Advisory Agreements on the part of AIM or its officers,
directors or employees, AIM shall not be liable to the Companies or the Funds or
their shareholders for any act or omission in the course of or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.

The Advisory Agreements provide that, subject to the approval of the Board
of Trustees of the applicable Company and the shareholders of the applicable
Fund, AIM may delegate certain of its duties to a sub-advisor, provided that AIM
shall continue to supervise the performance of any such sub-advisor.

The Advisory Agreements provide that all of the ordinary business expenses
incurred in the operations of each of the Funds and the offering of each of
their shares shall be paid by each such Fund. These expenses include brokerage
commissions, taxes, legal, accounting, auditing or governmental fees, custodian,
transfer agent and shareholder service agent costs.

The New Advisory Agreements also expressly provide that a Company shall be
entitled to use the name "AIM" with respect to a Fund only so long as AIM serves
as investment manager or advisor to

14
<PAGE> 19

such Fund. Although some of the Current Advisory Agreements presently have a
similar provision, the provision in each of the New Advisory Agreements will
read as follows:

License Agreement. The Company shall have the non-exclusive right to use
the name "AIM" to designate any current or future series of shares only
so long as A I M Advisors, Inc. serves as investment manager or advisor
to the Company with respect to such series of shares.

Management of each Company understands that each such Company has been
using the AIM mark for each Fund only by permission of AIM and that the express
licensing provision contained in each New Advisory Agreement clarifies this
understanding.

Information with regard to the fees payable under each of the Advisory
Agreements and the aggregate advisory fees paid to AIM in each Fund's most
recently completed fiscal year is as set forth in Annex F.

Each Advisory Agreement may be terminated with respect to a Fund on 60
days' written notice without penalty by (i) the applicable Fund, (ii) the action
of shareholders of the applicable Fund, (iii) the Board of Trustees of the
applicable Company, or (iv) AIM. Each Advisory Agreement will terminate
automatically in the event of any assignment, as defined by the 1940 Act. The
Advisory Agreements continue from year to year with respect to a Fund so long as
their continuance is specifically approved at least annually either (i) by the
Board of Trustees of the applicable Company or (ii) by the vote of a majority of
such Fund's outstanding voting securities, as defined by the 1940 Act, provided
that in either event the continuance is also approved by the vote of a majority
of the Trustees of the Company who are not interested persons of the Company or
of AIM, cast in person at a meeting called for the purpose of voting on such
approval.

The Advisory Agreements provide that, upon the request of the applicable
Company's Board of Trustees, AIM may perform certain additional services on
behalf of the Funds. The Boards of Trustees have approved, and the Funds have
entered into, Master Administrative Services Agreements with AIM, pursuant to
which AIM has agreed to provide or arrange for the provision of certain
accounting and other administrative services to each Fund, including the
services of a principal financial officer of each Company and related staff. As
compensation to AIM for its services under the Master Administrative Services
Agreements, the Funds reimburse AIM for expenses incurred by AIM or its
affiliates in connection with such services.

ADDITIONAL SERVICES PROVIDED BY AIM AND ITS AFFILIATES

As noted above, AIM provides administrative services to each of the Funds.
In addition, A I M Distributors, Inc. ("AIM Distributors"), a wholly owned
subsidiary of AIM, serves as the principal underwriter for each of the retail
classes of the Funds. Shares of the Funds are generally sold with an initial
sales charge ("Class A Shares"), or with respect to some of the Funds, subject
to a contingent deferred sales charge ("Class B Shares"). Such sales charges are
paid by investors. Each of the series portfolios of AFG and the retail class of
AISF has also adopted a distribution plan or plans under Rule 12b-1 of the 1940
Act (each, a "Plan") with respect to each of its retail classes. Pursuant to
each Plan, each such Fund makes payments to AIM Distributors in connection with
the distribution of the Fund's shares and the provision of ongoing services to
shareholders of each class. The fees are calculated as a percentage of the
annualized average daily net assets attributable to a class of shares. AIM
Distributors pays a portion of the Rule 12b-1 fees that it receives to the
brokers, dealers, agents

15
<PAGE> 20

and other service providers with whom it has entered into agreements and who
offer shares of the Fund for sale or provide customers or clients certain
continuing personal services. Each Fund categorizes the first 0.25% (0.15%, in
the case of AISF) per year of the Rule 12b-1 fees paid to such third parties
attributable to the Class A Shares of the respective Fund as a service fee for
ongoing personal services.

AIM Distributors is authorized to advance to institutions through whom
Class B Shares are sold a sales commission under schedules established by AIM
Distributors. AIM Distributors (or its assignee or transferee) receives 0.75%
(of the total 1.00% payable under the distribution plan applicable to Class B
Shares) of each applicable Fund's annualized average daily net assets
attributable to those Class B Shares sold through the sales efforts of AIM
Distributors. The remaining 0.25% of each applicable Funds' annualized average
daily net assets attributable to Class B Shares is paid to brokers, dealers,
agents and other service providers as a service fee for on-going personal
services.

The amounts payable by a Fund under the Plans need not be directly related
to the expenses actually incurred by AlM Distributors on behalf of each Fund.
Thus, even if AIM Distributors' actual expenses exceed the fee payable to AIM
Distributors thereunder at any given time, the Funds will not be obligated to
pay more than that fee, and if AIM Distributors' expenses are less than the fee
it receives, AIM Distributors will retain the full amount of the fee.

A I M Fund Services, Inc. ("AIM Services"), a wholly owned subsidiary of
AIM, serves as transfer agent to each of the retail classes of the Funds.

Information with regard to the amount of fees paid by each Fund to AIM and
its affiliates for services provided other than under the Current Advisory
Agreements in each Fund's most recently completed fiscal year is set forth in
Annex D.

Fund Management Company ("Fund Management"), a wholly owned subsidiary of
AIM, serves as the principal underwriter to the institutional class of AISF
which are sold primarily to institutional investors (the "institutional class").
A I M Institutional Fund Services, Inc. ("AIM Institutional"), a wholly owned
subsidiary of AIM, serves as transfer agent to the institutional class of AISF.

The agreements pursuant to which AIM provides administrative services to
the Funds, and pursuant to which Fund Management and AIM Distributors serve as
principal underwriters to the Funds will terminate as a result of the Merger.
The Board of Trustees of each of the Companies has approved new agreements,
which are substantially identical to the existing administrative services and
distribution agreements, to take effect upon consummation of the Merger. Under
the 1940 Act, such agreements do not require the approval of shareholders before
they become effective. The agreements pursuant to which AIM Institutional and
AIM Services provide transfer agency services will not terminate as a result of
the Merger.

INFORMATION CONCERNING AIM

AIM serves as the investment advisor to each of the Funds. AIM was
organized in 1976 and, together with its affiliates, advises 38 investment
company portfolios constituting the AIM Funds and sub-advises one investment
company portfolio. As of December 3, 1996, the total assets of the AIM Funds
were approximately $62.6 billion. AIM is a wholly owned subsidiary of AIM
Management. Certain of the Directors and officers of AIM are also Trustees and
executive officers of the Companies,

16
<PAGE> 21

and their names, principal occupations and affiliations are shown in the table
under Proposal 1 and under "Executive Officers" in Annex E. Information
regarding the AIM Funds, including their total net assets and the fees received
by AIM from such AIM Funds for its services, is set forth in Annex F. The
address of AIM, all of the Directors of AIM, AIM Distributors, AIM Services,
Fund Management, AIM Institutional and AIM Management, is 11 Greenway Plaza,
Suite 1919, Houston, Texas 77046-1173.

RECOMMENDATION OF TRUSTEES

The Board of Trustees of each Company recommends that you vote FOR the
approval of the New Investment Advisory Agreement.

PROPOSAL 3 --

ELIMINATION OF THE FUNDAMENTAL INVESTMENT POLICY
PROHIBITING INVESTMENTS IN OTHER INVESTMENT COMPANIES AND/OR
AMENDMENT OF CERTAIN RELATED FUNDAMENTAL INVESTMENT POLICIES

The Boards of Trustees of AFG and AISF propose the elimination and, for
certain Funds, the modification of certain fundamental investment policies that
prohibit the Funds from investing in other investment companies. The specific
changes proposed are described below.

Set forth below is each Fund's current fundamental investment policy
prohibiting investments in other investment companies.

<TABLE>
<CAPTION>
POLICY ON INVESTMENTS IN
COMPANY/FUND OTHER INVESTMENT COMPANIES
- ----------------------------------- --------------------------------------------------------
<S> <C>
AFG
All AFG Funds...................... Fund may not acquire for value the securities of any
other investment company, except in connection with a
merger, consolidation or acquisition of assets and
except for the investment in such securities of funds
representing compensation otherwise payable to its
trustees pursuant to any deferred compensation plan
existing at any time between the Trust and its Trustees.
AISF
Limited Maturity Treasury Fund may not acquire for value the securities of any
Portfolio........................ other investment company, except in connection with a
merger, consolidation, reorganization or acquisition of
assets.
</TABLE>

Section 12 of the 1940 Act generally prohibits each Fund from (i) owning
more than 3% of the total outstanding voting stock of any other investment
company; (ii) investing more than 5% of its total assets in the securities of
any one other investment company; and (iii) investing more than 10% of its total
assets (in the aggregate) in the securities of other investment companies.

The Boards of Trustees may, in the near future, authorize AIM and the
Companies to seek exemptive relief from the Securities and Exchange Commission
("SEC") to permit the Funds to purchase securities of other investment companies
in excess of the limitations imposed by Section 12

17
<PAGE> 22

of the 1940 Act (exemptive orders granted with respect to such Funds are
referred to herein collectively as the "Exemptive Orders"). There is no
assurance that such Exemptive Orders will be granted. The investment companies
in which the Funds may invest pursuant to the Exemptive Orders are referred to
herein collectively as the "Exemptive Order Funds." In order to take full
advantage of the exemptive relief that may be granted by the SEC and to invest
in shares of the Exemptive Order Funds in excess of the percentage limitations
imposed by Section 12, each such Fund is seeking shareholder approval to
eliminate the prohibition against investing in other investment companies.

The Companies and AIM may seek Exemptive Orders because they believe each
Fund can effectively invest in certain other types of securities through pooled
investment vehicles such as the Exemptive Order Funds. By pooling their
investments in such securities, the Funds may have the ability to invest in a
wider range of issuers, industries and markets, thereby seeking to decrease
volatility and risk while at the same time providing greater liquidity than a
Fund would have available to it investing in such securities by itself. Pooling
investments may also allow the Funds to increase the efficiency of portfolio
management by permitting each Fund's portfolio manager to concentrate on those
investments that constitute the bulk of the Fund's assets and not spend a
disproportionate amount of time on specialized areas. The Companies may seek
Exemptive Orders to permit, among other things, investments by the Funds for
cash management purposes in money market funds advised by AIM, implementation of
a master/feeder fund structure or investments in a separate small capitalization
or initial public offering fund.

If the proposed elimination of each Fund's prohibition against investments
in other investment companies is approved, each such Fund may invest in
securities of an Exemptive Order Fund only to the extent consistent with the
respective Fund's investment objectives and policies as set forth from time to
time in each Company's registration statement.

In connection with obtaining Exemptive Orders, AIM may agree to waive fees
applicable to the Funds to the extent that the assets of the Funds are invested
in Exemptive Order Funds and collect fees from the Exemptive Order Funds. Other
expenses incurred by the Exemptive Order Funds (such as audit and custodial
fees) will be borne by them, and thus indirectly by the Funds. AIM believes that
these indirect expenses will be offset by the benefits to the Funds of pooling
their investments.

CERTAIN RELATED FUNDAMENTAL INVESTMENT POLICIES

The Funds of AFG currently have other fundamental investment restrictions
that may prohibit each such Fund from taking full advantage of the Exemptive
Orders. These fundamental restrictions include the following:

Diversification. Each Fund of AFG is prohibited from investing more
than 5% of its assets in securities of a single issuer (except for U.S.
Government securities, including securities issued by its agencies and
instrumentalities), except that AIM Balanced Fund and AIM High Yield Fund
may invest up to 25% of their assets without regard to such restrictions
and AIM Money Market Fund may exceed this limit to the extent permitted by
Rule 2a-7 under the 1940 Act. AIM Income Fund and AIM Intermediate
Government Fund are prohibited from purchasing the securities of any issuer
if such purchase would cause more than 5% of the voting securities, or 10%
of the securities of any class, of such issuer to be held by such Fund.

18
<PAGE> 23

From time to time, such Funds may desire to invest more than 25% of their
total assets in one or more Exemptive Order Funds.

The foregoing restrictions may be worded differently from Fund to Fund, but
the substance of the restrictions is as set forth above. Additional information
regarding a Fund's fundamental investment restrictions may be obtained without
cost by telephoning AIM at 1-800-347-4246 and requesting a copy of the Fund's
Statement of Additional Information.

In order to take full advantage of the Exemptive Orders, each Fund subject
to the foregoing investment restrictions seeks shareholder approval to amend
such restrictions by adding the following exception to each restriction:

. . . , except that the [name of the applicable Fund] may purchase
securities of other investment companies to the extent permitted by
applicable law or exemptive order.

The elimination of the fundamental investment policy prohibiting
investments in other investment companies and/or the amendments to the related
fundamental investment policies would become effective March 1, 1997, if
approved by shareholders at the Annual Meeting. These changes are not related to
the Merger described in Proposal 2. Shareholders are being asked to consider
such amendments at this time because the Companies do not regularly hold annual
shareholder meetings. AIM believes that submitting this proposal together with
Proposal 2 may reduce the expenses incurred by each Fund in connection with
soliciting approval of this proposal because the Companies will not be required
to hold a separate meeting.

RECOMMENDATION OF TRUSTEES

The Board of Trustees of each Company recommends that you vote FOR the
proposal to eliminate the fundamental investment policy prohibiting investments
in other investment companies and/or to amend certain related fundamental
investment policies.

PROPOSAL 4 --

RATIFICATION OF SELECTION OF
KPMG PEAT MARWICK LLP AS INDEPENDENT ACCOUNTANTS

The Board of Trustees of each of AFG and AISF, including a majority of the
Independent Trustees, has selected KPMG Peat Marwick LLP as independent
accountants for the fiscal year of the Funds ending in 1997 to examine and
verify the accounts and securities of the Funds, and to report thereon to the
Boards and the shareholders. This selection will be submitted for ratification
at the Annual Meeting. A representative of KPMG Peat Marwick LLP is expected to
be present at the Annual Meeting.

RECOMMENDATION OF TRUSTEES

The Board of Trustees of each Company recommends that you vote FOR the
ratification of the selection of KPMG Peat Marwick LLP as each such Company's
independent accountants.

19
<PAGE> 24

GENERAL INFORMATION

EXECUTIVE OFFICERS OF EACH OF THE COMPANIES

Information regarding the executive officers of each of the Companies is
set forth in Annex E.

SECURITY OWNERSHIP OF MANAGEMENT AND 5% HOLDERS

Information regarding ownership of each class of the Funds' shares by
Trustees and the Chief Executive Officer and by 5% holders of each class of such
Fund is set forth in Annex G.

PROXY SOLICITATION

The Companies have engaged the services of Shareholder Communications
Corporation ("SCC") to assist them in the solicitation of proxies for the Annual
Meeting. It is estimated that the aggregate cost of SCC's services with respect
to all of the AIM Funds will be approximately $3,500,000. The cost of soliciting
proxies will be borne primarily by AIM Management and certain incremental costs
will be borne by the AIM Funds. The Companies expect to solicit proxies
principally by mail, but the Companies or SCC may also solicit proxies by
telephone, facsimile or personal interview. AIM Management may also reimburse
firms and others for their expenses in forwarding solicitation materials to the
beneficial owners of shares of the Funds.

SHAREHOLDER PROPOSALS

As a general matter, each Company does not hold regular annual meetings of
shareholders. Any shareholder who wishes to submit proposals for consideration
at a shareholders' meeting should send such proposal to the applicable Company
at the address set forth on the first page of this proxy statement. To be
considered for presentation at a shareholders' meeting, proposals must be
received a reasonable time before a solicitation is made and must comply with
applicable law.

OTHER BUSINESS

The management knows of no business to be presented to the Annual Meeting
other than the matters set forth in this proxy statement.

By order of the Boards of Trustees,

Charles T. Bauer
Chairman of the Boards of Trustees

December 20, 1996

20
<PAGE> 25

ANNEX A

NUMBER OF SHARES OUTSTANDING ON DECEMBER 3, 1996
FOR EACH SERIES PORTFOLIO OF AFG AND AISF

AIM FUNDS GROUP

<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING ON
NAME OF FUND DECEMBER 3, 1996
- ------------------------------------------------------------------------ -----------------
<S> <C>
AIM Balanced Fund....................................................... 24,290,184.254
AIM Global Utilities Fund............................................... 15,315,546.132
AIM Growth Fund......................................................... 33,090,286.657
AIM High Yield Fund..................................................... 229,274,221.160
AIM Income Fund......................................................... 44,686,656.417
AIM Intermediate Government Fund........................................ 27,260,398.566
AIM Money Market Fund................................................... 670,661,890.044
AIM Municipal Bond Fund................................................. 38,307,656.064
AIM Value Fund.......................................................... 324,370,017.713
-----------------
TOTAL -- AIM FUNDS GROUP................................................ 1,407,256,857.007
=================
</TABLE>

AIM INVESTMENT SECURITIES FUNDS

<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING ON
NAME OF FUND DECEMBER 3, 1996
- -------------------------------------------------------------------------- ----------------
<S> <C>
Limited Maturity Treasury Portfolio....................................... 42,498,777.665
----------------
</TABLE>

21
<PAGE> 26

ANNEX B

DATES OF ADVISORY AGREEMENTS

<TABLE>
<CAPTION>
DATE SINCE
DATE LAST AIM HAS
SUBMITTED TO SERVED AS
A VOTE OF INVESTMENT
NAME OF COMPANY AND FUND DATE OF CURRENT ADVISORY AGREEMENT SHAREHOLDERS* ADVISOR
- --------------------------------------- --------------------------------------- ------------- -------------
<S> <C> <C> <C>
AIM FUNDS GROUP
AIM Balanced Fund Master Investment Advisory Agreement, August 6, February 27,
dated October 18, 1993, as amended by 1993 1978
Amendment No. 1, dated September 28,
1994, as amended by Amendment No. 2,
dated November 14, 1994
AIM High Yield Fund Master Investment Advisory Agreement, August 6, June 30, 1992
dated October 18, 1993, as amended by 1993
Amendment No. 1, dated September 28,
1994, as amended by Amendment No. 2,
dated November 14, 1994
AIM Income Fund Master Investment Advisory Agreement, August 6, June 30, 1992
dated October 18, 1993, as amended by 1993
Amendment No. 1, dated September 28,
1994, as amended by Amendment No. 2,
dated November 14, 1994
AIM Intermediate Government Fund Master Investment Advisory Agreement, August 6, June 30, 1992
dated October 18, 1993, as amended by 1993
Amendment No. 1, dated September 28,
1994, as amended by Amendment No. 2,
dated November 14, 1994
AIM Money Market Fund Master Investment Advisory Agreement, August 6, June 30, 1992
dated October 18, 1993, as amended by 1993
Amendment No. 1, dated September 28,
1994, as amended by Amendment No. 2,
dated November 14, 1994
AIM Municipal Bond Fund Master Investment Advisory Agreement, August 6, June 30, 1992
dated October 18, 1993, as amended by 1993
Amendment No. 1, dated September 28,
1994, as amended by Amendment No. 2,
dated November 14, 1994
AIM INVESTMENT SECURITIES FUNDS
Limited Maturity Treasury Portfolio Master Investment Advisory Agreement, August 6, January 26,
dated October 18, 1993 1993 1989
</TABLE>

- ------------------------------

* The Current Advisory Agreements, dated October 18, 1993, were last submitted
to a vote of shareholders in 1993 as a result of a reorganization of several
AIM Funds and/or the recapitalization of A I M Management Group Inc.

22
<PAGE> 27

ANNEX C

[NAME OF COMPANY]

MASTER INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT is made this day of , 1997, by and between
[Name of Company], a Delaware business trust (the "Company") with respect to its
series of shares shown on the Appendix A attached hereto, as the same may be
amended from time to time, and A I M Advisors, Inc., a Delaware corporation (the
"Advisor").

RECITALS

WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company;

WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment advisor and engages in
the business of acting as an investment advisor;

WHEREAS, the Company's Agreement and Declaration of Trust authorizes the
Board of Trustees of the Company to classify or reclassify authorized but
unissued shares of the Company, and as of the date of this Agreement, the
Company's Board of Trustees has authorized the issuance of [ ] series
of shares representing interests in [ ] investment portfolios (such
portfolios and any other portfolios hereafter added to the Company being
referred to individually herein as a "Fund," collectively as the "Funds"); and

WHEREAS, the Company and the Advisor desire to enter into an agreement to
provide for investment advisory services to the Funds upon the terms and
conditions hereinafter set forth;

NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:

1. Advisory Services. The Advisor shall act as investment advisor for the
Funds and shall, in such capacity, supervise all aspects of the Funds'
operations, including the investment and reinvestment of cash, securities or
other properties comprising the Funds' assets, subject at all times to the
policies and control of the Company's Board of Trustees. The Advisor shall give
the Company and the Funds the benefit of its best judgment, efforts and
facilities in rendering its services as investment advisor.

2. Investment Analysis and Implementation. In carrying out its obligations
under Section 1 hereof, the Advisor shall:

(a) supervise all aspects of the operations of the Funds;

(b) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Funds,
and whether concerning the individual issuers whose securities are included
in the assets of the Funds or the activities in which such issuers engage,
or with respect to securities which the Advisor considers desirable for
inclusion in the Funds' assets;

23
<PAGE> 28

(c) determine which issuers and securities shall be represented in the
Funds' investment portfolios and regularly report thereon to the Company's
Board of Trustees; and

(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Company's Board of Trustees;

and take, on behalf of the Company and the Funds, all actions which appear to
the Company and the Funds necessary to carry into effect such purchase and sale
programs and supervisory functions as aforesaid, including but not limited to
the placing of orders for the purchase and sale of securities for the Funds.

3. Delegation of Responsibilities. Subject to the approval of the Board of
Trustees and the shareholders of the Funds, the Advisor may delegate to a
sub-advisor certain of its duties enumerated in Section 2 hereof, provided that
the Advisor shall continue to supervise the performance of any such sub-advisor.

4. Control by Board of Trustees. Any investment program undertaken by the
Advisor pursuant to this Agreement, as well as any other activities undertaken
by the Advisor on behalf of the Funds, shall at all times be subject to any
directives of the Board of Trustees of the Company.

5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Advisor shall at all times conform to:

(a) all applicable provisions of the 1940 Act and the Advisers Act and
any rules and regulations adopted thereunder;

(b) the provisions of the registration statement of the Company, as
the same may be amended from time to time under the Securities Act of 1933
and the 1940 Act;

(c) the provisions of the Agreement and Declaration of Trust of the
Company, as the same may be amended from time to time;

(d) the provisions of the by-laws of the Company, as the same may be
amended from time to time; and

(e) any other applicable provisions of state, federal or foreign law.

6. Broker-Dealer Relationships. The Advisor is responsible for decisions to
buy and sell securities for the Funds, broker-dealer selection, and negotiation
of brokerage commission rates. The Advisor's primary consideration in effecting
a security transaction will be to obtain execution at the most favorable price.
In selecting a broker-dealer to execute each particular transaction, the Advisor
will take the following into consideration: the best net price available; the
reliability, integrity and financial condition of the broker-dealer; the size of
and the difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the Funds on
a continuing basis. Accordingly, the price to the Funds in any transaction may
be less favorable than that available from another broker-dealer if the
difference is reasonably justified by other aspects of the fund execution
services offered. Subject to such policies as the Board of Trustees may from
time to time determine, the Advisor shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise solely by
reason of its having caused the Funds to pay a broker or dealer that provides
brokerage and research services to the Advisor an amount of

24
<PAGE> 29

commission for effecting a fund investment transaction in excess of the amount
of commission another broker or dealer would have charged for effecting that
transaction, if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Advisor's overall responsibilities with respect to
a particular Fund, other Funds of the Company, and to other clients of the
Advisor as to which the Advisor exercises investment discretion. The Advisor is
further authorized to allocate the orders placed by it on behalf of the Funds to
such brokers and dealers who also provide research or statistical material, or
other services to the Funds, to the Advisor, or to any sub-advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocations regularly to the Board
of Trustees of the Company indicating the brokers to whom such allocations have
been made and the basis therefor. In making decisions regarding broker-dealer
relationships, the Advisor may take into consideration the recommendations of
any sub-advisor appointed to provide investment research or advisory services in
connection with the Funds, and may take into consideration any research services
provided to such sub-advisor by broker-dealers.

7. Compensation. The Company shall pay the Advisor as compensation for
services rendered hereunder an annual fee, payable monthly, based upon the
average daily net assets of the Funds as the same is set forth in Appendix A
attached hereto. The average daily net asset value of the Funds shall be
determined in the manner set forth in the Agreement and Declaration of Trust and
registration statement of the Company, as amended from time to time.

8. Additional Services. Upon the request of the Company's Board of
Trustees, the Advisor may perform certain accounting, shareholder servicing or
other administrative services on behalf of the Funds which are not required by
this Agreement. Such services will be performed on behalf of the Funds and the
Advisor may receive from the Funds such reimbursement for costs or reasonable
compensation for such services as may be agreed upon between the Advisor and the
Company's Board of Trustees based on a finding by the Board of Trustees that the
provision of such services by the Advisor is in the best interests of the
Company and its shareholders. Payment or assumption by the Advisor of any Fund
expense that the Advisor is not otherwise required to pay or assume under this
Agreement shall not relieve the Advisor of any of its obligations to the Funds
nor obligate the Advisor to pay or assume any similar Fund expense on any
subsequent occasions. Such services may include, but are not limited to:

(a) the services of a principal financial officer of the Company
(including applicable office space, facilities and equipment) whose normal
duties consist of maintaining the financial accounts and books and records
of the Company and the Funds, including the review and calculation of daily
net asset value and the preparation of tax returns; and the services
(including applicable office space, facilities and equipment) of any of the
personnel operating under the direction of such principal financial
officer;

(b) the services of staff to respond to shareholder inquiries
concerning the status of their accounts; providing assistance to
shareholders in exchanges among the mutual funds managed or advised by the
Advisor; changing account designations or changing addresses; assisting in
the purchase or redemption of shares; supervising the operations of the
custodian, transfer agent(s) or dividend disbursing agent(s) for the Funds;
or otherwise providing services to shareholders of the Funds; and

25
<PAGE> 30

(c) such other administrative services as may be furnished from time
to time by the Advisor to the Company or the Funds at the request of the
Company's Board of Trustees.

9. Expenses of the Funds. All of the ordinary business expenses incurred in
the operations of the Funds and the offering of their shares shall be borne by
the Funds unless specifically provided otherwise in this Agreement. These
expenses borne by the Funds include but are not limited to brokerage
commissions, taxes, legal, accounting auditing, or governmental fees, the cost
of preparing share certificates, custodian, transfer and shareholder service
agent costs, expenses of issue, sale, redemption and repurchase of shares,
expenses of registering and qualifying shares for sale, expenses relating to
directors and shareholder meetings, the cost of preparing and distributing
reports and notices to shareholders, the fees and other expenses incurred by the
Company on behalf of the Funds in connection with membership in investment
company organizations and the cost of printing copies of prospectuses and
statements of additional information distributed to the Funds' shareholders.

10. Expense Limitation. If, for any fiscal year of the Company, the total
of all ordinary business expenses of the Funds, including all investment
advisory fees, but excluding brokerage commissions and fees, taxes, interest and
extraordinary expenses, such as litigation costs, would exceed the applicable
expense limitations imposed by state securities regulations in any state in
which the Funds' shares are qualified for sale, as such limitations may be
raised or lowered from time to time, the aggregate of all such investment
advisory fees shall be reduced by the amount of such excess. The amount of any
such reduction to be borne by the Advisor shall be deducted from the monthly
investment advisory fee otherwise payable to the Advisor during such fiscal
year. If required pursuant to such state securities regulations, the Advisor
will, not later than the last day of the first month of the next succeeding
fiscal year, reimburse the Funds for any such annual operating expenses (after
reduction of all investment advisory fees in excess of such limitation). For the
purposes of this Section, the term "fiscal year" shall exclude the portion of
the current fiscal year which shall have elapsed prior to the date hereof and
shall include the portion of the then current fiscal year which shall have
elapsed at the date of termination of this Agreement. The application of expense
limitations shall be applied to each Fund of the Company separately unless the
laws or regulations of any state shall require that the expense limitations be
imposed with respect to the Company as a whole.

11. Non-Exclusivity. The services of the Advisor to the Company and the
Funds are not to be deemed to be exclusive, and the Advisor shall be free to
render investment advisory and administrative or other services to others
(including other investment companies) and to engage in other activities. It is
understood and agreed that officers or directors of the Advisor may serve as
officers or directors of the Company, and that officers or directors of the
Company may serve as officers or directors of the Advisor to the extent
permitted by law; and that the officers and directors of the Advisor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.

12. Term and Approval. This Agreement shall become effective with respect
to a Fund if approved by the shareholders of such Fund, and if so approved, this
Agreement shall thereafter continue in force and effect until February 28, 1999,
and may be continued from year to year thereafter, provided that the
continuation of the Agreement is specifically approved at least annually:

26
<PAGE> 31

(a) (i) by the Company's Board of Trustees or (ii) by the vote of "a
majority of the outstanding voting securities" of such Fund (as defined in
Section 2(a)(42) of the 1940 Act); and

(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or "interested persons" (as defined in the 1940
Act) of a party to this Agreement (other than as Company trustees), by
votes cast in person at a meeting specifically called for such purpose.

13. Termination. This Agreement may be terminated as to the Company or as
to any one or more of the Funds at any time, without the payment of any penalty,
by vote of the Company's Board of Trustees or by vote of a majority of the
outstanding voting securities of the applicable Fund, or by the Advisor, on
sixty (60) days' written notice to the other party. The notice provided for
herein may be waived by the party entitled to receipt thereof. This Agreement
shall automatically terminate in the event of its assignment, the term
"assignment" for purposes of this paragraph having the meaning defined in
Section 2(a)(4) of the 1940 Act.

14. Liability of Advisor and Indemnification. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Advisor or any of its officers, directors or
employees, the Advisor shall not be subject to liability to the Company or to
the Funds or to any shareholder of the Funds for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.

15. Liability of Shareholders. Notice is hereby given that, as provided by
applicable law, the obligations of or arising out of this Agreement are not
binding upon any of the shareholders of the Company individually but are binding
only upon the assets and property of the Company and that the shareholders shall
be entitled, to the fullest extent permitted by applicable law, to the same
limitation on personal liability as stockholders of private corporations for
profit.

16. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered, telecopied or mailed postage paid, to the other party
entitled to receipt thereof at such address as such party may designate for the
receipt of such notice. Until further notice to the other party, it is agreed
that the address of the Company shall be and that of the Advisor shall be Eleven
Greenway Plaza, Suite 1919, Houston, Texas 77046.

17. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act or the Advisers Act shall be resolved by
reference to such term or provision of the 1940 Act or the Advisers Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission issued pursuant to said Acts. In
addition, where the effect of a requirement of the 1940 Act or the Advisers Act
reflected in any provision of the Agreement is revised by rule, regulation or
order of the Securities and Exchange Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order. [The following
provision is applicable only to AFG: Subject to the foregoing, this Agreement
shall be governed by and construed in accordance with the laws (without
reference to conflicts of law provisions) of the State of Texas.]

27
<PAGE> 32

18. License Agreement. The Company shall have the non-exclusive right to
use the name "AIM" to designate any current or future series of shares only so
long as A I M Advisors, Inc. serves as investment manager or advisor to the
Company with respect to such series of shares.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.

<TABLE>
<S> <C>
[NAME OF COMPANY]
Attest: (a Delaware business trust)

By:
- -------------------------------------------- --------------------------------------------
Assistant Secretary President

(SEAL) A I M ADVISORS, INC.

Attest: By:
- -------------------------------------------- --------------------------------------------
Assistant Secretary President
(SEAL)
</TABLE>

28
<PAGE> 33

APPENDIX A
TO
MASTER INVESTMENT ADVISORY AGREEMENT
OF
[NAME OF COMPANY]

The Company shall pay the Advisor, out of the assets of a Fund, as full
compensation for all services rendered and all facilities furnished hereunder, a
management fee for such Fund set forth below. Such fees shall be calculated by
applying the following annual rates to the average daily net assets of such Fund
for the calendar year computed in the manner used for the determination of the
net asset value of shares of such Fund.

[FUND NAMES]

<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
---------- -------
<S> <C>
</TABLE>

[Fees will be those set forth in Annex F]

29
<PAGE> 34

ANNEX D

FEES PAID TO AFFILIATES
IN MOST RECENT FISCAL YEAR

<TABLE>
<CAPTION>
AIM
(ADMINISTRATIVE AIM AIM
COMPANY AND FUND AGREEMENT) DISTRIBUTORS* SERVICES
- ------------------------------------------------------------- --------------- ------------- --------
<S> <C> <C> <C>
AIM FUNDS GROUP
AIM Balanced Fund.......................................... $67,928 $ 303,104 $121,853
AIM High Yield Fund........................................ 82,116 2,387,778 724,482
AIM Income Fund............................................ 82,185 230,928 193,500
AIM Intermediate Government Fund........................... 71,765 289,995 185,603
AIM Money Market Fund...................................... 55,020 955,357 363,275
AIM Municipal Bond Fund.................................... 65,899 187,024 141,963
</TABLE>
<TABLE>
<CAPTION>
AIM
(ADMINISTRATIVE AIM FUND AIM AIM
COMPANY AND FUND AGREEMENT) DISTRIBUTORS* MANAGEMENT INSTITUTIONAL SERVICES
- ----------------------------------------- --------------- ------------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C>
AIM INVESTMENT SECURITIES FUNDS
Limited Maturity Treasury Portfolio.... $60,857 $ 219,596 $ 0 $10,350 $160,400
</TABLE>

- ---------------

* Net Amount Received from sales commissions and Rule 12b-1 fees not including
amounts reallocated to brokers, dealers, agents and other service providers.

30
<PAGE> 35

ANNEX E

EXECUTIVE OFFICERS

EXECUTIVE OFFICERS OF AFG

Officers of AFG serve at the pleasure of the Board. Set forth below is
certain information regarding the executive officers of AFG.

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
NAME AGE POSITION WITH AFG DURING PAST FIVE YEARS
- ------------------------- --- ----------------------------- ---------------------------------------
<S> <C> <C> <C>
Charles T. Bauer 77 Chairman See Trustee table under Proposal 1.
Robert H. Graham 50 President See Trustee table under Proposal 1.
John J. Arthur* 52 Senior Vice President and Senior Vice President and Treasurer,
Treasurer AIM; and Vice President and Treasurer,
A I M Management Group Inc. ("AIM
Management"), A I M Capital Management,
Inc. ("AIM Capital"), A I M
Distributors, Inc. ("AIM
Distributors"), A I M Fund Services,
Inc. ("AIM Services"), A I M
Institutional Fund Services, Inc.,
("AIM Institutional") and Fund
Management Company ("Fund Management").
Gary T. Crum 49 Senior Vice President Director and President, AIM Capital;
Director and Senior Vice President, AIM
Management, AIM; and Director, AIM
Distributors.
Scott G. Lucas 37 Senior Vice President Director and Senior Vice President, AIM
Capital; and Vice President, AIM
Management and AIM.
Carol F. Relihan* 42 Senior Vice President and Senior Vice President, General Counsel
Secretary and Secretary, AIM; Vice President,
General Counsel and Secretary, AIM
Management; Vice President and General
Counsel, Fund Management; and Vice
President, AIM Capital, AIM
Distributors, AIM Services, and AIM
Institutional.
Robert G. Alley 48 Vice President Senior Vice President, AIM Capital; and
Vice President, AIM. Formerly, Senior
Fixed Income Money Manager, Waddell and
Reed, Inc.
</TABLE>

- ---------------

* Mr. Arthur and Ms. Relihan are married to each other.

31
<PAGE> 36

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
NAME AGE POSITION WITH AFG DURING PAST FIVE YEARS
- ------------------------- --- ----------------------------- ---------------------------------------
<S> <C> <C> <C>
Stuart W. Coco 41 Vice President Senior Vice President, AIM Capital; and
Vice President, AIM.
Melville B. Cox 53 Vice President Vice President and Chief Compliance
Officer, AIM, AIM Capital, AIM
Distributors, AIM Services, AIM
Institutional and Fund Management.
Formerly, Vice President, Charles
Schwab & Co., Inc.; Assistant
Secretary, Charles Schwab Family of
Funds and Schwab Investments; Chief
Compliance Officer, Charles Schwab
Investment Management, Inc.; and Vice
President, Integrated Resources Life
Insurance Co. and Capital Life
Insurance Co.
Karen D. Kelley 36 Vice President Senior Vice President, AIM Capital; and
Vice President, AIM.
Jonathan C. Schoolar 35 Vice President Director and Senior Vice President, AIM
Capital; and Vice President, AIM.
Dana R. Sutton 37 Vice President and Assistant Vice President and Fund Controller,
Treasurer AIM; and Assistant Vice President and
Assistant Treasurer, Fund Management.
</TABLE>

32
<PAGE> 37

EXECUTIVE OFFICERS OF AISF

Officers of AISF serve at the pleasure of the Board. Set forth below is
certain information regarding the executive officers of AISF.

<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
NAME AGE POSITION WITH AISF DURING PAST FIVE YEARS
- ------------------------- --- ----------------------------- ---------------------------------------
<S> <C> <C> <C>
Charles T. Bauer 77 Chairman See Trustee table under Proposal 1.
Robert H. Graham 50 President See Trustee table under Proposal 1.
John J. Arthur* 52 Senior Vice President and Senior Vice President and Treasurer,
Treasurer AIM; and Vice President and Treasurer,
AIM Management, AIM Capital, AIM
Distributors, AIM Services, AIM
Institutional and Fund Management.
Gary T. Crum 49 Senior Vice President Director and President, AIM Capital;
Director and Senior Vice President, AIM
Management and AIM; and Director, AIM
Distributors.
Carol F. Relihan* 42 Senior Vice President and Senior Vice President, General Counsel
Secretary and Secretary, AIM; Vice President,
General Counsel and Secretary, AIM
Management; Vice President and General
Counsel, Fund Management; and Vice
President, AIM Capital, AIM
Distributors, AIM Services, and AIM
Institutional.
Melville B. Cox 53 Vice President Vice President and Chief Compliance
Officer, AIM, AIM Capital, AIM
Distributors, AIM Services, AIM
Institutional and Fund Management.
Formerly, Vice President, Charles
Schwab & Co., Inc.; Assistant
Secretary, Charles Schwab Family of
Funds and Schwab Investments; Chief
Compliance Officer, Charles Schwab
Investment Management, Inc.; and Vice
President, Integrated Resources Life
Insurance Co. and Capital Life
Insurance Co.
Karen D. Kelley 36 Vice President Senior Vice President, AIM Capital; and
Vice President, AIM.
Dana R. Sutton 37 Vice President and Assistant Vice President and Fund Controller,
Treasurer AIM; and Assistant Vice President and
Assistant Treasurer, Fund Management.
</TABLE>

- ---------------

* Mr. Arthur and Ms. Relihan are married to each other.

33
<PAGE> 38

ANNEX F

ADVISORY AGREEMENT FEE SCHEDULE

<TABLE>
<CAPTION>
AGGREGATE
TOTAL NET FEES
NET ASSETS FOR PAID TO AIM WAIVERS FOR
THE MOST FOR THE MOST THE MOST
ANNUAL RATE RECENTLY RECENTLY RECENTLY
(BASED ON COMPLETED COMPLETED COMPLETED
NAME OF COMPANY AND FUND AVERAGE DAILY NET ASSETS) FISCAL YEAR FISCAL YEAR* FISCAL YEAR
- ---------------------------------------- ---------------------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
AIM EQUITY FUNDS, INC.
AIM Aggressive Growth Fund 0.80% of the first $150
million.
0.625% of the excess over
$150 million. $ 2,750,563,943 $16,492,564 0
AIM Blue Chip Fund 0.75% of the first $350
million.
0.625% of the excess over
$350 million. $ 128,548,354 $ 256,773 ** $ 26,433
AIM Capital Development Fund 0.75% of the first $350
million.
0.625% of the excess over
$350 million. $ 273,687,609 $ 280,248 *** $ 144,946
AIM Charter Fund 1.00% of the first $30
million.
0.75% over $30 million up to
$150 million.
0.625% of the excess over
$150 million. $ 3,192,471,415 $16,529,891 $ 156,975
AIM Constellation Fund 1.00% of the first $30
million.
0.75% over $30 million up to
$150 million.
0.625% of the excess over
$150 million. $11,548,540,962 $57,614,412 $1,869,383
AIM Weingarten Fund 1.00% of the first $30
million.
0.75% over $30 million up to
$350 million.
0.625% of the excess over
$350 million. $ 5,305,435,087 $29,960,379 $1,458,804
</TABLE>

- ---------------

* AIM reimbursed expenses with respect to the following Funds: AIM Municipal
Bond Fund, $13,200; AIM Global Growth Fund, $11,719; AIM Global Income Fund,
$18,300; AIM V.I. Global Utilities Fund, $13,800; Liquid Assets Portfolio,
$116,930; Prime Portfolio, $61,100; Treasury Portfolio, $113,500; Treasury
TaxAdvantage Portfolio, $25,600; and Cash Reserve Portfolio, $20,000.

** For the period 06/03/96 through 10/31/96.

*** For the period 06/17/96 through 10/31/96.

34
<PAGE> 39

ADVISORY AGREEMENT FEE SCHEDULE

<TABLE>
<CAPTION>
AGGREGATE
TOTAL NET FEES
NET ASSETS FOR PAID TO AIM WAIVERS FOR
THE MOST FOR THE MOST THE MOST
ANNUAL RATE RECENTLY RECENTLY RECENTLY
(BASED ON COMPLETED COMPLETED COMPLETED
NAME OF COMPANY AND FUND AVERAGE DAILY NET ASSETS) FISCAL YEAR FISCAL YEAR* FISCAL YEAR
- ---------------------------------------- ---------------------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
AIM FUNDS GROUP
AIM Balanced Fund 0.75% of the first $150
million.
0.50% of the excess over
$150 million. $ 164,874,356 $ 666,619 $ 24,176
AIM Global Utilities Fund 0.60% of the first $200
million.
0.50% over $200 million up
to $500 million.
0.40% over $500 million up
to $1 billion.
0.30% of the excess over $1
billion. $ 241,317,685 $ 1,256,220 0
AIM Growth Fund 0.80% of the first $150
million.
0.625% of excess over $150
million. $ 306,250,064 $ 1,715,406 0
AIM High Yield Fund 0.625% of the first $200
million.
0.55% over $200 million to
$500 million.
0.50% over $500 million to
$1 billion.
0.45% of the excess over $1
billion. $ 1,444,032,572 $ 5,717,303 0
AIM Income Fund 0.50% of the first $200
million.
0.40% over $200 million to
$500 million.
0.35% over $500 million to
$1 billion.
0.30% of the excess over $1
billion. $ 295,583,696 $ 1,176,249 0
AIM Intermediate Government Fund 0.50% of the first $200
million.
0.40% over $200 million to
$500 million.
0.35% over $500 million to
$1 billion.
0.30% of the excess over $1
billion. $ 237,617,705 $ 996,681 0
</TABLE>

35
<PAGE> 40

ADVISORY AGREEMENT FEE SCHEDULE

<TABLE>
<CAPTION>
AGGREGATE
TOTAL NET FEES
NET ASSETS FOR PAID TO AIM WAIVERS FOR
THE MOST FOR THE MOST THE MOST
ANNUAL RATE RECENTLY RECENTLY RECENTLY
(BASED ON COMPLETED COMPLETED COMPLETED
NAME OF COMPANY AND FUND AVERAGE DAILY NET ASSETS) FISCAL YEAR FISCAL YEAR* FISCAL YEAR
- ---------------------------------------- ---------------------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
AIM Money Market Fund 0.55% of the first $1
billion.
0.50% of the excess over $1
billion. $ 584,793,680 $ 2,589,822 0
AIM Municipal Bond Fund 0.50% of the first $200
million.
0.40% over $200 million to
$500 million.
0.35% over $500 million to
$1 billion.
0.30% of the excess over $1
billion. $ 306,280,329 $ 1,356,225 0
AIM Value Fund 0.80% of the first $150
million.
0.625% of excess over $150
million. $ 6,269,483,246 $24,829,687 $ 502,799
AIM INTERNATIONAL FUNDS, INC.
AIM Global Aggressive Growth Fund 0.90% of the first $1
billion.
0.85% of the excess over $1
billion. $ 1,726,533,976 $ 8,751,918 0
AIM Global Growth Fund 0.85% of the first $1
billion.
0.80% of the excess over $1
billion. $ 236,819,172 $ 1,162,771 0
AIM Global Income Fund 0.70% of the first $1
billion.
0.65% of the excess over $1
billion. $ 38,713,770 $ 0 $ 182,596
AIM International Equity Fund 0.95% of the first $1
billion.
0.90% of the excess over $1
billion. $ 1,476,749,468 $10,085,495 $ 299,147
AIM INVESTMENT SECURITIES FUNDS
Limited Maturity Treasury Portfolio 0.20% of the first $500
million.
0.175% of the excess over
$500 million. $ 502,515,805 $ 933,207 0
AIM SUMMIT FUND, INC. 1.00% of the first $10
million.
0.75% over $10 million to
$150 million.
0.625% over $150 million. $ 1,261,008,244 $ 7,360,028 **** 0
</TABLE>

- ---------------

**** Of the $7,360,028 paid to AIM, $2,442,907 was paid by AIM to TradeStreet
pursuant to a sub-advisory agreement.

36
<PAGE> 41

ADVISORY AGREEMENT FEE SCHEDULE

<TABLE>
<CAPTION>
AGGREGATE
TOTAL NET FEES
NET ASSETS FOR PAID TO AIM WAIVERS FOR
THE MOST FOR THE MOST THE MOST
ANNUAL RATE RECENTLY RECENTLY RECENTLY
(BASED ON COMPLETED COMPLETED COMPLETED
NAME OF COMPANY AND FUND AVERAGE DAILY NET ASSETS) FISCAL YEAR FISCAL YEAR* FISCAL YEAR
- ---------------------------------------- ---------------------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
AIM TAX-EXEMPT FUNDS, INC.
AIM Tax-Exempt Cash Fund 0.35%. $ 30,014,343 $ 101,649 0
AIM Tax-Exempt Bond Fund of
Connecticut 0.50%. $ 39,355,441 $ 0 $ 198,182
Intermediate Portfolio 0.30% of the first $500
million.
0.25% over $500 million to
$1 billion.
0.20% of the excess over $1
billion. $ 83,066,447 $ 232,893 0
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund 0.65% of the first $250
million.
0.60% of the excess over
$250 million. $ 212,152,423 $ 882,870 0
AIM V.I. Diversified Income Fund 0.60% of the first $250
million.
0.55% of the excess over
$250 million. $ 44,630,145 $ 193,008 0
AIM V.I. Global Utilities Fund 0.65% of the first $250
million.
0.60% of the excess over
$250 million. $ 8,393,967 0 $ 32,703
AIM V.I. Government Securities Fund 0.50% of the first $250
million.
0.45% of the excess over
$250 million. $ 19,545,391 $ 71,080 0
AIM V.I. Growth Fund 0.65% of the first $250
million.
0.60% of the excess over
$250 million. $ 102,600,112 $ 434,620 0
AIM V.I. Growth and Income Fund 0.65% of the first $250
million.
0.60% of the excess over
$250 million. $ 38,567,212 $ 46,017 $ 67,802
AIM V.I. International Equity Fund 0.75% of the first $250
million.
0.70% of the excess over
$250 million. $ 82,256,855 $ 457,559 0
</TABLE>

37
<PAGE> 42

ADVISORY AGREEMENT FEE SCHEDULE

<TABLE>
<CAPTION>
AGGREGATE
TOTAL NET FEES
NET ASSETS FOR PAID TO AIM WAIVERS FOR
THE MOST FOR THE MOST THE MOST
ANNUAL RATE RECENTLY RECENTLY RECENTLY
(BASED ON COMPLETED COMPLETED COMPLETED
NAME OF COMPANY AND FUND AVERAGE DAILY NET ASSETS) FISCAL YEAR FISCAL YEAR* FISCAL YEAR
- ---------------------------------------- ---------------------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
AIM V.I. Money Market Fund 0.40% of the first $250
million.
0.35% of the excess over
$250 million. $ 65,505,754 $ 168,901 0
AIM V.I. Value Fund 0.65% of the first $250
million.
0.60% of the excess over
$250 million. $ 257,211,787 $ 1,078,007 0
SHORT-TERM INVESTMENTS CO.
Liquid Assets Portfolio 0.15% $ 2,086,944,322 $ 125,264 $2,562,094
Prime Portfolio 0.20% of the first $100
million.
0.15% over $100 million up
to $200 million.
0.10% over $200 million up
to $300 million.
0.06% over $300 million up
to $1.5 billion.
0.05% over $1.5 billion. $ 6,151,948,355 $ 3,007,431 0
SHORT-TERM INVESTMENTS TRUST
Treasury Portfolio 0.15% of the first $300
million.
0.06% over $300 million up
to $1.5 billion.
0.05% of the excess over
$1.5 billion. $ 3,703,891,140 $ 2,227,788 0
Treasury TaxAdvantage Portfolio 0.20% of the first $250
million.
0.15% over $250 million up
to $500 million.
0.10% of the excess over
$500 million. $ 457,196,150 $ 675,795 $ 116,126
TAX-FREE INVESTMENTS CO.
Cash Reserve Portfolio 0.25% of the first $500
million.
0.20% of the excess over
$500 million. $ 1,044,178,428 $ 1,819,232 $ 690,397
</TABLE>

38
<PAGE> 43

ANNEX G

SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth certain information regarding the ownership
of the shares of the Companies listed below by the Trustees and Chief Executive
Officer of such Companies. To the extent that a Company is not listed next to a
Trustee's name, such Trustee held no shares of any class of such Company as of
December 3, 1996.

<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY AS
OF DECEMBER 3,
NAME OF TRUSTEE/CHIEF EXECUTIVE OFFICER COMPANY FUND (CLASS) 1996*
- ------------------------------------------ ------- -------------------------------------------------------- ----------------
<S> <C> <C> <C>
Charles T. Bauer.......................... AFG AIM Balanced Fund (Class A) 14,896.127
AIM High Yield Fund (Class A) 111,363.510
AIM Money Market Fund (Class C) 1,251,178.970
AIM Municipal Bond Fund (Class A) 11,245.556
AIM Value Fund (Class A) 6,382.102
Bruce L. Crockett......................... AFG AIM Growth Fund (Class A) 173.973
AIM High Yield Fund (Class A) 3,568.672
AIM Value Fund (Class A) 144.599
Owen Daly II.............................. AIS Limited Maturity Treasury 28,682.032
Portfolio (AIM Limited Maturity Treasury Shares)
Carl Frischling........................... AFG AIM Balanced Fund (Class A) 10,148.981
AIM High Yield Fund (Class A) 11,257.402
AIM Value Fund (Class A) 3,686.664
Robert H. Graham.......................... AFG AIM Balanced Fund (Class A) 3,986.987
AIM High Yield Fund (Class A) 7,243.947
AIM Money Market Fund (Class A) 403,861.340
AIM Money Market Fund (Class C) 323,102.060
AIM Municipal Bond Fund (Class A) 6,923.828
AIM Value Fund (Class A) 6,420.316
AIS Limited Maturity Treasury 81,238.693
Portfolio (AIM Limited Maturity Treasury Shares)
John F. Kroeger........................... AFG AIM Balanced Fund (Class A) 1,967.543
AIM High Yield Fund (Class A) 9,247.927
AIS Limited Maturity Treasury 4,302.685
Portfolio (AIM Limited Maturity Treasury Shares)
Lewis F. Pennock.......................... AFG AIM Balanced Fund (Class A) 765.499
Ian W. Robinson........................... AFG AIM High Yield Fund (Class A) 3,147.967
Louis S. Sklar............................ Owned no shares of any class of any Company as of
December 3, 1996
All Trustees and Chief Executive Officer AFG AIM Balanced Fund (Class A) 31,765.137
AIM Growth Fund (Class A) 173.973
AIM High Yield Fund (Class A) 145,829.425
AIM Money Market Fund (Class A) 403,861.340
AIM Money Market Fund (Class C) 1,574,281.030
AIM Municipal Bond Fund (Class A) 18,169.384
AIM Value Fund (Class A) 16,633.681
AIS Limited Maturity Treasury 114,223.410
Portfolio (AIM Limited Maturity Treasury Shares)
</TABLE>

- ---------------

* Less than 1% of the outstanding shares of the Class.

39
<PAGE> 44

SECURITY OWNERSHIP OF CERTAIN RECORD OWNERS

AFG

To the best knowledge of AFG, the names and addresses of the record holders
of 5% or more of the outstanding shares of AFG as of the Record Date, and the
amount of the outstanding shares owned of record by such holders, are set forth
below. AFG has no knowledge of shares held beneficially.
<TABLE>
<CAPTION>
SHARES OWNED OF
NAME AND ADDRESS RECORD AS OF PERCENT
FUND (CLASS) OF RECORD OWNERS DECEMBER 3, 1996 OF CLASS
- ------------------------------------- ---------------------------------------------------------- ---------------- --------
<S> <C> <C> <C>
AIM BALANCED FUND
CLASS A............................ Merrill Lynch Pierce Fenner & Smith 1,247,771.000 8.74%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246

Comerica Bank 795,708.586 5.57%
FBO 401k Accounts-Expediter
P.O. Box 75000
411 W. Lafayette
Detroit, MI 48275-3455

CLASS B............................ Merrill Lynch Pierce Fenner & Smith 1,257,139.000 12.56%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
AIM GLOBAL UTILITIES FUND
CLASS B............................ Merrill Lynch Pierce Fenner & Smith 374,822.837 7.45%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
AIM GROWTH FUND
CLASS B............................ Merrill Lynch Pierce Fenner & Smith 3,201,650.740 17.41%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
AIM HIGH YIELD FUND
CLASS A............................ Merrill Lynch Pierce Fenner & Smith 9,577,152.910 7.61%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246

CLASS B............................ Merrill Lynch Pierce Fenner & Smith 17,660,369.149 17.06%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
</TABLE>

40
<PAGE> 45

<TABLE>
<CAPTION>
SHARES OWNED OF
NAME AND ADDRESS RECORD AS OF PERCENT
FUND (CLASS) OF RECORD OWNERS DECEMBER 3, 1996 OF CLASS
- ------------------------------------- ---------------------------------------------------------- ---------------- --------
<S> <C> <C> <C>
AIM INCOME FUND
CLASS A............................ Merrill Lynch Pierce Fenner & Smith 2,066,607.000 5.98%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246

CLASS B............................ Merrill Lynch Pierce Fenner & Smith 1,121,932.000 11.10%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
AIM INTERMEDIATE GOVERNMENT FUND
CLASS A............................ Merrill Lynch Pierce Fenner & Smith 1,397,241.000 7.40%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246

CLASS B............................ Merrill Lynch Pierce Fenner & Smith 1,281,759.000 15.31%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
AIM MONEY MARKET FUND
CLASS C............................ A I M Advisors, Inc. 24,182,897.980 8.29%
11 Greenway Plaza
Suite 1919
Attn: David Hessel
Houston, TX 77046
AIM MUNICIPAL BOND FUND
CLASS B............................ Merrill Lynch Pierce Fenner & Smith 372,417.000 9.12%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
AIM VALUE FUND
CLASS A............................ Merrill Lynch Pierce Fenner & Smith 18,237,696.251 11.07%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246

CLASS B............................ Merrill Lynch Pierce Fenner & Smith 27,400,230.540 17.17%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246
</TABLE>

41
<PAGE> 46

AISF

To the best knowledge of AISF, the names and addresses of the record
holders of 5% or more of the outstanding shares of AISF as of the Record Date,
and the amount of the outstanding shares owned of record by such holders, are
set forth below. AISF has no knowledge of shares held beneficially.
<TABLE>
<CAPTION>
SHARES OWNED OF
NAME AND ADDRESS RECORD AS OF PERCENT
FUND (CLASS) OF RECORD OWNERS DECEMBER 3, 1996 OF CLASS
- ------------------------------------- ---------------------------------------------------------- ---------------- --------
<S> <C> <C> <C>
LIMITED MATURITY TREASURY PORTFOLIO
AIM LIMITED MATURITY TREASURY
SHARES........................... Merrill Lynch Pierce Fenner & Smith 6,020,435.000 16.33%
FBO the sole benefit of customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246

BOB & Co. 2,867,475.290 7.78%
c/o Bank of Boston
Attn: Mutual Funds
P.O. Box 1809
Boston, MA 02105

INSTITUTIONAL SHARES............... Frost National Bank 4,122,476.942 73.21%
Muir & Co.
P.O. Box 2479
San Antonio, TX 78296-2479

Mississippi Treasury Dept. 495,540.139 8.80%
P.O. Box 138
Jackson, MS 39205
</TABLE>

42
<PAGE> 47
APPENDIX 1

PROXY PROXY
AIM BALANCED FUND
A SERIES OF AIM FUNDS GROUP
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- FEBRUARY 7, 1997

The undersigned hereby appoints Charles T. Bauer, Robert H. Graham and Carol F.
Relihan, and each of them separately, proxies with the power of substitution to
each, and hereby authorizes them to represent and to vote, as designated below,
at the Annual Meeting of Shareholders of the Fund indicated above, on February
7, 1997 at 2 p.m. Central time, and at any adjournment thereof, all of the
shares of the Fund which the undersigned would be entitled to vote if personally
present. IF THIS PROXY IS SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE
SHARES WILL BE VOTED FOR THE ELECTION OF THE NOMINEES NAMED ON THIS PROXY AND
FOR APPROVAL OF THE OTHER PROPOSALS.

NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
ON THIS PROXY CARD. All joint owners should
sign. When signing as executor, administrator,
attorney, trustee or guardian or as custodian
for a minor, please give full title as such.
If a corporation, please sign in full
corporate name and indicate the signer's
office. If a partner, sign in the partnership
name.

___________________________________________
Signature

___________________________________________
Signature (if held jointly)

___________________________________________
Date
GROUP E

THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES. THE TRUSTEES RECOMMEND VOTING "FOR" ALL PROPOSALS.

1. ELECTION OF TRUSTEES - To Withhold Authority to vote for any individual nominee,
strike a line through the name below.

Nominees: Charles T. Bauer Bruce L. Crockett Owen Daly II Carl Frischling Robert H. Graham
John F. Kroeger Lewis F. Pennock Ian W. Robinson Louis S. Sklar
FOR AGAINST ABSTAIN
2. Proposal to approve a new Master Investment Advisory Agreement for the Fund. / / / / / /

3. Proposal to eliminate fundamental investment policy prohibiting investments in / / / / / /
other investment companies and/or to amend certain related fundamental investment
policies.

4. Proposal to ratify the selection of KPMG Peat Marwick LLP as independent / / / / / /
accountants for the Fund.

5. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>

GROUP E

<PAGE> 49
PROXY PROXY
AIM HIGH-YIELD FUND
A SERIES OF AIM EQUITY FUNDS GROUP
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- FEBRUARY 7, 1997

___________________________________________
Signature

___________________________________________
Signature (if held jointly)

___________________________________________
Date
GROUP E
<PAGE> 50
<TABLE>
<S> <C> <C> <C>
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES. THE TRUSTEES RECOMMEND VOTING "FOR" ALL PROPOSALS.

1. ELECTION OF TRUSTEES - To Withhold Authority to vote for any individual nominee,
strike a line through the name below.

3. Proposal to eliminate fundamental investment policy prohibiting investments in / / / / / /
other investment companies and/or to amend certain related fundamental investment
policies.

4. Proposal to ratify the selection of KPMG Peat Marwick LLP as independent / / / / / /
accountants for the Fund.

5. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>

GROUP E

<PAGE> 51
PROXY PROXY
AIM INCOME FUND
A SERIES OF AIM FUNDS GROUP
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- FEBRUARY 7, 1997

___________________________________________
Signature

___________________________________________
Signature (if held jointly)

___________________________________________
Date
GROUP E

THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES. THE TRUSTEES RECOMMEND VOTING "FOR" ALL PROPOSALS.

1. ELECTION OF TRUSTEES - To Withhold Authority to vote for any individual nominee,
strike a line through the name below.

3. Proposal to eliminate fundamental investment policy prohibiting investments in / / / / / /
other investment companies and/or to amend certain related fundamental investment
policies.

4. Proposal to ratify the selection of KPMG Peat Marwick LLP as independent / / / / / /
accountants for the Fund.

5. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>

GROUP E

<PAGE> 53
PROXY PROXY
AIM INTERMEDIATE GOVERNMENT FUND
A SERIES OF AIM FUNDS GROUP
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- FEBRUARY 7, 1997

___________________________________________
Signature

___________________________________________
Signature (if held jointly)

___________________________________________
Date
GROUP E
<PAGE> 54
<TABLE>
<S> <C> <C> <C>
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES. THE TRUSTEES RECOMMEND VOTING "FOR" ALL PROPOSALS.

1. ELECTION OF TRUSTEES - To Withhold Authority to vote for any individual nominee,
strike a line through the name below.

Nominees: Charles T. Bauer Bruce L. Crockett Owen Daly II Carl Frischling Robert H. Graham
John F. Kroeger Lewis F. Pennock Ian W. Robinson Louis S. Sklar

FOR AGAINST ABSTAIN
2. Proposal to approve a new Master Investment Advisory Agreement for the Fund. / / / / / /

3. Proposal to eliminate fundamental investment policy prohibiting investments in / / / / / /
other investment companies and/or to amend certain related fundamental investment
policies.

4. Proposal to ratify the selection of KPMG Peat Marwick LLP as independent / / / / / /
accountants for the Fund.

5. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>

GROUP E

<PAGE> 55
PROXY PROXY
AIM MONEY MARKET FUND
A SERIES OF AIM FUNDS GROUP
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- FEBRUARY 7, 1997

___________________________________________
Signature

___________________________________________
Signature (if held jointly)

___________________________________________
Date
GROUP E

<PAGE> 56
<TABLE>
<S> <C> <C> <C>
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES. THE TRUSTEES RECOMMEND VOTING "FOR" ALL PROPOSALS.

1. ELECTION OF TRUSTEES - To Withhold Authority to vote for any individual nominee,
strike a line through the name below.

3. Proposal to eliminate fundamental investment policy prohibiting investments in / / / / / /
other investment companies and/or to amend certain related fundamental investment
policies.

4. Proposal to ratify the selection of KPMG Peat Marwick LLP as independent / / / / / /
accountants for the Fund.

5. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>

GROUP E

<PAGE> 57
PROXY PROXY
AIM MUNICIPAL BOND FUND
A SERIES OF AIM FUNDS GROUP
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- FEBRUARY 7, 1997

___________________________________________
Signature

___________________________________________
Signature (if held jointly)

___________________________________________
Date
GROUP E

<PAGE> 58
<TABLE>
<S> <C> <C> <C>
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES. THE TRUSTEES RECOMMEND VOTING "FOR" ALL PROPOSALS.

1. ELECTION OF TRUSTEES - To Withhold Authority to vote for any individual nominee,
strike a line through the name below.

3. Proposal to eliminate fundamental investment policy prohibiting investments in / / / / / /
other investment companies and/or to amend certain related fundamental investment
policies.

4. Proposal to ratify the selection of KPMG Peat Marwick LLP as independent / / / / / /
accountants for the Fund.

5. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>

GROUP E

<PAGE> 59
PROXY PROXY
LIMITED MATURITY TREASURY PORTFOLIO
A SERIES OF AIM INVESTMENT SECURITIES FUNDS
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- FEBRUARY 7, 1997

___________________________________________
Signature

___________________________________________
Signature (if held jointly)

___________________________________________
Date
GROUP E

<PAGE> 60
<TABLE>
<S> <C> <C> <C>
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES. THE TRUSTEES RECOMMEND VOTING "FOR" ALL PROPOSALS.

1. ELECTION OF TRUSTEES - To Withhold Authority to vote for any individual nominee,
strike a line through the name below.

Nominees: Charles T. Bauer Bruce L. Crockett Owen Daly II Carl Frischling Robert H. Graham
John F. Kroeger Lewis F. Pennock Ian W. Robinson Louis S. Sklar
FOR EXEWMPT ABSTAIN
2. Proposal to approve a new Master Investment Advisory Agreement for the Fund. / / / / / /

3. Proposal to eliminate fundamental investment policy prohibiting investments in / / / / / /
other investment companies and/or to amend certain related fundamental investment
policies.

4. Proposal to ratify the selection of KPMG Peat Marwick LLP as independent / / / / / /
accountants for the Fund.

5. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>

GROUP E