<PAGE> 1
As filed with the Securities and Exchange Commission on July 25, 1997
1933 Act Registration No. 2-27334
1940 Act Registration No. 811-1540
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No. ____ ---
Post-Effective Amendment No. 73 X
---
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 73 ---
X
---
(Check appropriate box or boxes.)
AIM FUNDS GROUP
(Exact name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
Charles T. Bauer
11 Greenway Plaza, Suite 100, Houston, TX 77046
(Name and Address of Agent for Service)
Copy to:
Samuel D. Sirko, Esquire Martha J. Hays, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll
11 Greenway Plaza, Suite 100 1735 Market Street, 51st Floor
Houston, Texas 77046 Philadelphia, Pennsylvania 19103-7599
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this
Amendment
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
X on August 4, 1997, pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(1)
----
on (date) pursuant to paragraph (a)(1)
----
75 days after filing pursuant to paragraph (a)(2)
----
on (date) pursuant to paragraph (a)(2) of rule 485.
----
(Continued on Next Page)
<PAGE> 2
If appropriate, check the following box:
_____ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Registrant continues its election to register an indefinite number of its
shares of beneficial interest under Rule 24f-2 under the Investment Company Act
of 1940, and filed its Rule 24f-2 Notice for the fiscal year ended December 31,
1996 on February 27, 1997.
<PAGE> 3
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
FORM N-1A ITEM PROSPECTUS CAPTION
- -------------- ------------------
<S> <C>
Part A
Item 1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Table of Fees and Expenses
Item 3. Condensed Financial Information . . . . . . . . . . . . . . . . . . . . . . . Financial Highlights; Performance
Item 4. General Description of Registrant . . . . . . . . . . . . . . . . . . . . . Cover Page; Investment Objectives;
Summary; About the Funds; Investment
Programs; Management; General Information;
Description of Money Market Instruments
Item 5. Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; Investment Programs;
Management; General Information
Item 5A.Management's Discussion of Fund Performance . . . . . . . . . . . . . . . . . . [included in annual reports]
Item 6. Capital Stock and Other Securities . . . . . . . . . . . . . . Summary; Management; Organization of the Trust;
Dividends, Distributions and Tax Matters;
General Information
Item 7. Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . . Management; How to Purchase Shares;
Terms and Conditions of Purchase
of the AIM Funds; Special Plans;
Exchange Privilege; Determination
of Net Asset Value
Item 8. Redemption or Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . How To Redeem Shares; Special Plans
Item 9. Pending Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
<CAPTION>
STATEMENT OF ADDITIONAL INFORMATION CAPTION
-------------------------------------------
Part B
<S> <C>
Item 10. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table of Contents
Item 12. General Information and History . . . . . . . . . . . . . . . . . . . . . . Introduction; General Information
About the Trust
Item 13. Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . Investment Objectives and Policies;
Investment Restrictions; Description
of Money Market Instruments;
Repurchase Agreements and Reverse
Repurchase Agreements; Ratings of Securities
Item 14. Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management of the Trust
Item 15. Control Persons and Principal
Holders of Securities .............................. . . . . . . . . . . . . Control Persons and Principal
Holders of Securities
Item 16. Investment Advisory and Other Services . . . . . . . . . . . . . . . . Investment Advisory and Other Services;
The Distribution Plans; The Distributor
Item 17. Brokerage Allocation and Other Practices . . . . . . . . . . . . . . . . Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . . General Information About the Trust
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . How to Purchase and Redeem Shares;
Qualifying for a Reduced Front-End
Sales Charge; Programs and Services
for Shareholders; Redemptions Paid in Cash
Item 20. Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax Matters
Item 21. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Distributor
Item 22. Calculation of Performance Data........................................................Performance Information
Item 23. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements
</TABLE>
<PAGE> 4
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE> 5
[APPLICATION INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
AIM BALANCED FUND
AIM GLOBAL UTILITIES FUND
AIM GROWTH FUND
AIM HIGH YIELD FUND
AIM INCOME FUND
AIM INTERMEDIATE GOVERNMENT FUND
AIM MONEY MARKET FUND
AIM MUNICIPAL BOND FUND
AIM VALUE FUND
(SERIES PORTFOLIOS OF AIM FUNDS GROUP)
PROSPECTUS
AUGUST 4, 1997
This Prospectus contains information about the nine mutual funds listed above
(the "Funds") which are separate series portfolios of AIM Funds Group (the
"Trust"), a Delaware business trust. The investment objectives of the Funds are
listed on the inside cover page.
This Prospectus sets forth basic information about the Funds that prospective
investors should know before investing. It should be read and retained for
future reference. A Statement of Additional Information, dated August 4, 1997,
has been filed with the United States Securities and Exchange Commission ("SEC")
and is incorporated herein by reference. The Statement of Additional Information
is available without charge upon written request to the Trust at P.O. Box 4739,
Houston, Texas 77210-4739 or by calling (800) 347-4246. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Trust.
AIM HIGH YIELD FUND MAY INVEST UP TO 100% OF ITS NET ASSETS IN NON-INVESTMENT
GRADE DEBT SECURITIES, COMMONLY REFERRED TO AS "JUNK BONDS." JUNK BONDS ARE
CONSIDERED TO BE SPECULATIVE, AND ENTAIL GREATER RISKS, INCLUDING DEFAULT RISKS,
THAN THOSE FOUND IN HIGHER RATED SECURITIES. PURCHASERS SHOULD CAREFULLY
CONSIDER THE RISKS ASSOCIATED WITH AN INVESTMENT IN THIS FUND PRIOR TO
INVESTING. SEE "INVESTMENT PROGRAMS -- AIM HIGH YIELD FUND," "CERTAIN INVESTMENT
STRATEGIES AND POLICIES -- RISK FACTORS REGARDING NON-INVESTMENT GRADE DEBT
SECURITIES" AND "APPENDIX C -- DESCRIPTIONS OF RATING CATEGORIES."
THE FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUNDS' SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THERE CAN BE NO ASSURANCE THAT AIM MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 6
INVESTMENT OBJECTIVES
- --------------------------------------------------------------------------------
The investment objectives of the Funds are as follows:
AIM BALANCED FUND: To achieve as high a total return as possible, consistent
with preservation of capital, by investing in a broadly diversified portfolio of
high-yielding securities, including common stocks, preferred stocks, convertible
securities and bonds.
AIM GLOBAL UTILITIES FUND: To achieve a high level of current income, and as a
secondary objective to achieve capital appreciation, by investing primarily in
the common and preferred stocks of public utility companies.
AIM GROWTH FUND: To achieve long-term growth of capital by investing primarily
in the common stocks of established medium-to-large size companies with
prospects for above-average, long-term earnings growth.
AIM HIGH YIELD FUND: To achieve a high level of current income by investing
primarily in publicly traded debt securities of less than investment grade.
AIM INCOME FUND: To achieve a high level of current income consistent with
reasonable concern for safety of principal by investing primarily in fixed rate
corporate debt and U.S. Government obligations.
AIM INTERMEDIATE GOVERNMENT FUND: To achieve a high level of current income
consistent with reasonable concern for safety of principal by investing in debt
securities issued, guaranteed or otherwise backed by the United States
Government.
AIM MONEY MARKET FUND: To provide as high a level of current income as is
consistent with the preservation of capital and liquidity.
AIM MUNICIPAL BOND FUND: To achieve a high level of current income exempt from
federal income taxes consistent with the preservation of principal by investing
in a diversified portfolio of municipal bonds.
AIM VALUE FUND: To achieve long-term growth of capital by investing primarily
in equity securities judged by the Fund's investment advisor to be undervalued
relative to the investment advisor's appraisal of the current or projected
earnings of the companies issuing the securities, or relative to current market
values of assets owned by the companies issuing the securities or relative to
the equity market generally. Income is a secondary objective.
SUMMARY
- --------------------------------------------------------------------------------
THE FUNDS. AIM Funds Group (the "Trust") is a Delaware business trust
organized as an open-end, series, management investment company. Currently the
Trust offers nine separate series portfolios, each of which pursues unique
investment objectives. This Prospectus relates to all of such portfolios (the
"Funds"), which are listed on the cover.
THE ADVISOR. A I M Advisors, Inc. ("AIM") serves as each Fund's investment
advisor pursuant to a Master Investment Advisory Agreement (the "Advisory
Agreement").
AIM, together with its subsidiaries, manages or advises 53 investment company
portfolios. As of July 15, 1997, the total assets of the investment company
portfolios advised or managed by AIM or its subsidiaries were approximately
$76.0 billion. Under the terms of the Advisory Agreement, AIM supervises all
aspects of each Fund's operations and provides investment advisory services to
each Fund. As compensation for these services AIM receives a fee based on each
Fund's average daily net assets. Under a Master Administrative Services
Agreement, AIM may be reimbursed by each Fund for its costs of performing, or
arranging for the performance of, certain accounting, shareholder servicing and
other administrative services for the Funds.
MULTIPLE DISTRIBUTION SYSTEM. Investors may select Class A, Class B or Class C
shares of each Fund and, in the case of AIM MONEY MARKET FUND, AIM Cash Reserve
Shares, all of which are offered by this Prospectus at an offering price that
reflects differing sales charges and expense levels. See "Terms and Conditions
of Purchase of the AIM Funds -- Sales Charges and Dealer Concessions."
Class A Shares -- Shares are offered at net asset value plus any
applicable initial sales charge.
Class B Shares -- Shares are offered at net asset value, without an
initial sales charge, and are subject to a maximum contingent deferred
sales charge of 5% on certain redemptions made within six years from the
date such shares were purchased. Class B shares automatically convert to
Class A shares of the same Fund eight years following the end of the
calendar month in which a purchase was made. Class B shares are subject to
higher expenses than Class A shares.
Class C Shares -- Shares are offered at net asset value, without an
initial sales charge, and are subject to a contingent deferred sales charge
of 1% on certain redemptions made within one year from the date such shares
were purchased.
AIM Cash Reserve Shares (AIM MONEY MARKET FUND only) -- Shares are
offered at net asset value, without an initial sales charge and without
contingent deferred sales charges.
SUITABILITY FOR INVESTORS. The multiple class structure permits an investor to
choose the method of purchasing shares that is most beneficial given the amount
of the purchase, the length of time the shares are expected to be held, whether
dividends will be paid in cash or reinvested in additional shares of a Fund and
other circumstances. Class A shares of AIM MONEY MARKET FUND are designed to
meet the needs of an investor who wishes to establish a dollar cost averaging
program, pursuant to which Class A shares of
2
<PAGE> 7
AIM MONEY MARKET FUND are exchanged for shares of other funds advised by AIM
that are sold with an initial sales charge. Investors should consider whether,
during the anticipated life of their investment in a Fund, the accumulated
distribution fees and any applicable contingent deferred sales charges on Class
B shares prior to conversion or on Class C shares would be less than the initial
sales charge and accumulated distribution fees on Class A shares purchased at
the same time, and to what extent such differential would be offset by the
higher return on Class A shares. To assist investors in making this
determination, the table under the caption "Table of Fees and Expenses" sets
forth examples of the charges applicable to each class of shares. Class A shares
will normally be more beneficial than Class B or Class C shares to the investor
who qualifies for reduced initial sales charges, as described below. Therefore,
A I M Distributors, Inc. will reject any order for purchase of more than
$250,000 for Class B shares.
PURCHASING SHARES. Initial investments in any class of shares must be at least
$500 and additional investments must be at least $50. The minimum initial
investment is modified for investments through tax-qualified retirement plans
and accounts initially established with an Automatic Investment Plan. The
distributor of the Funds' shares is A I M Distributors, Inc. ("AIM
Distributors"), P.O. Box 4739, Houston, Texas 77210-4739. See "How to Purchase
Shares" and "Special Plans."
EXCHANGE PRIVILEGE. The Funds are among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds"). Class A, Class B and
Class C shares of the Funds, and AIM Cash Reserve Shares of AIM MONEY MARKET
FUND, may be exchanged for shares of other funds in The AIM Family of Funds in
the manner and subject to the policies and charges set forth herein. See
"Exchange Privilege."
REDEEMING SHARES. Holders of Class A shares may redeem all or a portion of
their shares at net asset value on any business day, generally without charge. A
contingent deferred sales charge of 1% may apply to certain redemptions of Class
A shares, where purchases of $1 million or more were made at net asset value.
See "How to Redeem Shares -- Contingent Deferred Sales Charge Program for Large
Purchases."
Holders of Class B shares may redeem all or a portion of their shares at net
asset value on any business day, less a contingent deferred sales charge for
redemptions made within six years from the date such shares were purchased.
Class B shares redeemed after six years from the date such shares were purchased
will not be subject to any contingent deferred sales charge. See "How to Redeem
Shares -- Multiple Distribution System."
Holders of Class C shares may redeem all or a portion of their shares at net
asset value on any business day, less a 1% contingent deferred sales charge for
redemptions made within one year from the date such shares were purchased. See
"How to Redeem Shares -- Multiple Distribution System."
Holders of AIM Cash Reserve Shares of AIM MONEY MARKET FUND may redeem all or
a portion of their shares at net asset value on any business day, without
charge.
DISTRIBUTIONS. AIM GLOBAL UTILITIES FUND, AIM HIGH YIELD FUND, AIM INCOME
FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM MONEY MARKET FUND and AIM MUNICIPAL
BOND FUND currently declare dividends from net investment income on a daily
basis and pay such dividends on a monthly basis. AIM BALANCED FUND currently
declares and pays dividends from net investment income on a quarterly basis. AIM
GROWTH FUND and AIM VALUE FUND currently declare and pay dividends from net
investment income, if any, on an annual basis. All of the Funds make
distributions of realized capital gains, if any, on an annual basis, although
AIM MONEY MARKET FUND may distribute net realized short-term capital gains more
frequently. Dividends and distributions paid with respect to Class A shares of a
Fund may be paid by check, reinvested in additional Class A shares of the Fund
or reinvested in shares of another fund in The AIM Family of Funds, subject to
certain conditions. Dividends and distributions paid with respect to Class B
shares of a Fund may be paid by check or reinvested in additional Class B shares
of other funds in The AIM Family of Funds at net asset value. Dividends and
distributions paid with respect to Class C shares of a Fund may be paid by check
or reinvested in additional Class C shares of another fund in The AIM Family of
Funds at net asset value. Dividends and distributions paid with respect to AIM
Cash Reserve Shares of AIM MONEY MARKET FUND may be paid by check, reinvested in
additional AIM Cash Reserve Shares of the Fund, or reinvested in shares of
another fund in The AIM Family of Funds, subject to certain conditions. See
"Dividends, Distributions and Tax Matters" and "Special Plans."
RISK FACTORS. Subject to certain restrictions designed to reduce any
associated risks, AIM MONEY MARKET FUND may invest in securities such as money
market instruments which are not rated (but are determined by AIM to be of
comparable quality to securities which have received the highest ratings),
certain repurchase agreements, and U.S. dollar-denominated obligations issued by
foreign banks. Accordingly, an investment in AIM MONEY MARKET FUND may entail
somewhat different risks from an investment in an investment company which does
not engage in such investment practices. See "Investment Programs."
AIM HIGH YIELD FUND, and to a lesser extent AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM INCOME FUND and AIM MUNICIPAL BOND FUND, seek to meet their
respective investment objectives by investing in non-investment grade debt
securities, commonly known as "junk bonds." Investments in junk bonds, while
generally providing greater income and opportunity for gain, may be subject to
greater risks than higher rated securities. Such risks may include: greater
market fluctuations and risk of loss of income and principal, limited liquidity
and secondary market support, greater sensitivity to economic and business
downturns, and certain other risks. See "Certain Investment Strategies and
Policies -- Risk Factors Regarding Non-Investment Grade Debt Securities."
Investors should carefully consider the relative risks and rewards of investing
in each of the above-named Funds prior to investing, and should not consider an
investment in any of those Funds to represent a complete investment program.
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds, La Familia AIM
de Fondos and La Familia AIM de Fondos and Design are registered service marks
and aimfunds.com is a service mark of A I M Management Group Inc.
3
<PAGE> 8
THE FUNDS
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TABLE OF FEES AND EXPENSES
The following table is designed to help an investor in the Funds understand
the various costs that an investor will bear, both directly and indirectly.
Except where noted, the fees and expenses set forth in the table are based on
the expenses of the Funds for the most recent fiscal year. The fees and expenses
for Class C shares set forth in the table below are based on estimated average
net assets of Class C shares of each Fund for the first period of operation. The
rules of the SEC require that the maximum sales charge be reflected in the table
even though certain investors may qualify for reduced sales charges. See "How to
Purchase Shares."
<TABLE>
<CAPTION>
AIM
AIM GLOBAL AIM AIM AIM
BALANCED UTILITIES GROWTH HIGH YIELD INCOM
FUND FUND FUND FUND FUND
--------------------- --------------------- --------------------- --------------------- -----
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B C A B C A B C A B C A
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum sales load
imposed on purchase
of shares (as a % of
the offering
price)............... 4.75% None None 5.50% None None 5.50% None None 4.75% None None 4.75%
Maximum sales load on
reinvested
dividends............ None None None None None None None None None None None None None
Deferred sales load (as
a % of
original purchase
price or
redemption proceeds,
whichever is
lower)............... None* 5.0% 1.0% None* 5.0% 1.0% None* 5.0% 1.0% None* 5.0% 1.0% None*
Redemption fees........ None None None None None None None None None None None None None
Exchange fee........... None None None None None None None None None None None None None
Annual Fund Operating
Expenses
(as a % of average net
assets)
Management fees........ 0.61% 0.61% 0.61% 0.58% 0.58% 0.58% 0.69% 0.69% 0.69% 0.50% 0.50% 0.50% 0.46%
Rule 12b-1 distribution
plan payments........ 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25%
All other expenses..... 0.29% 0.36% 0.36% 0.34% 0.38% 0.38% 0.24% 0.34% 0.34% 0.22% 0.18% 0.18% 0.27%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total fund
operating
expenses....... 1.15% 1.97% 1.97% 1.17% 1.96% 1.96% 1.18% 2.03% 2.03% 0.97% 1.68% 1.68% 0.98%
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
AIM
INCOME
FUND
-------------
CLASS CLASS
B C
----- -----
<S> <C> <C>
Shareholder Transaction
Expenses
Maximum sales load
imposed on purchase
of shares (as a % of
the offering
price)............... None None
Maximum sales load on
reinvested
dividends............ None None
Deferred sales load (as
a % of
original purchase
price or
redemption proceeds,
whichever is
lower)............... 5.0% 1.0%
Redemption fees........ None None
Exchange fee........... None None
Annual Fund Operating
Expenses
(as a % of average net
assets)
Management fees........ 0.46% 0.46%
Rule 12b-1 distribution
plan payments........ 1.00% 1.00%
All other expenses..... 0.34% 0.34%
---- ----
Total fund
operating
expenses....... 1.80% 1.80%
==== ====
</TABLE>
<TABLE>
<CAPTION>
AIM
AIM MONEY
INTERMEDIATE MARKET FUND AIM AIM
GOVERNMENT ------------------------------- MUNICIPAL VALUE
FUND AIM BOND FUND FUND
--------------------- CASH --------------------- -----
CLASS CLASS CLASS CLASS CLASS CLASS RESERVE CLASS CLASS CLASS CLASS
A B C A B C SHARES A B C A
----- ----- ----- ----- ----- ----- ------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on
purchase of shares (as a % of the
offering price)................... 4.75% None None 5.50% None None None 4.75% None None 5.50%
Maximum sales load on reinvested
dividends......................... None None None None None None None None None None None
Deferred sales load (as a % of
original purchase price or
redemption proceeds, whichever is
lower)............................ None* 5.0% 1.0% None* 5.0% 1.0% None None* 5.0% 1.0% None*
Redemption fees..................... None None None None None None None None None None None
Exchange fee........................ None None None None None None None None None None None
Annual Fund Operating Expenses (as a %
of average net assets)
Management fees (after fee
waivers).......................... 0.48% 0.48% 0.48% 0.55% 0.55% 0.55% 0.55% 0.47% 0.47% 0.47% 0.61%(1)
Rule 12b-1 distribution plan
payments.......................... 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25% 0.25% 1.00% 1.00% 0.25%
All other expenses.................. 0.27% 0.28% 0.28% 0.27% 0.26% 0.26% 0.28% 0.08% 0.14% 0.14% 0.25%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total fund operating
expenses.................... 1.00% 1.76% 1.76% 1.07% 1.81% 1.81% 1.08% 0.80% 1.61% 1.61% 1.11%
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
AIM
VALUE
FUND
---------------
CLASS CLASS
B C
----- -----
<S> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on
purchase of shares (as a % of the
offering price)................... None None
Maximum sales load on reinvested
dividends......................... None None
Deferred sales load (as a % of
original purchase price or
redemption proceeds, whichever is
lower)............................ 5.0% 1.0%
Redemption fees..................... None None
Exchange fee........................ None None
Annual Fund Operating Expenses (as a %
of average net assets)
Management fees (after fee
waivers).......................... 0.61%(1) 0.61%(1)
Rule 12b-1 distribution plan
payments.......................... 1.00% 1.00%
All other expenses.................. 0.33% 0.33%
---- ----
Total fund operating
expenses.................... 1.94% 1.94%
==== ====
</TABLE>
- ------------------------
(1) After fee waivers. If management fees were not being waived, they would be
0.63% on all classes of AIM VALUE FUND.
* Purchases of $1 million or more are not subject to an initial sales charge.
However, a contingent deferred sales charge of 1% applies to certain
redemptions made within 18 months from the date such shares were purchased.
See the Investor's Guide, under the caption "How to Redeem Shares --
Contingent Deferred Sales Charge Program for Large Purchases."
4
<PAGE> 9
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EXAMPLES. You would pay the following expenses on a $1,000 investment in Class
A shares of the Funds, assuming (1) a 5% annual return and (2) redemption at the
end of each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ------ ---- ------ ------------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year.................. $59 $66 $66 $57 $57 $57 $65 $55 $66
3 years................. 82 90 90 77 77 78 87 72 88
5 years................. 108 116 116 99 99 100 111 90 113
10 years................ 181 189 190 161 162 164 178 142 183
</TABLE>
The above examples assume payment of a sales charge at the time of purchase;
actual expenses may vary for purchases of $1 million or more, which are made at
net asset value and are subject to a contingent deferred sales charge for 18
months from the date such shares were purchased.
You would pay the following expenses on a $1,000 investment in Class B shares
of the Funds, assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ------ ---- ------ ------------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year.................. $70 $70 $71 $67 $68 $68 $68 $66 $70
3 years................. 92 92 94 83 87 85 87 81 91
5 years................. 126 126 129 111 117 115 118 108 125
10 years*............... 208 208 214 180 190 187 193 169 205
</TABLE>
You would pay the following expenses on the same $1,000 investment in Class B
shares, assuming no redemption at the end of each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ------ ---- ------ ------------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year.................. $20 $20 $21 $17 $18 $18 $18 $16 $20
3 years................. 62 62 64 53 57 55 57 51 61
5 years................. 106 106 109 91 97 95 98 88 105
10 years*............... 208 208 214 180 190 187 193 169 205
</TABLE>
You would pay the following expenses on a $1,000 investment in Class C shares
of the Funds, assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ------ ---- ------ ------------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year.................. $30 $30 $31 $27 $28 $28 $28 $26 $30
3 years................. 62 62 64 53 57 55 57 51 61
</TABLE>
You would pay the following expenses on the same $1,000 investment in Class C
shares, assuming no redemption at the end of each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ------ ---- ------ ------------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year.................. $20 $20 $21 $17 $18 $18 $18 $16 $20
3 years................. 62 62 64 53 57 55 57 51 61
</TABLE>
- ---------------
* Reflects the conversion to Class A shares eight years following the end of the
calendar month in which a purchase was made; therefore years nine and ten
reflect Class A expenses.
You would pay the following expenses on a $1,000 investment in AIM Cash
Reserve Shares of AIM MONEY MARKET FUND, assuming (1) a 5% annual return and (2)
redemption at the end of each time period:
<TABLE>
<CAPTION>
AIM
MONEY
MARKET
FUND
------
<S> <C>
1 year................................. $11
3 years................................ 34
5 years................................ 60
10 years............................... 132
</TABLE>
5
<PAGE> 10
- --------------------------------------------------------------------------------
As a result of 12b-1 distribution plan payments, a long-term shareholder of
the Funds may pay more than the economic equivalent of the maximum front-end
sales charges permitted by rules of the National Association of Securities
Dealers, Inc. Given the maximum front-end and contingent deferred sales charges
and the 12b-1 distribution plan payments applicable to Class A shares, Class B
shares and Class C shares of the Funds, it is estimated that it would require a
substantial number of years to exceed the maximum permissible front-end sales
charges.
The above examples should not be considered to be representative of the Funds'
actual or future expenses, which may be greater or less than those shown. In
addition, while the examples assume a 5% annual return, each Fund's actual
performance will vary and may result in an actual return that is greater or less
than 5%. The examples assume reinvestment of all dividends and distributions
and that the percentage amounts for total fund operating expenses remain the
same for each year.
6
<PAGE> 11
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following per share data, ratios and supplemental data for the Class A
shares of AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM
HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
MUNICIPAL BOND FUND and AIM VALUE FUND for (i) all periods presented for AIM
BALANCED FUND and (ii) the years ended December 31, 1996, 1995, 1994 and 1993
for the Funds other than AIM BALANCED FUND have been audited by KPMG Peat
Marwick LLP, independent auditors, whose reports thereon were unqualified. The
per share data, ratios and supplemental data for the Class A shares of AIM
GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND, AIM INCOME FUND,
AIM INTERMEDIATE GOVERNMENT FUND, AIM MUNICIPAL BOND FUND and AIM VALUE FUND for
each of the periods presented other than those described above have been derived
from financial statements audited by Price Waterhouse LLP, independent
accountants, whose reports thereon were also unqualified. This information
should be read in conjunction with the Funds' financial statements included in
the Statement of Additional Information. Class C shares of the Funds commenced
operations on August 4, 1997. The investment advisor to the above-named Funds,
other than AIM BALANCED FUND, changed on June 30, 1992.+
(PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
AIM BALANCED FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 1,
DECEMBER 31, 1993 TO YEAR ENDED AUGUST 31,
---------------------------------- DECEMBER 31, -----------------------------
1996 1995 1994 1993 1993 1992 1991
-------- ------- ------- ------------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 19.22 $ 14.62 $ 16.10 $ 15.97 $ 12.77 $ 12.04 $ 9.73
Income from investment operations:
Net investment income.................. 0.66 0.49 0.44 0.10 0.32 0.29 0.28
Net gains or losses on securities (both
realized and unrealized)............... 2.99 4.57 (1.31) 0.18 3.18 0.74 2.33
-------- ------- ------- -------- ------- -------- --------
Total from investment operations....... 3.65 5.06 (0.87) 0.28 3.50 1.03 2.61
-------- ------- ------- -------- ------- -------- --------
Less distributions:
Dividends from net investment income... (0.55) (0.46) (0.39) (0.15) (0.30) (0.30) (0.30)
Distributions from net realized capital
gains................................ (0.48) -- (0.22) -- -- -- --
-------- ------- ------- -------- ------- -------- --------
Total distributions.................... (1.03) (0.46) (0.61) (0.15) (0.30) (0.30) (0.30)
-------- ------- ------- -------- ------- -------- --------
Net asset value, end of period.......... $ 21.84 $ 19.22 $ 14.62 $ 16.10 $ 15.97 $ 12.77 $ 12.04
======== ======= ======= ======== ======= ======== ========
Total return(a)......................... 19.25% 34.97% (5.44)% 1.76% 27.75% 8.66% 27.41%
======== ======= ======= ======== ======= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $334,189 $92,241 $37,572 $ 23,520 $19,497 $ 11,796 $ 11,750
======== ======= ======= ======== ======= ======== ========
Ratio of expenses to average net
assets............................... 1.15%(b)(c) 1.43%(d) 1.25%(e) 2.17%(f) 2.07% 2.12% 2.39%
======== ======= ======= ======== ======= ======== ========
Ratio of net investment income to
average net assets..................... 2.97%(b) 2.81%(d) 3.07%(e) 1.81%(f) 2.23% 2.32% 2.74%
======== ======= ======= ======== ======= ======== ========
Portfolio turnover rate................ 72% 77% 76% 233% 154% 166% 208%
======== ======= ======= ======== ======= ======== ========
Average broker commission rate(g)...... $ 0.0558 N/A N/A N/A N/A N/A N/A
======== ======= ======= ======== ======= ======== ========
Borrowings for the period:
Amount of debt outstanding at end of
period............................... -- -- -- -- -- -- --
Average amount of debt outstanding
during the period(h)................. -- -- -- -- -- -- --
Average number of shares outstanding
during the period (000s
omitted)(h).......................... 9,778 3,173 2,061 1,305 1,046 939 1,051
Average amount of debt per share during
the period........................... -- -- -- -- -- -- --
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------
1990 1989 1988
-------- -------- -------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 10.67 $ 9.08 $ 11.89
Income from investment operations:
Net investment income.................. 0.32 0.39 0.42
Net gains or losses on securities (both
realized and unrealized)............... (0.91) 1.63 (2.65)
-------- -------- -------
Total from investment operations....... (0.59) 2.02 (2.23)
-------- -------- -------
Less distributions:
Dividends from net investment income... (0.35) (0.43) (0.50)
Distributions from net realized capital
gains................................ -- -- (0.08)
-------- -------- -------
Total distributions.................... (0.35) (0.43) (0.58)
-------- -------- -------
Net asset value, end of period.......... $ 9.73 $ 10.67 $ 9.08
======== ======== =======
Total return(a)......................... (5.67)% 22.96% (18.57)%
======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $ 10,965 $ 14,405 $16,789
======== ======== =======
Ratio of expenses to average net
assets............................... 2.15% 1.94% 2.31%
======== ======== =======
Ratio of net investment income to
average net assets..................... 3.18% 3.99% 4.50%
======== ======== =======
Portfolio turnover rate................ 307% 149% 118%
======== ======== =======
Average broker commission rate(g)...... N/A N/A N/A
======== ======== =======
Borrowings for the period:
Amount of debt outstanding at end of
period............................... -- $260,000 --
Average amount of debt outstanding
during the period(h)................. $138,181 $ 83,195 --
Average number of shares outstanding
during the period (000s
omitted)(h).......................... 1,238 1,589 2,131
Average amount of debt per share during
the period........................... $ 0.110 $ 0.052 --
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges and are not annualized for periods
of less than one year.
(b) Ratios are based on average daily net assets of $205,275,849.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have remained the same.
(d) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees are 1.46% and 2.78%,
respectively.
(e) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees are 1.68% and 2.64%,
respectively.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
(h) Averages computed on a daily basis.
7
<PAGE> 12
AIM GLOBAL UTILITIES FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 14.59 $ 11.85 $ 14.09 $ 13.31 $ 13.75
Income from investment operations:
Net investment income...................... 0.55 0.55 0.59 0.60 0.67
Net gains or losses on securities (both
realized and unrealized)................. 1.43 2.71 (2.20) 1.02 0.36
-------- -------- -------- -------- --------
Total from investment operations........... 1.98 3.26 (1.61) 1.62 1.03
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income....... (0.56) (0.52) (0.60) (0.61) (0.68)
Distributions from net realized capital
gains.................................... -- -- -- (0.23) (0.79)
Returns of capital......................... -- -- (0.03) -- --
-------- -------- -------- -------- --------
Total distributions........................ (0.56) (0.52) (0.63) (0.84) (1.47)
-------- -------- -------- -------- --------
Net asset value, end of period.............. $ 16.01 $ 14.59 $ 11.85 $ 14.09 $ 13.31
======== ======== ======== ======== ========
Total return(a)............................. 13.88% 28.07% (11.57)% 12.32% 7.92%
======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted)... $164,001 $170,624 $150,515 $200,016 $111,771
======== ======== ======== ======== ========
Ratio of expenses to average net assets.... 1.17%(b)(c) 1.21% 1.18% 1.16% 1.17%
======== ======== ======== ======== ========
Ratio of net investment income to average
net assets............................... 3.62%(b) 4.20% 4.67% 4.21% 4.96%
======== ======== ======== ======== ========
Portfolio turnover rate.................... 48% 88% 101% 76% 148%
======== ======== ======== ======== ========
Average broker commission rate(g).......... $ 0.0460 N/A N/A N/A N/A
======== ======== ======== ======== ========
<CAPTION>
JANUARY 18, 1988*
YEAR ENDED DECEMBER 31, TO
-------------------------------- DECEMBER 31,
1991 1990 1989 1988
-------- -------- -------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 12.45 $ 13.73 $ 10.99 $ 10.00
Income from investment operations:
Net investment income...................... 0.70 0.66 0.77 0.82
Net gains or losses on securities (both
realized and unrealized)................. 2.12 (1.10) 3.06 0.83
------- ------- ------- ------
Total from investment operations........... 2.82 (0.44) 3.83 1.65
------- ------- ------- ------
Less distributions:
Dividends from net investment income....... (0.66) (0.70) (0.69) (0.66)
Distributions from net realized capital
gains.................................... (0.86) (0.14) (0.40) --
Returns of capital......................... -- -- -- --
------- ------- ------- ------
Total distributions........................ (1.52) (0.84) (1.09) (0.66)
------- ------- ------- ------
Net asset value, end of period.............. $ 13.75 $ 12.45 $ 13.73 $ 10.99
======= ======= ======= ======
Total return(a)............................. 23.65% (2.98)% 36.11% 17.03%
======= ======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted)... $91,939 $69,541 $58,307 $20,104
======= ======= ======= ======
Ratio of expenses to average net assets.... 1.23% 1.21%(d) 1.05%(d) 1.22%(d)(f)
======= ======= ======= ======
Ratio of net investment income to average
net assets............................... 5.36% 5.21%(e) 6.13%(e) 7.63%(e)(f)
======= ======= ======= ======
Portfolio turnover rate.................... 169% 123% 115% 87%
======= ======= ======= ======
Average broker commission rate(g).......... N/A N/A N/A N/A
======= ======= ======= ======
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges and are not annualized for periods
of less than one year.
(b) Ratios are based on average daily net assets of $163,634,721.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22%, 1.11% and 1.69% (annualized) for 1990-1988, respectively.
(e) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 5.20%, 6.07% and 7.16% (annualized) for 1990-1988,
respectively.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
AIM GROWTH FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 13.05 $ 10.32 $ 11.32 $ 12.28 $ 14.73 $ 12.35 $ 13.92
Income from investment operations:
Net investment income................. 0.07 0.02 -- -- 0.06 0.11 0.21
Net gains or losses on securities
(both realized and unrealized)...... 2.34 3.50 (0.57) 0.41 (0.04) 4.33 (0.91)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations...... 2.41 3.52 (0.57) 0.41 0.02 4.44 (0.70)
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income.............................. -- -- -- -- (0.06) (0.13) (0.20)
Distributions from net realized
capital gains....................... (0.68) (0.79) (0.43) (1.37) (2.41) (1.93) (0.67)
-------- -------- -------- -------- -------- -------- --------
Total distributions................... (0.68) (0.79) (0.43) (1.37) (2.47) (2.06) (0.87)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period......... $ 14.78 $ 13.05 $ 10.32 $ 11.32 $ 12.28 $ 14.73 $ 12.35
======== ======== ======== ======== ======== ======== ========
Total return(a)........................ 18.61% 34.31% (4.99)% 3.64% 0.19% 37.05% (5.04)%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $227,882 $168,217 $123,271 $146,723 $168,395 $185,461 $153,245
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets.............................. 1.18%(b)(c) 1.28% 1.22% 1.17% 1.17% 1.21% 1.16%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets.................. 0.46%(b) 0.20% 0.02% 0.02% 0.42% 0.73% 1.41%
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate............... 97% 87% 201% 192% 133% 73% 61%
======== ======== ======== ======== ======== ======== ========
Average broker commission rate(d)..... $ 0.0621 N/A N/A N/A N/A N/A N/A
======== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period... $ 11.93 $ 11.04 $ 12.91
Income from investment operations:
Net investment income................. 0.25 0.23 0.24
Net gains or losses on securities
(both realized and unrealized)...... 3.16 0.89 0.30
-------- -------- --------
Total from investment operations...... 3.41 1.12 0.54
-------- -------- --------
Less distributions:
Dividends from net investment
income.............................. (0.27) (0.23) (0.31)
Distributions from net realized
capital gains....................... (1.15) -- (2.10)
-------- -------- --------
Total distributions................... (1.42) (0.23) (2.41)
-------- -------- --------
Net asset value, end of period......... $ 13.92 $ 11.93 $ 11.04
======== ======== ========
Total return(a)........................ 28.87% 10.13% 3.62%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $187,805 $180,793 $203,329
======== ======== ========
Ratio of expenses to average net
assets.............................. 1.00% 0.98% 0.84%
======== ======== ========
Ratio of net investment income to
average net assets.................. 1.62% 1.73% 1.51%
======== ======== ========
Portfolio turnover rate............... 53% 38% 78%
======== ======== ========
Average broker commission rate(d)..... N/A N/A N/A
======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $204,456,793.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
8
<PAGE> 13
AIM HIGH YIELD FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07 $ 8.94
Income from investment operations:
Net investment income.................. 0.92 0.93 0.96 0.97 1.04 1.02 1.09
Net gains or losses on securities (both
realized and unrealized)............. 0.46 0.52 (1.12) 0.69 0.55 1.81 (1.84)
---------- -------- -------- -------- -------- -------- --------
Total from investment operations....... 1.38 1.45 (0.16) 1.66 1.59 2.83 (0.75)
---------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.93) (0.95) (0.96) (1.01) (1.05) (1.04) (1.12)
---------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 9.88 $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07
========== ======== ======== ======== ======== ======== ========
Total return(a)......................... 15.44% 16.86% (1.67)% 18.40% 18.60% 42.18% (9.03)%
========== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $1,272,974 $886,106 $578,959 $550,760 $324,518 $259,677 $204,932
========== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 0.97%(b)(c) 0.96% 1.00% 1.12% 1.15% 1.22% 1.21%(d)
========== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 9.67%(b) 9.95% 10.07% 9.82% 11.00% 12.67% 13.59%(e)
========== ======== ======== ======== ======== ======== ========
Portfolio turnover rate................ 77% 61% 53% 53% 56% 61% 27%
========== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 10.01 $ 9.67 $ 10.54
Income from investment operations:
Net investment income.................. 1.21 1.18 1.16
Net gains or losses on securities (both
realized and unrealized)............. (1.07) 0.34 (0.83)
-------- -------- --------
Total from investment operations....... 0.14 1.52 0.33
-------- -------- --------
Less distributions:
Dividends from net investment income... (1.21) (1.18) (1.20)
-------- -------- --------
Net asset value, end of period.......... $ 8.94 $ 10.01 $ 9.67
======== ======== ========
Total return(a)......................... 1.18% 16.41% 3.07%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $261,920 $274,631 $242,858
======== ======== ========
Ratio of expenses to average net
assets............................... 0.99% 0.96%(d) 0.92%
======== ======== ========
Ratio of net investment income to
average net assets................... 12.40% 11.84%(e) 11.21%
======== ======== ========
Portfolio turnover rate................ 36% 76% 81%
======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $1,052,462,336.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22% and 1.00% for 1990 and 1988, respectively.
(e) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 13.58% and 11.80% for 1990 and 1988, respectively.
AIM INCOME FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41 $ 7.80
Income from investment operations:
Net investment income.................. 0.57 0.58 0.58 0.60 0.60 0.61 0.65
Net gains or losses on securities (both
realized and unrealized)............. 0.09 1.00 (1.22) 0.61 (0.03) 0.66 (0.39)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations....... 0.66 1.58 (0.64) 1.21 0.57 1.27 0.26
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.59) (0.61) (0.49) (0.60) (0.61) (0.61) (0.65)
Distributions from net realized capital
gains................................ -- -- (0.01) (0.19) -- -- --
Returns of capital..................... -- -- (0.11) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions.................... (0.59) (0.61) (0.61) (0.79) (0.61) (0.61) (0.65)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 8.24 $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41
======== ======== ======== ======== ======== ======== ========
Total return(a)......................... 8.58% 22.77% (7.65)% 15.38% 7.42% 18.00% 3.65%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $286,183 $251,280 $201,677 $244,168 $218,848 $231,798 $215,987
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 0.98%(b)(c) 0.98% 0.98% 0.98% 0.99%(d) 1.00%(d) 1.00%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 7.13%(b) 7.52% 7.53% 7.01% 7.54%(d) 7.97%(d) 8.73%
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate................ 80% 227% 185% 99% 82% 67% 106%
======== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 7.53 $ 7.55 $ 8.20
Income from investment operations:
Net investment income.................. 0.66 0.68 0.67
Net gains or losses on securities (both
realized and unrealized)............. 0.32 (0.02) (0.63)
-------- -------- --------
Total from investment operations....... 0.98 0.66 0.04
-------- -------- --------
Less distributions:
Dividends from net investment income... (0.71) (0.68) (0.69)
Distributions from net realized capital
gains................................ -- -- --
Returns of capital..................... -- -- --
-------- -------- --------
Total distributions.................... (0.71) (0.68) (0.69)
-------- -------- --------
Net asset value, end of period.......... $ 7.80 $ 7.53 $ 7.55
======== ======== ========
Total return(a)......................... 13.56% 9.01% 0.56%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $229,222 $218,946 $237,466
======== ======== ========
Ratio of expenses to average net
assets............................... 0.96% 0.95% 0.84%
======== ======== ========
Ratio of net investment income to
average net assets................... 8.56% 8.81% 8.64%
======== ======== ========
Portfolio turnover rate................ 222% 361% 195%
======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $262,501,383.
(c) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average daily net assets would have been 0.97%.
(d) After waiver of advisory fees and expense reimbursements. Ratios of expenses
to average net assets prior to waiver of advisory fees and expense
reimbursements were 1.00% and 1.03% for 1992 and 1991, respectively. Ratios
of net investment income to average net assets prior to waiver of advisory
fees and expense reimbursements were 7.53% and 7.94% for 1992 and 1991,
respectively.
9
<PAGE> 14
AIM INTERMEDIATE GOVERNMENT FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 9.70 $ 8.99 $ 10.05 $ 10.19 $ 10.34 $ 9.95
Income from investment operations:
Net investment income................ 0.63 0.69 0.68 0.74 0.77 0.82
Net gains or losses on securities
(both realized and unrealized)..... (0.42) 0.73 (1.02) (0.04) (0.15) 0.41
-------- -------- -------- -------- -------- --------
Total from investment operations..... 0.21 1.42 (0.34) 0.70 0.62 1.23
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................. (0.59) (0.67) (0.58) (0.70) (0.74) (0.84)
Distributions from net realized
capital gains...................... -- -- (0.04) (0.14) (0.03) --
Returns of capital................... (0.04) (0.04) (0.10) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions.................. (0.63) (0.71) (0.72) (0.84) (0.77) (0.84)
-------- -------- -------- -------- -------- --------
Net asset value, end of period........ $ 9.28 $ 9.70 $ 8.99 $ 10.05 $ 10.19 $ 10.34
======== ======== ======== ======== ======== ========
Total return(a)....................... 2.35% 16.28% (3.44)% 7.07% 6.26% 12.98%
======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)..................... $174,344 $176,318 $158,341 $139,586 $123,484 $101,409
======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets (exclusive of interest
expense)(b)........................ 1.00%(c)(d) 1.08% 1.04% 1.00% 0.98% 1.00%
======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets(e).............. 6.76%(c) 7.36% 7.34% 7.08% 7.53% 8.15%
======== ======== ======== ======== ======== ========
Portfolio turnover rate.............. 134% 140% 109% 110% 42% 26%
======== ======== ======== ======== ======== ========
<CAPTION>
APRIL 28,
1987*
YEAR ENDED DECEMBER 31, TO
---------------------------- DECEMBER 31,
1990 1989 1988 1987
-------- ------- ------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 9.91 $ 9.70 $ 9.92 $ 10.00
Income from investment operations:
Net investment income................ 0.87 0.90 0.89 0.55
Net gains or losses on securities
(both realized and unrealized)..... 0.01 0.15 (0.27) (0.14)
-------- ------- ------- -------
Total from investment operations..... 0.88 1.05 0.62 0.41
-------- ------- ------- -------
Less distributions:
Dividends from net investment
income............................. (0.84) (0.84) (0.84) (0.49)
Distributions from net realized
capital gains...................... -- -- -- --
Returns of capital................... -- -- -- --
-------- ------- ------- -------
Total distributions.................. (0.84) (0.84) (0.84) (0.49)
-------- ------- ------- -------
Net asset value, end of period........ $ 9.95 $ 9.91 $ 9.70 $ 9.92
======== ======= ======= =======
Total return(a)....................... 9.39% 11.28% 6.43% 4.18%
======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period
(000s omitted)..................... $ 61,463 $57,077 $48,372 $28,052
======== ======= ======= =======
Ratio of expenses to average net
assets (exclusive of interest
expense)(b)........................ 1.00% 1.00% 1.00% 1.20%(f)
======== ======= ======= =======
Ratio of net investment income to
average net assets(e).............. 8.85% 9.10% 9.11% 8.64%(f)
======== ======= ======= =======
Portfolio turnover rate.............. 16% 15% 15% 35%
======== ======= ======= =======
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges and are not annualized for periods
of less than one year.
(b) Ratios of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement were 1.05%, 1.04%, 1.04%, 1.10%, 1.13%, 1.08% and
1.08% for 1994-1988, respectively.
(c) Ratios are based on average net assets of $175,038,605.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) Ratios of net investment income to average net assets prior to reduction of
advisory fee and expense reimbursement were 7.32%, 7.04%, 7.48%, 8.05%,
8.72%, 9.03% and 9.03% for 1994-1988, respectively.
(f) Annualized.
AIM MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 8.31 $ 7.78 $ 8.61 $ 8.27 $ 8.13 $ 7.66 $ 7.81
Income from investment operations:
Net investment income.................. 0.43 0.43 0.46 0.48 0.51 0.52 0.53
Net gains or losses on securities (both
realized and unrealized)............. (0.12) 0.56 (0.78) 0.46 0.21 0.46 (0.14)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations....... 0.31 0.99 (0.32) 0.94 0.72 0.98 0.39
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.43) (0.43) (0.45) (0.48) (0.51) (0.51) (0.53)
Distributions from net realized capital
gains................................ -- -- (0.03) (0.11) (0.07) -- --
Returns of capital..................... -- (0.03) (0.03) (0.01) -- -- (0.01)
-------- -------- -------- -------- -------- -------- --------
Total distributions.................... (0.43) (0.46) (0.51) (0.60) (0.58) (0.51) (0.54)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 8.19 $ 8.31 $ 7.78 $ 8.61 $ 8.27 $ 8.13 $ 7.66
======== ======== ======== ======== ======== ======== ========
Total return(a)......................... 3.90% 13.05% (3.79)% 11.66% 9.10% 13.30% 5.27%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $278,812 $284,803 $257,456 $294,209 $271,205 $273,037 $258,194
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 0.80%(b)(c) 0.88% 0.89% 0.91% 0.90% 0.94% 0.91%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 5.29%(b) 5.26% 5.61% 5.65% 6.15% 6.58% 6.91%
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate................ 26% 36% 43% 24% 160% 289% 230%
======== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 7.64 $ 7.32 $ 8.41
Income from investment operations:
Net investment income.................. 0.54 0.53 0.51
Net gains or losses on securities (both
realized and unrealized)............. 0.18 0.34 (0.65)
-------- -------- --------
Total from investment operations....... 0.72 0.87 (0.14)
-------- -------- --------
Less distributions:
Dividends from net investment income... (0.55) (0.55) (0.49)
Distributions from net realized capital
gains................................ -- -- (0.46)
Returns of capital..................... -- -- --
-------- -------- --------
Total distributions.................... (0.55) (0.55) (0.95)
-------- -------- --------
Net asset value, end of period.......... $ 7.81 $ 7.64 $ 7.32
======== ======== ========
Total return(a)......................... 9.70% 12.33% (1.88)%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $262,997 $243,480 $237,225
======== ======== ========
Ratio of expenses to average net
assets............................... 0.89% 0.87% 0.80%
======== ======== ========
Ratio of net investment income to
average net assets................... 6.97% 7.11% 6.71%
======== ======== ========
Portfolio turnover rate................ 305% 381% 392%
======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $276,724,764.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
10
<PAGE> 15
AIM VALUE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 26.81 $ 21.14 $ 20.82 $ 18.24 $ 17.55 $ 13.75 $ 14.53
Income from investment operations:
Net investment income.................. 0.43(a) 0.14 0.16 0.04 0.12 0.13 0.26
Net gains on securities
(both realized and
unrealized).......................... 3.42 7.21 0.52 3.34 2.68 5.73 0.01
---------- ---------- ---------- -------- -------- -------- --------
Total from investment operations....... 3.85 7.35 0.68 3.38 2.80 5.86 0.27
---------- ---------- ---------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.41) (0.09) (0.16) (0.03) (0.12) (0.14) (0.26)
Distributions from net realized capital
gains................................ (1.10) (1.59) (0.20) (0.77) (1.99) (1.92) (0.79)
---------- ---------- ---------- -------- -------- -------- --------
Total distributions.................... (1.51) (1.68) (0.36) (0.80) (2.11) (2.06) (1.05)
---------- ---------- ---------- -------- -------- -------- --------
Net asset value, end
of period.............................. $ 29.15 $ 26.81 $ 21.14 $ 20.82 $ 18.24 $ 17.55 $ 13.75
========== ========== ========== ======== ======== ======== ========
Total return(b)......................... 14.52% 34.85% 3.28% 18.71% 16.39% 43.45% 1.88%
========== ========== ========== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $5,100,061 $3,408,952 $1,358,725 $765,305 $239,663 $152,149 $ 86,565
========== ========== ========== ======== ======== ======== ========
Ratio of expenses to average net
assets(c)............................ 1.11%(d)(e) 1.12% 0.98% 1.09% 1.16% 1.22% 1.21%
========== ========== ========== ======== ======== ======== ========
Ratio of net investment income to
average net assets(f)................ 1.65%(d) 0.74% 0.92% 0.30% 0.75% 0.89% 1.87%
========== ========== ========== ======== ======== ======== ========
Portfolio turnover rate................ 126% 151% 127% 177% 170% 135% 131%
========== ========== ========== ======== ======== ======== ========
Average broker commission rate(g)...... $ 0.0436 N/A N/A N/A N/A N/A N/A
========== ========== ========== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 12.79 $ 11.47 $ 12.26
Income from investment operations:
Net investment income.................. 0.40 0.26 0.25
Net gains on securities
(both realized and
unrealized).......................... 3.58 2.07 0.53
-------- -------- --------
Total from investment operations....... 3.98 2.33 0.78
-------- -------- --------
Less distributions:
Dividends from net investment income... (0.43) (0.26) (0.39)
Distributions from net realized capital
gains................................ (1.81) (0.75) (1.18)
-------- -------- --------
Total distributions.................... (2.24) (1.01) (1.57)
-------- -------- --------
Net asset value, end
of period.............................. $ 14.53 $ 12.79 $ 11.47
======== ======== ========
Total return(b)......................... 31.54% 20.61% 5.96%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $ 76,444 $ 60,076 $ 55,527
======== ======== ========
Ratio of expenses to average net
assets(c)............................ 1.00% 1.00% 1.00%
======== ======== ========
Ratio of net investment income to
average net assets(f)................ 2.65% 1.98% 1.91%
======== ======== ========
Portfolio turnover rate................ 152% 124% 219%
======== ======== ========
Average broker commission rate(g)...... N/A N/A N/A
======== ======== ========
</TABLE>
- ---------------
(a) Calculated using average shares outstanding.
(b) Total returns do not deduct sales charges.
(c) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.13%, 1.13%, 1.23%, 1.09% and 1.08% for 1996, 1995, 1990-1988,
respectively.
(d) Ratios are based on average net assets of $4,296,112,779.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(f) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 1.63%, 0.73%, 1.85%, 2.56% and 1.90% for 1996, 1995,
1990-1988, respectively.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
+ Each of the Funds is a separate series of shares of AIM Funds Group, a
Delaware business trust established May 5, 1993 (the "Trust"). The
shareholders of the applicable Funds separately approved a plan of
reorganization pursuant to which, effective October 15, 1993, each of the
predecessor funds to AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM HIGH
YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
MUNICIPAL BOND FUND and AIM VALUE FUND, organized as separate series
portfolios of AIM Funds Group, a Massachusetts business trust ("AFG(MA)"),
and to AIM BALANCED FUND, organized as AIM Convertible Securities, Inc., a
Maryland corporation, was reorganized as a separate series portfolio of the
Trust. AIM Convertible Securities, Inc. had investment objectives and
policies that differed from those of AIM BALANCED FUND. Certain information
reported in these statements pertains to such Funds as separate series
portfolios of AFG(MA) and as a corporation, as applicable, rather than
separate series of the Trust.
* Commencement of operations.
11
<PAGE> 16
The following per share data, ratios and supplemental data for the Class B
shares of AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM
HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
MUNICIPAL BOND FUND and AIM VALUE FUND for the periods indicated have been
audited by KPMG Peat Marwick LLP, independent auditors, whose reports thereon
were unqualified. This information should be read in conjunction with the Funds'
financial statements included in the Statement of Additional Information.
AIM BALANCED FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, OCTOBER 18, 1993*
------------------------------------ TO
1996 1995 1994 DECEMBER 31, 1993
-------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 19.22 $ 14.62 $ 16.11 $16.69
Income from investment operations:
Net investment income....................... 0.48 0.31 0.31 0.04
Net gains (losses) on securities (both
realized and unrealized)................. 2.99 4.61 (1.31) (0.58)
-------- ------- ------- -------
Total from investment operations............ 3.47 4.92 (1.00) (0.54)
-------- ------- ------- -------
Less distributions:
Dividends from net investment income........ (0.38) (0.32) (0.27) (0.04)
Distributions from net realized capital
gains.................................... (0.48) -- (0.22) --
-------- ------- ------- -------
Total distributions......................... (0.86) (0.32) (0.49) (0.04)
-------- ------- ------- -------
Net asset value, end of period................ $ 21.83 $ 19.22 $ 14.62 $16.11
======== ======= ======= =======
Total return(a)............................... 18.28% 33.93% (6.23)% (3.23)%
======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted).... $237,082 $72,634 $20,245 $2,754
======== ======= ======= =======
Ratio of expenses to average net assets..... 1.97%(b)(c) 2.21%(d) 1.98%(e) 2.83%(f)
======== ======= ======= =======
Ratio of net investment income to average
net assets............................... 2.15%(b) 2.03%(d) 2.34%(e) 1.15%(f)
======== ======= ======= =======
Portfolio turnover rate..................... 72% 77% 76% 233%
======== ======= ======= =======
Average broker commission rate(g)........... $ 0.0558 N/A N/A N/A
======== ======= ======= =======
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $149,660,567.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees are 2.23% and 2.01%,
respectively.
(e) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees are 2.45% and 1.87%,
respectively.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
12
<PAGE> 17
AIM GLOBAL UTILITIES FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
SEPTEMBER 1,
1993*
YEAR ENDED DECEMBER 31, TO
--------------------------------- DECEMBER 31,
1996 1995 1994 1993
------- ------- ------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 14.60 $ 11.84 $ 14.08 $ 15.30
Income from investment operations:
Net investment income........................ 0.42 0.44 0.47 0.17
Net gains (losses) on securities (both
realized and unrealized).................. 1.44 2.73 (2.19) (0.98)
------- ------- ------- -------
Total from investment operations............. 1.86 3.17 (1.72) (0.81)
------- ------- ------- -------
Less distributions:
Dividends from net investment income......... (0.45) (0.41) (0.49) (0.17)
Distributions from net realized capital
gains..................................... -- -- -- (0.24)
Returns of capital........................... -- -- (0.03) --
------- ------- ------- -------
Total distributions.......................... (0.45) (0.41) (0.52) (0.41)
------- ------- ------- -------
Net asset value, end of period................. $ 16.01 $ 14.60 $ 11.84 $ 14.08
======= ======= ======= =======
Total return(a)................................ 12.98% 27.16% (12.35)% (5.32)%
======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)..... $79,530 $70,693 $42,568 $23,892
======= ======= ======= =======
Ratio of expenses to average net assets...... 1.96%(b)(c) 1.97% 2.07% 1.99%(d)
======= ======= ======= =======
Ratio of net investment income to average net
assets.................................... 2.83%(b) 3.44% 3.78% 3.38%(d)
======= ======= ======= =======
Portfolio turnover rate...................... 48% 88% 101% 76%
======= ======= ======= =======
Average broker commission rate(e)............ $0.0460 N/A N/A N/A
======= ======= ======= =======
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $75,949,144.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) Annualized.
(e) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
13
<PAGE> 18
AIM GROWTH FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993*
--------------------------------------- TO
1996 1995 1994 DECEMBER 31, 1993
-------- -------- ------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 12.77 $ 10.21 $ 11.31 $ 12.83
Income from investment operations:
Net investment income (loss).......... (0.05) (0.08)(a) (0.06) (0.01)
Net gains (losses) on securities (both
realized and unrealized)........... 2.28 3.43 (0.61) (0.14)
-------- -------- ------- --------
Total from investment operations...... 2.23 3.35 (0.67) (0.15)
-------- -------- ------- --------
Less distributions:
Distributions from net realized
capital gains...................... (0.68) (0.79) (0.43) (1.37)
-------- -------- ------- --------
Total distributions................... (0.68) (0.79) (0.43) (1.37)
-------- -------- ------- --------
Net asset value, end of period.......... $ 14.32 $ 12.77 $ 10.21 $ 11.31
======== ======== ======= ========
Total return(b)......................... 17.60% 33.00% (5.88)% (0.92)%
======== ======== ======= ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................... $280,807 $138,034 $38,448 $11,053
======== ======== ======= ========
Ratio of expenses to average net
assets............................. 2.03%(c)(d) 2.13% 2.18% 1.91% (e)
======== ======== ======= ========
Ratio of net investment income (loss)
to average net assets.............. (0.39)%(c) (0.65)% (0.94)% (0.72)%(e)
======== ======== ======= ========
Portfolio turnover rate............... 97% 87% 201% 192%
======== ======== ======= ========
Average broker commission rate(f)..... $ 0.0621 N/A N/A N/A
======== ======== ======= ========
</TABLE>
- ---------------
(a) Calculated using average shares outstanding.
(b) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(c) Ratios are based on average net assets of $213,327,146.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) Annualized.
(f) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
AIM HIGH YIELD FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993*
------------------------------------------ TO
1996 1995 1994 DECEMBER 31, 1993
---------- -------- -------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 9.42 $ 8.92 $ 10.04 $ 9.96
Income from investment operations:
Net investment income................. 0.85 0.85 0.87 0.32
Net gains (losses) on securities (both
realized and unrealized)........... 0.47 0.52 (1.10) 0.07
---------- -------- -------- --------
Total from investment operations...... 1.32 1.37 (0.23) 0.39
---------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................. (0.86) (0.87) (0.89) (0.31)
---------- -------- -------- --------
Net asset value, end of period.......... $ 9.88 $ 9.42 $ 8.92 $ 10.04
========== ======== ======== ========
Total return(a)......................... 14.68% 15.91% (2.48)% 4.00%
========== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................... $1,068,060 $557,926 $191,338 $31,264
========== ======== ======== ========
Ratio of expenses to average net
assets............................. 1.68%(b)(c) 1.73% 1.80% 1.93%(d)
========== ======== ======== ========
Ratio of net investment income to
average net assets................. 8.95%(b) 9.18% 9.27% 8.99%(d)
========== ======== ======== ========
Portfolio turnover rate............... 77% 61% 53% 53%
========== ======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $808,336,751.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) Annualized.
14
<PAGE> 19
AIM INCOME FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 7, 1993*
--------------------------------- TO
1996 1995 1994 DECEMBER 31, 1993
------- ------- ------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 8.15 $ 7.18 $ 8.43 $ 8.95
Income from investment operations:
Net investment income........................ 0.50 0.53 0.52 0.19
Net gains (losses) on securities (both
realized and unrealized).................. 0.11 0.98 (1.23) (0.34)
------- ------- ------- --------
Total from investment operations............. 0.61 1.51 (0.71) (0.15)
------- ------- ------- --------
Less distributions:
Dividends from net investment income......... (0.53) (0.54) (0.42) (0.18)
Distributions from net realized capital
gains..................................... -- -- (0.01) (0.19)
Returns of capital........................... -- -- (0.11) --
------- ------- ------- --------
Total distributions.......................... (0.53) (0.54) (0.54) (0.37)
------- ------- ------- --------
Net asset value, end of period................. $ 8.23 $ 8.15 $ 7.18 $ 8.43
======= ======= ======= ========
Total return(a)................................ 7.87% 21.72% (8.46)% (0.75)%
======= ======= ======= ========
Ratios/supplemental data:
Net assets, end of period (000s omitted)..... $85,343 $44,304 $12,321 $ 3,602
======= ======= ======= ========
Ratio of expenses to average net assets...... 1.80%(b)(c) 1.79% 1.83%(d) 1.75%(d)(e)
======= ======= ======= ========
Ratio of net investment income to average net
assets.................................... 6.30%(b) 6.71% 6.69%(d) 6.24%(d)(e)
======= ======= ======= ========
Portfolio turnover rate...................... 80% 227% 185% 99%
======= ======= ======= ========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $65,062,096.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) After expense reimbursements. Ratios of expenses and net investment income
to average net assets prior to expense reimbursements were 2.04% and 2.50%
(annualized) and 6.48% and 5.49% (annualized) for 1994 and 1993,
respectively.
(e) Annualized.
AIM INTERMEDIATE GOVERNMENT FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 7, 1993*
--------------------------------- TO
1996 1995 1994 DECEMBER 31, 1993
------- ------- ------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 9.69 $ 8.99 $ 10.04 $ 10.44
Income from investment operations:
Net investment income....................... 0.55 0.63 0.61 0.21
Net gains (losses) on securities (both
realized and unrealized)................. (0.41) 0.70 (1.02) (0.27)
------- ------- ------- --------
Total from investment operations............ 0.14 1.33 (0.41) (0.06)
------- ------- ------- --------
Less distributions:
Dividends from net investment income........ 0.51 (0.59) (0.50) (0.20)
Distributions from net realized capital
gains.................................... -- -- (0.04) (0.14)
Returns of capital.......................... (0.04) (0.04) (0.10) --
------- ------- ------- --------
Total distributions......................... (0.55) (0.63) (0.64) (0.34)
------- ------- ------- --------
Net asset value, end of period................ $ 9.28 $ 9.69 $ 8.99 $ 10.04
======= ======= ======= ========
Total return(a)............................... 1.61% 15.22% (4.13)% (0.52)%
======= ======= ======= ========
Ratios/supplemental data:
Net assets, end of period (000s omitted).... $79,443 $61,300 $23,415 $ 6,160
======= ======= ======= ========
Ratio of expenses to average net assets
(exclusive of interest expense)(b)....... 1.76%(c)(d) 1.86% 1.82% 1.71%(f)
======= ======= ======= ========
Ratio of net investment income to average
net assets(e)............................ 6.00%(c) 6.58% 6.56% 6.37%(f)
======= ======= ======= ========
Portfolio turnover rate..................... 134% 140% 109% 110%
======= ======= ======= ========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratio of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement for 1994 and 1993 were 1.87% and 2.18%
(annualized), respectively.
(c) Ratios are based on average net assets of $71,976,395.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) Ratio of net investment income to average net assets prior to reduction of
advisory fee and expense reimbursement for 1994 and 1993 were 6.50% and
5.90% (annualized), respectively.
(f) Annualized.
15
<PAGE> 20
AIM MUNICIPAL BOND FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993*
-------------------------------- TO
1996 1995 1994 DECEMBER 31, 1993
------- ------- ------ ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 8.31 $ 7.78 $ 8.61 $ 8.71
Income from investment operations:
Net investment income................. 0.37 0.39 0.39 0.14
Net gains (losses) on securities (both
realized and unrealized)........... (0.13) 0.54 (0.78) 0.01
------- ------- ------ --------
Total from investment operations...... 0.24 0.93 (0.39) 0.15
------- ------- ------ --------
Less distributions:
Dividends from net investment
income............................. (0.36) (0.37) (0.38) (0.13)
Distributions from net realized
capital gains...................... -- -- (0.03) (0.11)
Returns of capital.................... -- (0.03) (0.03) (0.01)
------- ------- ------ --------
Total distributions................... (0.36) (0.40) (0.44) (0.25)
------- ------- ------ --------
Net asset value, end of period.......... $ 8.19 $ 8.31 $ 7.78 $ 8.61
======= ======= ====== ========
Total return(a)......................... 2.99% 12.14% (4.57)% 1.95%
======= ======= ====== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................... $33,770 $21,478 $9,175 $ 2,319
======= ======= ====== ========
Ratio of expenses to average net
assets(b).......................... 1.61%(c)(d) 1.68% 1.67% 1.65%(e)
======= ======= ====== ========
Ratio of net investment income to
average net assets(b).............. 4.49%(c) 4.46% 4.83% 4.91%(e)
======= ======= ====== ========
Portfolio turnover rate............... 26% 36% 43% 24%
======= ======= ====== ========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios of expenses and net investment income to average daily net assets
prior to expense reimbursements are 1.77%, 1.84% and 3.08% (annualized) and
4.37%, 4.66% and 3.48% (annualized) for 1995-1993, respectively.
(c) Ratios are based on average net assets of $27,530,145.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) Annualized.
16
<PAGE> 21
AIM VALUE FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, OCTOBER 18, 1993*
---------------------------------------- TO
1996 1995 1994 DECEMBER 31, 1993
---------- ---------- -------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 26.65 $ 21.13 $ 20.82 $ 21.80
Income from investment operations:
Net investment income................. 0.20(a) (0.01) -- 0.02
Net gains (losses) on securities (both
realized and unrealized)........... 3.38 7.12 0.51 (0.21)
---------- ---------- -------- --------
Total from investment operations...... 3.58 7.11 0.51 (0.19)
---------- ---------- -------- --------
Less distributions:
Dividends from net investment
income............................. (0.21) -- -- (0.02)
Distributions from net realized
capital gains...................... (1.10) (1.59) (0.20) (0.77)
---------- ---------- -------- --------
Total distributions................... (1.31) (1.59) (0.20) (0.79)
---------- ---------- -------- --------
Net asset value, end of period.......... $ 28.92 $ 26.65 $ 21.13 $ 20.82
========== ========== ======== ========
Total return(b)......................... 13.57% 33.73% 2.46% (0.74)%
========== ========== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................... $4,875,933 $2,860,531 $680,119 $63,215
========== ========== ======== ========
Ratio of expenses to average net
assets(c).......................... 1.94%(d)(e) 1.94% 1.90% 1.85%(f)
========== ========== ======== ========
Ratio of net investment income (loss)
to average net assets(c)........... 0.82%(d) (0.08)% 0.00% (0.46)%(f)
========== ========== ======== ========
Portfolio turnover rate............... 126% 151% 127% 177%
========== ========== ======== ========
Average broker commission rate(g)..... $ 0.0436 N/A N/A N/A
========== ========== ======== ========
</TABLE>
- ---------------
(a) Calculated using average shares outstanding.
(b) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(c) The ratios of expenses to average net assets prior to waiver of advisory
fees were 1.96% and 1.96%, for 1996 and 1995, respectively. The ratio of net
investment income (loss) to average net assets prior to waiver of advisory
fees were 0.81% and (0.09%), for 1996 and 1995, respectively.
(d) Ratios are based on average net assets of $3,953,324,717.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
* Date sales commenced.
17
<PAGE> 22
The following per share data, ratios and supplemental data for the Class A
shares, Class B shares and AIM Cash Reserve Shares of AIM MONEY MARKET FUND for
the years ended December 31, 1996, 1995 and 1994 and the period October 16, 1993
(date operations commenced) through December 31, 1993 have been audited by KPMG
Peat Marwick LLP, independent auditors, whose report thereon was unqualified.
This information should be read in conjunction with the financial statements of
AIM MONEY MARKET FUND included in the Statement of Additional Information.
AIM MONEY MARKET FUND -- CLASS A, CLASS B AND AIM CASH RESERVE SHARES
<TABLE>
<CAPTION>
CLASS A SHARES
---------------------------------------------------
OCTOBER 16,
YEAR ENDED DECEMBER 31, 1993 TO
----------------------------------- DECEMBER 31,
1996 1995 1994 1993
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................. 0.0433 0.0495 0.0337 0.0048
-------- -------- -------- --------
Less distributions:
Dividends from net investment income.. (0.0433) (0.0495) (0.0337) (0.0048)
-------- -------- -------- --------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total return(a)......................... 4.42% 5.06% 3.43% 2.27%(e)
======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $287,905 $221,487 $148,886 $ 81,460
======== ======== ======== ========
Ratio of expenses to average net
assets.............................. 1.07%(b)(c) 1.03% 0.97%(d) 1.00%(d)(e)
======== ======== ======== ========
Ratio of net investment income to
average net assets.................. 4.34%(b) 4.91% 3.53%(d) 2.27%(d)(e)
======== ======== ======== ========
<CAPTION>
CLASS B SHARES
---------------------------------------------------------
OCTOBER 16,
YEAR ENDED DECEMBER 31, 1993 TO
----------------------------------------- DECEMBER 31,
1996 1995 1994 1993
-------------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................. 0.0360 0.0419 0.0259 0.0032
-------------- -------- -------- --------
Less distributions:
Dividends from net investment income.. (0.0360) (0.0419) (0.0259) (0.0032)
-------------- -------- -------- --------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ======== ======== ========
Total return(a)......................... 3.66% 4.27% 2.62% 1.51%(e)
============== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $ 91,148 $ 69,857 $ 33,999 $ 1,289
============== ======== ======== ========
Ratio of expenses to average net
assets.............................. 1.81%(b)(c) 1.78% 1.78%(f) 1.75%(e)(f)
============== ======== ======== ========
Ratio of net investment income to
average net assets.................. 3.60%(b) 4.14% 3.14%(f) 1.54%(e)(f)
============== ======== ======== ========
<CAPTION>
AIM CASH RESERVE SHARES
--------------------------------------------------------
OCTOBER 16,
YEAR ENDED DECEMBER 31, 1993 TO
---------------------------------------- DECEMBER 31,
1996 1995 1994 1993
------------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................. 0.0433 0.0493 0.0337 0.0048
------------- -------- -------- --------
Less distributions:
Dividends from net investment income.. (0.0433) (0.0493) (0.0337) (0.0048)
------------- -------- -------- --------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ======== ======== ========
Total return(a)......................... 4.41% 5.04% 3.42% 2.27%(e)
============= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $ 315,470 $293,450 $359,952 $241,778
============= ======== ======== ========
Ratio of expenses to average net
assets.............................. 1.08%(b)(c) 1.04% 0.99%(g) 1.00%(e)(g)
============= ======== ======== ========
Ratio of net investment income to
average net assets.................. 4.32%(b) 4.92% 3.49%(g) 2.27%(e)(g)
============= ======== ======== ========
</TABLE>
- ---------------
(a) Does not deduct sales charges or contingent deferred sales charges, where
applicable.
(b) Ratios are based on average daily net assets as follows: Class A
Shares - $266,627,474, Class B Shares - $99,033,713 and AIM Cash Reserve
Shares - $385,881,111.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.06% and 3.44% for 1994 and 1.20%
(annualized) and 2.07% (annualized) for 1993.
(e) Annualized.
(f) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.87% and 3.05% for 1994 and 1.95%
(annualized) and 1.34% (annualized) for 1993.
(g) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.08% and 3.40% for 1994 and 1.20%
(annualized) and 2.07% (annualized) for 1993.
18
<PAGE> 23
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Funds will disclose the maximum sales charge
(including deferred sales charges) to which investments in a Fund's shares may
be subject. If any advertised performance data does not reflect the maximum
sales charge (if any), such advertisement will disclose that the sales charge
has not been deducted in computing the performance data, and that, if reflected,
the maximum sales charge would reduce the performance quoted. See the Statement
of Additional Information for further details concerning performance comparisons
used in advertisements by the Funds. Further information regarding each Fund's
performance is contained in that Fund's annual report to shareholders, which is
available upon request and without charge.
Each Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. Standardized total return
for Class A shares reflects the deduction of a Fund's maximum initial sales
charge at the time of purchase. Standardized total return for Class B shares
reflects the deduction of the maximum applicable contingent deferred sales
charge on a redemption of shares held for the period. Standardized total return
for Class C shares reflects the deduction of a 1% contingent deferred sales
charge, if applicable, on a redemption of shares held for one year.
A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested. A cumulative total return reflects the Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
compounded annual rate of return that would have produced the same cumulative
total return if the Fund's performance had been constant over the entire period.
BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE FUND'S RETURN,
INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL YEAR-
BY-YEAR RESULTS. To illustrate the components of overall performance, a Fund may
separate its cumulative and average annual returns into income results and
capital gains or losses.
Yield is computed in accordance with standardized formulas described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, the
yield information may not provide a basis for comparison with investments which
pay a fixed rate of interest for a stated period of time. Yield reflects
investment income net of expenses over the relevant period attributable to a
Fund share, expressed as an annualized percentage of the maximum offering price
per share for Class A shares and net asset value per share for Class B shares,
Class C shares and AIM Cash Reserve Shares of AIM MONEY MARKET FUND.
Yield is a function of the type and quality of a Fund's investments, the
maturity of the securities held in a Fund's portfolio and the operating expense
ratio of the Fund. A shareholder's investment in a Fund is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in a Fund. A tax-equivalent yield is calculated in the same
manner as the standard yield with an adjustment for a stated, assumed tax rate.
AIM MUNICIPAL BOND FUND may also demonstrate the effect of such tax-equivalent
adjustments generally by comparing various yield levels with their corresponding
tax-equivalent yields, given a stated tax rate.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of any Fund. Such practices will
have the effect of increasing that Fund's yield and total return. The
performance of each Fund will vary from time to time and past results are not
necessarily representative of future results. A Fund's performance is a function
of its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund as well as by
general market conditions.
- --------------------------------------------------------------------------------
ABOUT THE FUNDS
The Funds are separate series of shares of the Trust, a Delaware business
trust established on May 5, 1993 and registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company (see "Organization of the Trust"). Each Fund has its own investment
objective(s) and policies designed to meet specific investment goals, operates
as a diversified portfolio and intends to be treated as a regulated investment
company for federal income tax purposes.
Each Fund invests in securities of different issuers and industry
classifications (with the exception of AIM GLOBAL UTILITIES FUND which
concentrates its investments in the utilities industry) in an attempt to spread
and reduce the risks inherent in all investing. Each Fund continuously offers
new shares for sale to the public, and stands ready to redeem its outstanding
shares for cash at net asset value (subject, in certain circumstances, to a
contingent deferred sales charge). See "How to Redeem Shares." AIM, the
investment advisor for each Fund, continuously reviews and, from time to time,
changes the portfolio holdings of each of the Funds in pursuit of each Fund's
objective(s).
19
<PAGE> 24
- --------------------------------------------------------------------------------
INVESTMENT PROGRAMS
The investment objective(s) of each Fund, except AIM HIGH YIELD FUND, are
deemed to be fundamental policies which may not be changed without the approval
of a majority of the Fund's outstanding shares (within the meaning of the 1940
Act). The Board of Trustees on behalf of AIM HIGH YIELD FUND is permitted to
change the investment objective of that Fund without shareholder approval.
Further information is available in the Statement of Additional Information.
Individuals considering the purchase of shares of any Fund should recognize that
there are risks in the ownership of any security and that no assurance can be
given that any particular Fund will attain its investment objective(s).
AIM BALANCED FUND. The Fund's objective is to achieve as high a total return
to investors as possible, consistent with preservation of capital, by investing
in a broadly diversified portfolio of high-yielding securities, including common
stocks, preferred stocks, convertible securities and bonds. Although equity
securities will be purchased primarily for capital appreciation and fixed income
securities will be purchased primarily for income purposes, income and capital
appreciation potential will be considered in connection with all investments.
The Fund normally will have a minimum of 30% and a maximum of 70% of its total
assets invested in equity securities and a minimum of 30% and a maximum of 70%
of its total assets invested in (non-convertible) fixed income securities. Most
of such fixed income securities will be rated Baa or better by Moody's Investors
Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Ratings Services
("S&P") or, if unrated, deemed to be of comparable quality by AIM, although the
Fund may invest to a limited extent in lower-rated securities. The fixed income
securities in which the Fund invests may include U.S. Government obligations,
mortgage-backed securities, asset-backed securities, bank obligations, corporate
debt obligations and unrated obligations, including those of foreign issuers.
The Fund may, in pursuit of its objective, invest up to 10% of its total assets
in debt securities rated lower than Baa by Moody's or BBB by S&P, which are
commonly known as "junk bonds." During 1996, the Fund invested less than 5% of
its net assets in below investment grade debt securities. See "Certain
Investment Strategies and Policies -- Risk Factors Regarding Non-Investment
Grade Debt Securities" for more information concerning the risk factors
associated with investing in such securities.
The Fund may also invest up to 25% of its total assets in convertible
securities. Compliance with all of the above percentage requirements may limit
the ability of the Fund to maximize total return. The actual percentage of the
assets invested in equity and fixed income securities will vary from time to
time, depending on the judgment of AIM as to general market and economic
conditions and trends, yields and interest rates and changes in fiscal and
monetary policies.
AIM GLOBAL UTILITIES FUND. The Fund's objective is to achieve a high level of
current income, and as a secondary objective the Fund seeks to achieve capital
appreciation, by investing primarily in the common and preferred stocks of
public utility companies. Under normal circumstances, at least 65% of the Fund's
total assets will be invested in securities of public utility companies (either
domestic or foreign). Public utility companies include companies that provide
electricity, natural gas or water and other sanitary services to the public, and
telephone or telegraph companies, and other companies providing public
communications services. The Fund may also invest in developing utility
technology companies and in holding companies which derive a substantial portion
of their revenues from utility-related activities. Generally, a holding company
will be considered to derive a substantial portion of its revenues from
utility-related activities if such activities account for at least 40% of its
revenues. The Fund may invest up to 25% of its total assets in convertible
securities. When AIM deems it appropriate, the Fund may purchase bonds issued by
the above types of companies, although investments in non-convertible bonds will
not exceed 25% of the Fund's total assets. The Fund may invest up to 10% of its
total assets in bonds rated lower than Baa by Moody's or BBB by S&P (or
comparable ratings by other nationally recognized statistical rating
organizations "NRSROs") or unrated bonds which AIM determines to be of
comparable quality. During 1996, the Fund invested less than 5% of its net
assets in below investment grade debt securities. See "Certain Investment
Strategies and Policies -- Risk Factors Regarding Non-Investment Grade Debt
Securities" for more information concerning the risk factors associated with
investing in such securities.
The Fund may invest up to 80% of its total assets in foreign securities,
including investments in American Depositary Receipts, European Depositary
Receipts and other securities representing underlying securities of foreign
issuers. Under normal market conditions, the Fund will be invested in securities
of issuers located in at least four countries, one of which will be the United
States, although for temporary defensive purposes it may invest 100% of its
total assets in securities of United States issuers. In some foreign countries,
utility companies are partially owned by government agencies. In some cases,
foreign government agencies may have significant investments in businesses other
than utility companies. Also, investments in securities of foreign issuers may
involve other risks which are not ordinarily associated with investments in
domestic issuers (see "Certain Investment Strategies and Policies -- Investments
in Foreign Securities").
In addition, investors should also be aware that the Fund may invest in
companies located within emerging or developing countries. An "emerging or
developing country" is a country in the initial stages of its industrial cycle.
Investments in emerging or developing countries involve exposure to economic
structures that are generally less diverse and mature and to political systems
which can be expected to have less stability than those of more developed
countries. Such countries may have relatively unstable governments,
20
<PAGE> 25
economies based on only a few industries, and securities markets which trade
only a small number of securities. Historical experience indicates that markets
of emerging or developing countries have been more volatile than the markets of
more mature economies; such markets have also from time to time provided higher
rates of return and greater risks to investors. AIM believes that these
characteristics of emerging or developing countries can be expected to continue
in the future.
A portfolio of utility company securities is subject to a different degree of
volatility than a more broadly diversified portfolio. Economic, operational or
regulatory changes that affect utility companies will have a material impact
upon the value of the securities that the Fund owns. Events that have no direct
connection with companies whose securities are owned by the Fund may affect the
prices of those securities, such as emergencies involving nuclear power plants.
Moreover, a portfolio of utilities industry securities is subject to the risks
unique to that industry, such as inflationary or other cost increases in fuel
and operating expenses, possible increases in the interest costs of loans needed
for capital construction programs, compliance with environmental regulations,
possible adverse changes in the regulatory climate and availability of fuel
sources. A description of the utilities industry is contained in the Statement
of Additional Information.
AIM GROWTH FUND. The Fund's objective is to achieve long-term growth of
capital by investing primarily in the common stocks of established medium- to
large-size companies with prospects for above-average, long-term earnings
growth. Realization of current income is an incidental consideration.
It is anticipated that common stocks will be the principal form of investment
by the Fund. The Fund's portfolio is primarily comprised of securities of two
basic categories of companies: (1) "core" companies, which the Fund's management
considers to have experienced above-average and consistent long-term growth in
earnings and to have excellent prospects for outstanding future growth, and (2)
"earnings acceleration" companies, which the Fund's management believes are
currently enjoying a dramatic increase in profits.
AIM HIGH YIELD FUND. The Fund's objective is to achieve a high level of
current income by investing primarily in publicly traded non-investment grade
debt securities. The Fund will also consider the possibility of capital growth
when it purchases and sells securities. Debt securities of less than investment
grade are considered "high risk" securities (commonly referred to as junk
bonds).
The Fund seeks high income principally by purchasing securities that are rated
Baa, Ba or B by Moody's or BBB, BB or B by S&P, or securities of comparable
quality in the opinion of AIM that are either unrated or rated by other NRSROs.
The Fund may also hold, from time to time, securities rated Caa by Moody's or
CCC by S&P, or, if unrated or rated by other NRSROs, securities of comparable
quality as determined by AIM. It should be noted, however, that achieving the
Fund's investment objective may be more dependent on the credit analysis of AIM,
and less on that of credit rating agencies, than may be the case for funds that
invest in more highly rated bonds. At least 80% of the value of the Fund's total
assets will be invested in debt securities, including convertible debt
securities, and/or cash and cash equivalents. At least 65% of the value of the
Fund's assets will be invested in high yield debt securities. The Fund may also
invest in preferred stocks.
For a breakdown of the quality ratings of the Fund's investments as of
December 31, 1996, see the chart on page 24.
While the securities held by the Fund are expected to provide greater income
and, possibly, opportunity for greater gain than investments in more highly
rated securities, they may be subject to greater risk of loss of income and
principal and are more speculative in nature. The Fund's yield and the net asset
value of its shares may be expected to fluctuate over time. Therefore, an
investment in the Fund may not be appropriate for some investors and should not
constitute a complete investment program for others. See "Certain Investment
Strategies and Policies -- Risk Factors Regarding Non-Investment Grade Debt
Securities."
The Fund may invest in both illiquid securities and securities which are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933. See "Certain Investment Strategies and
Policies -- Illiquid Securities" for further information regarding such
investments.
AIM INCOME FUND. The Fund's objective is to achieve a high level of current
income consistent with reasonable concern for safety of principal, by investing
primarily in fixed rate corporate debt, U.S. Government obligations and U.S.
Government Agency Mortgage-Backed Securities. The Fund may also invest in
preferred stock issues and convertible corporate debt. In selecting portfolio
securities the Fund will, in accordance with its concern for safety of
principal, consider individual credit risks, but shareholders should recognize
that the market value of even high quality long-term fixed rate securities will
fluctuate with changes in interest rate levels. The percent of the Fund's assets
in various types of securities will vary in light of the Fund's investment
objective and existing market conditions.
The Fund may invest up to 40% of its total assets in securities issued by
foreign entities. Purchases of foreign securities which are payable in foreign
currencies will be affected either favorably or unfavorably by changes in the
value of the foreign currencies against the U.S. dollar. Investing in foreign
securities payable in foreign currencies carries increased risk to the Fund (see
"Certain Investment Strategies and Policies -- Investments in Foreign
Securities" and " -- Foreign Exchange Transactions"). The Fund will maintain
less than 35% of its net assets in debt securities rated below Baa/BBB, which
are commonly known as "junk bonds." See "Certain Investment Strategies and
Policies -- Risk Factors Regarding Non-Investment Grade Debt Securities."
For a breakdown of the quality ratings of the Fund's investments as of
December 31, 1996, see the chart on page 24.
21
<PAGE> 26
Ordinarily, the Fund does not purchase securities with the intention of
engaging in short-term trading. However, any particular security will be sold,
and the proceeds reinvested, whenever such action is deemed prudent in light of
the Fund's investment objectives, regardless of the holding period of that
security. The Fund will not necessarily dispose of a security because of a
reduction in rating. A higher rate of portfolio turnover may result in higher
transaction costs, including brokerage commissions. Also, to the extent that
higher portfolio turnover results in a higher rate of net realized capital gains
to a Fund, the portion of the Fund's distributions constituting taxable capital
gains may increase. See "Dividends, Distributions and Tax Matters."
AIM INTERMEDIATE GOVERNMENT FUND. The Fund's objective is to achieve a high
level of current income consistent with reasonable concern for safety of
principal by investing, under normal circumstances, at least 65% of its total
assets in debt securities issued, guaranteed or otherwise backed by the United
States Government. The Government securities which may be purchased by the Fund
include but are not limited to (1) U.S. Treasury obligations such as Treasury
Bills (maturities of one year or less), Treasury Notes (maturities of one to ten
years) and Treasury Bonds (generally maturities of greater than ten years) and
(2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities ("Agency Securities") which are supported by any of the
following: (a) the full faith and credit of the U.S. Treasury, such as
obligations of the Government National Mortgage Association ("GNMA"), (b) the
right of the issuer to borrow an amount limited to a specific line of credit
from the U.S. Treasury, such as obligations of the Federal National Mortgage
Association ("FNMA"), the Federal Home Loan Bank and the U.S. Postal Service, or
(c) the credit of the agency or instrumentality, such as obligations of the
Federal Home Loan Mortgage Corporation ("FHLMC") and Federal Farm Credit System.
Although their close relationship with the U.S. Government is believed to make
them high-quality securities with minimal credit risks, the U.S. Government is
not obligated by law to support either FNMA or FHLMC. Accordingly, such
securities may involve risk of loss of principal and interest; however,
historically there have not been any defaults of such issues. For a listing of
some of the types of Agency Securities in which the Fund may invest, see
Appendix B to this Prospectus. The Fund may also invest in U.S. Government
Agency Mortgage-Backed Securities. Mortgage-backed securities consist of
interests in underlying mortgages with maturities of up to thirty years.
The Fund purchases primarily fixed-rate securities, including but not limited
to high coupon U.S. Government Agency Mortgage-Backed Securities, which provide
a higher coupon at the time of purchase than the then prevailing market rate
yield. The prices of high coupon U.S. Government Agency Mortgage-Backed
Securities do not tend to rise as rapidly as those of traditional fixed-rate
securities at times when interest rates are decreasing, and tend to decline more
slowly at times when interest rates are increasing. The Fund may purchase such
securities at a premium, which means that a faster principal prepayment rate
than expected will reduce the market value of and income from such securities,
while a slower prepayment rate will tend to increase the market value of and
income from such securities.
The composition and weighted average maturity of the Fund's portfolio will
vary from time to time, based upon AIM's determination of how best to achieve
the Fund's investment objective. The Fund may invest in Government securities of
all maturities, short-term, intermediate-term and long-term. The Fund will
maintain a dollar-weighted average portfolio maturity of between three and ten
years. This policy regarding portfolio maturity is a non-fundamental policy of
the Fund.
AIM MONEY MARKET FUND. The Fund's objective is to provide as high a level of
current income as is consistent with the preservation of capital and liquidity.
The Fund intends to invest in money market instruments such as bankers'
acceptances, certificates of deposit, repurchase agreements, master notes, time
deposits, taxable municipal securities and commercial paper, all of which will
be denominated in U.S. dollars (referred to collectively as "Money Market
Instruments") and U.S. Government direct obligations and U.S. Government
agencies' securities. Bankers' acceptances, certificates of deposit and time
deposits may be purchased from U.S. or foreign banks. Certain types of Money
Market Instruments are briefly described in Appendix A to this Prospectus and
are described more fully in the Statement of Additional Information.
The Fund may invest in other types of Money Market Instruments not prohibited
by its investment restrictions, if approved by the trustees. The Fund will not
invest in instruments maturing more than 397 days from the date of investment,
and will maintain a dollar-weighted average portfolio maturity of 90 days or
less.
The Fund will limit investments in Money Market Instruments to those which at
the date of purchase are "First Tier" securities as defined in Rule 2a-7 under
the 1940 Act, as such Rule may be amended from time to time. Generally, "First
Tier" securities are securities that are rated in the highest rating category by
two NRSROs, or, if only rated by one NRSRO, are rated in the highest rating
category by that NRSRO, or, if unrated, are determined by AIM (under the
supervision of and pursuant to guidelines established by the Board of Trustees)
to be of comparable quality to a rated security that meets the foregoing quality
standards. For a complete definition of a "First Tier" security, see the
definition set forth in the Statement of Additional Information.
The Fund must also comply with the requirements of Rule 2a-7 under the 1940
Act, which govern the operations of money market funds and may be more
restrictive than the Fund's restrictions. If any of the Fund's policies and
restrictions are more restrictive than Rule 2a-7, such policies and restrictions
will be followed.
22
<PAGE> 27
The Fund will normally hold portfolio securities to maturity but may dispose
of such securities prior to maturity if AIM believes such disposition advisable.
Investing in Money Market Instruments of short maturity and/or actively managing
its portfolio will result in a large number of transactions, but since the costs
of these transactions are small, they are not expected to have a significant
effect on net asset value or yield.
AIM MUNICIPAL BOND FUND. The Fund's objective is to achieve a high level of
current income exempt from federal income taxes consistent with the preservation
of principal by investing in a diversified portfolio of municipal bonds. These
investments may include obligations issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies, authorities and instrumentalities,
the interest from which, in the opinion of bond counsel, is exempt from federal
income tax.
Municipal bonds include debt obligations of varying maturities issued to
obtain funds for various public purposes, including the construction of a wide
range of public facilities, the refunding of outstanding obligations, the
obtaining of funds for general operating expenses and the lending of such funds
to other public institutions and facilities. In addition, certain types of
industrial development bonds are issued by or on behalf of public authorities to
obtain funds to provide for the construction, equipment, repair or improvement
of privately operated facilities ("private activity bonds"). Such obligations
are considered to be municipal bonds appropriate for investment by the Fund,
provided that the interest paid thereon, in the opinion of bond counsel, is
exempt from federal income taxes. As used in this Prospectus and the Statement
of Additional Information, interest which is "tax-exempt" or "exempt from
federal income taxes" means interest on municipal bonds which is excluded from
gross income for federal income tax purposes, but which may give rise to federal
alternative minimum tax liability. The principal and interest payments on
private activity bonds (such as industrial development or pollution control
bonds) are the responsibility of the industrial user and, therefore, are not
backed by the taxing power of the issuing municipality. Such obligations are
included within the term municipal bonds if the interest paid thereon qualifies
for exemption from federal income tax, but the interest on private activity
bonds will be considered to be an item of preference for purposes of alternative
minimum tax liability under the Internal Revenue Code of 1986, as amended (the
"Code"). See "Tax Matters" in the Statement of Additional Information. The Fund
will invest at least 80% of its total invested assets in securities that do not
pay interest subject to federal income taxes and that do not constitute an item
of preference for purposes of the alternative minimum tax.
In addition, the Fund will invest at least 80% of its total invested assets in
municipal bonds. At least 80% of the municipal securities purchased by the Fund
will be rated within the four highest ratings, or will be obligations of issuers
having an issue of outstanding municipal bonds rated within the four highest
ratings of Moody's, S&P or any other NRSRO. However, up to 20% of the Fund's
total assets may be invested in unrated municipal bonds if in the judgment of
AIM, after considering available information regarding the creditworthiness of
the issuer, such bonds are similar in quality to those bonds rated within the
four highest ratings mentioned above. The Fund will maintain less than 20% of
its total assets in securities rated below Baa/BBB (or a comparable rating of
any other NRSRO). For purposes of the foregoing percentage limitations,
municipal securities (i) which have been collateralized with U.S. Government
securities held in escrow until the municipal securities' refunding date or
final maturity, but (ii) which have not been re-rated by a NRSRO, will be
treated by the Fund as the equivalent of Aaa/AAA rated securities. During 1996,
the Fund invested less than 5% of its net assets in below investment grade debt
securities. See "Certain Investment Strategies and Policies -- Risk Factors
Regarding Non-Investment Grade Debt Securities" for more information concerning
the risk factors associated with investing in such securities.
Since the Fund invests primarily in municipal obligations, the marketability
and market value of these obligations may be affected by certain constitutional
amendments, legislative measures, executive orders, administrative regulations
and voter initiatives as well as regional economies. The ability of the Fund to
achieve its objective is affected by the ability of municipal issuers to meet
their payment obligations. Problems which may arise in the foregoing areas and
which are not resolved could adversely affect the various municipal issuers'
abilities to meet their financial obligations.
The Fund may invest in short-term obligations, including taxable investments,
to establish a defensive position in anticipation of a market decline with a
corresponding rise in interest rates. Such short-term obligations include notes
issued by or on behalf of municipal issuers, obligations of the U.S. Government,
its agencies or instrumentalities, instruments of domestic banks, domestic
commercial paper and other cash equivalent investments. Interest income from
certain short-term holdings may be taxable to shareholders as ordinary income.
AIM VALUE FUND. The Fund's objective is to achieve long-term growth of capital
by investing primarily in equity securities judged by the Fund's investment
advisor to be undervalued relative to the investment advisor's appraisal of the
current or projected earnings of the companies issuing the securities, or
relative to current market values of assets owned by the companies issuing the
securities or relative to the equity market generally. Income is a secondary
objective and would be satisfied principally from the income (interest and
dividends) generated by the common stocks, convertible bonds and convertible
preferred stocks that make up the Fund's portfolio. The Fund should not be
purchased by those who seek income as their primary investment objective.
23
<PAGE> 28
In addition to the securities described above, the Fund may also acquire
preferred stocks and debt instruments having prospects for growth of capital.
Although these different types of securities can be expected to generate amounts
of income to satisfy the Fund's secondary objective, they will be purchased for
their potential for growth of capital.
The primary emphasis of AIM's search for undervalued equity securities is in
four categories: (1) out-of-favor cyclical growth companies; (2) established
growth companies that are undervalued compared to historical relative valuation
parameters; (3) companies where there is early but tangible evidence of
improving prospects which are not yet reflected in the price of the company's
equity securities; and (4) companies whose equity securities are selling at
prices that do not reflect the current market value of their assets and where
there is reason to expect realization of this potential in the form of increased
equity values.
Because AIM VALUE FUND invests in equity securities judged by the Fund's
investment advisor to be undervalued relative to the investment advisor's
appraisal of the current or projected earnings of the companies issuing such
securities, investors should carefully assess the risks associated with an
investment in the Fund.
PORTFOLIO RATINGS. During 1996, the percentage of average annual assets of AIM
HIGH YIELD FUND and AIM INCOME FUND, calculated on a dollar weighted basis,
which was invested in securities within the various rating categories (based on
the higher of Standard and Poor's Corporation and Moody's Investors Service,
Inc. ratings as described in Appendix C), and in unrated securities determined
to be of comparable quality, was as follows:
<TABLE>
<CAPTION>
AIM HIGH AIM INCOME
YIELD FUND FUND
---------- ----------
<S> <C> <C>
AAA/Aaa..................................................... 0% 17.77%
AA/Aa....................................................... 0.35% 13.55%
A/A......................................................... 0.40% 15.03%
BBB/Baa..................................................... 0.21% 22.04%
BB/Ba....................................................... 10.30% 11.15%
B/B......................................................... 75.01% 18.66%
CCC/Caa..................................................... 6.21% 0.92%
CC/Ca....................................................... 0% 0%
C/C......................................................... 0% 0%
Unrated..................................................... 7.52% 0.88%
------ ------
Total Average Annual Assets............................ 100% 100%
</TABLE>
- --------------------------------------------------------------------------------
CERTAIN INVESTMENT STRATEGIES AND POLICIES
In pursuit of its objectives and policies, one or more of the Funds may employ
one or more of the following strategies in order to enhance investment results:
CASH MANAGEMENT AND TEMPORARY DEFENSIVE INVESTMENTS. A portion of each Fund's
assets may be held from time to time in cash, repurchase agreements, commercial
paper, taxable municipal securities or other Money Market Instruments when such
positions are deemed advisable in light of economic conditions or for daily cash
management purposes. In addition, each of the Funds may invest for temporary
defensive purposes all or a substantial portion of its assets in the foregoing
types of investments, although AIM MONEY MARKET FUND invests exclusively in
Money Market Instruments. None of the Funds (except AIM MONEY MARKET FUND) is
limited to investing in Money Market Instruments which are "First Tier"
securities as defined in Rule 2a-7 under the 1940 Act. To the extent that a Fund
(other than AIM MONEY MARKET FUND) invests in the foregoing types of
investments, its ability to achieve its investment objective may be adversely
affected.
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. (All Funds).
Each Fund may purchase securities on a "when-issued" basis, that is, delivery of
and payment for the securities is not fixed at the date of purchase, but is set
after the securities are issued (normally within forty-five days after the date
of the transaction). Each Fund also may purchase or sell securities on a delayed
delivery basis. The payment obligation and the interest rate that will be
received on the delayed delivery securities are fixed at the time the buyer
enters into the commitment. A Fund will only make commitments to purchase
when-issued or delayed delivery securities with the intention of actually
acquiring such securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable.
Investment in securities on a when-issued or delayed delivery basis may
increase a Fund's exposure to market fluctuation and may increase the
possibility that the Fund will incur short-term gains subject to federal
taxation or short-term losses if the Fund must engage in portfolio transactions
in order to honor a when-issued or delayed delivery commitment. In a delayed
delivery transaction, the Fund relies on the other party to complete the
transaction. If the transaction is not completed, the Fund may miss a price or
yield considered to be advantageous. A Fund will employ techniques designed to
reduce such risks. If a Fund purchases a when-issued secur-
24
<PAGE> 29
ity, the Fund's custodian bank will segregate cash or other high grade
securities (including temporary investments and Municipal Securities) in an
amount equal to the when-issued commitment. If the market value of such
securities declines, additional cash or securities will be segregated on a daily
basis so that the market value of the segregated assets will equal the amount of
the Fund's when-issued commitments. To the extent cash and securities are
segregated, they will not be available for new investments or to meet
redemptions. Securities purchased on a delayed delivery basis may require a
similar segregation of cash or other high grade securities. For a more complete
description of when-issued securities and delayed delivery transactions see the
Statement of Additional Information.
DOLLAR ROLL TRANSACTIONS. AIM INCOME FUND and AIM INTERMEDIATE GOVERNMENT FUND
only. In order to enhance portfolio returns and manage prepayment risks, AIM
INCOME FUND and AIM INTERMEDIATE GOVERNMENT FUND may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA and FHLMC.
In a dollar roll transaction, a Fund sells a mortgage security held in the
portfolio to a financial institution such as a bank or broker-dealer, and
simultaneously agrees to repurchase a substantially similar security (same type,
coupon and maturity) from the institution at a later date at an agreed upon
price. The mortgage securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by different pools of
mortgages with different prepayment histories. During the period between the
sale and repurchase, a Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be invested
in short-term instruments, and the income from these investments, together with
any additional fee income received on the sale, could generate income for a Fund
exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the
securities retained by a Fund may decline below the price of the securities that
the Fund has sold but is obligated to repurchase under the agreement. In the
event the buyer of securities in a dollar roll transaction files for bankruptcy
or becomes insolvent, the Fund's use of the proceeds from the sale of the
securities may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the Fund's obligation to repurchase the
securities. AIM INCOME FUND and AIM INTERMEDIATE GOVERNMENT FUND will limit
their respective borrowings from banks, reverse repurchase agreements and dollar
roll transactions to an aggregate of 33 1/3% of their respective total assets at
the time of investment. A Fund will not purchase additional securities when any
borrowings from banks exceed 5% of the Fund's total assets. For further
information regarding reverse repurchase agreements see the Statement of
Additional Information.
INVESTMENT IN OTHER INVESTMENT COMPANIES. Each of the Funds is permitted to
invest in other investment companies to the extent permitted by the 1940 Act,
and rules and regulations thereunder, and, if applicable, exemptive orders
granted by the SEC.
STOCK INDEX FUTURES CONTRACTS AND RELATED OPTIONS. (AIM BALANCED FUND, AIM
GLOBAL UTILITIES FUND, AIM GROWTH FUND and AIM VALUE FUND ("Equity Funds")).
INTEREST RATE FUTURES CONTRACTS AND RELATED OPTIONS. (AIM BALANCED FUND, AIM
GLOBAL UTILITIES FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND and AIM MUNICIPAL BOND FUND ("Debt Funds")). Each of the Equity
Funds may purchase and sell stock index futures contracts or purchase and sell
options thereon in order to hedge the value of their respective portfolios
against changes in market conditions. Similarly, each of the Debt Funds may
purchase and sell interest rate futures contracts or purchase and sell options
thereon in order to hedge the value of their respective portfolios against
changes in market conditions. A stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar or other currency amount times the difference
between the stock index value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. No
physical delivery of the underlying stocks in the index is made. An interest
rate futures contract is an agreement between two parties to buy and sell a debt
security for a set price on a future date. Generally, a Fund may elect to close
a position in a futures contract by taking an opposite position which will
operate to terminate the Fund's position in the futures contract.
There are risks associated with investments in stock index futures contracts,
interest rate futures contracts, and options on such contracts. During certain
market conditions, purchases and sales of futures contracts may not completely
offset a decline or rise in the value of a Fund's portfolio. In the futures
markets, it may not always be possible to execute a buy or sell order at the
desired price, or to close out an open position due to market conditions, limits
on open positions and/or daily price fluctuations. Changes in the market value
of a Fund's portfolio may differ substantially from the changes anticipated by
the Fund when hedged positions were established and unanticipated price
movements in a futures contract may result in a loss substantially greater than
a Fund's initial investment in such contract. Successful use of futures
contracts and related options is dependent upon AIM's ability to predict
correctly movements in the direction of the applicable markets. No assurance can
be given that AIM's judgment in this respect will be correct.
No Fund may purchase or sell futures contracts or purchase or sell related
options if, immediately thereafter, the sum of the amount of margin deposits and
premiums on open positions with respect to futures contracts and related options
would exceed 5% of the market value of a Fund's total assets. See the Statement
of Additional Information for a description of a Fund's investments in futures
contracts and options on futures contracts, including certain additional risks.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets (10% of
the net assets of AIM MONEY MARKET FUND) in securities that are illiquid.
Illiquid securities include securities that have no readily available market
quotations and cannot be disposed of promptly (within seven days) in the normal
course of business at a price at which they are valued. Illiquid securities may
25
<PAGE> 30
include securities that are subject to restrictions on resale because they have
not been registered under the Securities Act of 1933. Restricted securities may,
in certain circumstances, be resold pursuant to Rule 144A, and thus may or may
not constitute illiquid securities. Limitations on the resale of restricted
securities may have an adverse effect on their marketability, which may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering such securities for resale, and the risk of
substantial delays in effecting such registrations. The Trust's Board of
Trustees is responsible for developing and establishing guidelines and
procedures for determining the liquidity of Rule 144A restricted securities on
behalf of the Funds and monitoring AIM's implementation of the guidelines and
procedures.
RISK FACTORS REGARDING NON-INVESTMENT GRADE DEBT SECURITIES. AIM HIGH YIELD
FUND, and to a lesser extent AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM
INCOME FUND and AIM MUNICIPAL BOND FUND, seek to meet their respective
investment objectives by investing in non-investment grade debt securities,
commonly known as "junk bonds." While generally providing greater income and
opportunity for gain, non-investment grade debt securities may be subject to
greater risks than higher-rated securities. Economic downturns tend to disrupt
the market for junk bonds and adversely affect their values. Such economic
downturns may be expected to result in increased price volatility for junk bonds
and of the value of shares of the above-named Funds, and increased issuer
defaults on junk bonds.
In addition, many issuers of junk bonds are substantially leveraged, which may
impair their ability to meet their obligations. In some cases, junk bonds are
subordinated to the prior payment of senior indebtedness, which potentially
limits a Fund's ability to fully recover principal or to receive payments when
senior securities are subject to a default.
The credit rating of a junk bond does not necessarily address its market value
risk, and ratings may from time to time change to reflect developments regarding
the issuer's financial condition. Junk bonds have speculative characteristics
which are likely to increase in number and significance with each successive
lower rating category.
When the secondary market for junk bonds becomes more illiquid, or in the
absence of readily available market quotations for such securities, the relative
lack of reliable objective data makes it more difficult for the trustees to
value a Fund's securities, and judgment plays a more important role in
determining such valuations. Increased illiquidity in the junk bond market also
may affect a Fund's ability to dispose of such securities at desirable prices.
In the event a Fund experiences an unexpected level of net redemptions, the
Fund could be forced to sell its junk bonds without regard to their investment
merits, thereby decreasing the asset base upon which the Fund's expenses can be
spread and possibly reducing the Fund's rate of return. Prices of junk bonds
have been found to be less sensitive to fluctuations in interest rates, and more
sensitive to adverse economic changes and individual corporate developments than
those of higher-rated debt securities.
INVESTMENTS IN FOREIGN SECURITIES. (All Funds except AIM INTERMEDIATE
GOVERNMENT FUND and AIM MUNICIPAL BOND FUND). Each Fund may invest up to 25% of
its total assets (up to 20% for AIM BALANCED FUND, 40% for AIM INCOME FUND, 50%
for AIM MONEY MARKET FUND and 80% for AIM GLOBAL UTILITIES FUND) in foreign
securities, although AIM MONEY MARKET FUND may only invest in foreign securities
denominated in U.S. dollars. To the extent it invests in securities denominated
in foreign currencies, each Fund bears the risks of changes in the exchange
rates between U.S. currency and the foreign currency, as well as the
availability and status of foreign securities markets. Each Fund (other than AIM
MONEY MARKET FUND) may invest in securities of foreign issuers which are in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), or other securities representing underlying securities of foreign
issuers, and such investments are treated as foreign securities for purposes of
percentage limitations on investments in foreign securities. For a discussion of
the risks pertaining to investments in foreign securities. See "Risk Factors
Regarding Foreign Securities" below.
FOREIGN EXCHANGE TRANSACTIONS. (All Funds except AIM INTERMEDIATE GOVERNMENT
FUND, AIM MONEY MARKET FUND and AIM MUNICIPAL BOND FUND). Each Fund has
authority to deal in foreign exchange between currencies of the different
countries in which it will invest as a hedge against possible variations in the
foreign exchange rates between those countries. This may be accomplished through
direct purchases or sales of foreign currency, purchases of options on futures
contracts with respect to foreign currency, and contractual agreements to
purchase or sell a specified currency at a specified future date (up to one
year) at a price set at the time of the contract. Such contractual commitments
may be forward contracts entered into directly with another party or exchange
traded futures contracts.
The Funds may purchase and sell options on futures contracts, forward
contracts or futures contracts which are denominated in a particular foreign
currency to hedge the risk of fluctuations in the value of another currency.
Each Fund's dealings in foreign exchange will be limited to hedging involving
either specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of foreign currency with respect to specific receivables or
payables of the Fund accruing in connection with the purchase or sale of its
portfolio securities, the sale and redemption of shares of the Fund, or the
payment of dividends and distributions by the Fund. Position hedging is the
purchase or sale of foreign currency with respect to portfolio security
positions denominated or quoted in a foreign currency. The Funds will not
speculate in foreign exchange. No Fund will commit a larger percentage of its
total assets to foreign ex-
26
<PAGE> 31
change hedges than the percentage of its total assets which it could invest in
foreign securities. Further information concerning futures contracts and related
options is set forth above.
RISK FACTORS REGARDING FOREIGN SECURITIES. Investments by a Fund in foreign
securities, whether denominated in U.S. dollars or foreign currencies, may
entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs or
similar securities also may entail some or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be affected by
changes in currency exchange rates. The U.S. dollar value of a foreign security
decreases when the value of the U.S. dollar rises against the foreign currency
in which the security is denominated, and increases when the value of the U.S.
dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which
the Funds may invest may not be as developed as the United States' economy and
may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation, and limitations on the
removal of funds or other assets could also adversely affect the value of the
Funds' investments.
Regulatory Risk. Foreign companies are not registered with the Securities and
Exchange Commission and are generally not subject to the regulatory controls
imposed on United States issuers and, as a consequence, there is generally less
publicly available information about foreign securities than is available about
domestic securities. Foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic companies. Income from foreign
securities owned by the Funds may be reduced by a withholding tax at the source,
which tax would reduce dividend income payable to the Fund's shareholders.
Market Risk. The securities markets in many of the countries in which the
Funds invest will have substantially less trading volume than the major United
States markets. As a result, the securities of some foreign companies may be
less liquid and experience more price volatility than comparable domestic
securities. Increased custodian costs as well as administrative costs (such as
the need to use foreign custodians) may be associated with the maintenance of
assets in foreign jurisdictions. There is generally less government regulation
and supervision of foreign stock exchanges, brokers and issuers which may make
it difficult to enforce contractual obligations. In addition, transaction costs
in foreign securities markets are likely to be higher, since brokerage
commission rates in foreign countries are likely to be higher than in the United
States.
PORTFOLIO TURNOVER. (All Funds except AIM MONEY MARKET FUND). Any particular
security will be sold, and the proceeds reinvested, whenever such action is
deemed prudent from the viewpoint of a Fund's investment objectives, regardless
of the holding period of that security. Each Fund's historical portfolio
turnover rates are included in the Financial Highlights tables above. A higher
rate of portfolio turnover may result in higher transaction costs, including
brokerage commissions. Also, to the extent that higher portfolio turnover
results in a higher rate of net realized capital gains to a Fund, the portion of
the Fund's distributions constituting taxable capital gains may increase. See
"Dividends, Distributions and Tax Matters."
- --------------------------------------------------------------------------------
MANAGEMENT
The overall management of the business and affairs of the Funds is vested in
the Trust's Board of Trustees. The Board of Trustees approves all significant
agreements between the Trust, on behalf of one or more of the Funds, and persons
or companies furnishing services to the Funds, including the investment advisory
agreement and administrative services agreement with AIM, the agreements with
AIM Distributors regarding distribution of each Fund's shares, the agreements
with State Street Bank and Trust Company and The Bank of New York as the
custodians and the transfer agency agreement with A I M Fund Services, Inc., a
wholly owned subsidiary of AIM. The day-to-day operations of each Fund are
delegated to the officers of the Trust and to AIM, subject always to the
objective and policies of the applicable Fund and to the general supervision of
the Board of Trustees. Certain trustees and officers of the Trust are affiliated
with AIM and A I M Management Group Inc. ("AIM Management"), the parent
corporation of AIM. AIM Management is a holding company engaged in the financial
services business and is an indirect wholly owned subsidiary of AMVESCAP plc.
AMVESCAP plc and its subsidiaries are an independent investment management group
engaged in institutional investment management and retail mutual fund businesses
in the United States, Europe and the Pacific Region. Information concerning the
Board of Trustees may be found in the Statement of Additional Information.
INVESTMENT ADVISOR. A I M Advisors, Inc. ("AIM"), 11 Greenway Plaza, Suite
100, Houston, Texas 77046, serves as the investment advisor to each Fund
pursuant to a master investment advisory agreement, dated as of February 28,
1997 (the "Advisory Agreement"). AIM was organized in 1976 and, together with
its subsidiaries, manages or advises 53 investment company portfolios. As of
July 15, 1997, the total assets of such investment company portfolios were
approximately $76.0 billion.
Under the terms of the Advisory Agreement, AIM supervises all aspects of each
Fund's operations and provides investment advisory services to the Funds. AIM
obtains and evaluates economic, statistical and financial information to
formulate and implement investment programs for the Funds. The Advisory
Agreement also provides that, upon the request of the Board of Trustees, AIM may
per-
27
<PAGE> 32
form or arrange for certain accounting and other administrative services for the
Funds which are not required to be performed by AIM under the Advisory
Agreement. The Board of Trustees has made such a request. As a result, AIM and
the Trust have entered into a master administrative services agreement
("Administrative Services Agreement"), dated as of February 28, 1997, pursuant
to which AIM is entitled to receive from each Fund reimbursement of its costs or
such reasonable compensation as may be approved by the Board of Trustees.
Currently, AIM is reimbursed for the services of the Funds' principal financial
officer and his staff, and any expenses related to fund accounting services. In
addition, pursuant to the terms of a Transfer Agency and Service Agreement,
A I M Fund Services, Inc. ("AFS"), a wholly owned subsidiary of AIM and
registered transfer agent, receives a fee for its provision of transfer agency,
dividend distribution and disbursement and shareholder services to the Funds.
AFS' principal address is P.O. Box 4739, Houston, Texas 77210-4739.
For a discussion of AIM's brokerage allocation policies and practices, see
"Portfolio Transactions and Brokerage" in the Statement of Additional
Information. In accordance with policies established by the Board of Trustees,
AIM may take into account sales of shares of the Funds and other funds advised
by AIM in selecting broker-dealers to effect portfolio transactions on behalf of
the Funds.
PORTFOLIO MANAGEMENT. AIM uses a team approach and disciplined investment
strategy in providing investment advisory services to all its accounts,
including the Funds. AIM's investment staff consists of approximately 125
individuals. While individual members of AIM's investment staff are assigned
primary responsibility for the day-to-day management of each of AIM's accounts,
all accounts are reviewed on a regular basis by AIM's Investment Policy
Committee to ensure that they are being invested in accordance with the
accounts' and AIM's investment policies. The individuals on the investment team
who are primarily responsible for the day-to-day management of each of the Funds
(other than AIM MONEY MARKET FUND) and their titles, if any, with AIM or its
subsidiaries and the Trust, the length of time they have been responsible for
the management of the Funds, their years of investment experience and prior
experience (if they have been with AIM for less than five years) are described
below:
AIM Balanced Fund. Claude C. Cody IV is Vice President of A I M Capital
Management, Inc. ("AIM Capital"), a wholly owned subsidiary of AIM; and has been
responsible for the Fund since its investment objective and policies were
changed to that of a balanced fund in 1993. Mr. Cody has been associated with
AIM and/or its subsidiaries since 1992 and has a total of 21 years of experience
as an investment professional. Robert G. Alley is Senior Vice President of AIM
Capital; Vice President of AIM and of the Trust; and also has been responsible
for the Fund since 1993. Mr. Alley has been associated with AIM and/or its
subsidiaries since 1992 and has a total of 25 years of experience as an
investment professional. Craig A. Smith is Vice President of AIM Capital and
also has been responsible for the Fund since 1996. Mr. Smith has been associated
with AIM since 1989 and has a total of eight years of experience as an
investment professional.
AIM Global Utilities Fund. Claude C. Cody IV and Robert G. Alley have been
responsible for the management of the Fund since 1992. Craig A. Smith has been
responsible for the management of the Fund since 1996. Background information
for Mr. Cody, Mr. Alley and Mr. Smith is discussed above with respect to the
management of AIM BALANCED FUND.
AIM Growth Fund. Jonathan C. Schoolar is Senior Vice President and Director of
AIM Capital, Vice President of AIM and the Trust, and has been responsible for
the Fund since 1994. He has been associated with AIM and/or its subsidiaries
since 1986 and has 14 years of experience as an investment professional. Robert
M. Kippes is Vice President of AIM Capital and has been responsible for the Fund
since 1994. Mr. Kippes has been associated with AIM and/or its subsidiaries
since 1989 and has a total of eight years of experience as an investment
professional. David P. Barnard is Vice President of AIM Capital and has been
responsible for the Fund since 1992. Mr. Barnard has been associated with AIM
and/or its subsidiaries since 1982 and has 23 years of experience as an
investment professional.
AIM High Yield Fund. John L. Pessarra is Vice President of AIM Capital and has
been responsible for the Fund since 1992. Mr. Pessarra has been associated with
AIM since 1990 and has a total of 13 years of experience as an investment
professional. Kevin E. Rogers is Vice President of AIM Capital and has been
responsible for the Fund since 1995. Mr. Rogers has been associated with AIM
and/or its subsidiaries since 1991 and has over 11 years of experience as an
investment professional.
AIM Income Fund. Robert G. Alley and John L. Pessarra have been responsible
for the management of the Fund since 1992. Mr. Alley's background is discussed
above with respect to the management of AIM BALANCED FUND, and Mr. Pessarra's
background is discussed above with respect to the management of AIM HIGH YIELD
FUND. Carolyn L. Gibbs is Vice President of AIM Capital and has been responsible
for the Fund since 1995. Ms. Gibbs has been associated with AIM since 1992 and
has over 14 years of experience as an investment professional.
AIM Intermediate Government Fund. Karen Dunn Kelley is Senior Vice President
of AIM Capital, Vice President of AIM and of the Trust and has been responsible
for the Fund since 1992. Ms. Kelley has been associated with AIM and/or its
subsidiaries since 1989 and has a total of 15 years of experience as an
investment professional. Meggan Walsh is Vice President of AIM Capital and has
been responsible for the Fund since 1992. Ms. Walsh has been associated with AIM
and/or its subsidiaries since 1991 and has 10 years of experience as an
investment professional. Paula A. Permenter has been responsible for the Fund
since 1996. Ms. Permenter has been
28
<PAGE> 33
associated with AIM and/or its subsidiaries since 1996 and has 11 years of
experience as an investment professional. Prior to joining AIM, she was an
Associate Trader and Investment Assistant with Van Kampen American Capital Asset
Management, Inc.
AIM Municipal Bond Fund. Richard A. Berry is Vice President of AIM Capital and
has been responsible for the Fund since 1992. Mr. Berry has been associated with
AIM and/or its subsidiaries since 1987 and has a total of 29 years of experience
as an investment professional. Stephen D. Turman is Vice President of AIM
Capital and has been responsible for the Fund since 1992. Mr. Turman has been
associated with AIM since 1985 and has a total of 14 years of experience as an
investment professional.
AIM Value Fund. Joel E. Dobberpuhl is Vice President of AIM Capital and has
been responsible for the Fund since 1992. Mr. Dobberpuhl has been associated
with AIM and/or its subsidiaries since 1990 and has a total of eight years of
experience as an investment professional. Robert A. Shelton is Investment
Officer of AIM Capital and has been responsible for the Fund since 1997. Mr.
Shelton has been associated with AIM and/or its subsidiaries since 1995 and has
a total of six years of experience as an investment professional.
FEES AND EXPENSES. For the fiscal year ended December 31, 1996, each Fund
(other than AIM MONEY MARKET FUND) paid the following compensation to AIM for
its advisory services, and the total expenses of each such Fund's class were,
stated as a percentage of that class' average daily net assets, as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
COMPENSATION EXPENSE EXPENSE
TO AIM RATIO RATIO
------------ ------- -------
<S> <C> <C> <C>
AIM Balanced Fund............................ 0.61% 1.15% 1.97%
AIM Global Utilities Fund.................... 0.58% 1.17% 1.96%
AIM Growth Fund.............................. 0.69% 1.18% 2.03%
AIM High Yield Fund.......................... 0.50% 0.97% 1.68%
AIM Income Fund.............................. 0.46% 0.98% 1.80%
AIM Intermediate Government Fund............. 0.48% 1.00% 1.76%
AIM Municipal Bond Fund...................... 0.47% 0.80% 1.61%
AIM Value Fund............................... 0.61%* 1.11% 1.94%
</TABLE>
- ---------------
* Net of advisory fee waivers. Without such waivers, the amount would have been
0.63%
For the year ended December 31, 1996, AIM MONEY MARKET FUND paid 0.55% of its
average daily net assets to AIM as compensation for its advisory services, and
the Class A shares', Class B shares' and AIM Cash Reserve Shares' total expenses
for such period were 1.07%, 1.81% and 1.08% of each Class' average daily net
assets, respectively.
For the fiscal year ended December 31, 1996, each Fund reimbursed AIM for
administrative services in the following amounts, stated as a percentage of the
Funds' average daily net assets:
<TABLE>
<CAPTION>
REIMBURSEMENT
PAYMENTS
-------------
<S> <C>
AIM Balanced Fund........................................... .02%
AIM Global Utilities Fund................................... .03%
AIM Growth Fund............................................. .02%
AIM High Yield Fund......................................... .01%
AIM Income Fund............................................. .02%
AIM Intermediate Government Fund............................ .03%
AIM Money Market Fund....................................... .01%
AIM Municipal Bond Fund..................................... .02%
AIM Value Fund.............................................. .002%
</TABLE>
FEE WAIVERS. In order to increase the return to investors, AIM may from time
to time voluntarily waive or reduce its fee, while retaining its ability to be
reimbursed for such fee prior to the end of each fiscal year. AIM is currently
voluntarily waiving a portion of its advisory fees payable by AIM VALUE FUND as
follows: 0.80% of the first $150 million of the Fund's average daily net assets,
plus 0.625% of the Fund's average daily net assets in excess of $150 million to
and including $2 billion, plus 0.60% of the Fund's average daily net assets in
excess of $2 billion. Fee waivers or reductions, other than those set forth in
the Advisory Agreement, may be rescinded at any time and without notice to
investors. During the year ended December 31, 1996, AIM VALUE FUND waived 0.02%
in advisory fees.
29
<PAGE> 34
DISTRIBUTOR. The Trust has entered into master distribution agreements
relating to the Funds (the "Distribution Agreements"), dated February 28, 1997,
with A I M Distributors, Inc. ("AIM Distributors"), a registered broker-dealer
and a wholly owned subsidiary of AIM, pursuant to which AIM Distributors acts as
the distributor of Class A, Class B and Class C shares of the Funds and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND. The address of AIM Distributors is P.O.
Box 4739, Houston, Texas 77210-4739. Certain trustees and officers of the Trust
are affiliated with AIM Distributors.
The Distribution Agreements provide AIM Distributors with the exclusive right
to distribute shares of the Funds directly and through institutions with whom
AIM Distributors has entered into selected dealer agreements. Under the
Distribution Agreement for the Class B shares, AIM Distributors sells Class B
shares at net asset value subject to a contingent deferred sales charge
established by AIM Distributors. AIM Distributors is authorized to advance to
institutions through whom Class B shares are sold a sales commission under
schedules established by AIM Distributors. The Distribution Agreement for the
Class B shares provides that AIM Distributors (or its assignee or transferee)
will receive 0.75% (of the total 1.00% payable under the distribution plan
applicable to Class B shares) of each Fund's average daily net assets
attributable to Class B shares attributable to the sales efforts of AIM
Distributors. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset-based
sales charges in respect of the outstanding Class B shares attributable to the
distribution efforts of AIM Distributors; provided, however, that a complete
termination of the Class B shares master distribution plan (as defined in the
plan) would terminate all payments to AIM Distributors. Termination of the Class
B shares distribution plan or Distribution Agreement does not affect the
obligation of Class B shareholders to pay contingent deferred sales charges.
DISTRIBUTION PLANS. Class A and C Plan. The Trust has adopted a Master
Distribution Plan applicable to Class A and Class C shares of the Funds (the
"Class A and C Plan") pursuant to Rule 12b-1 under the 1940 Act, to compensate
AIM Distributors for the purpose of financing any activity that is intended to
result in the sale of Class A and Class C shares of the Funds.
Under the Class A and C Plan, the Trust may compensate AIM Distributors an
aggregate amount of 0.25% of the average daily net assets of Class A shares of
each Fund on an annualized basis and an aggregate amount of 1.00% of the average
daily net assets of Class C shares of each Fund on an annualized basis.
The Class A and C Plan is designed to compensate AIM Distributors, on a
quarterly basis, for certain promotional and other sales-related costs, and to
implement a dealer incentive program which provides for periodic payments to
selected dealers who furnish continuing personal shareholder services to their
customers who purchase and own Class A or Class C shares of a Fund. Payments can
also be directed by AIM Distributors to selected institutions who have entered
into service agreements with respect to Class A and Class C shares of the Funds
and who provide continuing personal services to their customers who own Class A
and Class C shares of a Fund. The service fees payable to selected institutions
are calculated at the annual rate of 0.25% of the average daily net asset value
of those Fund shares that are held in such institution's customers' accounts
which were purchased on or after a prescribed date set forth in the Plan.
Of the aggregate amount payable under the Class A and C Plan, payments to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of a Fund,
in amounts of up to 0.25% of the average net assets of such Fund attributable to
the customers of such dealers or financial institutions are characterized as a
service fee, and that payments to dealers and other financial institutions in
excess of such amount and payments to AIM Distributors would be characterized as
an asset-based sales charge pursuant to the Class A and C Plan. The Class A and
C Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Trust with respect to a Fund.
The Class A and C Plan does not obligate the Funds to reimburse AIM Distributors
for the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Class A and C Plan on behalf of the Funds. Thus, under the Class A and
C Plan, even if AIM Distributors' actual expenses exceed the fee payable to AIM
Distributors thereunder at any given time, the Funds will not be obligated to
pay more than that fee. If AIM Distributors' expenses are less than the fee it
receives, AIM Distributors will retain the full amount of the fee. Payments
pursuant to the Plans are subject to any applicable limitations imposed by rules
of the National Association of Securities Dealers, Inc.
Class B Plan. The Trust has also adopted a Master Distribution Plan applicable
to Class B shares of the Funds (the "Class B Plan"). Under the Class B Plan,
each Fund pays distribution expenses at an annual rate of 1.00% of the average
daily net assets attributable to such Fund's Class B shares. Of such amount, the
Fund pays a service fee of 0.25% of the average daily net assets attributable to
such Fund's Class B shares to selected dealers and financial institutions who
furnish continuing personal shareholder services to their customers who purchase
and own Class B shares of the Fund. Any amounts not paid as a service fee would
constitute an asset-based sales charge. Amounts paid in accordance with the
Class B Plan with respect to any Fund may be used to finance any activity
primarily intended to result in the sale of Class B shares of such Fund.
Both Plans. Activities that may be financed under the Class A and C Plan and
the Class B Plan (collectively, the "Plans") include, but are not limited to:
printing of prospectuses and statements of additional information and reports
for other than existing shareholders, overhead, preparation and distribution of
advertising material and sales literature, supplemental payments to dealers and
other institutions such as asset-based sales charges or as payments of service
fees under shareholder service arrangements, and the cost of administering the
Plans. These amounts payable by a Fund under the Plans need not be directly
related to the expenses actually
30
<PAGE> 35
incurred by AIM Distributors on behalf of each Fund. Thus, even if AIM
Distributors' actual expenses exceed the fee payable to AIM Distributors
thereunder at any given time, the Trust will not be obligated to pay more than
that fee, and if AIM Distributors' expenses are less than the fee it receives,
AIM Distributors will retain the full amount of the fee. Payments pursuant to
the Plans are subject to any applicable limitations imposed by the rules of the
National Association of Securities Dealers, Inc.
Each of the Plans may be terminated at any time by a vote of the majority of
those trustees who are not "interested persons" of the Trust or by a vote of the
holders of the majority of the outstanding shares of the applicable class.
Under the Plans, AIM Distributors may in its discretion from time to time
agree to waive voluntarily all or any portion of its fee that has not been
assigned or transferred, while retaining its ability to be reimbursed for such
fee prior to the end of each fiscal year.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Funds on an agency basis, may
receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent, for the Funds in
making such payments. The Funds will obtain a representation from such financial
institutions that they will either be licensed as dealers as required under
applicable state law, or that they will not engage in activities which would
constitute acting as a "dealer" as defined under applicable state law. Financial
intermediaries and any other person entitled to receive compensation for selling
Fund shares may receive different compensation for selling shares of one class
over another.
For additional information concerning the operation of the Plans see the
Statement of Additional Information.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST
The Trust is organized as a Delaware business trust pursuant to an Agreement
and Declaration of Trust dated May 5, 1993, as amended (the "Trust Agreement").
The Trust is an open-end series management investment company, and may consist
of one or more series portfolios as authorized from time to time by the Board of
Trustees. The Trust currently consists of nine separate series, and each of the
Funds represents one series.
Class A shares, Class B shares, Class C shares and, in the case of AIM MONEY
MARKET FUND, AIM Cash Reserve Shares, of the same Fund represent interests in
that Fund's assets and have identical voting, dividend, liquidation and other
rights on the same terms and conditions, except that each class of shares bears
differing class-specific expenses, is subject to differing sales loads,
conversion features and exchange privileges, and has exclusive voting rights on
matters pertaining to that class' distribution plan (although shareholders of
Class A and Class C shares and AIM Cash Reserve Shares (of AIM MONEY MARKET
FUND) and Class B shareholders of a given portfolio must approve any material
increase in fees payable with respect to such portfolio under the Class A and C
Plan).
The Trust is not required to hold annual or regular meetings of shareholders.
Meetings of shareholders of a Fund will be held from time to time to consider
matters requiring a vote of such shareholders in accordance with the
requirements of the 1940 Act, state law or the provisions of the Trust
Agreement. It is not expected that shareholder meetings will be held annually.
Except as specifically noted above, shareholders of each Fund are entitled to
one vote per share (with proportionate voting for fractional shares),
irrespective of the relative net asset value of the shares of a Fund. However,
on matters affecting an individual Fund or class of shares, a separate vote of
shareholders of that Fund or class is required. Shareholders of a Fund or class
are not entitled to vote on any matter which does not affect that Fund or class
but which requires a separate vote of another Fund or class. An example of a
matter which would be voted on separately by shareholders of each Fund is the
approval of the Advisory Agreement, and an example of a matter which would be
voted on separately by shareholders of each class of shares is approval of the
distribution plans. When issued, shares of each Fund are fully paid and
nonassessable, have no preemptive or subscription rights, and are fully
transferable. Other than the automatic conversion of Class B shares to Class A
shares, there are no conversion rights. Shares do not have cumulative voting
rights, which means that in situations in which shareholders elect trustees,
holders of more than 50% of the shares voting for the election of trustees can
elect all of the trustees of the Trust, and the holders of less than 50% of the
shares voting for the election of trustees will not be able to elect any
trustees.
The Trust Agreement provides that the trustees of the Trust shall hold office
during the existence of the Trust, except as follows: (a) any trustee may resign
or retire; (b) any trustee may be removed by a vote of the majority of the
outstanding shares of the Trust, or at any time by written instrument signed by
at least two-thirds of the trustees and specifying when such removal becomes
effective; or (c) any trustee who has died or become incapacitated and is unable
to serve may be removed by a written instrument signed by a majority of the
trustees.
Under Delaware law, the shareholders of the Trust enjoy the same limitations
of liability extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
the Trust Agreement disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
trustee. The Trust Agreement provides for indemnification from the Trust
property for all losses and expenses of any shareholder held personally liable
for the Trust's obligations. Thus, the risk of a shareholder incurring financial
loss on account of such liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and where the other party was
held not to be bound by the disclaimer.
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<PAGE> 36
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND SHAREHOLDER
ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Registered Trademark--
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM ADVISOR CASH MANAGEMENT FUND(1),(2) AIM GLOBAL INCOME FUND
AIM ADVISOR FLEX FUND AIM GLOBAL UTILITIES FUND
AIM ADVISOR INCOME FUND(2) AIM GROWTH FUND
AIM ADVISOR INTERNATIONAL VALUE FUND AIM HIGH YIELD FUND
AIM ADVISOR LARGE CAP VALUE FUND AIM INCOME FUND
AIM ADVISOR MULTIFLEX FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM ADVISOR REAL ESTATE FUND AIM INTERNATIONAL EQUITY FUND
AIM AGGRESSIVE GROWTH FUND AIM LIMITED MATURITY TREASURY SHARES
AIM BALANCED FUND AIM MONEY MARKET FUND(1)
AIM BLUE CHIP FUND AIM MUNICIPAL BOND FUND
AIM CAPITAL DEVELOPMENT FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM CHARTER FUND AIM TAX-EXEMPT CASH FUND(1)
AIM CONSTELLATION FUND AIM TAX-FREE INTERMEDIATE SHARES
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM VALUE FUND
AIM GLOBAL GROWTH FUND AIM WEINGARTEN FUND
</TABLE>
(1) Class A shares of AIM TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM
MONEY MARKET FUND, and Class A and Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND, are offered to investors at net asset value, without
payment of a sales charge, as described below. Other funds, including the
Class A, Class B and Class C shares of AIM MONEY MARKET FUND, are sold with
an initial sales charge or subject to a contingent deferred sales charge
upon redemption, as described below.
(2)Fund closed to new investments on August 4, 1997. However, until October 3,
1997 the Fund will continue to accept investments (i) from shareholders of
record on August 4, 1997 of AIM ADVISOR CASH MANAGEMENT FUND, AIM ADVISOR
FLEX FUND, AIM ADVISOR INCOME FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM
ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND and AIM ADVISOR REAL
ESTATE FUND or (ii) on behalf of clients of selling group members who were
INVESCO Advisor Funds, Inc. selling group members on August 1, 1997. Please
refer to "Exchange Privilege" herein and the Fund's prospectus dated August
4, 1997.
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds ("AIM Funds"), an investor must submit a fully completed new Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by A I M Distributors, Inc. ("AIM
Distributors") to sell shares of the AIM Funds.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed IRS Form W-8 (for non-resident aliens) or Form
W-9 (certifying exempt status) accompanying the registration information will be
subject to backup withholding. See the Account Application for applicable
Internal Revenue Service penalties. The minimum initial investment is $500,
except for accounts initially established through an Automatic Investment Plan,
which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for an Individual Retirement Arrangement ("IRA") is $250. There are
no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, IRA/Simplified Employee
Pension ("SEP") accounts, 403(b) plans or 457 (state deferred compensation)
plans (except that the minimum initial investment for salary deferrals for such
plans is $25), or for investment of dividends and distributions of any of the
AIM Funds into any existing AIM Funds account. A Salary Reduction SEP ("SARSEP")
may not be established after December 31, 1996; however existing SARSEP accounts
can remain in effect.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
MCF-A 07/97
A-1
<PAGE> 37
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus are offered
pursuant to separate prospectuses. Copies of other prospectuses may be obtained
by calling (800) 347-4246.
HOW TO PURCHASE ADDITIONAL SHARES. The minimum investment for subsequent
purchases is $50. The minimum employee salary deferral investment for
participants in money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or
457 plans is $25. There are no such minimum investment requirements for
investment of dividends and distributions of any of the AIM Funds into any other
existing AIM Funds account.
Additional shares may be purchased directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors.
Direct investments may be made by mail or by wiring payment to AFS as follows:
SUBSEQUENT PURCHASES BY MAIL: Investors must indicate their account number and
the name of the Fund being purchased. The remittance slip from a confirmation
statement should be used for this purpose, and sent to AFS.
PURCHASES BY WIRE: To insure prompt credit to his account, an investor or his
dealer should call AFS' Client Services Department at (800) 959-4246 prior to
sending a wire to receive a reference number for the wire. The following wire
instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM ADVISOR CASH MANAGEMENT FUND, AIM ADVISOR FLEX FUND, AIM ADVISOR INCOME
FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND,
AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND, AIM AGGRESSIVE GROWTH
FUND, AIM BALANCED FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM
CHARTER FUND, AIM CONSTELLATION FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM
GROWTH FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
FUND, AIM INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND
FUND, AIM VALUE FUND and AIM WEINGARTEN FUND, collectively (other than AIM
AGGRESSIVE GROWTH FUND), the "Multiple Class Funds," may be purchased at their
respective net asset value plus a sales charge as indicated below, except that
Class A shares of AIM TAX-EXEMPT CASH FUND, Class A shares of AIM ADVISOR CASH
MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold
without a sales charge and Class B shares (the "Class B shares") and Class C
shares ("Class C shares") of the Multiple Class Funds (except Class C shares of
AIM ADVISOR CASH MANAGEMENT FUND) are sold at net asset value subject to a
contingent deferred sales charge payable upon certain redemptions. These
contingent deferred sales charges are described under the caption "How to Redeem
Shares -- Multiple Distribution System." Securities dealers and other persons
entitled to receive compensation for selling or servicing shares of a Multiple
Class Fund may receive different compensation for selling or servicing one
particular class of shares over another class in the same Multiple Class Fund.
Factors an investor should consider prior to purchasing Class A, Class B or
Class C shares (or, if applicable, AIM Cash Reserve Shares) of a Multiple Class
Fund are described below under "Special Information Relating to Multiple Class
Funds." For information on purchasing any of the AIM Funds and to receive a
prospectus, please call (800) 347-4246. As described below, the sales charge
otherwise applicable to a purchase of shares of a fund may be reduced if certain
conditions are met. In order to take advantage of a reduced sales charge, the
prospective investor or his dealer must advise AIM Distributors that the
conditions for obtaining a reduced sales charge have been met. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value." The following tables show the sales charge and dealer concession
at various investment levels for the AIM Funds.
MCF-A 07/97
A-2
<PAGE> 38
SALES CHARGES AND DEALER CONCESSIONS
GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds include Class A shares of each of AIM ADVISOR FLEX FUND, AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, AIM AGGRESSIVE GROWTH FUND, AIM BLUE CHIP FUND, AIM CAPITAL
DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM GLOBAL UTILITIES
FUND, AIM GROWTH FUND, AIM INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM
VALUE FUND and AIM WEINGARTEN FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
GROUP II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: the Class A shares of each of AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM ADVISOR INCOME FUND, AIM ADVISOR REAL ESTATE FUND, AIM BALANCED
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL
INCOME FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
FUND and AIM MUNICIPAL BOND FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
MCF-A 07/97
A-3
<PAGE> 39
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are AIM LIMITED MATURITY TREASURY SHARES and the Class A shares
of AIM TAX-FREE INTERMEDIATE SHARES.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than AIM LIMITED MATURITY TREASURY SHARES and AIM TAX-FREE INTERMEDIATE
SHARES as follows: 1% of the first $2 million of such purchases, plus 0.80% of
the next $1 million of such purchases, plus 0.50% of the next $17 million of
such purchases, plus 0.25% of amounts in excess of $20 million of such
purchases. See "Contingent Deferred Sales Charge Program for Large Purchases."
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), and which are sold at net
asset value and are not subject to a contingent deferred sales charge, in an
amount up to 0.10% of such purchases of shares of AIM LIMITED MATURITY TREASURY
SHARES, and in an amount up to 0.25% of such purchases of shares of AIM TAX-FREE
INTERMEDIATE SHARES.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.00% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price (0.60% of the
purchase price of the AIM ADVISOR INCOME FUND) of the Class C shares sold by the
dealer or institution, and will consist of a sales commission of 0.75% of the
purchase price (0.35% of the purchase price of the AIM ADVISOR INCOME FUND) of
the Class C shares sold plus an advance of the first year service fee of 0.25%
with respect to such shares. After the first full year, AIM Distributors will
make such payments quarterly to dealers and institutions based on the average
net asset value of Class C shares which are attributable to shareholders for
whom the dealers and institutions are designated as dealers of record. The
portion of the payments to AIM Distributors under the Class C Plan attributable
to Class C shares which constitutes an asset-based sales charge (0.75%) (0.35%
for AIM ADVISOR INCOME FUND) is intended in part to permit AIM Distributors to
recoup a portion of such on-going sales commission plus financing costs, if any.
MCF-A 07/97
A-4
<PAGE> 40
TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of the New York Stock Exchange ("NYSE"), which is generally 4:00 p.m.
Eastern Time (and which is hereinafter referred to as "NYSE Close") on any
business day of an AIM Fund will be confirmed at the price next determined.
Orders received after NYSE Close will be confirmed at the price determined on
the next business day of the AIM Fund. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent.
Any loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. Please see "How to Purchase
Shares -- Purchases by Wire" for information on obtaining a reference number for
wire orders, which will facilitate the handling of such orders and ensure prompt
credit to an investor's account. A "business day" of an AIM Fund is any day on
which the NYSE is open for business. It is expected that the NYSE will be closed
during the next twelve months on Saturdays and Sundays and on the days on which
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class Funds
currently offer two or more classes of shares through separate distribution
systems (the "Multiple Distribution System"). Although each class of shares of a
particular Multiple Class Fund represents an interest in the same portfolio of
investments, each class is subject to a different distribution structure and, as
a result, differing expenses. This Multiple Distribution System allows investors
to select the class that is best suited to the investor's needs and objectives.
In considering the options afforded by the Multiple Distribution System,
investors should consider both the applicable initial sales charge or contingent
deferred sales charge, as well as the ongoing expenses borne by each class of
shares and other relevant factors, such as whether his or her investment goals
are long-term or short-term.
CLASS A SHARES (except Class A shares of AIM ADVISOR CASH MANAGEMENT FUND)
are sold subject to the initial sales charges described above and are
subject to the other fees and expenses described herein. Class A shares of
AIM MONEY MARKET FUND are designed to meet the needs of an investor who
wishes to establish a dollar cost averaging program, pursuant to which
Class A shares an investor owns may be exchanged at net asset value for
Class A shares of another Multiple Class Fund or shares of another AIM Fund
which is not a Multiple Class Fund, subject to the terms and conditions
described under the caption "Exchange Privilege -- Terms and Conditions of
Exchanges."
CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Rule 12b-1 Plan payments of 1.00%
per annum on the average daily net assets of a Multiple Class Fund
attributable to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the date such shares were purchased are subject to a
contingent deferred sales charge ranging from 5% for redemptions made
within the first year to 1% for redemptions made within the sixth year. No
contingent deferred sales charge will be imposed if Class B shares are
redeemed after six years from the date such shares were purchased.
Redemptions of Class B shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B
shares was made. Following such conversion of their Class B shares,
investors will be relieved of the higher Rule 12b-1 Plan payments
associated with Class B shares. See "Management -- Distribution Plans."
CLASS C SHARES are sold without an initial sales charge. Thus the entire
purchase price of Class C shares is immediately invested in Class C shares.
Class C shares (except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND)
are subject, however, to Rule 12b-1 Plan payments of 1.00% per annum on the
average daily net assets of a Multiple Class Fund attributable to Class C
shares. See the discussion under the caption "Management -- Distribution
Plans." In addition, Class C shares (except Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) redeemed within one year from the date such shares
were purchased are subject to a 1.00% contingent deferred sales charge. No
contingent deferred sales charge will be imposed if Class C shares are
redeemed after one year from the date such shares were purchased.
Redemptions of Class C shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class A and Class C shares of AIM ADVISOR CASH MANAGEMENT FUND and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND are sold without an initial sales
charge and are not subject to a contingent deferred sales charge. (A
contingent deferred sales charge may be imposed upon redemptions of Class A
and Class C shares of AIM ADVISOR CASH MANAGEMENT FUND when such shares
were purchased in an exchange. See "How to Redeem Shares -- Multiple
Distribution System -- Class C Shares" and "How to Redeem
Shares -- Contingent Deferred Sales Charge Program for Large Purchases").
AIM Cash Reserve Shares of AIM MONEY MARKET FUND are, however, subject to
the other fees and expenses described in the prospectus for AIM MONEY
MARKET FUND.
MCF-A 07/97
A-5
<PAGE> 41
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon Eastern Time or NYSE Close on any
business day of the Fund will be confirmed at the price next determined. Net
asset value is normally determined at 12:00 noon Eastern Time and NYSE Close on
each business day of AIM MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO AIM ADVISOR CASH MANAGEMENT FUND, AIM MONEY
MARKET FUND, AND AIM TAX-EXEMPT CASH FUND (THE "MONEY MARKET FUNDS"). Because
each Money Market Fund uses the amortized cost method of valuing the securities
it holds and rounds its per share net asset value to the nearest whole cent, it
is anticipated that the net asset value of the shares of such funds will remain
constant at $1.00 per share. However, there is no assurance that each Money
Market Fund can maintain a $1.00 net asset value per share. In order to earn
dividends with respect to AIM MONEY MARKET FUND on the same day that a purchase
is made, purchase payments in the form of federal funds must be received by the
Transfer Agent before 12:00 noon Eastern Time on that day. Purchases made by
payments in any other form, or payments in the form of federal funds received
after such time but prior to NYSE Close, will begin to earn dividends on the
next business day following the date of purchase. The Money Market Funds
generally will not issue share certificates but will record investor holdings in
noncertificate form and regularly advise the shareholder of his ownership
position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
TAX-EXEMPT CASH FUND, Class A and Class C shares of AIM ADVISOR CASH MANAGEMENT
FUND, AIM Cash Reserve Shares of AIM MONEY MARKET FUND and Class B and Class C
shares of the Multiple Class Funds will not be taken into account in determining
whether a purchase qualifies for a reduction in initial sales charges.
The term "purchaser" means:
- an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, a single-participant
money-purchase/profit-sharing plan or an individual participant in a 403(b)
Plan (unless such 403(b) plan qualifies as the purchaser as defined below);
- a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
- a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
- a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP") where the employer has
notified AIM Distributors in writing that all of its related employee SEP or
SARSEP accounts should be linked;
MCF-A 07/97
A-6
<PAGE> 42
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
- the discretionary advised accounts of A I M Advisors, Inc. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge as provided herein.
(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for
(i) Class A shares of AIM TAX-EXEMPT CASH FUND, Class A and Class C shares of
AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY
MARKET FUND and (ii) Class B and Class C shares of the Multiple Class Funds)
within the following 13 consecutive months. By marking the LOI section on the
account application and by signing the account application, the purchaser
indicates that he understands and agrees to the terms of the LOI and is bound by
the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM TAX-EXEMPT CASH FUND, Class A and Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY MARKET FUND and (ii)
Class B and Class C shares of the Multiple Class Funds) at the time of the
proposed purchase. Rights of Accumulation are also available to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992. To determine
whether or not a reduced initial sales charge applies to a proposed purchase,
AIM Distributors takes into account not only the money which is invested upon
such proposed purchase, but also the value of all shares of the AIM Funds
(except for (i) Class A shares of AIM TAX-EXEMPT CASH FUND, Class A and Class C
shares of AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and (ii) Class B and Class C shares of the Multiple Class
Funds) owned by such purchaser, calculated at their then current public offering
price. If a purchaser so qualifies for a reduced sales charge, the reduced sales
charge applies to the total amount of money then being invested by such
purchaser and not just to the portion that exceeds the breakpoint above which a
reduced sales charge applies. For example, if a purchaser already owns
qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest
an additional $20,000 in a fund with a maximum
MCF-A 07/97
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<PAGE> 43
initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will
apply to the full $20,000 purchase and not just to the $15,000 in excess of the
$25,000 breakpoint. To qualify for obtaining the discount applicable to a
particular purchase, the purchaser or his dealer must furnish AFS with a list of
the account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a fund
(see "Dividends, Distributions and Tax Matters"); (b) exchanges of shares of
certain other funds (see "Exchange Privilege"); (c) use of the reinstatement
privilege (see "How to Redeem Shares"); or (d) a merger, consolidation or
acquisition of assets of a fund.
Shareholders of record of Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
shares of the particular AIM Fund(s) whose shares they owned on such date, at
net asset value (without payment of a sales charge) for as long as they
continuously own Class A shares of such AIM Fund(s) having a market value of at
least $500. In addition, discretionary advised clients of any investment
advisors whose clients held Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A shares of the applicable AIM
Fund(s) at the net asset value of such shares.
The following persons may purchase shares of the AIM Funds through AIM
Distributors without payment of an initial sales charge: (a) A I M Management
Group Inc. ("AIM Management") and its affiliated companies; (b) any current or
retired officer, director, trustee or employee, or any member of the immediate
family (including spouse, children, parents and parents of spouse) of any such
person, of AIM Management or its affiliates or of certain mutual funds which are
advised or managed by AIM, or any trust established exclusively for the benefit
of such persons; (c) any employee benefit plan established for employees of AIM
Management or its affiliates; (d) any current or retired officer, director,
trustee or employee, or any member of the immediate family (including spouse,
children, parents and parents of spouse) of any such person, or of CIGNA
Corporation or of any of its affiliated companies, or of First Data Investor
Services Group (formerly The Shareholders Services Group, Inc.); (e) any
investment company sponsored by CIGNA Investments, Inc. or any of its affiliated
companies for the benefit of its directors' deferred compensation plans; (f)
discretionary advised clients of AIM or AIM Capital; (g) registered
representatives and employees of dealers who have entered into agreements with
AIM Distributors (or financial institutions that have arrangements with such
dealers with respect to the sale of shares of the AIM Funds) and any member of
the immediate family (including spouse, children, parents and parents of spouse)
of any such person, provided that purchases at net asset value are permitted by
the policies of such person's employer; and (h) certain broker-dealers,
investment advisers or bank trust departments that provide asset allocation,
similar specialized investment services or investment company transaction
services for their customers, that charge a minimum annual fee for such
services, and that have entered into an agreement with AIM Distributors with
respect to their use of the AIM Funds in connection with such services.
In addition, shares of any AIM Fund may be purchased at net asset value,
without payment of a sales charge, by pension, profit-sharing or other employee
benefit plans created pursuant to a plan qualified under Section 401 of the Code
or plans under Section 457 of the Code, or employee benefit plans created
pursuant to Section 403(b) of the Code and sponsored by nonprofit organizations
defined under Section 501(c)(3) of the Code. Such plans will qualify for
purchases at net asset value provided that (1) the total amount invested in the
plan is at least $1,000,000, (2) the sponsor signs a $1,000,000 LOI, (3) such
shares are purchased by an employer-sponsored plan with at least 100 eligible
employees, or (4) all of the plan's transactions are executed through a single
financial institution or service organization who has entered into an agreement
with AIM Distributors with respect to their use of the AIM Funds in connection
with such accounts. Section 403(b) plans sponsored by public educational
institutions will not be eligible for net asset value purchases based on the
aggregate investment made by the plan or the number of eligible employees.
Participants in such plans will be eligible for reduced sales charges based
solely on the aggregate value of their individual investments in the applicable
AIM Fund. PLEASE NOTE THAT TAX-EXEMPT FUNDS ARE NOT APPROPRIATE INVESTMENTS FOR
SUCH PLANS. AIM Distributors may pay investment dealers or other financial
service firms for share purchases of the Load Funds (as defined on page A-10
herein) sold at net asset value to an employee benefit plan in accordance with
this paragraph as follows: 1% of the first $2 million of such purchases, plus
0.80% of the next $1 million of such purchases, plus 0.50% of the next $17
million of such purchases, plus 0.25% of amounts in excess of $20 million of
such purchases and up to 0.10% of the net asset value of any AIM Limited
Maturity Treasury Shares sold at net asset value to an employee benefit plan in
accordance with this paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A shares of such funds may also be purchased at net asset
value by other unit investment trusts approved by the Board of Directors of AIM
Equity Funds, Inc. Unit holders of such trusts may elect to invest cash
distributions from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND at net asset value, including: (a) distributions of any
dividend income or other income received by such trusts; (b) distributions of
any net capital gains received in respect of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sale of Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such trusts;
and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided:
MCF-A 07/97
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<PAGE> 44
(a) that the investment in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND is effected within 30 days of such redemption or repurchase;
and (b) that the unit holder or his dealer provides AIM Distributors with a
letter which: (i) identifies the name, address and telephone number of the
dealer who sold to the unit holder the units to be redeemed or repurchased; and
(ii) states that the investment in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND is being funded exclusively by the proceeds from the
redemption or repurchase of units of such trusts.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns shares which are not subject to a contingent deferred sales charge, can
arrange for monthly, quarterly or annual checks in any amount (but not less than
$50) to be drawn against the balance of his account in the designated AIM Fund.
Shareholders who own shares subject to a contingent deferred sales charge, can
only arrange for monthly or quarterly withdrawals under a Systematic Withdrawal
Plan. Payment of this amount can be made on any day of the month the shareholder
specifies, except the thirtieth or thirty-first day of each month in which a
payment is to be made. A minimum account balance of $5,000 is required to
establish a Systematic Withdrawal Plan, but there is no requirement thereafter
to maintain any minimum investment. With respect to shares subject to a
contingent deferred sales charge (all classes) no contingent deferred sales
charge will be imposed on withdrawals made under a Systematic Withdrawal Plan,
provided that the amounts withdrawn under such a plan do not exceed on an annual
basis 12% of the account value at the time the shareholder elects to participate
in the Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to
shares subject to a contingent deferred sales charge that exceed on an annual
basis 12% of such account will be subject to a contingent deferred sales charge
on the amounts exceeding 12% of the account value at the time the shareholder
elects to participate in the Systematic Withdrawal Plan.
Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested in shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic Withdrawal Plan, the Transfer Agent redeems sufficient full
and fractional shares at their net asset value in effect at the time of each
such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the Multiple Class Funds, AIM Cash
Reserve Shares of AIM MONEY MARKET FUND and Class A shares of AIM ADVISOR CASH
MANAGEMENT FUND), it is disadvantageous to effect such purchases while a
Systematic Withdrawal Plan is in effect.
The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make monthly or quarterly
investments may establish an Automatic Investment Plan. Under this plan, on or
about the tenth and/or twenty-fifth day of the applicable month, a draft is
drawn on the shareholder's bank account in the amount specified by the
shareholder (minimum $50 per investment, per account). The proceeds of the draft
are invested in shares of the designated AIM Fund at the applicable offering
price determined on the date of the draft. An Automatic Investment Plan may be
discontinued upon 10 days' prior notice to the Transfer Agent or AIM
Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
MCF-A 07/97
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<PAGE> 45
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; dividends and distributions attributable to Class C
shares may be reinvested in Class C shares of the same fund or in Class C shares
of another Multiple Class Fund; and dividends and distributions attributable to
AIM Cash Reserve Shares of AIM MONEY MARKET FUND may be reinvested in additional
shares of such fund, in Class A shares of another Multiple Class Fund or in
shares of another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" for a description
of payment dates for these options. In order to qualify to have dividends and
distributions of one AIM Fund invested in shares of another AIM Fund, the
following conditions must be satisfied: (a) the shareholder must have an account
balance in the dividend paying fund of at least $5,000; (b) the account must be
held in the name of the shareholder (i.e., the account may not be held in
nominee name); and (c) the shareholder must have requested and completed an
authorization relating to the reinvestment of dividends into another AIM Fund.
An authorization may be given on the account application or on an authorization
form available from AIM Distributors. An AIM Fund will waive the $5,000 minimum
account value requirement if the shareholder has an account in the fund selected
to receive the dividends and distributions with a value of at least $500.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." The account from
which exchanges are to be made must have a value of at least $5,000 when a
shareholder elects to begin this program, and the exchange minimum is $50 per
transaction. All of the accounts that are part of this program must have
identical registrations. The net asset value of shares purchased under this
program may vary, and may be more or less advantageous than if shares were not
exchanged automatically. There is no charge for entering the Dollar Cost
Averaging program. Sales charges may apply, as described under the caption
"Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM TAX-FREE
INTERMEDIATE SHARES, AIM TAX-EXEMPT CASH FUND, AIM MUNICIPAL BOND FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the following prototype
retirement plans available to corporations, individuals and employees of
non-profit organizations and public schools: combination money-
purchase/profit-sharing plans; 403(b) plans; IRA plans; SARSEP plans; and SEP
plans (collectively, "retirement accounts"). Information concerning these plans,
including the custodian's fees and the forms necessary to adopt such plans, can
be obtained by calling or writing the AIM Funds or AIM Distributors. Shares of
the AIM Funds are also available for investment through existing 401(k) plans
(for both individuals and employers) adopted under the Code. The plan custodian
currently imposes an annual $10 maintenance fee with respect to each retirement
account for which it serves as the custodian. This fee is generally charged in
December. Each AIM Fund and/or the custodian reserve the right to change this
maintenance fee and to initiate an establishment fee (not to exceed its cost).
MCF-A 07/97
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<PAGE> 46
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds,
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds (except AIM
ADVISOR CASH MANAGEMENT FUND), listed below and referred to herein as the "Load
Funds," are sold at a public offering price that includes a maximum sales charge
of 5.50% or 4.75% of the public offering price of such shares; Class A shares
(or shares which normally involve the payment of initial sales charges) of
certain of the AIM Funds, listed below and referred to herein as the "Lower Load
Funds," are sold at a public offering price that includes a maximum sales charge
of 1.00% of the public offering price of such shares; and Class A shares or
shares of certain other funds, listed below and referred to herein as the "No
Load Funds," are sold at net asset value, without payment of a sales charge.
<TABLE>
<S> <C> <C>
LOAD FUNDS: LOWER LOAD FUNDS:
AIM ADVISOR FLEX FUND -- AIM GLOBAL GROWTH AIM LIMITED MATURITY TREASURY SHARE
CLASS A FUND -- CLASS A AIM TAX-FREE INTERMEDIATE
AIM ADVISOR INCOME FUND -- AIM GLOBAL INCOME SHARES -- CLASS A
CLASS A FUND -- CLASS A NO LOAD FUNDS:
AIM ADVISOR INTERNATIONAL AIM GLOBAL UTILITIES
VALUE FUND -- CLASS A FUND -- CLASS A AIM ADVISOR CASH MANAGEMENT FUND
AIM ADVISOR LARGE CAP AIM GROWTH FUND -- CLASS A -- CLASS A
VALUE FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A AIM MONEY MARKET FUND
AIM ADVISOR MULTIFLEX AIM INCOME FUND -- CLASS A -- AIM CASH RESERVE SHARES
FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT AIM TAX-EXEMPT CASH FUND -- CLASS A
AIM ADVISOR REAL ESTATE FUND -- CLASS A
FUND -- CLASS A AIM INTERNATIONAL EQUITY
AIM AGGRESSIVE GROWTH FUND -- CLASS A
FUND -- CLASS A AIM MONEY MARKET
AIM BALANCED FUND -- CLASS A FUND -- CLASS A
AIM BLUE CHIP FUND -- CLASS A AIM MUNICIPAL BOND
AIM CAPITAL DEVELOPMENT FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM CHARTER FUND -- CLASS A OF CONNECTICUT -- CLASS A
AIM CONSTELLATION AIM VALUE FUND -- CLASS A
FUND -- CLASS A AIM WEINGARTEN FUND -- CLASS A
AIM GLOBAL AGGRESSIVE GROWTH
FUND -- CLASS A
</TABLE>
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund on
the terms described on the chart below, except that (i) effective August 4, 1997
(except with respect to shares of AIM ADVISOR CASH MANAGEMENT FUND, AIM ADVISOR
FLEX FUND, AIM ADVISOR INCOME FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM
ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND and AIM ADVISOR REAL
ESTATE FUND), no shares of any Load Fund, Class C of a Multiple Class Fund,
Lower Load Fund or No Load Fund may be exchanged for shares of AIM ADVISOR CASH
MANAGEMENT FUND or AIM ADVISOR INCOME FUND; (ii) effective October 3, 1997 no
share of any Load Fund, Class C of a Multiple Class Fund, Lower Load Fund or No
Load Fund may be exchanged for shares of AIM ADVISOR CASH MANAGEMENT FUND or AIM
ADVISOR INCOME FUND; (iii) Load Fund share purchases of $1,000,000 or more which
are subject to a contingent deferred sales charge may not be exchanged for Lower
Load Funds or for AIM TAX-EXEMPT CASH FUND; (iv) LOWER LOAD FUND SHARE PURCHASES
OF $1,000,000 OR MORE AND AIM Cash Reserve Shares of AIM MONEY MARKET FUND and
AIM TAX-EXEMPT CASH FUND PURCHASES MAY BE EXCHANGED FOR LOAD FUND SHARES IN
AMOUNTS OF $1,000,000 OR MORE WHICH WILL THEN BE SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE; HOWEVER, FOR PURPOSES OF CALCULATING THE CONTINGENT
DEFERRED SALES CHARGE ON THE LOAD FUND SHARES ACQUIRED, THE 18-MONTH PERIOD
SHALL BE COMPUTED FROM THE DATE OF SUCH EXCHANGE; (v) Class A shares and AIM
LIMITED MATURITY TREASURY SHARES may be exchanged for Class A shares or AIM
LIMITED MATURITY TREASURY SHARES, (vi) Class B shares may be exchanged only for
Class B shares; (vii) Class C shares may only be exchanged for Class C shares;
(viii) Class A shares of AIM ADVISOR CASH MANAGEMENT FUND may be exchanged for
Class A shares of any Load Fund, Lower Load Fund or No-Load Fund at net asset
value; (ix) Class C shares of AIM ADVISOR CASH MANAGEMENT FUND may be exchanged
for Class C shares of any Multiple Class Fund at net asset value; and (x) AIM
Cash Reserve Shares of AIM MONEY MARKET FUND may not be exchanged for Class A
shares of AIM MONEY MARKET FUND or for Class B or Class C shares.
MCF-A 07/97
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<PAGE> 47
Broker-dealers and institutions of record for Class A or Class C shares
purchased pursuant to an exchange from Class A or Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND will be compensated according to the sales commission or
concession that would apply if these Class A or Class C share purchases had been
purchased in a manner other than pursuant to an exchange.
DEPENDING UPON THE FUND FROM WHICH AND INTO WHICH AN EXCHANGE IS BEING MADE,
SHARES BEING ACQUIRED IN AN EXCHANGE MAY BE ACQUIRED AT THEIR OFFERING PRICE OR
AT THEIR NET ASSET VALUE (WITHOUT PAYMENT OF A SALES CHARGE) AS SET FORTH IN THE
TABLE BELOW FOR SHARES INITIALLY PURCHASED PRIOR TO MAY 1, 1994:
<TABLE>
<CAPTION>
MULTIPLE CLASS FUNDS:
LOWER LOAD NO LOAD ------------------------------
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B CLASS C
----- -------------- ----------------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load
Funds.......... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund or any Fund or any Lower Load
Lower Load Fund. Fund; otherwise,
Offering Price.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load
Funds.......... Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable Not Applicable
acquired upon exchange of any
Load Fund. Otherwise, difference
in sales charge will apply.
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund. Fund or any Lower Load
Difference in sales charge will Fund; otherwise, Of-
apply if No Load shares were fering Price.
acquired upon exchange of Lower
Load Fund shares.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
Class C........ Not Applicable Not Applicable Not Applicable Not Applicable Net Asset Value
</TABLE>
An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A, Class B and Class C shares of a Multiple Class Fund
cannot be exchanged for each other), except that AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may be exchanged for Class A shares of another Multiple Class
Fund; (b) the dollar amount of the exchange must be at least equal to the
minimum investment applicable to the shares of the fund acquired through such
exchange; (c) the shares of the fund acquired through exchange must be qualified
for sale in the state in which the shareholder resides; (d) the exchange must be
made between accounts having identical registrations and addresses; (e) the full
amount of the purchase price for the shares being exchanged must have already
been received by the fund; (f) the account from which shares have been exchanged
must be coded as having a certified taxpayer identification number on file or,
in the alternative, an appropriate Internal Revenue Service ("IRS") Form W-8
(certificate of foreign status) or Form W-9 (certifying exempt status) must have
been received by the fund; (g) newly acquired shares (through either an initial
or subsequent investment) are held in an account for at least ten business days,
and all other shares are held in an account for at least one day, prior to the
exchange; and (h) certificates representing shares must be returned before
shares can be exchanged. There is no fee for exchanges among the AIM Funds.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
MCF-A 07/97
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<PAGE> 48
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received after NYSE Close will result in the redemption of shares at their net
asset value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. Normally, shares of an AIM Fund to be acquired
by exchange are purchased at their net asset value or applicable offering price,
as the case may be, determined on the date that such request is received, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is determined that a fund would be materially disadvantaged
by an immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into a fund paying daily dividends (See "Dividends, Distributions and
Tax Matters -- Dividends and Distributions," below), and the release of the
exchange proceeds is delayed for the foregoing five-day period, such shareholder
will not begin to accrue dividends until the sixth business day after the
exchange. Shares purchased by check may not be exchanged until it is determined
that the check has cleared, which may take up to ten business days from the date
that the check is received. See "Terms and Conditions of Purchase of the AIM
Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AFS. The request should contain the account registration and
account number, the dollar amount or number of shares to be exchanged, and the
names of the funds from which and into which the exchange is to be made. The
request should comply with all of the requirements for redemption by mail,
except those required for redemption of IRAs. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AFS at (800) 959-4246. If a shareholder is unable to reach
AFS by telephone, he may also request exchanges by telegraph or use overnight
courier services to expedite exchanges by mail, which will be effective on the
business day received by the Transfer Agent as long as such request is received
prior to NYSE Close. The Transfer Agent and AIM Distributors will not be liable
for any loss, expense or cost arising out of any telephone exchange request that
they reasonably believe to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
Social Security Number and current address, and mailings of confirmations
promptly after the transaction.
EXCHANGES OF CLASS B AND CLASS C SHARES. A contingent deferred sales charge
will not be imposed in connection with exchanges among Class B shares or among
Class C shares. For purposes of determining a shareholder's holding period of
Class B or Class C shares in the calculation of the applicable contingent
deferred sales charge, the period of time during which Class B or Class C shares
were held prior to an exchange will be added to the holding period of the
applicable Class B or Class C shares (except for Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors. In
addition to the obligation of the fund(s) named on the cover page to redeem
shares, AIM Distributors also repurchases shares. Although a contingent deferred
sales charge may be applicable to certain redemptions, as described below, there
is no redemption fee imposed when shares are redeemed or repurchased; however,
dealers may charge service fees for handling repurchase transactions.
MULTIPLE DISTRIBUTION SYSTEM. Class B shares. Class B shares purchased under
the Multiple Distribution System may be redeemed on any business day of a
Multiple Class Fund at the net asset value per share next determined following
receipt of the redemption order, as described under the caption "Timing and
Pricing of Redemption Orders," less the applicable contingent deferred sales
charge shown in the table below. No deferred sales charge will be imposed (i) on
redemptions of Class B shares following six years from the date such shares were
purchased, (ii) on Class B shares acquired through reinvestments of dividends
and distributions attrib-
MCF-A 07/97
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<PAGE> 49
utable to Class B shares or (iii) on amounts that represent capital appreciation
in the shareholder's account above the purchase price of the Class B shares.
<TABLE>
<CAPTION>
YEAR CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
-------- -------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
Class C Shares. Class C shares purchased under the Multiple Distribution
System may be redeemed on any business day of a Multiple Class Fund at the net
asset value per share next determined following receipt of the redemption order,
as described under the caption "Timing and Pricing of Redemption Orders," less a
1% contingent deferred sales charge. No deferred sales charge will be imposed
(i) on redemptions of Class C shares following one year from the date such
shares were purchased; (ii) on Class C shares acquired through reinvestment of
dividends and distributions attributable to Class C shares; (iii) on amounts
that represent capital appreciation in the shareholder's account above the
purchase price of the Class C shares; (iv) on redemptions of additional
purchases of shares of AIM ADVISOR FLEX FUND, AIM ADVISOR INCOME FUND, AIM
ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, and AIM ADVISOR REAL ESTATE FUND, by shareholders of record on
April 30, 1995 of these funds. Shareholders whose broker/dealers maintain a
single omnibus account with the Transfer Agent on behalf of those shareholders,
perform sub-accounting functions with respect to those shareholders, and are
unable to segregate shareholders of record prior to April 30, 1995 from
shareholders whose accounts were opened after that date will be subject to a
CDSC on all purchases made after March 1, 1996; or (v) on Class C shares of AIM
ADVISOR CASH MANAGEMENT FUND except in certain cases when the shares were
purchased in an exchange. Redemptions of shares of AIM ADVISOR CASH MANAGEMENT
FUND are generally not subject to a contingent deferred sales charge; however, a
contingent deferred sales charge may be applicable to redemptions of shares of
AIM ADVISOR CASH MANAGEMENT FUND if the redeemed shares were exchanged from
another Class C share fund and the one year holding period in such fund has not
been completed.
Contingent deferred sales charges on Class B and Class C shares will be waived
on redemptions (1) following the death or post-purchase disability, as defined
in Section 72(m)(7) of the Code, of a shareholder or a settlor of a living trust
(provided AIM Distributors is notified of such death or post-purchase disability
at the time of the redemption request and is provided with satisfactory evidence
of such death or post-purchase disability), (2) in connection with certain
distributions from individual retirement accounts, custodial accounts maintained
pursuant to Code Section 403(b), deferred compensation plans qualified under
Code Section 457 and plans qualified under Code Section 401 (collectively,
"Retirement Plans"), (3) pursuant to a Systematic Withdrawal Plan, provided that
amounts withdrawn under such plan do not exceed on an annual basis 12% of the
value of the shareholder's investment in Class B or Class C shares at the time
the shareholder elects to participate in the Systematic Withdrawal Plan, (4)
effected pursuant to the right of a Multiple Class Fund to liquidate a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the designated minimum account size described in the
prospectus of such Multiple Class Fund, (5) effected by AIM of its investment in
Class B or Class C shares and (6) of Class C shares where such investor's dealer
of record, due to the nature of the investor's account, notifies AIM
Distributors prior to the time of investment that the dealer waives the payment
otherwise payable to the dealer described in the fifth paragraph under the
caption "Terms and Conditions of Purchase of the AIM Funds -- All Groups of AIM
Funds.".
Waiver category (1) above applies only to redemptions of Class B or Class C
shares held at the time of death or initial determination of post-purchase
disability.
Waiver category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or
beneficiaries who are age 70- 1/2 or older, and only with respect to that
portion of such distributions which does not exceed 12% annually of the
participant's or beneficiary's account value;
(ii) in kind transfers of assets where the participant or beneficiary
notifies AIM Distributors of such transfer no later than the time such
transfer occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement
Plan invested in Class B or Class C shares of one or more Multiple Class
Funds;
MCF-A 07/97
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<PAGE> 50
(iv) tax-free returns of excess contributions or returns of excess
deferral amounts; and
(v) distributions upon the death or disability (as defined in the
Code) of the participant or beneficiary.
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B and Class C shares of a Multiple Class Fund and purchases
of shares of the No Load Funds and Lower Load Funds, A CONTINGENT DEFERRED SALES
CHARGE OF 1% APPLIES TO PURCHASES OF $1,000,000 OR MORE THAT ARE REDEEMED WITHIN
18 MONTHS OF THE DATE OF PURCHASE. For a description of the AIM Funds
participating in this program, see "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions." This charge will be 1% of the
lesser of the value of the shares redeemed (excluding reinvested dividends and
capital gain distributions) or the total original cost of such shares. In
determining whether a contingent deferred sales charge is payable, and the
amount of any such charge, shares not subject to the contingent deferred sales
charge are redeemed first (including shares purchased by reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-MONTH PERIOD (i) shares of any Load
Fund, Class A shares of AIM ADVISOR CASH MANAGEMENT FUND or AIM Cash Reserve
Shares of AIM MONEY MARKET FUND which were acquired through an exchange of
shares which previously were subject to the 1% contingent deferred sales charge
will be credited with the period of time such exchanged shares were held, and
(ii) shares of any Load Fund which are subject to the 1% contingent deferred
sales charge and which were acquired through an exchange of shares of a Lower
Load Fund or a No Load Fund which previously were not subject to the 1%
contingent deferred sales charge will not be credited with the period of time
such exchanged shares were held. The charge will be waived in the following
circumstances: (1) redemptions of shares by employee benefit plans ("Plans")
qualified under Sections 401 or 457 of the Code, or Plans created under Section
403(b) of the Code and sponsored by nonprofit organizations as defined under
Section 501(c)(3) of the Code, where shares are being redeemed in connection
with employee terminations or withdrawals, and (a) the total amount invested in
a Plan is at least $1,000,000, (b) the sponsor of a Plan signs a letter of
intent to invest at least $1,000,000 in one or more of the AIM Funds, or (c) the
shares being redeemed were purchased by an employer-sponsored Plan with at least
100 eligible employees; provided, however, that Plans created under Section
403(b) of the Code which are sponsored by public educational institutions shall
qualify under (a), (b) or (c) above on the basis of the value of each Plan
participant's aggregate investment in the AIM Funds, and not on the aggregate
investment made by the Plan or on the number of eligible employees; (2)
redemptions of shares following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at least
$1,000,000; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of record, due to the nature of
the investor's account, notifies AIM Distributors prior to the time of
investment that the dealer waives the payments otherwise payable to the dealer
as described in the third paragraph under the caption "Terms and Conditions of
Purchase of the AIM Funds -- All Groups of AIM Funds"; and (5) pursuant to a
Systematic Withdrawal Plan, provided that amounts withdrawn under such plan do
not exceed on an annual basis 12% of the value of the shareholder's investment
in Class A shares at the time the shareholder elects to participate in the
Systematic Withdrawal Plan.
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnerships, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
In addition to these requirements, shareholders who have invested in a fund to
establish an IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares: (a) a statement
as to whether or not the shareholder has attained age 59- 1/2; and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or wired to the pre-authorized bank
account as indicated on the account application; (b) there has been no change of
address of record on the account within the preceding 30 days; (c) the shares to
be redeemed are not in certificate form; (d) the person requesting the
redemption can provide proper identification information; and (e) the proceeds
of the redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM
MCF-A 07/97
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<PAGE> 51
Distributors has made arrangements with certain dealers and investment advisors
to accept telephone instructions for the redemption of shares. AIM Distributors
reserves the right to impose conditions on these dealers and investment
advisors, including the condition that they enter into agreements (which contain
additional conditions with respect to the redemption of shares) with AIM
Distributors. The Transfer Agent and AIM Distributors will not be liable for any
loss, expense or cost arising out of any telephone redemption request effected
in accordance with the authorization set forth at that item of the account
application if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions if they do not follow reasonable procedures for verification of
telephone transactions. Such reasonable procedures may include recordings of
telephone transactions (maintained for six months), requests for confirmation of
the shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transaction.
EXPEDITED REDEMPTIONS (AIM MONEY MARKET FUND ONLY). If a redemption order is
received prior to 11:30 a.m. Eastern Time, the redemption will be effective on
that day and AIM MONEY MARKET FUND will endeavor to transmit payment on that
same business day. If the redemption order is received after 11:30 a.m. and
prior to NYSE Close, the redemption will be made at the next determined net
asset value and payment will generally be transmitted on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND, AIM ADVISOR CASH MANAGEMENT
FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND). After completing the
appropriate authorization form, shareholders may use checks to effect
redemptions from AIM TAX-EXEMPT CASH FUND, AIM ADVISOR CASH MANAGEMENT FUND and
the AIM Cash Reserve Shares of AIM MONEY MARKET FUND. This privilege does not
apply to retirement accounts or qualified plans. Checks may be drawn in any
amount of $250 or more. Checks drawn against insufficient shares in the account,
against shares held less than ten business days, or in amounts of less than the
applicable minimum will be returned to the payee. The payee of the check may
cash or deposit it in the same way as an ordinary bank check. When a check is
presented to the Transfer Agent for payment, the Transfer Agent will cause a
sufficient number of shares of such fund to be redeemed to cover the amount of
the check. Shareholders are entitled to dividends on the shares redeemed through
the day on which the check is presented to the Transfer Agent for payment.
TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds
(other than AIM MONEY MARKET FUND) are redeemed at their net asset value next
computed after a request for redemption in proper form (including signature
guarantees and other required documentation for written redemptions) is received
by the Transfer Agent, except that shares that are subject to a contingent
deferred sales charge, may be subject to the imposition of deferred sales
charges that will be deducted from the redemption proceeds. See "Multiple
Distribution System" and "Contingent Deferred Sales Charge Program for Large
Purchases." Orders for the redemption of shares received in proper form prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer's failure to
submit a request for redemption within the prescribed time frame will be borne
by that dealer. Telephone redemption requests must be made by NYSE Close on any
business day of an AIM Fund and will be confirmed at the price determined as of
the close of that day. No AIM Fund will accept requests which specify a
particular date for redemption or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally mailed within seven
days following the redemption date. However, in the event of a redemption of
shares purchased by check, the investor may be required to wait up to ten
business days before the redemption proceeds are sent. See "Terms and Conditions
of Purchase of the AIM Funds -- Timing of Purchase Orders." A charge for special
handling (such as wiring of funds or expedited delivery services) may be made by
the Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent by wire to
other than the bank of record for the account; (4) redemptions requesting
proceeds to be sent to a new address or an address that has been changed within
the past 30 days; (5) requests to transfer the registration of shares to another
owner; (6) telephone exchange and telephone redemption authorization forms; (7)
changes in previously designated wiring instructions; and (8) written
redemptions or exchanges of shares previously reported as lost, whether or not
the redemption amount is under $50,000 or the proceeds are to be sent to the
address of record. These requirements may be waived or modified upon notice to
shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the Securities and
Exchange Commission ("SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as
MCF-A 07/97
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<PAGE> 52
certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client
Services Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES AND LIMITED MATURITY TREASURY SHARES
ONLY). Within 90 days of a redemption, a shareholder may invest all or part of
the redemption proceeds in Class A shares of any AIM Fund (except Class A shares
of AIM ADVISOR CASH MANAGEMENT FUND) and AIM Limited Maturity Treasury Shares at
the net asset value next computed after receipt by the Transfer Agent of the
funds to be reinvested; provided, however, if the redemption was made from AIM
Limited Maturity Treasury Shares or Class A shares of AIM TAX-FREE INTERMEDIATE
SHARES, the reinvested proceeds will be subject to the difference in sales
charge between the shares redeemed and the shares the proceeds are reinvested
in. The shareholder must ask the Transfer Agent for such privilege at the time
of reinvestment. A realized gain on the redemption is taxable, and reinvestment
may alter any capital gains payable. If there has been a loss on the redemption
and shares of the same fund are repurchased, all of the loss may not be tax
deductible, depending on the timing and amount reinvested. Under the Code, if
the redemption proceeds of fund shares on which a sales charge was paid are
reinvested in (or exchanged for) shares of another AIM Fund at a reduced sales
charge within 90 days of the payment of the sales charge, the shareholder's
basis in the fund shares redeemed may not include the amount of the sales charge
paid, thereby reducing the loss or increasing the gain recognized from the
redemption; however, the shareholder's basis in the fund shares purchased will
include the sales charge. Each AIM Fund may amend, suspend or cease offering
this privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation. This privilege may only be exercised once
each year by a shareholder with respect to each AIM Fund.
Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares and who subsequently reinvest a portion or
all of the value of the redeemed shares in Class A shares of any AIM Fund within
90 days after such redemption may do so at net asset value if such privilege is
claimed at the time of reinvestment. Such reinvested proceeds will not be
subject to either a front-end sales charge at the time of reinvestment or an
additional contingent deferred sales charge upon subsequent redemption. In order
to exercise this reinvestment privilege, the shareholder must notify the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B or Class C shares.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon Eastern Time and NYSE Close with
respect to AIM MONEY MARKET FUND), on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an AIM Fund's share
will be determined as of the close of the NYSE on such day. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE.The net asset
value per share is calculated by subtracting a class' liabilities from its
assets and dividing the result by the total number of class shares outstanding.
The determination of net asset value per share is made in accordance with
generally accepted accounting principles. Among other items, liabilities include
accrued expenses and dividends payable, and total assets include portfolio
securities valued at their market value, as well as income accrued but not yet
received. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the supervision of
the fund's officers and in accordance with methods which are specifically
authorized by its governing Board of Directors or Trustees. Short-term
obligations with maturities of 60 days or less, and the securities held by the
Money Market Funds, are valued at amortized cost as reflecting fair value. AIM
MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT and AIM TAX-FREE
INTERMEDIATE SHARES value variable rate securities that have an unconditional
demand or put feature exercisable within seven days or less at par, which
reflects the market value of such securities.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund.
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- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund's policy regarding the payment of dividends and distributions is
set forth below.
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM ADVISOR CASH MANAGEMENT FUND.......... declared daily; paid monthly annually annually
AIM ADVISOR FLEX FUND..................... declared and paid quarterly quarterly annually
AIM ADVISOR INCOME FUND................... declared and paid monthly monthly annually
AIM ADVISOR INTERNATIONAL VALUE FUND...... declared and paid annually annually annually
AIM ADVISOR LARGE CAP VALUE FUND.......... declared and paid quarterly quarterly annually
AIM ADVISOR MULTIFLEX FUND................ declared and paid quarterly quarterly annually
AIM ADVISOR REAL ESTATE FUND.............. declared and paid quarterly quarterly annually
AIM AGGRESSIVE GROWTH FUND................ declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BLUE CHIP FUND........................ declared and paid annually annually annually
AIM CAPITAL DEVELOPMENT FUND.............. declared and paid annually annually annually
AIM CHARTER FUND.......................... declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................... declared and paid annually annually annually
AIM GLOBAL AGGRESSIVE GROWTH FUND......... declared and paid annually annually annually
AIM GLOBAL GROWTH FUND.................... declared and paid annually annually annually
AIM GLOBAL INCOME FUND.................... declared daily; paid monthly annually annually
AIM GLOBAL UTILITIES FUND................. declared daily; paid monthly annually annually
AIM GROWTH FUND........................... declared and paid annually annually annually
AIM HIGH YIELD FUND....................... declared daily; paid monthly annually annually
AIM INCOME FUND........................... declared daily; paid monthly annually annually
AIM INTERMEDIATE GOVERNMENT FUND.......... declared daily; paid monthly annually annually
AIM INTERNATIONAL EQUITY FUND............. declared and paid annually annually annually
AIM LIMITED MATURITY TREASURY SHARES...... declared daily; paid monthly annually annually
AIM MONEY MARKET FUND..................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................... declared daily; paid monthly annually annually
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT... declared daily; paid monthly annually annually
AIM TAX-EXEMPT CASH FUND.................. declared daily; paid monthly at least annually annually
AIM TAX-FREE INTERMEDIATE SHARES.......... declared daily; paid monthly annually annually
AIM VALUE FUND............................ declared and paid annually annually annually
AIM WEINGARTEN FUND....................... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods.
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to a class are reinvested in additional
shares of such class, absent an election by a shareholder to receive cash or to
have such dividends and distributions reinvested in like shares of another
Multiple Class Fund, to the extent permitted. For funds that do not declare a
dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the ex-dividend date. For funds that declare
a dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or the
dividend portion thereof, in cash, or to invest such dividends and distributions
in shares of another fund in the AIM Funds; provided that (i) dividends and
distributions attributable to Class B shares may only be reinvested in Class B
shares, (ii) dividends and distributions attributable to Class C shares may only
be reinvested in Class C shares (except Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND) (iii) dividends and distributions attributable to Class A
shares or AIM Limited Maturity Treasury Shares may not be reinvested in Class A
shares of AIM ADVISOR CASH MANAGEMENT FUND or Class B or Class C shares, and
(iv) dividends and distributions attributable to the AIM Cash Reserve Shares of
AIM MONEY MARKET FUND may not be reinvested in the Class A shares of that Fund
or in any Class B or Class C shares. Investors who have not previously selected
such a reinvestment option on the account application form may contact the
Transfer Agent at any time to obtain a form to authorize such reinvestments in
another AIM Fund. Such reinvestments into the AIM Funds are not subject to sales
charges, and shares so purchased are automatically credited to the account of
the shareholder.
Dividends on Class B and Class C shares (except Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) are expected to be lower than those for Class A shares or
AIM Cash Reserve Shares because of higher distribution fees paid by Class B and
Class C shares (except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND).
Dividends on all shares may also be affected by other class-specific expenses.
MCF-A 07/97
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<PAGE> 54
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
TAX MATTERS
Each AIM Fund has qualified and intends to qualify for treatment as a
regulated investment company under Subchapter M of the Code. As long as a fund
qualifies for this tax treatment, it is not subject to federal income taxes on
net investment income and capital gains that are distributed to shareholders.
Each fund, for purposes of determining taxable income, distribution requirements
and other requirements of Subchapter M, is treated as a separate corporation.
Therefore, no fund may offset its gains against another fund's losses and each
fund must individually comply with all of the provisions of the Code which are
applicable to its operations.
TAX TREATMENT OF DISTRIBUTIONS -- GENERAL. Because each AIM Fund intends to
distribute substantially all of its net investment income and net realized
capital gains to its shareholders, it is not expected that any such fund will be
required to pay any federal income tax. Each AIM Fund also intends to meet the
distribution requirements of the Code to avoid the imposition of a
non-deductible 4% excise tax calculated as a percentage of certain undistributed
amounts of taxable ordinary income and capital gain net income. Nevertheless,
shareholders normally are subject to federal income taxes, and any applicable
state and local income taxes, on the dividends and distributions received by
them from a fund whether in the form of cash or additional shares of a fund,
except for tax-exempt dividends paid by AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND, and AIM TAX-FREE
INTERMEDIATE SHARES (the "Tax-Exempt Funds") which are exempt from federal tax.
Dividends paid by a fund (other than capital gain distributions) may qualify for
the federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM ADVISOR CASH
MANAGEMENT FUND, AIM ADVISOR INCOME FUND, AIM ADVISOR INTERNATIONAL VALUE FUND,
AIM ADVISOR REAL ESTATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL INCOME FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED
MATURITY TREASURY SHARES, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND or AIM TAX-FREE
INTERMEDIATE SHARES will qualify for this dividends received deduction. Shortly
after the end of each year, shareholders will receive information regarding the
amount and federal income tax treatment of all distributions paid during the
year. Certain dividends declared in October, November or December of a calendar
year are taxable to shareholders as though received on December 31 of that year
if paid to shareholders during January of the following calendar year. No gain
or loss will be recognized by shareholders upon the automatic conversion of
Class B shares of a Multiple Class Fund into Class A shares of such Fund. With
respect to tax-exempt shareholders, distributions from the Funds will not be
subject to federal income taxation to the extent permitted under the applicable
tax-exemption.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, SHAREHOLDERS OF A FUND MUST
FURNISH THE FUND WITH THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER
PENALTIES OF PERJURY THAT THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT
SUBJECT TO BACKUP WITHHOLDING FOR ANY REASON.
Under existing provisions of the Code, nonresident alien individuals, foreign
partnerships and foreign corporations may be subject to federal income tax
withholding at a 30% rate on ordinary income dividends and distributions (other
than exempt-interest dividends and capital gain dividends) and return of capital
distributions. Under applicable treaty law, residents of treaty countries may
qualify for a reduced rate of withholding or a withholding exemption.
DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE OR LOCAL TAX
LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED HEREIN.
ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE STATEMENT OF ADDITIONAL
INFORMATION.
TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may give rise to a federal alternative minimum tax liability, may
affect the amount of social security benefits subject to federal income tax, may
affect the deductibility of interest on certain indebtedness of the shareholder,
and may have other collateral federal income tax consequences. The Tax-Exempt
Funds may invest in Municipal Securities the interest on which will constitute
an item of tax preference and which therefore could give rise to a federal
alternative minimum tax liability for shareholders, and may invest up to 20% of
their net assets in such securities and
MCF-A 07/97
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<PAGE> 55
other taxable securities. For additional information concerning the alternative
minimum tax and certain collateral tax consequences of the receipt of
exempt-interest dividends, see the Statements of Additional Information
applicable to the Tax-Exempt Funds.
The Tax-Exempt Funds may pay dividends to shareholders which are taxable, but
will endeavor to avoid investments which would result in taxable dividends. The
percentage of dividends which constitute exempt-interest dividends, and the
percentage thereof (if any) which constitute an item of tax preference, will be
determined annually. This percentage may differ from the actual percentages for
any particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional shares.
Distributions of net long-term capital gains will be taxable as long-term
capital gains, whether received in cash or additional shares, and regardless of
the length of time a particular shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM INTERMEDIATE GOVERNMENT FUND and AIM LIMITED MATURITY TREASURY
SHARES -- SPECIAL TAX INFORMATION. Certain states exempt from state income taxes
dividends paid by mutual funds out of interest on U.S. Treasury and certain
other U.S. Government obligations, and investors should consult with their own
tax advisors concerning the availability of such exemption.
AIM ADVISOR INTERNATIONAL VALUE FUND, AIM INTERNATIONAL EQUITY FUND, AIM
GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND
AND AIM GLOBAL UTILITIES FUND -- SPECIAL TAX INFORMATION. For taxable years in
which it is eligible to do so, each of these funds may elect to pass through to
shareholders credits for foreign taxes paid. If the fund makes such an election,
a shareholder who receives a distribution (1) will be required to include in
gross income his proportionate share of foreign taxes allocable to the
distribution and (2) may claim a credit or deduction for such share for his
taxable year in which the distribution is received, subject to the general
limitations imposed on the allowance of foreign tax credits and deductions.
Shareholders should also note that certain gains or losses attributable to
fluctuations in exchange rates or foreign currency forward contracts may
increase or decrease the amount of income of the fund available for distribution
to shareholders, and should note that if such losses exceed other income during
a taxable year, the fund would not be able to pay ordinary income dividends.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM MUNICIPAL BOND
FUND, AIM LIMITED MATURITY TREASURY SHARES AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE SHARES, for
which The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, serves as custodian. Texas Commerce Bank National Association, P.O. Box
2558, Houston, Texas 77252-8084, serves as Sub-Custodian for retail purchases of
the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each AIM Fund's transfer agent and dividend
payment agent.
LEGAL COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll,
Philadelphia, Pennsylvania, serves as counsel to the AIM Funds and passes upon
the legality of the shares offered pursuant to this Prospectus.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
MCF-A 07/97
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<PAGE> 56
APPENDIX A
- --------------------------------------------------------------------------------
DESCRIPTION OF MONEY MARKET INSTRUMENTS
The following list does not purport to be an exhaustive list of all Money
Market Instruments, and the Funds reserve the right to invest in Money Market
Instruments other than those listed below:
U.S. GOVERNMENT DIRECT OBLIGATIONS -- Bills, notes and bonds issued by the U.S.
Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES -- Certain federal agencies such as the
Government National Mortgage Association have been established as
instrumentalities of the U.S. Government to supervise and finance certain types
of activities. Issues of these agencies, while not direct obligations of the
U.S. Government, are either backed by the full faith and credit of the United
States or are guaranteed by the Treasury or supported by the issuing agencies'
right to borrow from the Treasury.
BANKERS' ACCEPTANCES -- A bill of exchange or time draft drawn on and accepted
by a commercial bank. It is used by corporations to finance the shipment and
storage of goods and to furnish dollar exchange. Maturities are generally six
months or less.
CERTIFICATES OF DEPOSIT -- A negotiable interest-bearing instrument with a
specific maturity. Certificates of deposit are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market, prior to maturity.
TIME DEPOSITS -- A non-negotiable receipt issued by a bank in exchange for the
deposit of funds. Like a certificate of deposit, it earns a specified rate of
interest over a definite period of time; however, it cannot be traded in the
secondary market.
COMMERCIAL PAPER -- The term used to designate unsecured short-term promissory
notes issued by corporations and other entities. Maturities on these issues vary
from a few days to nine months.
REPURCHASE AGREEMENTS -- A repurchase agreement is a contractual undertaking
whereby the seller of securities (limited to U.S. Government securities,
including securities issued or guaranteed by the U.S. Treasury or the various
agencies and instrumentalities of the U.S. Government, including mortgage-backed
securities issued by U.S. Government agencies) agrees to repurchase the
securities at a specified price on a future date determined by negotiations.
MASTER NOTES -- Unsecured demand notes that permit investment of fluctuating
amounts of money at varying rates of interest pursuant to arrangements with
issuers who meet the quality criteria of a Fund. The interest rate on a master
note may fluctuate based upon changes in specified interest rates or be reset
periodically according to a prescribed formula or may be a set rate. Although
there is no secondary market in master notes, if such notes have a demand
feature, the payee may demand payment of the principal amount of the note on
relatively short notice.
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks or corporations,
may carry variable or floating rates of interest. Such instruments bear interest
at rates which are not fixed, but which vary with changes in specified market
rates or indices, such as a Federal Reserve composite index.
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<PAGE> 57
APPENDIX B
- --------------------------------------------------------------------------------
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED
BY U.S. GOVERNMENT AGENCIES OR INSTRUMENTALITIES
AIM INTERMEDIATE GOVERNMENT FUND may invest in "Agency Securities," as defined
in the Prospectus, including some or all of those listed below. The following
list does not purport to be an exhaustive list of all Agency Securities, and the
Fund reserves the right to invest in Agency Securities other than those listed
below.
EXPORT-IMPORT BANK CERTIFICATES -- are certificates of beneficial interest and
participation certificates issued and guaranteed by the Export-Import Bank of
the United States.
FEDERAL FARM CREDIT SYSTEM NOTES AND BONDS -- are bonds issued by a
cooperatively owned, nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
FEDERAL HOME LOAN BANK NOTES AND BONDS -- are notes and bonds issued by the
Federal Home Loan Bank System.
FHA DEBENTURES -- are debentures issued by the Federal Housing Administration
of the U.S. Government.
FHA INSURED NOTES -- are bonds issued by the Farmers Home Administration of
the U.S. Government.
FEDERAL HOME LOAN MORTGAGE CORPORATION ("FHLMC") BONDS -- are bonds issued and
guaranteed by FHLMC, a corporate instrumentality of the U.S. Government. The
Federal Home Loan Banks own all the capital stock of FHLMC, which obtains its
funds by selling mortgages (as well as participation interests in the mortgages)
and by borrowing funds through the issuance of debentures and otherwise.
FHLMC PARTICIPATION CERTIFICATES OR "FREDDIE MACS" -- represent undivided
interests in specified groups of conventional mortgage loans (and/or
participation interests in those loans) underwritten and owned by FHLMC. At
least 95% of the aggregate principal balance of the whole mortgage loans and/or
participations in a group formed by FHLMC typically consist of single-family
mortgage loans, and not more than 5% consists of multi-family loans. FHLMC
Participation Certificates are not guaranteed by, and do not constitute a debt
or obligation of, the U.S. Government or any Federal Home Loan Bank. FHLMC
Participation Certificates are issued in fully registered form only, in original
unpaid principal balances of $25,000, $100,000, $200,000, $500,000, $1 million
and $5 million. FHLMC guarantees to each registered holder of a Participation
Certificate, to the extent of such holder's pro rata share (i) the timely
payment of interest accruing at the applicable certificate rate on the unpaid
principal balance outstanding on the mortgage loans, and (ii) collection of all
principal on the mortgage loans without any offset or deductions. Pursuant to
these guaranties, FHLMC indemnifies holders of Participation Certificates
against any reduction in principal by reason of charges for property repairs,
maintenance, and foreclosure.
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") BONDS -- are bonds issued and
guaranteed by the Federal National Mortgage Association, a federally chartered
and privately-owned corporation.
FNMA PASS-THROUGH CERTIFICATES OR "FANNIE MAES" -- are mortgage pass-through
certificates issued and guaranteed by FNMA. FNMA Certificates represent a
fractional undivided ownership interest in a pool of mortgage loans either
provided from FNMA's own portfolio or purchased from primary lenders. The
mortgage loans included in the pool are conventional, insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. FNMA
Certificates are not backed by, nor entitled to, the full faith and credit of
the U.S. Government.
Loans not provided from FNMA's own portfolio are purchased only from primary
lenders that satisfy certain criteria developed by FNMA, including depth of
mortgage origination experience, servicing experience and financial capacity.
FNMA may purchase an entire loan pool from a single lender, and issue
Certificates backed by that loan pool alone, or may package a pool made up of
loans purchased from various lenders.
Various types of mortgage loans, and loans with varying interest rates, may be
included in a single pool, although each pool will consist of mortgage loans
related to one-family or two-to-four family residential properties.
Substantially all FNMA mortgage pools currently consist of fixed interest rate
and growing equity mortgage loans, although FNMA mortgage pools may also consist
of adjustable interest rate mortgage loans or other types of mortgage loans.
Each mortgage loans must conform to FNMA's published requirements or guidelines
with respect to maximum principal amount, loan-to-value ratio, loan term,
underwriting standards and insurance coverage.
All mortgage loans are held by FNMA as trustee pursuant to a trust indenture
for the benefit of Certificate holders. The trust indenture gives FNMA
responsibility for servicing or administering the loans in a pool. FNMA
contracts with the lenders or other servicing institutions to perform all
services and duties customary to the servicing of mortgages, as well as duties
specifically prescribed by FNMA, and under FNMA supervision. FNMA may remove
service providers for cause.
The pass-through rate on FNMA Certificates is the lowest annual interest rate
borne by an underlying mortgage loan in the pool, less a fee to FNMA as
compensation for servicing and for FNMA's guarantee. Lenders servicing the
underlying mortgage loans receive as
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compensation a portion of the fee paid to FNMA, the excess yields on pooled
loans with coupon rates above the lowest rate borne by any mortgage loan in the
pool and certain other amounts collected, such as late charges.
The minimum size of a FNMA pool is $1 million of mortgage loans. Registered
holders purchase Certificates in amounts not less than $25,000.
FNMA Certificates are marketed by the servicing lender banks, usually through
securities dealers. The lender of a single lender pool typically markets all
Certificates based on that pool, and lenders of multiple lender pools market
Certificates based on a pro rata interest in the aggregate pool. The amounts of
FNMA Certificates currently outstanding is limited.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") CERTIFICATES OR "GINNIE
MAES" -- are mortgage-backed securities which represent a partial ownership
interest in a pool of mortgage loans issued by lenders such as mortgage bankers,
commercial banks and savings and loan associations. Each mortgage loan included
in the pool is either insured by the Federal Housing Administration or
guaranteed by the Veterans Administration. A "pool" or group of such mortgages
is assembled, and, after being approved by GNMA, is offered to investors through
securities dealers. GNMA is a U.S. Government corporation within the Department
of Housing and Urban Development.
The Portfolio will purchase only GNMA Certificates of the "modified
pass-through" type, which entitle the holder to receive its proportionate share
of all interest and principal payments owed on the mortgage pool, net of fees
paid to the issuer and GNMA, regardless of whether or not the mortgagor actually
makes the payment. GNMA Certificates differ from bonds in that the principal is
paid back monthly by the borrower over the term of the loan rather than returned
in a lump sum at maturity. Payment of principal of and interest on GNMA
Certificates of the "modified pass-through" type is guaranteed by GNMA and
backed by the full faith and credit of the U.S. Government.
The average life of a GNMA Certificate is likely to be substantially less than
the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return on the greater part of principal invested far in advance of
the maturity of the mortgages in the pool. Foreclosures impose no risk to
principal investment because of the GNMA guarantee.
As the prepayment rates of individual mortgage pools will vary widely, it is
not possible to accurately predict the average life of a particular issue of
GNMA Certificates. However, statistics published by the FHA indicate that the
average life of a single-family dwelling mortgage with 25- to 30-year maturity,
the type of mortgage which backs the vast majority of GNMA Certificates, is
approximately 12 years. It is therefore customary practice to treat GNMA
Certificates as 30-year mortgage-backed securities which prepay fully in the
twelfth year.
As a consequence of the fees paid to GNMA and the issuer of GNMA Certificates,
the coupon rate of interest of GNMA Certificates is lower than the interest paid
on the VA-guaranteed or FHA-insured mortgages underlying the Certificates.
The yield which will be earned on GNMA Certificates may vary from their coupon
rates for the following reasons: (i) Certificates may be issued at a premium or
discount, rather than at par; (ii) Certificates may trade in the secondary
market at a premium or discount after issuance; (iii) interest is earned and
compounded monthly which has the effect of raising the effective yield earned on
the Certificates; and (iv) the actual yield of each Certificate is affected by
the prepayment of mortgages included in the mortgage pool underlying the
Certificates and the rate at which principal so prepaid is reinvested. In
addition, prepayment of mortgages included in the mortgage pool underlying a
GNMA Certificate purchased at a premium may result in a loss to the Portfolio.
Due to the large amount of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors, GNMA
Certificates are highly liquid instruments. Prices of GNMA Certificates are
readily available from securities dealers and depend on, among other things, the
level of market rates, the Certificate's coupon rate and the prepayment
experience of the pool of mortgages backing each Certificate.
GENERAL SERVICES ADMINISTRATION PARTICIPATION CERTIFICATES -- are
participation certificates issued by the General Services Administration of the
U.S. Government.
MARITIME ADMINISTRATION BONDS -- are bonds issued and provided by the
Department of Transportation of the U.S. Government.
NEW COMMUNITIES DEBENTURES -- are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
PUBLIC HOUSING NOTES AND BONDS -- are short-term project notes and long-term
bonds issued by public housing and urban renewal agencies in connection with
programs administered by the Department of Housing and Urban Development of the
U.S. Government, the payment of which is secured by the U.S. Government.
SBA DEBENTURES -- are debentures fully guaranteed as to principal and interest
by the Small Business Administration of the U.S. Government.
SLMA DEBENTURES -- are debentures backed by the Student Loan Marketing
Association.
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TITLE XI BONDS -- are bonds issued in accordance with the provisions of Title
XI of the Merchant Marine Act of 1936, as amended, the payment of which is
guaranteed by the U.S. Government.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY BONDS -- are bonds issued by
the Washington Metropolitan Area Transit Authority and are guaranteed by the
Secretary of Transportation of the U.S. Government.
A-24
<PAGE> 60
APPENDIX C
- --------------------------------------------------------------------------------
DESCRIPTIONS OF RATING CATEGORIES
The following are descriptions of ratings assigned by Moody's Investors
Service, Inc. ("Moody's") and Standard and Poor's Ratings Services ("S&P") to
certain debt securities in which AIM HIGH YIELD FUND and AIM INCOME FUND may
invest. See the Statement of Additional Information for descriptions of other
Moody's and S&P rating categories and those of other rating agencies.
MOODY'S: Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. These are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements, their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
S&P: AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C -- Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the lowest degree of speculation and
C the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or large exposures
to adverse conditions.
A-25
<PAGE> 61
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for the Requester of Form W-9 (which can be obtained
from the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF-A 07/97
B-1
<PAGE> 62
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney-in-fact to surrender for redemption any and all unissued
shares held by the Transfer Agent in the designated account(s), or in any other
account with any of the AIM Funds, present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and
mailing address of the shares to be purchased are identical to the registration
of the shares being redeemed. An investor acknowledges by signing the form that
he understands and agrees that the Transfer Agent and AIM Distributors may not
be liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction. The Transfer Agent
reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone exchange privilege at any time without notice.
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by the Transfer Agent in the designated account(s), present
or future, with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption. An investor acknowledges by signing the
form that he understands and agrees that the Transfer Agent and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any exchanges must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "Exchange Privilege -- Exchanges
by Mail").
MCF-A 07/97
B-2
<PAGE> 63
[AIM LOGO
APPEARS THE AIM FAMILY OF FUNDS--Registered Trademark--
HERE]
<TABLE>
<S> <C> <C>
Investment Advisor
A I M Advisors, Inc. TABLE OF CONTENTS
11 Greenway Plaza, Suite 100 INVESTMENT OBJECTIVES.................... 2
Houston, TX 77046-1173 SUMMARY.................................. 2
THE FUNDS................................ 4
Table of Fees and Expenses............. 4
Transfer Agent Financial Highlights................... 7
A I M Fund Services, Inc. Performance............................ 19
P.O. Box 4739 About the Funds........................ 19
Houston, TX 77210-4739 Investment Programs.................... 20
Certain Investment Strategies and
Policies............................... 24
Custodian Management............................. 27
State Street Bank and Trust Company Organization of the Trust.............. 31
225 Franklin Street INVESTOR'S GUIDE TO THE AIM FAMILY OF
Boston, MA 02110 FUNDS--Registered Trademark--.......... A-1
Introduction to The AIM Family of
Funds.................................. A-1
The Bank of New York How to Purchase Shares................. A-1
90 Washington Street Terms and Conditions of Purchase of the
New York, NY 10286 AIM Funds........................... A-2
[AIM Municipal Bond Fund only] Special Plans.......................... A-9
Exchange Privilege..................... A-11
How to Redeem Shares................... A-13
Principal Underwriter Determination of Net Asset Value....... A-17
A I M Distributors, Inc. Dividends, Distributions and Tax
P.O. Box 4739 Matters................................ A-18
Houston, TX 77210-4739 General Information.................... A-20
Appendix A............................. A-21
Appendix B............................. A-22
Independent Accountants Appendix C............................. A-25
KPMG Peat Marwick LLP
700 Louisiana Application Instructions................. B-1
NationsBank Bldg.
Houston, TX 77002
</TABLE>
For more complete information about any other fund in The AIM Family of
Funds--Registered Trademark--, including charges and expenses, please
call (800) 347-4246 or write to A I M Distributors, Inc. and request a free
prospectus. Please read the prospectus carefully before you invest or send
money.
<PAGE> 64
STATEMENT OF
ADDITIONAL INFORMATION
AIM FUNDS GROUP
AIM BALANCED FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM GLOBAL UTILITIES FUND AIM MONEY MARKET FUND
AIM GROWTH FUND AIM MUNICIPAL BOND FUND
AIM HIGH YIELD FUND AIM VALUE FUND
AIM INCOME FUND
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
(713) 626-1919
_________________________
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND IT SHOULD BE
READ IN CONJUNCTION WITH A PROSPECTUS FOR THE ABOVE-NAMED FUNDS, A COPY OF
WHICH MAY BE OBTAINED FROM AUTHORIZED DEALERS OR BY WRITING AIM DISTRIBUTORS,
INC., P.O. BOX 4739, HOUSTON, TEXAS 77210-4739, OR BY CALLING (800) 347-4246
_________________________
Statement of Additional Information Dated: August 4, 1997
Relating to the Prospectus Dated: August 4, 1997
<PAGE> 65
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GENERAL INFORMATION ABOUT THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Trust and its Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Total Return Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Yield Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
General Brokerage Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 28(e) Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
All Funds except AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
AIM Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
AIM Global Utilities Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Lending Portfolio Securities: All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Covered Call Options: All Funds except AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . 14
Put Options: AIM Global Utilities Fund, AIM Growth Fund and AIM Value Fund . . . . . . . . . . . . . . . . . 14
Combined Option Positions: AIM Global Utilities Fund, AIM Growth Fund and AIM Value Fund . . . . . . . . . . 15
Short Sales: AIM Balanced Fund and AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Futures Contracts: All Funds except AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . 15
Options on Futures Contracts: All Funds except AIM Money Market Fund . . . . . . . . . . . . . . . . . . . 17
Risks as to Futures Contracts and Related Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Delayed Delivery Agreements: All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
When-Issued Securities: All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Foreign Exchange Transactions: All Funds (except AIM Intermediate Government Fund, AIM Money Market Fund and
AIM Municipal Bond Fund) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Rule 144A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
AIM Balanced Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
AIM Global Utilities Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
AIM Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
AIM Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
AIM Intermediate Government Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
AIM Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
AIM Value Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
MANAGEMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
i
<PAGE> 66
<TABLE>
<S> <C>
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
THE DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
THE DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
HOW TO PURCHASE AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
QUALIFYING FOR A REDUCED FRONT-END SALES CHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
PROGRAMS AND SERVICES FOR SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Dividend Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
REDEMPTIONS PAID IN CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
DESCRIPTION OF MONEY MARKET INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Money Market Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Custodians and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
RATINGS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS-1
</TABLE>
ii
<PAGE> 67
INTRODUCTION
AIM Funds Group (the "Trust") is a series mutual fund. The rules and
regulations of the Securities and Exchange Commission (the "SEC") require all
mutual funds to furnish prospective investors certain information concerning
the activities of a fund being considered for investment. This information is
included in a Prospectus (the "Prospectus"), dated August 4, 1997, which relates
to all nine of the Trust's portfolios (collectively, the "Funds" and each
separately a "Fund"). Copies of the Prospectus and additional copies of this
Statement of Additional Information may be obtained without charge by writing
the principal distributor of the Funds' shares, A I M Distributors, Inc. ("AIM
Distributors"), P.O. Box 4739, Houston, Texas 77210-4739, or by calling (800)
347-4246. Investors must receive a Prospectus before they invest in any Fund.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Funds' current Prospectus, and in order to avoid
repetition, reference will be made herein to sections of the Prospectus.
Additionally, the Prospectus and this Statement of Additional Information omit
certain information contained in the Trust's Registration Statement filed with
the SEC. Copies of the Registration Statement, including items omitted from the
Prospectus and this Statement of Additional Information, may be obtained from
the SEC by paying the charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust was previously organized as a Massachusetts business trust
pursuant to a Master Trust Agreement, dated October 30, 1984, as amended.
Pursuant to agreements and plans of reorganization, the Funds were reorganized
on October 15, 1993 as portfolios of AIM Funds Group, a Delaware business
trust. The Trust currently is organized under an Agreement and Declaration of
Trust, dated May 5, 1993, as amended (the "Trust Agreement"). Each Fund is a
series of shares of the Trust. Under the Trust Agreement, the Board of Trustees
is authorized to create new series of shares without the necessity of a vote of
shareholders of the Trust.
On October 15, 1993, the Funds (other than AIM BALANCED FUND and AIM
MONEY MARKET FUND) succeeded to the assets and assumed the liabilities of the
funds with corresponding names (the "Predecessor Funds") of AIM Funds Group, a
Massachusetts business trust ("AFG"), pursuant to an Agreement and Plan of
Reorganization between the Trust and AFG. Also on October 15, 1993, AIM
BALANCED FUND succeeded to the assets and assumed the liabilities of AIM
Convertible Securities, Inc., a Maryland corporation ("ACS"), pursuant to an
Agreement and Plan of Reorganization between the Trust and ACS. Finally, on
October 16, 1993, AIM MONEY MARKET FUND succeeded to the assets and assumed the
liabilities of the AIM Cash Fund and AIM Money Market Fund(C) portfolios of AFG
and the AIM Money Market Fund portfolio of Short-Term Investments Co., a
Massachusetts business trust ("STIC"), pursuant to an Agreement and Plan of
Reorganization among the Trust, AFG and STIC. All historical financial and
other information contained in this Statement of Additional Information for
periods prior to October 15, 1993 relating to the Funds (or a class thereof) is
that of the Predecessor Funds (or the corresponding class thereof) or ACS.
However, the historical financial and other information relating to AIM MONEY
MARKET FUND does not reflect information prior to October 16, 1993. Pursuant
to an Amendment to the Trust Agreement, dated May 1, 1995, AIM UTILITIES FUND
changed its name to AIM GLOBAL UTILITIES FUND. The Trust Agreement was also
amended on September 25, 1995 to reflect a name change of AIM Government
Securities Fund to AIM INTERMEDIATE GOVERNMENT FUND. The Trust Agreement was
amended on May 1, 1997 to change the name AIM MONEY MARKET FUND Class C shares
to AIM MONEY MARKET FUND AIM Cash Reserve Shares. Shares of beneficial
interest of the Trust are redeemable at their net asset value at the option of
the shareholder or at the option of the Trust in certain circumstances. For
information concerning the methods of redemption and the rights
1
<PAGE> 68
of share ownership, investors should consult the Prospectus under the captions
"Organization of the Trust" and "How to Redeem Shares."
The assets received by the Trust from the issue or sale of shares of
each of its series of shares, and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
the appropriate Fund. They constitute the underlying assets of each Fund, are
required to be segregated on the Trust's books of account, and are to be
charged with the expenses with respect to such Fund and its respective classes.
Any general expenses of the Trust not readily identifiable as belonging to a
particular Fund are allocated by or under the direction of the Board of
Trustees, primarily on the basis of relative net assets, or other relevant
factors.
Each share of each Fund represents an equal proportionate interest in
that Fund with each other share and is entitled to such dividends and
distributions out of the income belonging to such Fund as are declared by the
Board. Each Fund, except AIM MONEY MARKET FUND, offers three separate classes
of shares: Class A shares, Class B shares and Class C shares. AIM MONEY MARKET
FUND offers four separate classes of shares: Class A shares, Class B shares,
Class C shares and AIM Cash Reserve Shares. Each such class represents
interests in the same portfolio of investments but, as further described in the
Prospectus, each such class is subject to differing sales charges and expenses,
which differences will result in differing net asset values and dividends and
distributions. Upon any liquidation of the Trust, shareholders of each class
are entitled to share pro rata in the net assets belonging to the applicable
Fund available for distribution.
PERFORMANCE INFORMATION
Total return and yield figures for the Funds are neither fixed nor
guaranteed, and no Fund's principal is insured. Performance quotations reflect
historical information and should not be considered representative of a Fund's
performance for any period in the future. Performance is a function of a
number of factors which can be expected to fluctuate. The Funds may provide
performance information in reports, sales literature and advertisements. The
Funds may also, from time to time, quote information about the Funds published
or aired by publications or other media entities which contain articles or
segments relating to investment results or other data about one or more of the
Funds. The following is a list of such publications or media entities:
<TABLE>
<S> <C> <C>
Advertising Age Forbes Nation's Business
Barron's Fortune New York Times
Best's Review Hartford Courant Pension World
Broker World Inc. Pensions & Investments
Business Week Institutional Investor Personal Investor
Changing Times Insurance Forum Philadelphia Inquirer
Christian Science Monitor Insurance Week USA Today
Consumer Reports Investor's Daily U.S. News & World Report
Economist Journal of the American Wall Street Journal
FACS of the Week Society of CLU & ChFC Washington Post
Financial Planning Kiplinger Letter CNN
Financial Product News Money CNBC
Financial Services Week Mutual Fund Forecaster PBS
Financial World
</TABLE>
Each Fund may also compare its performance to performance data of
similar mutual funds as published by the following services:
2
<PAGE> 69
Bank Rate Monitor Stanger
Donoghue's Weisenberger
Mutual Fund Values (Morningstar) Lipper Analytical Services
Each Fund's performance may also be compared in advertising to the
performance of comparative benchmarks such as the following:
Standard & Poor's 400 Index
Standard & Poor's 500 Stock Index Bond Buyer Index
Dow Jones Industrial Average NASDAQ
EAFE Index COFI
Consumer Price Index First Boston High Yield Index
Lehman Bond Indices
Each Fund may also compare its performance to rates on Certificates of
Deposit and other fixed rate investments such as the following:
10 year Treasuries
30 year Treasuries
90 day Treasury Bills
Advertising for AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND and AIM
VALUE FUND may from time to time include discussions of general economic
conditions and interest rates. Advertising for such Funds and for AIM BALANCED
FUND may also include references to the use of those Funds as part of an
individual's overall retirement investment program. From time to time, sales
literature and/or advertisements for any of the Funds may disclose (i) the
largest holdings in the Fund's portfolio, (ii) certain selling group members
and/or (iii) certain institutional shareholders.
From time to time, the Funds' sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. This
includes, but is not limited to, literature addressing general information
about mutual funds, variable annuities, dollar-cost averaging, stocks, bonds,
money markets, certificates of deposit, retirement, retirement plans, asset
allocation, tax-free investing, college planning, inflation.
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential
investments, investors should note that the methods of computing performance of
other potential investments are not necessarily comparable to the methods
employed by a Fund.
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return, as described in the
Prospectus, is as follows:
n
P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable
maximum sales load is deducted at the beginning of the
1, 5, or 10 year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the 1, 5, or 10 year periods (or
fractional portion of such period).
3
<PAGE> 70
The average annual total returns for each of the named Funds, with
respect to its Class A shares, for the one, five and ten year periods (or since
inception, if shorter) ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1996
--------------------------------------
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS
-------------- ------ ------- --------
<S> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . . . . . . . . 13.58% 12.93% 10.84%
AIM Global Utilities Fund . . . . . . . . . . . . . . . . 7.61% 8.12% 12.26%*
AIM Growth Fund . . . . . . . . . . . . . . . . . . . . . 12.08% 8.23% 11.01%
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . 9.95% 12.15% 10.79%
AIM Income Fund . . . . . . . . . . . . . . . . . . . . . 3.42% 7.76% 8.27%
AIM Intermediate Government Fund . . . . . . . . . . . . . -2.51% 4.49% 6.85%*
AIM Municipal Bond Fund . . . . . . . . . . . . . . . . . -1.04% 5.57% 6.58%
AIM Value Fund . . . . . . . . . . . . . . . . . . . . . . 8.22% 15.80% 17.73%
</TABLE>
* The inception dates of the Class A shares of AIM GLOBAL UTILITIES
FUND and AIM INTERMEDIATE GOVERNMENT FUND were January 18, 1988 and
April 28, 1987, respectively.
The average annual total returns for each of the named Funds, with
respect to its Class B shares, for the periods ended December 31, 1996, were as
follows:
<TABLE>
<CAPTION>
CLASS B SHARES: PERIODS ENDED DECEMBER 31, 1996
-------------- -------------------------------
1 YEAR SINCE INCEPTION**
------ -----------------
<S> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . . . . 13.28% 11.26%
AIM Global Utilities Fund . . . . . . . . . . . . 7.98% 4.61%
AIM Growth Fund . . . . . . . . . . . . . . . . . 12.60% 11.30%
AIM High Yield Fund . . . . . . . . . . . . . . . 9.68% 8.64%
AIM Income Fund . . . . . . . . . . . . . . . . . 2.87% 4.63%
AIM Intermediate Government Fund . . . . . . . . . -3.39% 2.68%
AIM Municipal Bond Fund . . . . . . . . . . . . . -2.01% 2.72%
AIM Value Fund . . . . . . . . . . . . . . . . . . 8.57% 13.83%
</TABLE>
**The inception date of the Class B shares of AIM GLOBAL UTILITIES
FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND, and AIM MUNICIPAL BOND
FUND was September 1, 1993; the inception date of the Class B shares
of AIM INCOME FUND and AIM INTERMEDIATE GOVERNMENT FUND was September
7, 1993; and the inception date of the Class B shares of AIM BALANCED
FUND and AIM VALUE FUND was October 18, 1993.
The average annual total returns for AIM MONEY MARKET FUND, with
respect to its Class A shares, Class B shares and AIM Cash Reserve Shares, for
the year ended December 31, 1996 were -1.32%, -1.34% and 4.41%, respectively;
and since inception (October 16, 1993) were 2.35%, 2.51% and 4.16%,
respectively.
The average annual total returns for each Fund, with respect to its
Class C shares, are not available as the inception date of Class C shares was
August 4, 1997.
Standard total return quotes may be accompanied by total return
figures calculated by alternative methods. For example, average annual total
return may be calculated without assuming payment of the full sales load
according to the following formula:
4
<PAGE> 71
n
P(1+U) =ERV
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only a
stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
Cumulative total return across a stated period may be calculated as
follows:
n
P(1+V) =ERV
Where P = a hypothetical initial payment of $1,000.
V = cumulative total return assuming payment of all of, a
stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
YIELD QUOTATIONS
The standard formula for calculating yield (including tax-equivalent
yield for AIM MUNICIPAL BOND FUND) for each Fund except AIM MONEY MARKET FUND,
as described in the Prospectus, is as follows:
6
YIELD = 2[((a-b)/(c x d) + 1) -1]
Where a = dividends and interest earned during a stated 30-day
period. For purposes of this calculation, dividends
are accrued rather than recorded on the ex-dividend
date. Interest earned under this formula must
generally be calculated based on the yield to maturity
of each obligation (or, if
more appropriate, based on yield to call date).
b = expenses accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during
the period.
d = the maximum offering price per share on the last day of
the period.
Tax-equivalent yield for AIM MUNICIPAL BOND FUND will be calculated by
dividing that portion of the yield of the Fund (as determined above) which is
tax-exempt by one minus a stated income tax rate and adding the product to that
portion of the yield that is not tax-exempt.
5
<PAGE> 72
The yields for each of the named Funds were as follows:
<TABLE>
<CAPTION>
30 DAYS ENDED DECEMBER 31, 1996*
---------------------------------
CLASS A SHARES CLASS B SHARES
-------------- --------------
<S> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . . . . . . 2.42% 1.71%
AIM Global Utilities Fund . . . . . . . . . . . . . . 2.54% 1.92%
AIM High Yield Fund . . . . . . . . . . . . . . . . . 8.74%** 8.40%**
AIM Income Fund . . . . . . . . . . . . . . . . . . . 6.07% 5.63%
AIM Intermediate Government Fund . . . . . . . . . . . 6.11% 5.62%
AIM Municipal Bond Fund . . . . . . . . . . . . . . . 4.64%*** 4.03%***
</TABLE>
* Yield is not available for the Class C shares of the Funds as the
inception date for Class C shares was August 4, 1997.
** The relatively high yields in this Fund, like that of other junk
bond funds, reflect a substantial premium for the high default
risk perceived by the market. Investors should not consider these
yields a measure of income potential.
*** The tax-equivalent yield, assuming a tax rate of 39.6%, for the
Class A shares and Class B shares of AIM MUNICIPAL BOND FUND was
7.68% and 6.67%, respectively.
The standard formula for calculating annualized yield for AIM MONEY
MARKET FUND, as described in the Prospectus, is as follows:
Y = V - V X 365
1 0
------ ---
V 7
0
Where Y = annualized yield.
V = the value of a hypothetical pre-existing account in
0 the Fund having a balance of one share at the
beginning of a stated seven-day period.
V = the value of such an account at the end of the
1 stated period.
The annualized yield for each of the Class A and Class B shares and AIM
Cash Reserve Shares of AIM MONEY MARKET FUND for the 7 days ended December 31,
1996, was 4.50%, 3.76% and 4.49%, respectively. The annualized yield for Class
C shares of AIM MONEY MARKET FUND is not available as the inception date for
Class C shares was August 4, 1997.
The standard formula for calculating effective annualized yield for AIM
MONEY MARKET FUND, as described in the Prospectus, is as follows:
365/7
EY = (Y+1) -1
Where EY = effective annualized yield.
Y = annualized yield, as determined above.
The effective annualized yield for each of the Class A and Class B
shares and AIM Cash Reserve Shares of AIM MONEY MARKET FUND for the 7 days
ended December 31, 1996 was 4.60%, 3.83% and 4.59%, respectively. The effective
annualized yield for Class C shares of AIM MONEY MARKET FUND is not available
as the inception date for Class C shares was August 4, 1997.
For the purpose of determining the annualized yield and effective
annualized yield, the net change in the value of the hypothetical AIM MONEY
MARKET FUND account reflects the value of additional shares purchased with
dividends from the original shares and any such additional shares, and all fees
charged, other than non-recurring account or sales charges, to all shareholder
accounts in proportion to the length of the base period and the Fund's average
account size, but does not include realized gains and losses or unrealized
appreciation and depreciation.
6
<PAGE> 73
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
Subject to policies established by the Board of Trustees of the Trust,
A I M Advisors, Inc. ("AIM") is responsible for decisions to buy and sell
securities for each Fund, for the selection of broker-dealers, for the
execution of each Fund's investment portfolio transactions, for the allocation
of brokerage fees in connection with such transactions, and where applicable,
for the negotiation of commissions and spreads on transactions. AIM's primary
consideration in effecting a security transaction is to obtain the best net
price and the most favorable execution of the order. While AIM generally seeks
reasonably competitive commission rates, a Fund does not necessarily pay the
lowest commission or spread available.
A portion of the securities in which each Fund invests may be traded in
over-the-counter ("OTC") markets, and in such transactions, the Fund deals
directly with the dealers who make markets in the securities involved, except
in those circumstances where better prices and executions are available
elsewhere. Portfolio transactions placed through dealers serving as primary
market makers are effected at net prices, without commissions as such, but
which include compensation in the form of mark up or mark down.
Foreign equity securities may be held by a Fund in the form of American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") or other
securities representing underlying securities of foreign issuers, or securities
convertible into foreign equity securities. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs are receipts typically issued by a United States
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. EDRs are receipts issued in Europe which evidence a
similar ownership arrangement. Generally, ADRs, in registered form, are
designed for use in the United States securities markets, and EDRs, in bearer
form, are designed for use in European securities markets. ADRs and EDRs may
be listed on stock exchanges, or traded in OTC markets in the United States or
Europe, as the case may be. ADRs, like other securities traded in the United
States, will be subject to negotiated commission rates.
AIM may from time to time determine target levels of commission business
for AIM to transact with various brokers on behalf of its clients (including
the Funds) over a certain time period. The target levels will be determined
based upon the following factors, among others: (1) the execution services
provided by the broker; (2) the research services provided by the broker; (3)
certain products and/or services provided to the Funds, the cost of which will
be included in Fund expenses reported to shareholders; and (4) the broker's
attitude toward and interest in mutual funds in general and in the Funds and
other mutual funds advised by AIM (collectively, the "AIM Funds") in
particular. No specific formula will be used in connection with any of the
foregoing considerations in determining the target levels. However, if a
broker has indicated a certain level of desired commissions in return for
certain research services provided by the broker, this factor will be taken
into consideration by AIM.
Subject to the overall objective of obtaining best price and execution
for the Funds, AIM may also consider sales of shares of the Funds and of the
other AIM Funds as a factor in the selection of broker-dealers to execute
portfolio transactions for the Funds. In such cases, the Funds' trades may be
executed directly by selling dealers or by other broker-dealers with which
selling dealers have clearing arrangements.
AIM will seek, whenever possible, to recapture for the benefit of each
Fund any commissions, fees, brokerage or similar payments paid by such Fund on
portfolio transactions. Normally, the only fees which may be recaptured are
the soliciting dealer fees on the tender of an account's portfolio securities
in a tender or exchange offer.
7
<PAGE> 74
The Funds are not under any obligation to deal with any broker or group
of brokers in the execution of transactions in portfolio securities. Brokers
who provide supplemental investment research to AIM may receive orders for
transactions by the Funds. Information so received will be in addition to and
not in lieu of the services required to be performed by AIM under its
agreements with the Trust, on behalf of each Fund, and the expenses of AIM will
not necessarily be reduced as a result of the receipt of such supplemental
information. Certain research services furnished by broker-dealers may be
useful to AIM in connection with its services to other advisory clients,
including the other AIM Funds. Also, each Fund may pay a higher price for
securities or higher commissions in recognition of research services furnished
by broker-dealers.
For the year ended December 31, 1996, AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND and AIM VALUE FUND
directed certain brokerage transactions to broker-dealers that provided AIM
with research, statistical and other information: $11,294,709, $4,063,774,
$40,751,154, $23,835 and $757,518,402, respectively. For the same period, AIM
BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND
and AIM VALUE FUND paid the following in related brokerage commissions:
$26,205, $9,634, $58,204, $150 and $1,107,865, respectively.
AIM and its affiliates manage several other investment accounts, some of
which may have investment objectives similar to those of one or more of the
Funds. It is possible that, at times, identical securities will be appropriate
for investment by one or more of the Funds and by one or more of such
investment accounts. The position of each account; however, in the securities
of the same issue may vary and the length of time that each account may choose
to hold its investment in the securities of the same issue may likewise vary.
The timing and amount of purchase by each account will also be determined by
its cash position. If the purchase or sale of securities is consistent with
the investment policies of a Fund and one or more of these accounts, and is
considered at or about the same time, transactions in such securities will be
allocated among such Fund and such accounts in a manner deemed equitable by
AIM. AIM may combine such transactions, in accordance with applicable laws and
regulations, in order to obtain the best net price and most favorable
execution. Simultaneous transactions could, however, adversely affect the
ability of a Fund to obtain or dispose of the full amount of a security which
it seeks to purchase or sell.
In some cases the procedure for allocating portfolio transactions among
the various investment accounts advised by AIM could have an adverse effect on
the price or amount of securities available to a Fund. In making such
allocations, the main factors considered by AIM are the respective investment
objectives and policies of its advisory clients, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment, the size of investment commitments generally held and the judgments
of the persons responsible for recommending the investment.
From time to time, an identical security may be sold by an AIM Fund or
another investment account advised by AIM or A I M Capital Management, Inc.
("AIM Capital") and simultaneously purchased by another investment account
advised by AIM or AIM Capital, when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment
objective(s) and policies of the investment accounts involved. Procedures
pursuant to Rule 17a-7 under the Investment Company Act of 1940, as amended
(the "1940 Act") regarding transactions between investment accounts advised by
AIM or AIM Capital have been adopted by the Boards of Directors/Trustees of the
various AIM Funds including the Trust. Although such transactions may result
in custodian, tax or other related expenses, no brokerage commissions or other
direct transaction costs are generated by transactions among the investment
accounts advised by AIM or AIM Capital.
The decrease in portfolio turnover rate for AIM INCOME FUND from 1995 to
1996 resulted from less volatile markets and thus a reduced need to restructure
the Fund's portfolio holdings.
8
<PAGE> 75
SECTION 28(e) STANDARDS
Under Section 28(e) of the Securities Exchange Act of 1934, AIM shall
not be deemed to have acted unlawfully or to have breached its fiduciary duty
solely because under certain circumstances it has caused an account to pay a
higher commission than the lowest available. To obtain the benefit of Section
28(e), AIM must make a good faith determination that the commissions paid are
"reasonable in relation to the value of the brokerage and research services
provided . . . viewed in terms of either that particular transaction or
[AIM's] overall responsibilities with respect to the accounts as to which it
exercises investment discretion," and that the services provided by a broker
provide AIM with lawful and appropriate assistance in the performance of its
investment decision-making responsibilities. Accordingly, the price to a Fund
in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of the
portfolio execution services offered.
Broker-dealers utilized by AIM may furnish statistical, research and
other information or services which are deemed by AIM to be beneficial to the
Funds' investment programs. Research services received from brokers supplement
AIM's own research (and the research of sub-advisors to other clients of AIM),
and may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
political developments; portfolio management strategies; performance
information on securities and information concerning prices of securities; and
information supplied by specialized services to AIM and to the Trust's trustees
with respect to the performance, investment activities and fees and expenses of
other mutual funds. Such information may be communicated electronically,
orally or in written form. Research services may also include the providing of
equipment used to communicate research information, the arranging of meetings
with management of companies and the providing of access to consultants who
supply research information.
The outside research assistance is useful to AIM since the brokers
utilized by AIM as a group tend to follow a broader universe of securities and
other matters than AIM's staff can follow. In addition, this research provides
AIM with a diverse perspective on financial markets. Research services which
are provided to AIM by brokers are available for the benefit of all accounts
managed or advised by AIM or by sub-advisors to accounts managed or advised by
AIM. In some cases, the research services are available only from the broker
providing such services. In other cases, the research services may be
obtainable from alternative sources in return for cash payments. AIM is of the
opinion that because the broker research supplements rather than replaces its
research, the receipt of such research does not tend to decrease its expenses,
but tends to improve the quality of its investment advice. However, to the
extent that AIM would have purchased any such research services had such
services not been provided by brokers, the expenses of such services to AIM
could be considered to have been reduced accordingly. Certain research
services furnished by broker-dealers may be useful to AIM in advising clients
other than the Funds. Similarly, any research services received by AIM through
the placement of portfolio transactions of other clients may be of value to AIM
in fulfilling its obligations to the Funds. AIM is of the opinion that this
material is beneficial in supplementing AIM's research and analysis and
therefore it may benefit the Funds by improving the quality of AIM's investment
advice. The advisory fees paid by the Funds are not reduced because AIM
receives such services.
Some broker-dealers may indicate that the provision of research services
is dependent upon the generation of certain specified levels of commissions and
underwriting concessions by AIM's clients, including the Funds.
With respect to AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM MONEY MARKET FUND and AIM MUNICIPAL BOND FUND, purchases
and sales of portfolio securities are generally transacted with the issuer or a
primary market maker for the securities on a net basis, without any brokerage
commission being paid by the Funds for such purchases. Purchases and sales of
certain portfolio securities for AIM BALANCED FUND are transacted on a net
basis, without any brokerage commission being
9
<PAGE> 76
paid by the Fund. Purchases from dealers serving as primary market makers
reflect the spread between the bid and asked prices. Purchases and sales for
AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND and AIM VALUE FUND generally involve
a broker, and purchases and sales for AIM BALANCED FUND often involve a broker,
and consequently involve the payment of commissions.
As of December 31, 1996, the following Funds entered into repurchase
agreements with the following regular brokers, as that term is defined in Rule
10b-1 under the 1940 Act, having the noted market values.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Merrill Lynch,
HSBC Securities, Pierce Fenner & Morgan Stanley & UBS Securities
Inc. Smith Inc. Co. Inc. Inc.
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM Balanced Fund N/A N/A N/A $ 14,800,000
- -------------------------------------------------------------------------------------------------------------
AIM Global Utilities Fund N/A N/A N/A 4,071,574
- -------------------------------------------------------------------------------------------------------------
AIM High Yield Fund N/A N/A N/A 46,218,974
- -------------------------------------------------------------------------------------------------------------
AIM Income Fund $ 210,059 N/A N/A 6,589,941
- -------------------------------------------------------------------------------------------------------------
AIM Money Market Fund 30,000,000 N/A N/A 30,000,000
- -------------------------------------------------------------------------------------------------------------
AIM Value Fund 19,021,553 $427,359,031 $30,000,000 N/A
- -------------------------------------------------------------------------------------------------------------
</TABLE>
As of December 31, 1996, AIM VALUE FUND held an amount of common stock
issued by Merrill Lynch & Co. Inc. having a market value of $57,050,000.
Except as noted, the Trust does not utilize an affiliated broker or
dealer in effecting portfolio transactions and does not recapture commissions
paid in such transactions. Brokerage commissions or underwriting concessions
(or both) paid by each of the Funds listed below were as follows for the years
ended December 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
FUND 1996 1995 1994
---- ------------ --------------------------------
(000) (000) (000)
<S> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . $357 $117 $86
AIM Global Utilities Fund . . . . . . . . . 275 596 799
AIM Growth Fund . . . . . . . . . . . . . . 929 520 803
AIM High Yield Fund . . . . . . . . . . . . 87 -0- -0-
AIM Income Fund . . . . . . . . . . . . . . 11 4 106
AIM Intermediate Government Fund . . . . . -0- -0- -0-
AIM Municipal Bond Fund . . . . . . . . . . -0- -0- -0-
AIM Value Fund . . . . . . . . . . . . . . 29,515 17,964 6,611
</TABLE>
Provisions of the 1940 Act and rules and regulations thereunder have
been construed to prohibit the Funds from purchasing securities or instruments
from, or selling securities or instruments to, any holder of 5% or more of the
voting securities of any investment company managed or advised by AIM. The
Funds have obtained an order of exemption from the SEC which permits them to
engage in certain transactions with such a 5% holder if the Funds comply with
conditions and procedures designed to ensure that such transactions are
executed at fair market value and present no conflict of interest.
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INVESTMENT OBJECTIVES AND POLICIES
For a general discussion of the investment objective(s) and policies
of each Fund, see the sections entitled "Investment Objectives" and "Investment
Programs" in the Prospectus.
ALL FUNDS EXCEPT AIM MONEY MARKET FUND
AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND and AIM VALUE FUND invest
in securities traded in the over-the-counter market or listed on a national
securities exchange, while AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND and AIM MUNICIPAL BOND FUND generally acquire
bonds in new offerings or in principal trades with broker-dealers. AIM
BALANCED FUND, investing in both equity and debt securities, acquires
securities in the over-the-counter market and on national securities
exchanges, and acquires bonds in new offerings or in principal trades with
broker-dealers. Ordinarily, the Funds do not purchase securities with the
intention of engaging in short-term trading. However, any particular security
will be sold, and the proceeds reinvested, whenever such action is deemed
prudent from the viewpoint of a Fund's investment objectives, regardless of the
holding period of that security.
The Funds may invest in high quality, short-term money market
instruments such as certificates of deposit, commercial paper, bankers'
acceptances, short-term U.S. Government obligations and repurchase agreements,
pending investment in portfolio securities, to meet anticipated short-term cash
needs such as dividend payments or redemptions of shares, or for temporary
defensive purposes. Such investments generally are the type in which AIM MONEY
MARKET FUND invests, generally will have maturities of 60 days or less and
normally are held to maturity. See "Description of Money Market Instruments."
The underlying securities that are subject to a repurchase agreement will be
"marked-to-market" on a daily basis so that AIM can determine the value of the
securities in relation to the amount of the repurchase agreement.
U.S. Government securities may take the form of participation
interests in, and may be evidenced by, deposit or safekeeping receipts.
Participation interests are pro rata interests in U.S. Government securities.
A Fund may acquire participation interests in pools of mortgages sold by the
Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Banks. Instruments
evidencing deposit or safekeeping are documentary receipts for such original
securities held in custody by others.
U.S. Government securities, including those that are guaranteed by
federal agencies or instrumentalities, may or may not be backed by the "full
faith and credit" of the United States. Some securities issued by federal
agencies or instrumentalities are only supported by the credit of the agency or
instrumentality (such as the Federal Home Loan Banks) while others have an
additional line of credit with the U.S. Treasury (such as the Federal National
Mortgage Association). In the case of securities not backed by the full faith
and credit of the United States, the Funds must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments.
AIM MONEY MARKET FUND
The types of money market instruments in which the Fund presently
invests are listed under "Description of Money Market Instruments" in the
Prospectus and this Statement of Additional Information. If the trustees
determine that it may be advantageous to invest in other types of money market
instruments, the Fund may invest in such instruments, if it is permitted to do
so by its investment objectives, policies and restrictions.
The rating applied to a security at the time the security is purchased
by the Fund may be changed while the Fund holds such security in its portfolio.
This change may affect, but will not necessarily compel, a decision to dispose
of a security. If the major rating services used by the Fund were to alter
their standards
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or systems for ratings, the Fund would then employ ratings under the revised
standards or systems that would be comparable to those specified in its current
investment objectives, policies and restrictions.
The Board of Trustees has established procedures in compliance with
Rule 2a-7 under the 1940 Act that include reviews of portfolio holdings by the
trustees at such intervals as they may deem appropriate to determine whether
net asset value, calculated by using available market quotations, deviates from
$1.00 per share and, if so, whether such deviation may result in material
dilution or is otherwise unfair to investors or existing shareholders. In the
event the trustees determine that a deviation having such a result exists, they
intend to take such corrective action as they deem necessary and appropriate,
including, but not limited to, the following: the sale of portfolio
instruments prior to maturity in order to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends; authorizing
redemption of shares in kind; or establishing a net asset value per share by
using available market quotations, in which case, the net asset value could
possibly be greater or less than $1.00 per share. If the trustees deem it
inadvisable to continue the practice of maintaining a net asset value of $1.00
per share, they may alter this procedure. The shareholders of the Fund will be
notified promptly after any such change.
Any increase in the value of a shareholder's investment in the Fund
resulting from the reinvestment of dividend income is reflected by an increase
in the number of shares in the shareholder's account.
AIM MUNICIPAL BOND FUND
The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source.
Industrial development bonds, which are municipal bonds, are in most cases
revenue bonds and do not generally constitute the pledge of the credit of the
issuer of such bonds.
The Fund invests in securities representing a number of different
investment classifications. In addition, there are variations in the security
of municipal bonds, both within a particular classification and between
classifications, depending on various factors.
AIM HIGH YIELD FUND
The Fund will not acquire equity securities, other than preferred
stocks, except when (a) attached to or included in a unit with
income-generating securities that otherwise would be attractive to the Fund;
(b) acquired through the exercise of equity features accompanying convertible
securities held by the Fund, such as conversion or exchange privileges or
warrants for the acquisition of stock or equity interests of the same or a
different issuer; or (c) in the case of an exchange offer whereby the equity
security would be acquired with the intention of exchanging it for a debt
security issued on a "when-issued" basis. The Fund does not expect to invest
more than 5% of the value of its total assets in issues, other than preferred
stocks, of the type discussed in this paragraph.
AIM GLOBAL UTILITIES FUND
DESCRIPTION OF THE UTILITIES INDUSTRY
Electric Utility Industry. Electric utilities are heavily regulated.
Local rates are subject to the review of state commissions, and sales either
between companies or that cross state lines are subject to review by the
Federal Energy Regulatory Commission. The industry is also subject to
regulation by the SEC under the
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Public Utility Holding Company Act of 1935. In addition, companies
constructing or operating nuclear powered generating stations are subject to
extensive regulation by the Nuclear Regulatory Commission.
Electric utility companies are also subject to extensive local
regulation in environmental and site location matters. Future legislation with
regard to the issues of acid rain and toxic and radioactive wastes could have a
significant impact on the manner in which utility companies conduct their
business, and the costs that they incur. Since the late 1970s, investor-owned
utilities have experienced a number of unfavorable regulatory trends, including
increased regulatory resistance to price increases and new legislation
encouraging competition.
Natural Gas Industry. The natural gas industry is comprised primarily
of many small distribution companies and a few large interstate pipeline
companies. The Public Utility Holding Company Act of 1935 has generally acted
as a bar to the consolidation of pipeline and distribution companies.
Regulation of these companies is similar to that of electric companies. The
performance of natural gas utilities may also be substantially affected by
fluctuations in energy prices.
Communications Industry. Most of the communications industry capacity
is concentrated in the hands of a few very large publicly-held companies,
unlike the situation in the electric and gas industries. Significant risks for
the investor to overcome still exist, however, including risk related to
pricing at marginal versus embedded cost. New entrants may have lower costs of
material due to newer technologies or lower standards of reliability than those
imposed in the past by American Telephone & Telegraph ("AT&T") on the industry.
Accordingly, the marginal cost of incremental service is much lower than the
costs embedded in an existing network. Communications companies are not
subject to the Public Utility Holding Company Act of 1935.
Interstate communications service may be subject to Federal
Communications Commission regulation. Local service may be regulated by the
states. In addition, AT&T and its former subsidiaries are still subject to
judicial review pursuant to the settlement of the antitrust case brought
against them by the Department of Justice.
Water Utility Industry. The water utility industry is composed of
regulated public utilities that are involved in the distribution of drinking
water to densely populated areas. The industry is geographically diverse and
subject to the same rate base and rate of return regulations as are other
public utilities. Demand for water is most heavily influenced by the local
weather, population growth in the service area and new construction. Supplies
of clean, drinkable water are limited and are primarily a function of the
amount of past rainfall.
Other. In addition to the particular types of utilities industries
described above, the Fund may invest in developing utility technology companies
(such as cellular telephone, fiber optics and satellite communications firms)
and in holding companies which derive a substantial portion of their revenues
from utility-related activities. Generally, a holding company will be
considered to derive a substantial portion of its revenues from utility-related
activities if such activities account for at least 40% of its revenues.
LENDING PORTFOLIO SECURITIES: ALL FUNDS
Consistent with applicable regulatory requirements, the Funds may lend
their portfolio securities (principally to broker-dealers) to the extent of
one-third of their respective total assets. Such loans would be callable at
any time and would be continuously secured by collateral equal to no less than
the market value, determined daily, of the loaned securities. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. The Funds would continue to receive the income on loaned
securities and would, at the same time, earn interest on the loan collateral or
on the investment of the loan collateral if it were cash. Any cash collateral
pursuant to these loans would be invested in short-term money
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market instruments. Where voting or consent rights with respect to loaned
securities pass to the borrower, the Funds will follow the policy of calling
the loan, in whole or in part as may be appropriate, to permit the exercise of
such voting or consent rights if the matters involved are expected to have a
material effect on the Funds' investment in the loaned securities. Lending
securities entails a risk of loss to the Funds if and to the extent that the
market value of the securities loaned were to increase and the lender did not
increase the collateral accordingly.
COVERED CALL OPTIONS: ALL FUNDS EXCEPT AIM MONEY MARKET FUND
Each Fund may write call options, but only on a covered basis; that
is, the Fund will own the underlying security. The exercise price of a call
option may be below, equal to, or above the current market value of the
underlying security at the time the option is written. When a Fund writes a
covered call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the liability
is subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the last sale
price, or in the absence of a sale, the last offering price. If a written call
option expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the sale
of the underlying security and the proceeds of the sale are increased by the
premium originally received.
A call option gives the purchaser of such option the right to buy, and
the writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call option
owns or has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, a Fund has given up
the opportunity for capital appreciation above the exercise price should the
market price of the underlying security increase, but has retained the risk of
loss should the price of the underlying security decline. During the option
period, a Fund may be required at any time to deliver the underlying security
against payment of the exercise price. This obligation is terminated upon the
expiration of the option period or at such earlier time at which a Fund effects
a closing purchase transaction by purchasing (at a price which may be higher
than was received when the call option was written) a call option identical to
the one originally written. A Fund will not write a covered call option if,
immediately thereafter, the aggregate value of the securities underlying all
such options, determined as of the dates such options were written, would
exceed 5% of the net assets of the Fund. Each of AIM GLOBAL UTILITIES FUND,
AIM GROWTH FUND and AIM VALUE FUND, as non-fundamental policies (a) will not
write covered call options which exceed 25% of the value of their respective
net assets, (b) will not write, sell or purchase uncovered call options,
straddles, spreads or combinations thereof, and (c) will only write covered
call options for hedging purposes and will not use leverage in doing so.
PUT OPTIONS: AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND AND AIM VALUE FUND
Each of AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND and AIM VALUE FUND
may purchase put options on securities. A put option constitutes a hedge
against a decline in the price of a security owned by a Fund. It may be sold
at a profit or loss depending upon changes in the price of the underlying
security. A put option may be exercised at a profit, provided that the amount
of the decline in the price of the underlying security below the option
exercise price during the option period exceeds the option premium, or a put
option may expire without value. The maximum loss exposure involved in the
purchase of a put option is the cost of the option contract. Each of AIM
GLOBAL UTILITIES FUND, AIM GROWTH FUND and AIM VALUE FUND, as non-fundamental
policies (a) will not purchase put options which exceed 25% of the value of
their respective net assets, (b) will not write or sell put options,
straddles, spreads or combinations thereof, and (c) will only purchase put
options for hedging purposes and will not use leverage in doing so. A Fund
will not purchase
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a put option if, immediately thereafter, the aggregate value of the securities
underlying all put options, determined as of the dates such options were
purchased, would exceed 5% of the net assets of the Fund.
COMBINED OPTION POSITIONS: AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND AND AIM
VALUE FUND
The Funds, for hedging purposes, may combine purchases and sales of
options to adjust the risk and return characteristics of a Fund's overall
position. For example, a Fund may purchase a put option and write a covered
call option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. This technique, called a "straddle," enables the Fund to offset the
cost of purchasing a put option with the premium received from writing the call
option. However, by selling the call option, the Fund gives up the ability for
potentially unlimited profit from the put option. Another possible combined
position would involve writing a covered call option at one strike price and
buying a call option at a lower price, in order to reduce the risk of the
written covered call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
SHORT SALES: AIM BALANCED FUND AND AIM HIGH YIELD FUND
Each of AIM BALANCED FUND and AIM HIGH YIELD FUND may from time to
time make short sales of securities which it owns or which it has the right to
acquire through the conversion or exchange of other securities it owns. In a
short sale, a Fund does not immediately deliver the securities sold and does
not receive the proceeds from the sale. A Fund is said to have a short
position in the securities sold until it delivers the securities sold, at which
time it receives the proceeds of the sale. A Fund will neither make short
sales of securities nor maintain a short position unless, at all times when a
short position is open, the Fund owns an equal amount of such securities or
securities convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue as, and equal in amount to, the
securities sold short. This is a technique known as selling short "against the
box." To secure its obligation to deliver the securities sold short, a Fund
will deposit in escrow in a separate account with its custodian, State Street
Bank and Trust Company ("State Street"), an equal amount of the securities sold
short or securities convertible into or exchangeable for such securities.
Since a Fund ordinarily will want to continue to receive interest and
dividend payments on securities in its portfolio which are convertible into the
securities sold short, the Fund will normally close out a short position by
purchasing and delivering an equal amount of the securities sold short, rather
than by delivering securities which it already holds.
A Fund will make a short sale, as a hedge, when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund or a security convertible into or exchangeable for such
security, or when the Fund does not want to sell the security it owns, because,
among other reasons, it wishes to defer recognition of gain or loss for federal
income tax purposes. In such case, any future losses in a Fund's long position
should be reduced by a gain in the short position. Conversely, any gain in the
long position should be reduced by a loss in the short position. The extent to
which such gains or losses are reduced will depend upon the amount of the
security sold short relative to the amount a Fund owns, either directly or
indirectly, and, in the case where the Fund owns convertible securities,
changes in the conversion premium. In determining the number of shares to be
sold short against a Fund's position in a convertible security, the anticipated
fluctuation in the conversion premium is considered. A Fund may also make
short sales to generate additional income from the investment of the cash
proceeds of short sales.
FUTURES CONTRACTS: ALL FUNDS EXCEPT AIM MONEY MARKET FUND
In cases of purchases of futures contracts, an amount of cash and cash
equivalents, equal to the cost of the futures contracts (less any related
margin deposits), will be segregated with a Fund's custodian to collateralize
the position and ensure that the use of such futures contracts is unleveraged.
Unlike when a
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Fund purchases or sells a security, no price is paid or received by a Fund upon
the purchase or sale of a futures contract. Initially, a Fund will be required
to deposit with its custodian for the account of the broker a stated amount, as
called for by the particular contract, of cash or U.S. Treasury bills. This
amount is known as "initial margin." The nature of initial margin in futures
transactions is different from that of margin in securities transactions in
that futures contract margin does not involve the borrowing of funds by the
customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract assuming all contractual obligations have
been satisfied. Subsequent payments, called "variation margin," to and from
the broker will be made on a daily basis as the price of the futures contract
fluctuates, making the long and short positions in the futures contract more or
less valuable. This process is known as "marking-to-market." For example, when
a Fund has purchased a stock index futures contract and the price of the
underlying stock index has risen, that position will have increased in value
and the Fund will receive from the broker a variation margin payment with
respect to that increase in value. Conversely, where a Fund has purchased a
stock index futures contract and the price of the underlying stock index has
declined, that position would be less valuable and the Fund would be required
to make a variation margin payment to the broker. Variation margin payments
would be made in a similar fashion when a Fund has purchased an interest rate
futures contract. At any time prior to expiration of the futures contract, a
Fund may elect to close the position by taking an opposite position which will
operate to terminate the Fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Fund and the Fund realizes a loss or a gain.
A description of the various types of futures contracts utilized by
certain Funds and the identification of those Funds whose investment policies
permit such investments is as follows:
Stock Index Futures Contracts - AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM GROWTH FUND and AIM VALUE FUND ("Equity Funds")
A stock index assigns relative values to the common stocks included in
the index and the index fluctuates with changes in the market values of the
common stocks so included. A stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. No physical delivery of
the underlying stocks in the index is made. Currently, stock index futures
contracts can be purchased or sold primarily with respect to broad based stock
indices such as the Standard & Poor's 500 Stock Index, the New York Stock
Exchange Composite Index, the American Stock Exchange Major Market Index, the
NASDAQ - 100 Stock Index and the Value Line Stock Index.
The stock indices listed above consist of a spectrum of stocks not
limited to any one industry such as utility stocks. Utility stocks, at most,
would be expected to comprise a minority of the stocks comprising the portfolio
of an index.
Interest Rate Futures Contracts - AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND and AIM MUNICIPAL BOND FUND ("Debt Funds")
An interest rate futures contract is an agreement between two parties
to buy and sell a debt security for a set price on a future date. Currently,
there are futures contracts based on long-term U.S. Treasury bonds, U.S.
Treasury notes, U.S. Treasury bills, Eurodollars and the Bond Buyer Municipal
Bond Index.
Foreign Currency Futures Contracts - All Funds (except AIM
INTERMEDIATE GOVERNMENT FUND, AIM MONEY MARKET FUND and AIM MUNICIPAL BOND
FUND)
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Futures contracts may also be used to hedge the risk of changes in the
exchange rates of foreign currencies.
OPTIONS ON FUTURES CONTRACTS: ALL FUNDS EXCEPT AIM MONEY MARKET FUND
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the option exercise period.
The writer of the option is required upon exercise to assume an offsetting
futures position (a short position if the option is a call and a long position
if the option is a put) at a specified exercise price at any time during the
period of the option. Upon exercise of the option, the assumption of
offsetting futures positions by the writer and holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's futures
margin account which represents the amount by which the market price of the
futures contract, at exercise, exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract.
If an option on a futures contract is exercised on the last trading date prior
to the expiration date of the option, the settlement will be made entirely in
cash equal to the difference between the exercise price of the option and the
closing price of the futures contract on the expiration date.
A Fund may purchase and sell put and call options on futures contracts
in order to hedge the value of its portfolio against changes in market
conditions. Depending on the pricing of the option compared to either the
price of the futures contract upon which it is based or the price of the
underlying securities or currency, it may or may not be less risky than
ownership of the futures contract or underlying securities or currency.
RISKS AS TO FUTURES CONTRACTS AND RELATED OPTIONS
The use of futures contracts and related options as hedging devices
presents several risks. One risk arises because of the imperfect correlation
between movements in the price of hedging instruments and movements in the
price of the stock, debt securities or foreign currency which are the subject
of the hedge. If the price of a hedging instrument moves less than the price
of the stocks, debt securities or foreign currency which are the subject of the
hedge, the hedge will not be fully effective. If the price of a hedging
instrument moves more than the price of the stock, debt securities or foreign
currency, a Fund will experience either a loss or a gain on the hedging
instrument which will not be completely offset by movements in the price of the
stock, debt securities or foreign currency which are the subject of the hedge.
The use of options on futures contracts involves the additional risk that
changes in the value of the underlying futures contract will not be fully
reflected in the value of the option.
Successful use of hedging instruments by a Fund is also subject to
AIM's ability to predict correctly movements in the direction of the stock
market (Equity Funds), of interest rates (Debt Funds) or of foreign exchange
rates (foreign currencies). Because of possible price distortions in the
futures and options markets, and because of the imperfect correlation between
movements in the prices of hedging instruments and the investments being
hedged, even a correct forecast by AIM of general market trends may not result
in a completely successful hedging transaction.
It is also possible that where a Fund has sold futures contracts to
hedge its portfolio against a decline in the market, the market may advance and
the value of stocks or debt securities held in a Fund's portfolio may decline.
If this occurred, a Fund would lose money on the futures contracts and also
experience a decline in the value of its portfolio securities. Similar risks
exist with respect to foreign currency hedges.
Positions in futures contracts or options may be closed out only on an
exchange on which such contracts are traded. Although the Funds intend to
purchase or sell futures contracts or purchase options only on exchanges or
boards of trade where there appears to be an active market, there is no
assurance that a liquid market on an exchange or board of trade will exist for
any particular contract or at any particular time.
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If there is not a liquid market at a particular time, it may not be possible to
close a futures position or purchase an option at such time. In the event of
adverse price movements under those circumstances, the Fund would continue to
be required to make daily cash payments of maintenance margin on its futures
positions. The extent to which the Fund may engage in futures contracts or
related options will be limited by Internal Revenue Code requirements for
qualification as a regulated investment company and the Funds' intent to
continue to qualify as such. The result of a hedging program cannot be
foreseen and may cause a Fund to suffer losses which it would not otherwise
sustain.
DELAYED DELIVERY AGREEMENTS: ALL FUNDS
Delayed delivery agreements involve commitments by a Fund to dealers
or issuers to acquire securities or instruments at a specified future date
beyond the customary same-day settlement for such securities or instruments.
These commitments may fix the payment price and interest rate to be received on
the investment. Delayed delivery agreements will not be used as a speculative
or leverage technique. Rather, from time to time, AIM can anticipate that cash
for investment purposes will result from, among other things, scheduled
maturities of existing portfolio instruments or from net sales of shares of a
Fund. To assure that a Fund will be as fully invested as possible in
instruments meeting the Fund's investment objective, the Fund may enter into
delayed delivery agreements, but only to the extent of anticipated funds
available for investment during a period of not more than five business days.
Until the settlement date, a Fund will segregate high-quality debt securities
of a dollar value sufficient at all times to make payment for the delayed
delivery securities. No more than 25% of a Fund's total assets will be
committed to delayed delivery agreements and when-issued securities, as
described below. The delayed delivery securities, which will not begin to
accrue interest or dividends until the settlement date, will be recorded as an
asset of a Fund and will be subject to the risk of market fluctuation. The
purchase price of the delayed delivery securities is a liability of a Fund
until settlement. Absent extraordinary circumstances, a Fund will not sell or
otherwise transfer the delayed delivery securities prior to settlement. If
cash is not available to a Fund at the time of settlement, the Fund may be
required to dispose of portfolio securities that it would otherwise hold to
maturity in order to meet its obligation to accept delivery under a delayed
delivery agreement. The Board of Trustees has determined that entering into
delayed delivery agreements does not present a materially increased risk of
loss to shareholders, but the Board of Trustees may restrict the use of delayed
delivery agreements if the risk of loss is determined to be material, or if it
affects the stable net asset value of AIM MONEY MARKET FUND.
WHEN-ISSUED SECURITIES: ALL FUNDS
Many new issues of securities are offered on a "when-issued" basis,
that is, the date for delivery of and payment for the securities is not fixed
at the date of purchase, but is set after the securities are issued (normally
within forty-five days after the date of the transaction). The payment
obligation and, if applicable, the interest rate that will be received on the
securities are fixed at the time the buyer enters into the commitment. A Fund
will only make commitments to purchase such securities with the intention of
actually acquiring such securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable. No additional
when-issued commitments will be made if as a result more than 25% of a Fund's
total assets would become committed to purchases of when-issued securities and
delayed delivery agreements.
If a Fund purchases a when-issued security, it will direct its
custodian bank to collateralize the when-issued commitment by segregating
assets in the same fashion as required for a delayed delivery agreement. Such
segregated assets will likewise be marked-to-market, and the amount segregated
will be increased if necessary to maintain adequate coverage of the when-issued
commitments.
Securities purchased on a when-issued basis and the securities held in
a Fund's portfolio are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and, if applicable,
changes in the level of interest rates. Therefore, if a Fund is to remain
substantially fully invested at the same time that it has purchased securities
on a when-issued basis, there will be a possibility that the
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market value of the Fund's assets will fluctuate to a greater degree.
Furthermore, when the time comes for the Fund to meet its obligations under
when-issued commitments, the Fund will do so by using then available cash flow,
by sale of the segregated assets, by sale of other securities or, although it
would not normally expect to do so, by directing the sale of the when-issued
securities themselves (which may have a market value greater or less than the
Fund's payment obligation).
A sale of securities to meet such obligations carries with it a
greater potential for the realization of net short-term capital gains, which
are not exempt from federal income taxes. The value of when-issued securities
on the settlement date may be more or less than the purchase price.
FOREIGN EXCHANGE TRANSACTIONS: ALL FUNDS (EXCEPT AIM INTERMEDIATE GOVERNMENT
FUND, AIM MONEY MARKET FUND AND AIM MUNICIPAL BOND FUND)
Purchases and sales of foreign securities are usually made with
foreign currencies, and consequently a Fund may from time to time hold cash
balances in the form of foreign currencies and multinational currency units.
Such foreign currencies and multinational currency units will usually be
acquired on a spot (i.e., cash) basis at the spot rate prevailing in foreign
exchange markets, and will result in currency conversion costs to a Fund. The
Funds attempt to purchase and sell foreign currencies on as favorable a basis
as practicable; however, some price spread on foreign exchange transactions (to
cover service charges) may be incurred, particularly when a Fund changes
investments from one country to another, or when U.S. dollars are used to
purchase foreign securities. Certain countries could adopt policies which
would prevent the Funds from transferring cash out of such countries, and the
Funds may be affected either favorably or unfavorably by fluctuations in
relative exchange rates while they hold foreign currencies.
RULE 144A SECURITIES
Each of the Funds may purchase securities which, while privately
placed, are eligible for purchase and sale pursuant to Rule 144A under the
Securities Act of 1933 (the "1933 Act"). This Rule permits certain qualified
institutional buyers, such as the Funds, to trade in privately placed
securities even though such securities are not registered under the 1933 Act.
AIM, under the supervision of the Trust's Board of Trustees, will consider
whether securities purchased under Rule 144A are illiquid and thus subject to
the Funds' restriction of investing no more than 15% of its net assets (10% in
the case of AIM MONEY MARKET FUND) in illiquid securities. Determination of
whether a Rule 144A security is liquid or not is a question of fact. In making
this determination AIM will consider the trading markets for the specific
security taking into account the unregistered nature of a Rule 144A security.
In addition, AIM could consider the (i) frequency of trades and quotes, (ii)
number of dealers and potential purchasers, (iii) dealer undertakings to make a
market, and (iv) nature of the security and of market place trades (for
example, the time needed to dispose of the security, the method of soliciting
offers and the mechanics of transfer). The liquidity of Rule 144A securities
will also be monitored by AIM and, if as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, a Fund's holdings of
illiquid securities will be reviewed to determine what, if any, action is
required to assure that such Fund does not invest more than 15% of its net
assets (10% in the case of AIM MONEY MARKET FUND) in illiquid securities.
Investing in Rule 144A securities could have the effect of increasing the
amount of each Fund's investments in illiquid securities if qualified
institutional buyers are unwilling to purchase such securities.
INVESTMENT RESTRICTIONS
Each Fund is subject to the following restrictions which may not be
changed without approval of the lesser of (i) 67% or more of the Fund's shares
present at a meeting if the holders of more than 50% of the outstanding shares
are present in person or represented by proxy, or (ii) more than 50% of the
Fund's outstanding shares. Any investment restriction that involves a maximum
or minimum percentage of securities
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<PAGE> 86
or assets shall not be considered to be violated unless an excess over or a
deficiency under the percentage occurs immediately after, and is caused by, an
acquisition or disposition of securities or utilization of assets by the Fund.
AIM BALANCED FUND
The Fund may not:
1. With respect to 75% of its total assets, purchase the
securities of any issuer if such purchase would cause more than 5% of
the value of its total assets to be invested in the securities of such
issuer (except U.S. Government securities or securities issued by its
agencies and instrumentalities), and except that the Fund may purchase
securities of other investment companies to the extent permitted by
applicable law or exemptive order.
2. Concentrate 25% or more of its investments in a particular
industry.
3. Make short sales of securities or maintain a short
position in securities unless at all times when a short position is
open, it owns at least an equal amount of such securities or owns
securities comparable to or exchangeable for at least an equal amount
of such securities.
4. Purchase or sell commodity contracts, except that the Fund
may, as appropriate and consistent with its investment policies and
other investment restrictions, for hedging purposes, write, purchase
or sell options (including puts, calls and combinations thereof),
write covered call options, enter into futures contracts on
securities, securities indices and currencies, options on such futures
contracts, forward foreign currency exchange contracts, forward
commitments and repurchase agreements.
5. Purchase or sell real estate (except that this restriction
does not preclude investments in companies engaged in real estate
activities or in real estate investment trusts or in securities
secured by real estate).
6. Borrow money or pledge its assets except that the Fund may
enter into reverse repurchase agreements and except, as a temporary
measure for extraordinary or emergency purposes and not for investment
purposes, the Fund may borrow from banks (including the Fund's
custodian bank) amounts of up to 33-1/3% of the value of its total
assets (including the amount of such borrowings) less its liabilities
(excluding the amount of such borrowings) and may pledge amounts of up
to 33-1/3% of its total assets to secure such borrowings. The Fund
will not purchase securities while borrowings in an amount in excess
of 5% of its total assets are outstanding. The Fund may not issue
senior securities, except to the extent permitted by the 1940 Act,
including permitted borrowings.
7. Make loans, except (a) through the purchase of a portion
of an issue of bonds or other obligations of types commonly offered
publicly and purchased by financial institutions, (b) through the
purchase of short-term obligations (maturing within a year),
including repurchase agreements, and (c) the Fund may lend its
portfolio securities, provided that the value of the securities loaned
does not exceed 33-1/3% of the Fund's total assets.
AIM GLOBAL UTILITIES FUND
The Fund may not:
1. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer, except that the Fund may purchase
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<PAGE> 87
securities of other investment companies to the extent permitted by
applicable law or exemptive order.
2. Purchase the securities of any issuer if such purchase
would cause more than 5% of the voting securities, or more than 10% of
the securities of any class of such issuer, to be held by the Fund,
except that the Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive
order.
3. Make short sales of securities or purchase securities on
margin, but it may obtain such short-term credits as are necessary for
the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in financial futures
contracts and options thereon.
4. Act as a securities underwriter.
5. Make loans, except (a) through the purchase of a portion
of an issue of bonds or other obligations of types commonly offered
publicly and purchased by financial institutions, and (b) through the
purchase of short-term obligations (maturing within a year), including
repurchase agreements, and (c) the Fund may lend its portfolio
securities, provided that the value of the securities loaned does not
exceed 33-1/3% of the Fund's total assets.
6. Borrow money or mortgage, pledge, or hypothecate its
assets, except that the Fund may enter into financial futures
contracts, and except that the Fund may borrow from banks to pay for
redemptions and for temporary purposes in an amount not exceeding
one-third of the value of its total assets (including the amount of
such borrowings) less its liabilities (excluding the amount of such
borrowings) and may secure such borrowings by pledging up to one-third
of the value of its total assets. For the purpose of this
restriction, collateral arrangements with respect to margin for a
financial futures contract are not deemed to be a pledge of assets.
The Fund will not purchase securities while borrowings in an amount in
excess of 5% of its total assets are outstanding.
7. Buy or sell commodities or commodity contracts, although
the Fund may purchase and sell financial futures contracts and options
thereon for hedging purposes.
8. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate.
AIM GROWTH FUND
The Fund may not:
1. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer (except U.S. Government securities,
including securities issued by its agencies and instrumentalities),
and except that the Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive
order.
2. Purchase the securities of any issuer if such purchase
would cause more than 5% of the voting securities, or more than 10% of
the securities of any class of such issuer, to be held by the Fund,
except that the Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive
order.
3. Concentrate 25% or more of its investments in a particular
industry.
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<PAGE> 88
4. Make short sales of securities or purchase securities on
margin, but it may obtain such short-term credits as are necessary for
the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in stock index futures
contracts and options thereon.
5. Act as a securities underwriter.
6. Make loans, except (a) through the purchase of a portion
of an issue of bonds or other obligations of types commonly offered
publicly and purchased by financial institutions, (b) through the
purchase of short-term obligations (maturing within a year), including
repurchase agreements, and (c) the Fund may lend its portfolio
securities, provided that the value of the securities loaned does not
exceed 33-1/3% of the Fund's total assets.
7. Borrow, except that the Fund may enter into stock index
futures contracts and that the right is reserved to borrow from banks,
provided that no borrowing may exceed one-third of the value of its
total assets (including the amount of such borrowings) less its
liabilities (excluding the amount of such borrowings) and may secure
such borrowings by pledging up to one-third of the value of its total
assets. For the purposes of this restriction, collateral arrangements
with respect to margin for a stock index futures contract are not
deemed to be a pledge of assets. The Fund will not purchase
securities while borrowings in excess of 5% of its total assets are
outstanding.
.
8. Buy or sell commodities or commodity contracts, although
the Fund may invest in financial futures and options thereon for
hedging purposes.
9. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate.
AIM HIGH YIELD FUND
The Fund may not:
1. Borrow money or issue senior securities or mortgage,
pledge, or hypothecate its assets, except that the Fund may enter into
financial futures contracts, and borrow from banks to pay for
redemptions and for temporary purposes in an amount not exceeding
one-third of the value of its total assets (including the amount of
such borrowings) less its liabilities (excluding the amount of such
borrowings) and may secure such borrowings by pledging up to one-third
of the value of its total assets. For the purpose of this
restriction, collateral arrangements with respect to margin for a
financial futures contract are not deemed to be a pledge of assets.
Secured temporary borrowings may take the form of reverse repurchase
agreements, pursuant to which the Fund would sell portfolio securities
for cash and simultaneously agree to repurchase them at a specified
date for the same amount of cash plus an interest component. The Fund
will not purchase securities while borrowings in excess of 5% of its
total assets are outstanding.
2. Make short sales of securities or maintain short
positions, unless, at all times when a short position is open, the
Fund owns at least an equal amount of the securities sold short or
owns securities convertible into or exchangeable for at least an equal
amount of such securities sold short, without the payment of further
consideration.
3. Purchase or sell real estate or interests therein, but the
Fund may purchase and sell (a) securities which are secured by real
estate, and (b) the securities of companies which invest or deal in
real estate or interests therein, including real estate investment
trusts.
4. Act as a securities underwriter.
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<PAGE> 89
5. Purchase or sell commodities or commodity contracts, other
than financial futures contracts and options thereon.
6. With respect to 75% of the value of its total assets,
invest more than 5% of the market value of its total assets in the
securities of any one issuer, other than obligations of or guaranteed
by the U.S. Government or any of its agencies or instrumentalities,
except that the Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive
order.
7. Concentrate 25% or more of the value of its total assets
in the securities of issuers which conduct their principal business
activities in the same industry. Gas, electric, water and telephone
companies as well as banks, credit institutions, and insurance
companies will be considered to be in separate industries.
8. Make loans, except that the Fund may lend its portfolio
securities provided that the value of the securities loaned does not
exceed 33-1/3% of its total assets, and except that the Fund may enter
into repurchase agreements.
9. Purchase securities on margin, except that the Fund may
obtain such short-term credits as may be necessary for the clearance
of purchases and sales of securities and may make margin payments in
connection with transactions in financial futures contracts and
options thereon.
10. Invest in puts, calls, or any combinations thereof,
except, however, that the Fund may invest in financial futures
contracts, purchase and sell options on financial futures contracts,
may acquire and hold puts which relate to equity securities acquired
by the Fund when such puts are attached to or included in a unit with
such equity securities, and may sell covered call options.
AIM INCOME FUND
The Fund may not:
1. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer (except U.S. Government securities,
including securities issued by its agencies and instrumentalities),
and except that the Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive
order.
2. Purchase the securities of any issuer if such purchase
would cause more than 5% of the voting securities, or more than 10% of
the securities of any class of such issuer, to be held by the Fund,
except that the Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive
order.
3. Concentrate 25% or more of its investments in a particular
industry.
4. Make short sales of securities or purchase securities on
margin, but it may obtain such short-term credits as are necessary for
the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in financial futures
contracts and options thereon.
5. Act as a securities underwriter.
6. Make loans, except (a) through the purchase of a portion
of an issue of bonds or other obligations of types commonly offered
publicly and purchased by financial institutions, (b) through the
23
<PAGE> 90
purchase of short-term obligations (maturing within a year), including
repurchase agreements, and (c) the Fund may lend its portfolio
securities, provided that the value of the securities loaned does not
exceed 33-1/3% of the Fund's total assets.
7. Borrow, except that the Fund may enter into financial
futures contracts and that the right is reserved to borrow from banks,
provided that no borrowing may exceed one-third of the value of its
total assets (including the amount of such borrowings) less its
liabilities (excluding the amount of such borrowings) and may secure
such borrowings by pledging up to one-third of the value of its total
assets. (For the purposes of this restriction, collateral
arrangements with respect to margin for a financial futures contract
are not deemed to be a pledge of assets.) The Fund will not purchase
securities while borrowings in an amount in excess of 5% of its total
assets are outstanding.
8. Invest in puts, calls, straddles, spreads or any
combination thereof, except, however, that the Fund may purchase and
sell options on financial futures contracts and may sell covered call
options.
9. Buy or sell commodities or commodity contracts, although
the Fund may purchase and sell financial futures contracts and options
thereon.
10. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate.
11. Invest in securities with unlimited liability except for
assessability allowed by statutes with respect to wages.
12. Issue senior securities except to the extent permitted by
the 1940 Act, including permitted borrowing.
AIM INTERMEDIATE GOVERNMENT FUND
The Fund may not:
1. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer (except U.S. Government securities,
including securities issued by its agencies and instrumentalities, as
described under "Investment Objectives" in the Prospectus, and except
that the Fund may purchase securities of other investment companies to
the extent permitted by applicable law or exemptive order).
2. Purchase the securities of any issuer if such purchase
would cause more than 5% of the voting securities, or more than 10% of
the securities of any class of such issuer, to be held by the Fund
(except U.S. Government securities including securities issued by its
agencies and instrumentalities, as described under "Investment
Objectives" in the Prospectus), and except that the Fund may purchase
securities of other investment companies to the extent permitted by
applicable law or exemptive order.
3. Concentrate 25% or more of its investments in a particular
industry.
4. Make short sales of securities or purchase securities on
margin, but it may obtain such short-term credits as are necessary for
the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in financial futures
contracts and options thereon.
5. Act as a securities underwriter.
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<PAGE> 91
6. Make loans, except (a) through the purchase of a portion
of an issue of bonds or other obligations of types commonly offered
publicly and purchased by financial institutions, (b) through the
purchase of short-term obligations (maturing within a year), including
repurchase agreements, and (c) the Fund may lend its portfolio
securities provided that the value of the securities loaned does not
exceed 33-1/3% of the Fund's total assets.
7. Borrow money or mortgage, pledge, or hypothecate its
assets, except that the Fund may enter into financial futures
contracts, and except that the Fund may borrow from banks to pay for
redemptions and for temporary purposes in an amount not exceeding
one-third of the value of its total assets (including the amount of
such borrowings) less its liabilities (excluding the amount of such
borrowings) and may secure such borrowings by pledging up to one-third
of the value of its total assets. For the purpose of this
restriction, collateral arrangements with respect to margin for a
financial futures contract are not deemed to be a pledge of assets.
The Fund will not purchase securities while borrowings in an amount in
excess of 5% of its total assets are outstanding.
8. Invest in puts, calls, straddles, spreads or any
combination thereof, except, however, that the Fund may purchase and
sell options on financial futures contracts and may sell covered call
options.
9. Buy or sell commodities or commodity contracts, although
the Fund may purchase and sell financial futures contracts and options
thereon.
10. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate.
AIM MONEY MARKET FUND
The Fund may not:
1. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer, except (a) U.S. Government securities,
including securities issued by its agencies and instrumentalities, (b)
to the extent permitted by Rule 2a-7 under the 1940 Act, as amended
from time to time, and (c) that the Fund may purchase securities of
other investment companies to the extent permitted by applicable law
or exemptive order.
2. Concentrate 25% or more of its investments in a particular
industry, provided that this limitation does not apply to securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and obligations of domestic banks.
3. Pledge, mortgage or hypothecate more than 33-1/3% of the
total assets of the Fund, except that reverse repurchase agreements
and loans of portfolio securities are not deemed to involve pledging,
mortgaging or hypothecating assets.
4. Purchase securities on margin or make short sales of
securities, except as is necessary for the clearance of purchases and
sales of securities.
5. Underwrite securities (except to the extent that the
purchase of securities either directly from the issuer or from an
underwriter for an issuer and the later disposition of such securities
may be deemed an underwriting).
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<PAGE> 92
6. Make loans, except it may purchase instruments
and securities permitted by the investment objectives and policies, it
may invest in reverse repurchase agreements, and it may loan portfolio
securities in an amount equal to one-third of its total assets.
7. Borrow money or issue senior securities (which term shall
not include delayed delivery and when- issued securities) except as a
temporary measure for extraordinary or emergency purposes and except
that the Fund may enter into reverse repurchase agreements in amounts,
inclusive of all borrowings, up to one-third of the value of the
Fund's total assets (including the amount of such borrowings) less its
liabilities (excluding the amount of such borrowings) at the time it
enters into such agreements. The Fund will not purchase portfolio
securities while borrowings in an amount in excess of 5% of its total
assets are outstanding.
8. Invest in puts or calls or engage in arbitrage
transactions.
9. Buy or sell commodities or commodity futures contracts.
10. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate or interests therein.
AIM MUNICIPAL BOND FUND
The Fund may not:
1. Invest less than 65% of its total assets in securities
other than municipal bonds.
2. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer (except U.S. Government securities,
including securities issued by its agencies and instrumentalities, and
except that the Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive
order). For the purpose of this restriction and that set forth in
restriction 3, the Fund will regard each state and each political
subdivision, agency or instrumentality of such state and each
multi-state agency of which such state is a member as a separate
issuer.
3. Purchase the securities of any issuer if such purchase
would cause more than 10% of the debt obligations of such issuer to be
held by the Fund.
4. Purchase securities if such purchase would cause, at the
time of purchase, 25% or more of total Fund assets to be invested in
any one industry. Investment in municipal bonds and obligations
issued or guaranteed by the U.S. Government, its agencies, authorities
or instrumentalities does not involve investment in any industry.
5. Make short sales of securities or purchase securities on
margin, but it may obtain such short-term credits as are necessary for
the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in financial futures
contracts and options thereon and municipal bond index futures
contracts.
6. Act as a securities underwriter except to the extent that
it may be deemed to be an underwriter under the Securities Act of 1933
when purchasing or selling a portfolio security.
7. Make loans, except that it may purchase debt instruments,
including repurchase agreements maturing within seven days, as
permitted by the investment objective and policies of the Fund, and
except that it may lend its portfolio securities provided that the
value of the securities loaned does not exceed 33-1/3% of its total
assets.
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<PAGE> 93
8. Borrow, except that the Fund may enter into financial
futures contracts and municipal bond index futures contracts and that
the right is reserved to borrow from banks, provided that no borrowing
may exceed one-third of the value of its total assets (including the
amount of such borrowings) less its liabilities (excluding the amount
of such borrowings) and may secure such borrowings by pledging up to
one-third of the value of its total assets. (For the purposes of this
restriction, collateral arrangements with respect to margin for a
financial or a municipal bond index futures contract are not deemed to
be a pledge of assets.) The Fund will not purchase securities while
borrowings in excess of 5% of its total assets are outstanding.
9. Invest in puts, calls, straddles, spreads or any
combination thereof, except, however, that the Fund may purchase and
sell options on financial futures contracts and may sell covered call
options.
10. Buy or sell commodities or commodity contracts, although
the Fund may purchase and sell financial futures contracts and options
thereon and municipal bond index futures contracts.
11. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate.
AIM VALUE FUND
The Fund may not:
1. Purchase the securities of any issuer if such purchase
would cause more than 5% of the value of its assets to be invested in
the securities of such issuer (except U.S. Government securities,
including securities issued by its agencies and instrumentalities, and
except that the Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive
order).
2. Purchase the securities of any issuer if such purchase
would cause more than 5% of the voting securities, or more than 10% of
the securities of any class of such issuer, to be held by the Fund,
except that the Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive
order.
3. Concentrate 25% or more of its investments in a particular
industry.
4. Make short sales of securities or purchase securities on
margin, but it may obtain such short-term credits as are necessary for
the clearance of purchases and sales of securities and may make margin
payments in connection with transactions in stock index futures
contracts and options thereon.
5. Act as a securities underwriter.
6. Make loans, except (a) through the purchase of a portion
of an issue of bonds or other obligations of types commonly offered
publicly and purchased by financial institutions, (b) through the
purchase of short-term obligations (maturing within a year), including
repurchase agreements, and (c) the Fund may lend its portfolio
securities, provided that the value of the securities loaned does not
exceed 33-1/3% of the Fund's total assets.
7. Borrow, except that the Fund may enter into stock index
futures contracts and that the right is reserved to borrow from banks,
provided that no borrowing may exceed one-third of the value of its
total assets (including the amount of such borrowings) less its
liabilities (excluding the amount of such borrowings) and may secure
such borrowings by pledging up to one-third of the value of its
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<PAGE> 94
total assets. (For the purposes of this restriction, collateral
arrangements with respect to margin for a stock index futures contract
are not deemed to be a pledge of assets.) The Fund will not purchase
securities while borrowings in an amount in excess of 5% of its total
assets are outstanding.
8. Buy or sell commodities or commodity contracts, although
the Fund may invest in financial futures and options thereon for
hedging purposes.
9. Invest in real estate, although the Fund may purchase
securities secured by real estate or interests therein or issued by
issuers which invest in real estate.
In order to permit the sale of the Funds' shares in certain states,
the Funds may from time to time make commitments that are more restrictive than
the restrictions described above. For example, as of the date of this Statement
of Additional Information, (1) each of the Funds has undertaken that it will
not invest more than 15% of its average net assets at the time of purchase in
investments which are not readily marketable (Texas); (2) AIM BALANCED FUND,
AIM GROWTH FUND and AIM VALUE FUND have undertaken that each Fund's investments
in warrants, valued at the lower of cost or market, may not exceed 5% of its
net assets, and that included within that amount (but not to exceed 2% of the
value of net assets) may be warrants which are not listed on the New York or
American stock exchanges (Texas); (3) AIM HIGH YIELD FUND has undertaken that
it will notify shareholders in writing at least 30 days prior to any change in
its investment objective (Arizona, Kentucky and South Dakota); (4) each of the
Funds will comply with California Rule 260.140.85(b) by purchasing and selling
only financial futures contracts, options on financial futures contracts and
municipal bond index futures contracts which are listed on national securities
or commodities exchanges, by limiting the aggregate premiums paid on all such
options held at any one time to less than 20% of each Fund's net assets and by
limiting the aggregate margin deposits required on all such futures contracts
or options thereon to less than 5% of each Fund's total assets; (5) no Fund
will exercise its right to redeem shareholder accounts of less than $500 unless
the account balance falls below $500 as a result of shareholder action and not
as a result of market fluctuation (Texas); (6) AIM BALANCED FUND and AIM VALUE
FUND will comply with Texas Rule 123.2(6), and follow SEC guidelines, that
provide that loans of their portfolio securities will be fully collateralized;
and (7) each of the Funds will comply with Texas Rule 123.2(4) and not issue
shares for any consideration other than cash. These restrictions are not
fundamental and may be changed by the trustees without shareholder approval.
In accordance with the requirements of the Texas State Securities
Board, the Funds will not purchase or sell real estate (including limited
partnership interests) and shall not invest in oil, gas or mineral leases. In
addition, none of the Funds intends to: (1) purchase securities of any company
with a record of less than three years' continuous operation (including that of
predecessors) if such purchase would cause the Fund's aggregate investments in
all such companies taken at cost to exceed 5% of the Fund's total assets taken
at market value; (2) invest for the purpose of influencing management or
exercising control, except that a Fund may purchase securities of other
investment companies to the extent permitted by applicable law or exemptive
order; or (3) purchase or retain the securities of any issuer if those officers
and trustees of the Trust or officers and directors of AIM who own beneficially
more than 1/2 of 1% of the securities of such issuer together own more than 5%
of the securities of such issuer. These restrictions are not fundamental and
may be changed by the trustees without shareholder approval.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of July 15, 1997, the trustees and officers of the Trust as a group
owned less than 1% of all classes of outstanding shares of the Trust; except
that the trustees and officers as a group owned 2.80% of the outstanding AIM
Cash Reserve Shares of AIM MONEY MARKET FUND, and 1.65% of the outstanding
Class A shares of AIM MUNICIPAL BOND FUND.
28
<PAGE> 95
To the best knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding shares of each class of the Trust's
equity securities as of July 15, 1997, and the percentage of the outstanding
shares held by such holders are set forth below:
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address Owned of and
Fund of Owner Record* Beneficially
- ---- ---------------- -------- ------------
<S> <C> <C> <C>
AIM Balanced Fund - MLTC TTEE FBO 7.21% -0-
Class A shares Qualified Retirement Plans
Merrill Lynch Grp Empl Svcs
265 Davidson Ave. 4th Fl.
Somerset, NJ 08873
Merrill Lynch, Pierce, 6.71% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Wachovia Bank of North Carolina 5.07% -0-
TTEE Vencor Inc. 401K Master Tr
DTD 01/01/97
301 N. Main St.
P.O. Box 3073
Winston-Salem, NC 27150
Class B shares Merrill Lynch, Pierce, 12.24% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
AIM Global Utilities Fund - Merrill Lynch, Pierce, 7.61% -0-
Class B shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
AIM Growth Fund - Merrill Lynch, Pierce, 17.89% -0-
Class B shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
</TABLE>
__________________________________
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
29
<PAGE> 96
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address Owned of and
Fund of Owner Record* Beneficially
- ---- --------------------- -------- ------------
<S> <C> <C> <C>
AIM High Yield Fund - Merrill Lynch, Pierce, 7.67% -0-
Class A shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 17.14% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
AIM Income Fund - Merrill Lynch, Pierce, 5.77% -0-
Class A shares Fenner & Smith
Mutual Fund Operations
P.O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 10.77% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
AIM Intermediate Government Fund - Merrill Lynch, Pierce, 8.14% -0-
Class A shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 15.87% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
AIM Money Market Fund - Charles T. Bauer and 5.40% -0-
AIM Cash Reserve Shares Ruth J. Bauer
11 Greenway Plaza, Suite 100
Houston, TX 77046
</TABLE>
__________________________________
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
30
<PAGE> 97
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address Owned of and
Fund of Owner Record* Beneficially
- ---- --------------------- -------- ------------
<S> <C> <C> <C>
AIM Municipal Bond Fund - Merrill Lynch, Pierce 9.59% -0-
Class B shares Fenner Smith
Mutual Fund Operations
P.O. Box 45286
Jacksonville, FL 32232-5286
AIM Value Fund - Merrill Lynch, Pierce, 10.31% -0-
Class A shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 16.74% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
</TABLE>
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The trustees and officers of the Trust and their principal occupations
during at least the last five years are set forth below. Unless otherwise
indicated, the address of each trustee and officer is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046.
__________________________________
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
31
<PAGE> 98
<TABLE>
<CAPTION>
=================================================================================================================
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
=================================================================================================================
<S> <C> <C>
*CHARLES T. BAUER (78) Trustee and Chairman of the Board of Directors, A I M Management
11 Greenway Plaza, Suite 100 Chairman Group Inc., A I M Advisors, Inc., A I M Capital
Houston, TX 77046 Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc., A I M Institutional Fund
Services, Inc. and Fund Management Company; and Vice
Chairman and Director, AMVESCAP plc.
- -----------------------------------------------------------------------------------------------------------------
BRUCE L. CROCKETT (53) Trustee Director, ACE Limited (insurance company). Formerly,
906 Frome Lane Director, President and Chief Executive Officer,
McLean, VA 22102 COMSAT Corporation (international communications
company).
- -----------------------------------------------------------------------------------------------------------------
OWEN DALY II (72) Trustee Director, Cortland Trust Inc. (investment company).
Six Blythewood Road Formerly, Director, CF & I Steel Corp., Monumental
Baltimore, MD 21210 Life Insurance Company and Monumental General
Insurance Company; and Chairman of the Board of
Equitable Bancorporation.
- -----------------------------------------------------------------------------------------------------------------
JACK FIELDS (45) Trustee Formerly, Member of the U.S. House of
2607 Old Humble Road Representatives.
Humble, Texas 77396
- -----------------------------------------------------------------------------------------------------------------
**CARL FRISCHLING (60) Trustee Partner, Kramer, Levin, Naftalis & Frankel (law
919 Third Avenue firm). Director, ERD Waste, Inc. (waste management
New York, NY 10022 company), Aegis Consumer Finance (auto leasing
company) and Lazard Funds, Inc. (investment
companies). Formerly, Partner, Reid & Priest (law
firm); and prior thereto, Partner, Spengler
Carlson Gubar Brodsky & Frischling (law firm).
- -----------------------------------------------------------------------------------------------------------------
*ROBERT H. GRAHAM (50) Trustee and Director, President and Chief Executive Officer,
11 Greenway Plaza, Suite 100 President A I M Management Group Inc.; Director and President,
Houston, TX 77046 A I M Advisors, Inc.; Director and Senior Vice
President, A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc.,
A I M Institutional Fund Services, Inc. and Fund
Management Company; and Director, AMVESCAP plc.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* A trustee who is an "interested person" of the Trust as defined in the
1940 Act.
** A trustee who is an "interested person" of the Trust and A I M
Advisors, Inc. as defined in the 1940 Act.
32
<PAGE> 99
<TABLE>
<CAPTION>
=================================================================================================================
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
=================================================================================================================
<S> <C> <C>
JOHN F. KROEGER (72) Trustee Director, Flag Investors International Fund, Inc.,
37 Pippins Way Flag Investors Emerging Growth Fund, Inc., Flag
Morristown, NJ 07960 Investors Telephone Income Fund, Inc., Flag Investors
Equity Partners Fund, Inc., Total Return U.S.
Treasury Fund, Inc., Flag Investors Intermediate Term
Income Fund, Inc., Managed Municipal Fund, Inc., Flag
Investors Value Builder Fund, Inc., Flag Investors
Maryland Intermediate Tax-Free Income Fund, Inc.,
Flag Investors Real Estate Securities Fund, Inc.,
Alex. Brown Cash Reserve Fund, Inc. and North
American Government Bond Fund, Inc. (investment
companies). Formerly, Consultant, Wendell & Stockel
Associates, Inc. (consulting firm).
- -----------------------------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (54) Trustee Attorney in private practice in Houston, Texas.
6363 Woodway, Suite 825
Houston, TX 77057
- -----------------------------------------------------------------------------------------------------------------
IAN W. ROBINSON (74) Trustee Formerly, Executive Vice President and Chief
183 River Drive Financial Officer, Bell Atlantic Management Services,
Tequesta, FL 33469 Inc. (provider of centralized management services to
telephone companies); Executive Vice President, Bell
Atlantic Corporation (parent of seven telephone
companies); and Vice President and Chief Financial
Officer, Bell Telephone Company of Pennsylvania and
Diamond State Telephone Company.
- -----------------------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (57) Trustee Executive Vice President, Development and Operations,
Transco Tower, 50th Floor Hines Interests Limited Partnership (real estate
2800 Post Oak Blvd. development).
Houston, TX 77056
- -----------------------------------------------------------------------------------------------------------------
***JOHN J. ARTHUR (52) Senior Vice Senior Vice President and Treasurer, A I M Advisors,
11 Greenway Plaza, Suite 100 President and Inc.; Vice President and Treasurer, A I M Management
Houston, TX 77046 Treasurer Group Inc., A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc., A I M
Institutional Fund Services, Inc. and Fund Management
Company.
- -----------------------------------------------------------------------------------------------------------------
GARY T. CRUM (49) Senior Vice Director and President, A I M Capital Management,
11 Greenway Plaza, Suite 100 President Inc.; Director and Senior Vice President, A I M
Houston, TX 77046 Management Group Inc. and A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP plc.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
*** Mr. Arthur and Ms. Relihan are married to each other.
33
<PAGE> 100
<TABLE>
<CAPTION>
=================================================================================================================
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
=================================================================================================================
<S> <C> <C>
SCOTT G. LUCAS (38) Senior Vice Director and Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 President Management, Inc.; and Vice President,
Houston, TX 77046 A I M Management Group Inc. and A I M Advisors, Inc.
- -----------------------------------------------------------------------------------------------------------------
***CAROL F. RELIHAN (42) Senior Vice Senior Vice President, General Counsel and Secretary,
11 Greenway Plaza, Suite 100 President A I M Advisors, Inc.; Vice President, General Counsel
Houston, TX 77046 and Secretary and Secretary, A I M Management Group Inc.; Vice
President and General Counsel, Fund Management
Company; and Vice President, A I M Capital
Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and A I M Institutional Fund
Services, Inc.
- -----------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (38) Vice President and Vice President and Fund Controller, A I M Advisors,
11 Greenway Plaza, Suite 100 Assistant Inc.; and Assistant Vice President and Assistant
Houston, TX 77046 Treasurer Treasurer, Fund Management Company.
- -----------------------------------------------------------------------------------------------------------------
ROBERT G. ALLEY (48) Vice President Senior Vice President, A I M Capital Management,
11 Greenway Plaza, Suite 100 Inc.; and Vice President, A I M Advisors, Inc.
Houston, TX 77046 Formerly, Senior Fixed Income Money Manager, Waddell
and Reed, Inc.
- -----------------------------------------------------------------------------------------------------------------
STUART W. COCO (42) Vice President Senior Vice President, A I M Capital Management,
11 Greenway Plaza, Suite 100 Inc.; and Vice President, A I M Advisors, Inc.
Houston, TX 77046
- -----------------------------------------------------------------------------------------------------------------
MELVILLE B. COX (53) Vice President Vice President and Chief Compliance Officer, A I M
11 Greenway Plaza, Suite 100 Advisors, Inc., A I M Capital Management, Inc., A I M
Houston, TX 77046 Distributors, Inc., A I M Fund Services, Inc., A I M
Institutional Fund Services, Inc. and Fund Management
Company.
- -----------------------------------------------------------------------------------------------------------------
KAREN DUNN KELLEY (37) Vice President Senior Vice President, A I M Capital Management,
11 Greenway Plaza, Suite 100 Inc.; and Vice President, A I M Advisors, Inc.
Houston, TX 77046
- -----------------------------------------------------------------------------------------------------------------
JONATHAN C. SCHOOLAR (36) Vice President Director and Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 Management, Inc.; and Vice President, A I M Advisors,
Houston, TX 77046 Inc.
=================================================================================================================
</TABLE>
The standing committees of the Board of Trustees are the Audit
Committee, the Investments Committee and the Nominating and Compensation
Committee.
- ---------------
*** Mr. Arthur and Ms. Relihan are married to each other.
34
<PAGE> 101
The members of the Audit Committee are Messrs. Crockett, Daly, Fields,
Frischling, Kroeger (Chairman), Pennock, Robinson and Sklar. The Audit
Committee is responsible for meeting with the Funds' auditors to review audit
procedures and results and to consider any matters arising from an audit to be
brought to the attention of the trustees as a whole with respect to the Funds'
fund accounting or its internal accounting controls, and for considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Trustees and such committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly (Chairman), Fields, Frischling, Kroeger, Pennock, Robinson and Sklar. The
Investments Committee is responsible for reviewing portfolio compliance,
brokerage allocation, portfolio investment pricing issues, interim dividend and
distribution issues, and considering such matters as may from time to time be
set forth in a charter adopted by the Board of Trustees and such committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Fields, Kroeger, Pennock (Chairman), Robinson and Sklar. The
Nominating and Compensation Committee is responsible for considering and
nominating individuals to stand for election as trustees who are not interested
persons as long as the Trust maintains a distribution plan pursuant to Rule
12b-1 under the 1940 Act, reviewing from time to time the compensation payable
to the dis-interested trustees, and considering such matters as may from time
to time be set forth in a charter adopted by the Board of Trustees and such
committee.
Remuneration of Trustees
Each trustee is reimbursed for expenses incurred in connection with
each meeting of the Board of Trustees or any committee thereof. Each Trustee
who is not also an officer of the Trust is compensated for his services
according to a fee schedule which recognizes the fact that such trustee also
serves as a director or trustee of other AIM Funds. Each such trustee receives
a fee, allocated among the AIM Funds, for which he serves as a director or
trustee, which consists of an annual retainer component and a meeting fee
component.
35
<PAGE> 102
Set forth below is information regarding compensation paid or accrued
for each trustee of the Trust:
<TABLE>
<CAPTION>
====================================================================================================
RETIREMENT
AGGREGATE BENEFITS TOTAL
COMPENSATION ACCRUED COMPENSATION
FROM THE BY ALL AIM FROM ALL AIM
TRUSTEE TRUST(1) FUNDS(2) FUNDS(3)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------
Bruce L. Crockett 16,392 38,621 68,000
- -----------------------------------------------------------------------------------------------------
Owen Daly II 16,273 82,607 68,000
- -----------------------------------------------------------------------------------------------------
Jack Fields(4) 0 0 0
- -----------------------------------------------------------------------------------------------------
Carl Frischling 16,392 56,683 68,000(5)
- -----------------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- -----------------------------------------------------------------------------------------------------
John F. Kroeger 15,795 83,654 66,000
- -----------------------------------------------------------------------------------------------------
Lewis F. Pennock 16,034 33,702 67,000
- -----------------------------------------------------------------------------------------------------
Ian W. Robinson 16,392 64,973 68,000
- -----------------------------------------------------------------------------------------------------
Louis S. Sklar 16,031 47,593 66,500
=====================================================================================================
</TABLE>
- ------------
(1) The total amount of compensation deferred by all Trustees of the Trust
during the fiscal year ended December 31, 1996, including amounts earned
thereon, was $67,102.
(2) During the fiscal year ended December 31, 1996, the total amount of
expenses allocated to the Trust in respect of such retirement benefits was
$98,998. Data reflects compensation estimated for the calendar year ended
December 31, 1996.
(3) Each Trustee serves as a director or trustee of a total of 11 registered
investment companies advised by AIM. Data reflect total compensation for the
calendar year ended December 31, 1996.
(4) Mr. Fields did not serve as a Trustee during the fiscal year ended
December 31, 1996.
(5) See also page 38 regarding fees earned by Mr. Frischling's law firm.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each trustee (who is not an employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Trustees.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible trustee has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "Applicable
AIM Funds"). Each eligible trustee is entitled to receive an annual benefit
from the Applicable AIM Funds commencing on the first day of the calendar
quarter coincident
36
<PAGE> 103
with or following his date of retirement equal to 75% of the retainer paid or
accrued by the Applicable AIM Funds for such trustee during the twelve-month
period immediately preceding the trustee's retirement (including amounts
deferred under a separate agreement between the Applicable AIM Funds and the
trustee) for the number of such Trustee's years of service (not in excess of 10
years of service) completed with respect to any of the Applicable AIM Funds.
Such benefit is payable to each eligible trustee in quarterly installments. If
an eligible trustee dies after attaining the normal retirement date but before
receipt of any benefits under the Plan commences, the trustee's surviving
spouse (if any) shall receive a quarterly survivor's benefit equal to 50% of
the amount payable to the deceased trustee, for no more than ten years
beginning the first day of the calendar quarter following the date of the
trustee's death. Payments under the Plan are not secured or funded by any
Applicable AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible trustee upon retirement assuming the retainer amount
reflected below and various years of service. 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 years, respectively.
ESTIMATED BENEFITS UPON RETIREMENT
Annual Retainer Paid By All AIM Funds
<TABLE>
<CAPTION>
$80,000
=================
<S> <C> <C>
10 $60,000
-----------------
Number of 9 $54,000
Years of -----------------
Service With 8 $48,000
Applicable -----------------
AIM Funds 7 $42,000
-----------------
6 $36,000
-----------------
5 $30,000
=================
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of
this paragraph only, the "deferring trustees") have each executed a Deferred
Compensation Agreement (collectively, the "Compensation Agreements"). Pursuant
to the Agreements, the deferring trustees may elect to defer receipt of up to
100% of their compensation payable by the Trust, and such amounts are placed
into a deferral account. Currently, the deferring trustees may select various
AIM Funds in which all or part of their deferral accounts shall be deemed to be
invested. Distributions from the deferring trustees' deferral accounts will be
paid in cash, generally in equal quarterly installments over a period of five
(5) or ten (10) years (depending on the Agreement) beginning on the date the
deferring trustee's retirement benefits commence under the Plan. The Trust's
Board of Trustees, in its sole discretion, may accelerate or extend the
distribution of such deferral accounts after the deferring trustee's
termination of service as a trustee of the Trust. If a deferring trustee dies
prior to the distribution of amounts in his deferral account, the balance of
the deferral account will be distributed to his designated beneficiary in a
single lump sum payment as soon as practicable after such deferring trustee's
death. The Compensation Agreements are not funded and, with respect to the
payments of amounts held in the deferral accounts, the deferring trustees have
the status of unsecured creditors of the Trust and of each other AIM Fund from
which they are deferring compensation.
37
<PAGE> 104
During the year ended December 31, 1996, AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND
and AIM VALUE FUND each paid $3,320, $3,406, $3,719, $7,485, $3,564, $3,411,
$4,488, $3,549, and $18,622, respectively, in legal fees to Mr. Frischling's
law firm, Kramer, Levin, Naftalis & Frankel for services rendered.
INVESTMENT ADVISORY AND OTHER SERVICES
The Trust, on behalf of each Fund, has entered into a Master
Investment Advisory Agreement and a Master Administrative Services Agreement,
both dated February 28, 1997, with AIM.
AIM and the Trust have adopted a Code of Ethics which requires
investment personnel and certain other employees (a) to pre-clear personal
securities transactions subject to the Code of Ethics, (b) to file reports or
duplicate confirmations regarding such transactions, (c) to refrain from
personally engaging in (i) short-term trading of a security, (ii) transactions
involving a security within seven days of an AIM Fund transaction involving the
same security, and (iii) transactions involving securities being considered for
investment by an AIM Fund, and (d) to abide by certain other provisions under
the Code of Ethics. The Code of Ethics also prohibits investment personnel and
all other AIM employees from purchasing securities in an initial public
offering. Personal trading reports are reviewed periodically by AIM, and the
Board of Trustees reviews quarterly and annual reports (including information
on any substantial violations of the Code of Ethics). Sanctions for violations
of the Code of Ethics may include censure, monetary penalties, suspension or
termination of employment.
The Master Investment Advisory Agreement provides that it will
continue in effect from year to year only if such continuance is specifically
approved at least annually by the Trust's Board of Trustees and by the
affirmative vote of a majority of the trustees who are not parties to the
agreement or "interested persons" of any such party (the "Qualified Trustees")
by votes cast in person at a meeting called for such purpose. The Master
Investment Advisory Agreement was approved by the Trust's Board of Trustees
(including the affirmative vote of all the Qualified Trustees) on December 11,
1996. The Master Investment Advisory Agreement was approved by the Funds'
shareholders on February 7, 1997. The agreement became effective as of February
28, 1997 and provides that either party may terminate such agreement on 60
days' written notice without penalty. The agreement terminates automatically in
the event of its assignment.
AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), and is the sole shareholder of the Funds' principal
underwriter, A I M Distributors, Inc. ("AIM Distributors"). AIM Management is
an indirect wholly owned subsidiary of AMVESCAP plc. AMVESCAP plc and its
subsidiaries are an independent investment management group engaged in
institutional investment management and retail mutual fund business in the
United States, Europe and the Pacific Region.
Subject to the control and periodic review of the Board of Trustees,
AIM determines what investments shall be purchased, held, sold or exchanged for
the account of the Funds and what portion, if any, of the assets of the Funds
shall be held in cash and other temporary investments. Accordingly, the role of
the trustees is not to approve specific investments, but rather to exercise a
control and review function.
Pursuant to the Master Investment Advisory Agreement, AIM receives a
fee from each of AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND and AIM
MUNICIPAL BOND FUND calculated at the following annual rates, based on the
average daily net assets of the Fund during the year:
38
<PAGE> 105
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $200 million 0.50%
Next $300 million 0.40%
Next $500 million 0.35%
Amount over $1 billion 0.30%
</TABLE>
Pursuant to the Master Investment Advisory Agreement, AIM receives a
fee from AIM MONEY MARKET FUND calculated at the following annual rates, based
on the average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $1 billion 0.55%
Amount over $1 billion 0.50%
</TABLE>
Pursuant to the Master Investment Advisory Agreement, AIM receives a
fee from AIM BALANCED FUND calculated at the following annual rates, based on
the average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $150 million 0.75%
Amount over $150 million 0.50%
</TABLE>
Pursuant to the Master Investment Advisory Agreement, AIM receives a
fee from AIM HIGH YIELD FUND calculated at the following annual rates, based on
the average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $200 million 0.625%
Next $300 million 0.550%
Next $500 million 0.500%
Amount over $1 billion 0.450%
</TABLE>
Pursuant to the Master Investment Advisory Agreement, AIM receives a
fee from AIM GROWTH FUND and AIM VALUE FUND calculated at the following annual
rates, based on the average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $150 million 0.80%
Amount over $150 million 0.625%
</TABLE>
Pursuant to the Master Investment Advisory Agreement, AIM
receives a fee from AIM GLOBAL UTILITIES FUND calculated at the following
annual rates, based on the average daily net assets of the Fund during the
year:
39
<PAGE> 106
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $200 million 0.60%
Next $300 million 0.50%
Next $500 million 0.40%
Amount over $1 billion 0.30%
</TABLE>
The Master Investment Advisory Agreement provides that if, for any
fiscal year, the total of all ordinary business expenses of a Fund, including
all investment advisory fees, but excluding brokerage commissions and fees,
taxes, interest and extraordinary expenses, such as litigation costs, exceed
the applicable expense limitations imposed by state securities regulations in
any state in which the Fund's shares are qualified for sale, as such
limitations may be raised or lowered from time to time, the aggregate of all
such investment advisory fees paid by such Fund shall be reduced by the amount
of such excess. The amount of any such reduction to be borne by AIM shall be
deducted from the monthly investment advisory fee otherwise payable to AIM
during such fiscal year. If required pursuant to such state securities
regulations, AIM will reimburse the Fund no later than the last day of the
first month of the next succeeding fiscal year, for any such annual operating
expenses (after reduction of all investment advisory fees in excess of such
limitation).
Each Fund paid to AIM the following management fees net of any expense
limitations and fee waivers for the years ended December 31, 1996, 1995 and
1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
AIM Balanced Fund...................... $2,151,655 $666,619 $137,235
AIM Global Utilities Fund.............. 1,397,762 1,256,220 $1,226,429
AIM Growth Fund........................ 2,874,943 1,715,406 1,012,632
AIM High Yield Fund.................... 9,277,005 5,717,303 3,881,526
AIM Income Fund........................ 1,510,254 1,176,249 1,110,855
AIM Intermediate Government Fund....... 1,188,121 996,681 734,086
AIM Money Market Fund.................. 4,136,659 2,589,822 2,057,756
AIM Municipal Bond Fund................ 1,417,007 1,356,225 1,327,611
AIM Value Fund......................... 50,259,125 25,332,486 6,674,684
</TABLE>
For the fiscal years ended December 31, 1996, 1995 and 1994, AIM waived
advisory fees for each Fund as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
AIM Balanced Fund .................... -0- $24,176 $201,586
AIM Global Utilities Fund............. -0- -0- -0-
AIM Growth Fund ...................... -0- -0- -0-
AIM High Yield Fund .................. -0- -0- -0-
AIM Income Fund ...................... -0- -0- -0-
AIM Intermediate Government Fund ..... -0- -0- -0-
AIM Money Market Fund ................ -0- -0- 387,205
AIM Municipal Bond Fund .............. -0- -0- -0-
AIM Value Fund ....................... $1,562,359 502,799 -0-
</TABLE>
For the fiscal years ended December 31, 1996, 1995 and 1994, AIM
reimbursed expenses as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
AIM Balanced Fund .................... -0- -0- -0-
AIM Global Utilities Fund............. -0- -0- -0-
AIM Growth Fund ...................... -0- -0- -0-
AIM High Yield Fund .................. -0- -0- -0-
AIM Income Fund ...................... -0- -0- $18,200
AIM Intermediate Government Fund ..... -0- -0- 31,200
AIM Money Market Fund ................ -0- -0- -0-
AIM Municipal Bond Fund .............. -0- $13,200 10,100
AIM Value Fund ....................... -0- -0- -0-
</TABLE>
The Trust pays all expenses not specifically assumed by AIM or AIM
Distributors including compensation and expenses of trustees who are not
directors, officers or employees of AIM, AIM Distributors or any other
affiliates of AIM Management; registration, filing and other fees in connection
with filings with regulatory authorities; the fees and expenses of independent
accountants; costs of printing and mailing registration statements,
prospectuses, proxy statements, and annual and periodic reports to shareholders;
custodian and transfer agent fees; brokerage commissions and securities
transactions costs incurred by the Funds; taxes and corporate fees; legal fees
incurred in connection with the affairs of the Funds; and expenses of meetings
of shareholders and trustees.
40
<PAGE> 107
AIM, at its own expense, furnishes to the Trust office space and
facilities. AIM furnishes to the Trust all personnel for managing the affairs
of the Trust and each of its series of shares and is reimbursed under the
Master Administrative Services Agreement for the services of a principal
financial officer of the Trust and his staff. The Master Administrative
Services Agreement between the Trust and AIM provides that AIM may perform or
arrange for the provision of certain accounting, and other administrative
services to each Fund which are not required to be performed by AIM under the
Master Investment Advisory Agreement. The Master Administrative Services
Agreement provides that such agreement will continue in effect from year to
year only if such continuance is specifically approved at least annually by the
Trust's Board of Trustees, including the Qualified Trustees, by votes cast in
person at a meeting called for such purpose. The Master Administrative Services
Agreement was approved by the Trust's Board of Trustees (including the
Qualified Trustees) on December 11, 1996, and became effective as of February
28, 1997.
The Funds paid AIM the following amounts, which represented the
indicated annualized percentage of average net assets for such period, as
reimbursement of administrative services costs for the years ended December 31,
1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AVERAGE AVERAGE AVERAGE
AMOUNT PAID NET ASSETS AMOUNT PAID NET ASSETS AMOUNT PAID NET ASSETS
----------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
AIM Balanced Fund....................$ 72,493 .02% $ 67,928 .07% $ 81,734 .18%
AIM Global Utilities Fund..............80,256 .03% 69,813 .03% 171,972 .08%
AIM Growth Fund........................72,903 .02% 67,618 .03% 134,789 .09%
AIM High Yield Fund....................98,734 .01% 82,116 .01% 313,218 .04%
AIM Income Fund........................75,132 .02% 82,185 .03% 154,517 .07%
AIM Intermediate Government Fund.......71,348 .03% 71,765 .04% 92,487 .06%
AIM Money Market Fund..................58,665 .01% 55,020 .01% 209,642 .05%
AIM Municipal Bond Fund................71,857 .02% 65,899 .02% 103,945 .04%
AIM Value Fund........................196,586 .002% 137,307 .003% 884,123 .06%
</TABLE>
In addition, the Transfer Agency and Service Agreement between the
Trust and A I M Fund Services, Inc. ("AFS"), a registered transfer agent and
wholly-owned subsidiary of AIM, provides that AFS will perform certain
shareholder services for the Funds for a fee per account serviced. The Transfer
Agency and Service Agreement provides that AFS will receive a per account fee
plus out-of-pocket expenses to process orders for purchases, redemptions and
exchanges of shares; prepare and transmit payments for dividends and
distributions declared by the Funds; maintain shareholder accounts and provide
shareholders with information regarding the Funds and their accounts. The
Transfer Agency and Service Agreement became effective on November 1, 1994.
THE DISTRIBUTION PLANS
THE CLASS A AND C PLAN. The Trust has adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to the Class A and Class
C shares of the Funds and the AIM Cash Reserve Shares of AIM MONEY MARKET FUND
(collectively, the "Covered Classes"). Such plan (the "Class A and C Plan")
provides that each Covered Class pays 0.25% per annum of its average daily net
assets as compensation to AIM Distributors for the purpose of financing any
activity which is primarily intended to result in the sale of shares of the
Covered Class. Activities appropriate for financing under the Class A and C Plan
include, but are not limited to, the following: printing of prospectuses and
statements of additional information and reports for other than existing
shareholders; overhead; preparation and distribution of advertising material and
sales literature; expenses of organizing and conducting sales seminars;
supplemental payments to dealers and other institutions such as asset-based
sales charges or as payments of service fees under shareholder service
arrangements; and costs of administering the Class A Plan.
41
<PAGE> 108
THE CLASS B PLAN. The Trust has also adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to Class B shares of
the Funds (the "Class B Plan", and collectively with the Class A and C Plan,
the "Plans"). Under the Class B Plan, each Fund pays compensation to AIM
Distributors at an annual rate of 1.00% of the average daily net assets
attributable to Class B shares. Of such amount, each Fund pays a service fee of
0.25% of the average daily net assets attributable to Class B shares to selected
dealers and other institutions which furnish continuing personal shareholder
services to their customers who purchase and own Class B shares. Amounts paid in
accordance with the Class B Plan may be used to finance any activity primarily
intended to result in the sale of Class B shares, including but not limited to
printing of prospectuses and statements of additional information and reports
for other than existing shareholders; overhead; preparation and distribution of
advertising material and sales literature; expenses of organizing and conducting
sales seminars; supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements; and costs of administering the Class B Plan. AIM
Distributors may transfer and sell its rights to payments under the Class B Plan
in order to finance distribution expenditures in respect of Class B shares.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may
enter into agreements ("Shareholder Service Agreements") with investment
dealers selected from time to time by AIM Distributors for the provision of
distribution assistance in connection with the sale of the Funds' shares to
such dealers' customers, and for the provision of continuing personal
shareholder services to customers who may from time to time directly or
beneficially own shares of the Funds. The distribution assistance and
continuing personal shareholder services to be rendered by dealers under the
Shareholder Service Agreements may include, but shall not be limited to, the
following: distributing sales literature; answering routine customer inquiries
concerning the Funds; assisting customers in changing dividend options, account
designations and addresses, and in enrolling in any of several special
investment plans offered in connection with the purchase of the Funds' shares;
assisting in the establishment and maintenance of customer accounts and records
and in the processing of purchase and redemption transactions; investing
dividends and any capital gains distributions automatically in the Funds'
shares; and providing such other information and services as the Funds or the
customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding a Fund and
the Trust; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as a Fund reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions which
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive
compensation for selling Fund shares may receive different compensation for
selling shares of one particular class over another.
Under a Shareholder Service Agreement, a Fund agrees to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement will be calculated at the end of each payment period for each
business day of the Funds during such period at the annual rate of 0.25% of the
average daily net asset value of the Funds' shares purchased or acquired
through exchange. Fees calculated in this manner shall be paid only to those
selected dealers or other institutions who are dealers or institutions of
record at the close of business on the last business day of the applicable
payment period for the account in which such Fund's shares are held.
42
<PAGE> 109
Payments pursuant to the Plans are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc. ("NASD"). The Plans conform to rules of the NASD by limiting payments made
to dealers and other financial institutions who provide continuing personal
shareholder services to their customers who purchase and own shares of the
Funds to no more than 0.25% per annum of the average daily net assets of the
Funds attributable to the customers of such dealers or financial institutions,
and by imposing a cap on the total sales charges, including asset based sales
charges, that may be paid by the Funds and their respective classes.
AIM Distributors does not act as principal, but rather as agent for
the Funds, in making dealer incentive and shareholder servicing payments under
the Plans. These payments are an obligation of the Funds and not of AIM
Distributors.
For the year ended December 31, 1996, the various classes of the Funds
paid to AIM Distributors the following amounts pursuant to the Plans:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- --------------
<S> <C> <C>
AIM Balanced Fund............................................ $ 513,190 $ 1,496,606
AIM Global Utilities Fund.................................... 409,087 759,491
AIM Growth Fund.............................................. 511,145 2,133,271
AIM High Yield Fund.......................................... 2,631,156 8,083,368
AIM Income Fund.............................................. 656,254 650,621
AIM Intermediate Government Fund............................. 437,596 719,764
AIM Money Market Fund........................................ 666,569 990,337
AIM Municipal Bond Fund...................................... 691,812 275,301
AIM Value Fund............................................... 10,740,282 39,533,247
</TABLE>
For the year ended December 31, 1996, the AIM Cash Reserve Shares
of AIM MONEY MARKET FUND paid $964,703 to AIM Distributors pursuant to the
Class A and C Plan.
Class C shares commenced operations on August 4, 1997.
An estimate by category of actual fees paid by the following Funds
under the Class A and C Plan during the year ended December 31, 1996 were
allocated as follows:
<TABLE>
<CAPTION>
PRINTING COMPENSATION
ADVERTISING AND MAILING SEMINARS TO DEALERS
----------- ----------- -------- ------------
<S> <C> <C> <C> <C>
AIM Balanced Fund..................................... $ 25,048 $ 3,006 $ 8,016 $ 477,120
AIM Global Utilities Fund.............................. 3,894 973 973 403,247
AIM Growth Fund........................................ 8,661 962 2,887 498,635
AIM High Yield Fund.................................... 80,319 10,907 25,781 2,514,149
AIM Income Fund........................................ 10,395 1,040 3,119 641,700
AIM Intermediate Government Fund....................... 10,525 1,052 3,157 422,862
AIM Money Market Fund-Class A Shares................... 24,450 3,056 7,131 631,932
AIM Municipal Bond Fund................................ 11,714 1,952 3,904 674,242
AIM Value Fund......................................... 382,710 51,961 121,908 10,183,703
</TABLE>
Class C shares commenced operations on August 4, 1997.
During the year ended December 31, 1996, actual fees paid by AIM Cash
Reserve Shares of AIM MONEY MARKET FUND were allocated as follows: $147,912 was
spent on advertising, $19,988 was spent on printing and mailing, $45,973 was
spent on seminars and $750,830 was spent on compensation to Dealers.
Class C shares commenced operations on August 4, 1997.
An estimate by category of actual fees paid by the following Funds
under the Class B Plan during the year ended December 31, 1996 were allocated
as follows:
43
<PAGE> 110
<TABLE>
<CAPTION>
COMPENSATION COMPENSATION
PRINTING AND TO TO
ADVERTISING MAILING SEMINARS UNDERWRITERS DEALERS
----------- ------- -------- ------------ -------
<S> <C> <C> <C> <C> <C>
AIM Balanced Fund............................ $ 183,303 $ 24,040 $ 57,094 $ 1,123,887 $ 108,282
AIM Global Utilities Fund.................... 43,646 5,952 13,887 569,800 126,206
AIM Growth Fund.............................. 203,719 27,963 63,912 1,601,364 236,313
AIM High Yield Fund.......................... 825,825 111,976 258,945 6,067,579 819,043
AIM Income Fund.............................. 74,335 10,045 22,099 488,419 55,723
AIM Intermediate Government Fund............. 66,086 9,012 20,026 540,123 84,517
AIM Money Market Fund........................ 111,529 15,072 34,162 743,395 86,179
AIM Municipal Bond Fund...................... 25,523 3,927 6,872 206,615 32,364
AIM Value Fund............................... 3,917,186 536,025 1,255,059 29,672,016 4,152,961
</TABLE>
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Trustees, including a majority
of the trustees who are not "interested persons" (as defined in the 1940 Act)
of the Trust and who have no direct or indirect financial interest in the
operation of the Plans or in any agreements related to the Plans (the
"Independent Trustees"). In approving the Plans in accordance with the
requirements of Rule 12b-1, the trustees considered various factors and
determined that there is a reasonable likelihood that the Plans would benefit
each class of the Funds and its respective shareholders.
The Plans do not obligate the Funds to reimburse AIM Distributors for
the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Funds will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less
than the fee it receives, AIM Distributors will retain the full amount of the
fee.
The Plans require AIM Distributors to provide the Board of Trustees at
least quarterly with a written report of the amounts expended pursuant to the
Plans and the purposes for which such expenditures were made. The Board of
Trustees reviews these reports in connection with their decisions with respect
to the Plans.
Unless terminated earlier in accordance with their terms, the Plans
continue in effect until June 30, 1998 and thereafter, as long as such
continuance is specifically approved at least annually by the Board of
Trustees, including a majority of the Independent Trustees.
The Plans may be terminated by the vote of a majority of the
Independent Trustees, or, with respect to a particular class, by the vote of a
majority of the outstanding voting securities of that class.
Any change in the Plans that would increase materially the
distribution expenses paid by the applicable class requires shareholder
approval; otherwise, it may be amended by the trustees, including a majority of
the Independent Trustees, by votes cast in person at a meeting called for the
purpose of voting upon such
44
<PAGE> 111
amendment. As long as the Plans are in effect, the selection or nomination of
the Independent Trustees is committed to the discretion of the Independent
Trustees.
The principal differences between the Class A and C Plan and the
Class B Plan are: The Class A and C Plan allows payment to AIM Distributors or
to dealers or financial institutions of up to 0.25% of average daily net assets
of each Fund's Class A shares and AIM Cash Reserve Shares as compared to 1.00%
of such assets of each Fund's Class B and Class C shares; (ii) the Class B Plan
obligates Class B shares to continue to make payments to AIM Distributors
following termination of the Class B shares Distribution Agreement with respect
to Class B shares sold by or attributable to the distribution efforts of AIM
Distributors, unless there has been a complete termination of the Class B Plan
(as defined in such Plan); and (iii) the Class B Plan expressly authorizes AIM
Distributors to assign, transfer or pledge its rights to payments pursuant to
the Class B Plan.
THE DISTRIBUTOR
Information concerning AIM Distributors and the continuous offering of
the Funds' shares is set forth in the Prospectus under the headings "How to
Purchase Shares" and "Terms and Conditions of Purchase of the AIM Funds." A
Master Distribution Agreement, dated February 28, 1997, with AIM Distributors
relating to the Class A and Class C shares of the Funds and the AIM Cash Reserve
Shares of AIM MONEY MARKET FUND was approved by the Board of Trustees on
December 11, 1996. A Master Distribution Agreement, dated February 28, 1997,
with AIM Distributors relating to the Class B shares of the Funds was also
approved by the Board of Trustees on December 11, 1996. Both such Master
Distribution Agreements are hereinafter collectively referred to as the
"Distribution Agreements."
The Distribution Agreements provide that AIM Distributors will bear
the expenses of printing from the final proof and distributing the Funds'
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Funds), and any promotional or
sales literature used by AIM Distributors or furnished by AIM Distributors to
dealers in connection with the public offering of the Funds' shares, including
expenses of advertising in connection with such public offerings. AIM
Distributors has not undertaken to sell any specified number of shares of any
classes of the Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B and Class C shares of the
Funds at the time of such sales.
Payments with respect to Class B shares will equal 4.0% of the
purchase price of the Class B shares sold by the dealer or institution, and will
consist of a sales commission equal to 3.75% of the purchase price of the Class
B shares sold plus an advance of the first year service fee of 0.25% with
respect to such shares. The portions of the payments to AIM Distributors under
the Class B Plan which constitutes an asset-based sales charge (0.75%) is
intended in part to permit AIM Distributors to recoup a portion of such sales
commissions plus financing costs. AIM Distributors anticipates that it requires
a number of years to recoup from Class B Plan payments the sales commissions
paid to dealers and institutions in connection with sales of Class B shares. In
the future, if multiple distributors serve a Fund, each such distributor (or its
assignee or transferee) would receive a share of the payments under the Class B
Plan based on the portion of the Fund's Class B shares sold by or attributable
to the distribution efforts of that distributor.
Payments with respect to Class C shares will equal 1% of the purchase
price of the Class C shares sold by the dealer or institution and will consist
of a sales commission of 0.75% and an advance of the first year service fee of
0.25% with respect to such shares. That portion of the payments to AIM
Distributors with respect to Class C shares under the Class A and C Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of such sales commission plus financing
costs.
The Trust (on behalf of any class of any Fund) or AIM Distributors may
terminate the Distribution Agreements on sixty (60) days' written notice
without penalty. The Distribution Agreements will terminate automatically in
the event of their assignment. In the event the Class B shares Distribution
Agreement is terminated, AIM Distributors would continue to receive payments of
asset-based distribution fees in respect of the outstanding Class B shares
attributable to the distribution efforts of AIM Distributors; provided,
however, that a complete termination of the Class B Plan (as defined in such
Plan) would terminate all payments to AIM Distributors. Termination of the
Class B Plan or the Distribution Agreement for Class B shares would not affect
the obligation of a Fund and its Class B shareholders to pay Contingent
Deferred Sales Charges.
45
<PAGE> 112
The following chart reflects the total sales charges paid in
connection with the sale of Class A shares of each Fund and the amount retained
by AIM Distributors for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
AIM Balanced Fund................$ 3,212,414 $ 611,603 $ 979,475 $ 165,692 $ 379,087 $ 63,481
AIM Global Utilities Fund........ 545,746 95,058 745,539 106,920 1,198,533 168,696
AIM Growth Fund.................. 1,266,626 219,373 892,904 146,533 255,624 37,866
AIM High Yield Fund.............. 10,452,011 1,965,594 8,338,447 1,388,106 5,149,515 808,554
AIM Income Fund.................. 1,346,651 248,078 914,135 154,679 554,349 94,637
AIM Intermediate Government Fund. 1,056,724 204,498 876,411 144,669 644,604 108,048
AIM Money Market Fund............ 3,696,001 736,782 2,845,276 494,184 996,876 182,129
AIM Municipal Bond Fund.......... 624,162 122,269 684,242 116,667 527,008 82,774
AIM Value Fund................... 46,277,225 7,792,991 52,075,064 7,659,031 22,815,744 3,063,899
</TABLE>
The following chart reflects the contingent deferred sales charges
paid by Class A and Class B shareholders for the years ended December 31, 1996,
1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
AIM Balanced Fund...........................................................$ 50,028 $ 92,409 $ 28,532
AIM Global Utilities Fund................................................... 145,184 167,444 107,127
AIM Growth Fund............................................................. 105,215 169,092 51,475
AIM High Yield Fund......................................................... 976,702 655,591 391,108
AIM Income Fund............................................................. 65,445 48,320 16,712
AIM Intermediate Government Fund............................................ 82,525 101,233 70,431
AIM Money Market Fund....................................................... 211,316 256,618 81,600
AIM Municipal Bond Fund..................................................... 49,906 31,956 18,017
AIM Value Fund.............................................................. 1,988,299 2,052,439 584,611
</TABLE>
Class C shares commenced operations August 4, 1997.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner in which shares of the Funds may
be purchased appears in the Prospectus under the headings "How to Purchase
Shares," "Terms and Conditions of Purchase of the AIM Funds" and "Special
Plans."
The sales charge normally deducted on purchases of Class A shares is
used to compensate AIM Distributors and participating dealers for their
expenses incurred in connection with the distribution of the Funds' Class A
shares. Since there is little expense associated with unsolicited orders placed
directly with AIM Distributors by persons who, because of their relationship
with the Funds or with AIM and its affiliates, are familiar with the Funds, or
whose programs for purchase involve little expense (e.g., because of the size
of the transaction and shareholder records required), AIM Distributors believes
that it is appropriate and in the Funds' best interests that such persons, and
certain other persons whose purchases result in relatively low expenses of
distribution, be permitted to purchase Class A shares of the Funds through AIM
Distributors without payment of a sales charge. The persons who may purchase
Class A shares of the Funds without a sales charge are set forth in the
Prospectus.
Complete information concerning the method of exchanging shares of the
Funds for shares of the other AIM Funds is set forth in the Prospectus under
the heading "Exchange Privilege."
46
<PAGE> 113
Information concerning redemption of the Funds' shares is set forth in
the Prospectus under the heading "How to Redeem Shares." In addition to the
Funds' obligation to redeem shares, AIM Distributors may also repurchase shares
as an accommodation to shareholders. To effect a repurchase, those dealers who
have executed Selected Dealer Agreements with AIM Distributors must phone
orders to the order desk of the Funds at (800) 959-4246 and guarantee delivery
of all required documents in good order. A repurchase is effected at the net
asset value per share of the applicable Fund next determined after the
repurchase order is received. Such an arrangement is subject to timely receipt
by A I M Fund Services, Inc., the Funds' transfer agent, of all required
documents in good order. If such documents are not received within a reasonable
time after the order is placed, the order is subject to cancellation. While
there is no charge imposed by a Fund or by AIM Distributors (other than any
applicable contingent deferred sales charge) when shares are redeemed or
repurchased, dealers may charge a fair service fee for handling the
transaction.
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange ("NYSE") is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the NYSE is closed for other than customary weekend and holiday closings, (c)
the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of a Fund not reasonably practicable.
A Fund's net asset value is calculated by dividing the number of
outstanding shares into the net assets of the Fund. Net assets are the excess
of a Fund's assets over its liabilities.
For AIM Money Market Fund: The Fund may use the amortized cost method
to determine its net asset value so long as the Fund does not (a) purchase any
instrument with a remaining maturity greater than 397 days (for these purposes,
repurchase agreements shall not be deemed to involve the purchase by the Fund
of the securities pledged as collateral in connection with such agreements) or
(b) maintain a dollar-weighted average portfolio maturity in excess of 90 days,
and otherwise complies with the terms of rules adopted by the SEC.
Under the amortized cost method, each investment is valued at its cost
and thereafter any discount or premium is amortized on a constant basis to
maturity. While this method provides certainty of valuation, it may result in
periods in which the amortized cost value of the Fund's investments is higher
or lower than the price that would be received if the investments were sold.
During periods of declining interest rates, use by the Fund of the amortized
cost method of valuing its portfolio may result in a lower value than the
market value of the portfolio, which could be an advantage to new investors
relative to existing shareholders. The converse would apply in a period of
rising interest rates.
The Board of Trustees has established procedures designed to stabilize
at $1.00, to the extent reasonably possible, the Fund's net asset value per
share. Such procedures include review of portfolio holdings by the trustees at
such intervals as they may deem appropriate to determine whether net asset
value, calculated by using available market quotations, deviates from $1.00 per
share and, if so, whether such deviation may result in material dilution or is
otherwise unfair to investors or existing shareholders. In the event the
trustees determine that a deviation having such a result exists, they intend to
take such corrective action as they deem necessary and appropriate, including
the sale of portfolio securities prior to maturity in order to realize capital
gains or losses or to shorten average portfolio maturity; withholding
dividends; redemption of shares in kind; or establishing a net asset value per
share by using available market quotations, in which case, the net asset value
could possibly be more or less than $1.00 per share.
For all other Funds: The following formula may be used to determine
the public offering price per Class A share of an investor's investment:
Net Asset Value / (1 - Sales Charge as % of Offering Price) = Offering
Price.
47
<PAGE> 114
For example, at the close of business on December 31, 1996, AIM VALUE
FUND - Class A shares had 174,979,851 shares outstanding, net assets of
$5,100,060,952 and a net asset value per share of $29.15. The offering price,
therefore, was $30.85.
AIM HIGH YIELD FUND
Variable Annuity Contracts--Currently, shares of AIM HIGH YIELD FUND
may be purchased at net asset value by the Life Insurance Company of North
America ("LINA") under an arrangement whereby the shares will serve as an
underlying investment medium for certain variable annuity contracts previously
issued by LINA.
The basic objective of the variable annuity contracts is to provide
individuals with retirement benefits through net purchase payment accumulations
and annuity payments which are based upon the performance of AIM HIGH YIELD
FUND or other available funds. The contracts allow their owners and
participants to defer federal income tax ("FIT") payments on contract
investment accumulations until annuity payments begin. The annuity payment
options generally provide for lifetime annuity payments based upon the life of
the named annuitant (and joint annuitant, if applicable). Such payments may be
made for a guaranteed minimum number of years. Certain charges are made in
connection with the sale of the contracts.
The LINA contracts are no longer being issued except that existing
owners, participants and, in some cases, new participants under existing group
contracts under certain tax-qualified plans, may continue to make contributions
under the contract. Persons who wish to receive additional information
concerning investment in AIM HIGH YIELD FUND through LINA's variable annuity
contracts are urged to read the LINA prospectus which describes them. LINA
variable annuity information and a prospectus may be obtained by writing to INA
Security Corporation, 601 Walnut Street, Ninth Floor, Philadelphia,
Pennsylvania 19102, or by calling (215) 351-3121.
QUALIFYING FOR A REDUCED FRONT-END SALES CHARGE
As described in the Prospectus, the front-end sales charge for Class A
shares is calculated by multiplying an investor's total investment by the
applicable sales charge rate. The applicable rate varies with the amount
invested. The Funds offer programs such as Right of Accumulation and Letter of
Intent, which are described in the Prospectus, and are designed to permit
investors to aggregate purchases of different funds, or separate purchases over
time, in order to qualify for a lower sales charge rate. See "Terms and
Conditions of Purchase of the AIM Funds -- Reductions in Initial Sales Charges"
in the Prospectus.
DETERMINATION OF NET ASSET VALUE
For AIM Money Market Fund: The net asset value per share of the Fund
is determined daily as of 12:00 noon and the close of trading on the NYSE
(generally 4:00 p.m. Eastern time) on each business day of the Fund. In the
event the NYSE closes early (i.e., before 4:00 p.m. Eastern time) on a
particular day, the net asset value of a Fund is determined as of the close of
the NYSE on such day. Net asset value per share is determined by dividing the
value of the Fund's securities, cash and other assets (including interest
accrued but not collected) attributable to a particular class, less all its
liabilities (including accrued expenses and dividends payable) attributable to
that class, by the number of shares outstanding of that Class and rounding the
resulting per share net asset value to the nearest one cent. Determination of
the net asset value per share is made in accordance with generally accepted
accounting principles.
The securities of the Fund are valued on the basis of amortized cost.
This method values a security at its cost on the date of purchase and
thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the security. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if the security were
sold. During such periods, the daily yield on shares of the Fund computed as
described under "Performance Information" may differ
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<PAGE> 115
somewhat from an identical computation made by another investment company with
identical investments utilizing available indications as to the market value of
its portfolio securities.
The valuation of portfolio instruments based upon their amortized cost
and the concomitant maintenance of the net asset value per share of $1.00 for
the Fund is permitted in accordance with applicable rules and regulations of
the SEC which require the Fund to adhere to certain conditions. These rules
require, among other things, that the Fund maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of 397 calendar days or less and invest only in securities
determined by the Board of Trustees to be "Eligible Securities" and to present
minimal credit risk to the Fund. For the definition of "Eligible Securities"
see the caption "Description of Money Market Instruments."
The Board of Trustees is required to establish procedures designed to
stabilize, to the extent reasonably practicable, the Fund's price per share at
$1.00, as computed for the purpose of sales and redemptions. Such procedures
include review of the Fund's holdings by the Board of Trustees at such
intervals as they may deem appropriate, to determine whether the net asset
value calculated by using available market quotations or other reputable
sources for the Fund deviates from $1.00 per share and, if so, whether such
deviation may result in material dilution or is otherwise unfair to existing
holders of the Fund's shares. In the event the Board of Trustees determines
that such a deviation exists for the Fund, it will take such corrective action
as the Board of Trustees deems necessary and appropriate with respect to the
Fund, including the sale of portfolio instruments prior to maturity to realize
capital gains or losses or to shorten the average portfolio maturity; the
withholding of dividends; redemption of shares in kind; or the establishment of
a net asset value per share by using available market quotations.
The Fund intends to comply with any amendments made to Rule 2a-7 which
may require corresponding changes in the Fund's procedures which are designed
to stabilize the Fund's price per share at $1.00.
For All Other Funds: The net asset value per share of each Fund is
normally determined daily as of the close of trading of the NYSE (generally
4:00 p.m. Eastern time) on each business day of the Fund. In the event the NYSE
closes early (i.e., before 4:00 p.m. Eastern time) on a particular day, the net
asset value of a Fund is determined as of the close of the NYSE on such day.
Net asset value per share is determined by dividing the value of a Fund's
securities, cash and other assets (including interest accrued but not
collected) attributable to a particular class, less all its liabilities
(including accrued expenses and dividends payable) attributable to that class,
by the total number of shares outstanding of that class. Determination of a
Fund's net asset value per share is made in accordance with generally accepted
accounting principles.
Each equity security held by a Fund is valued at its last sales price
on the exchange where the security is principally traded or, lacking any sales
on a particular day, the security is valued at the mean between the closing bid
and asked prices on that day. Each security traded in the over-the-counter
market (but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based upon
quotes furnished by market makers for such securities. Each security reported
on the NASDAQ National Market System is valued at the last sales price on the
valuation date or absent a last sales price, at the mean between the closing
bid and asked prices on that day. Debt securities are valued on the basis of
prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted prices,
and may reflect appropriate factors such as institution-size trading in
similar groups of securities, developments related to special securities,
yield, quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Securities for which market quotations
are not readily available are valued at fair value as determined in good faith
by or under the supervision of the Trust's officers in a manner specifically
authorized by the Board of Trustees. Short-term obligations having 60 days or
less to maturity are valued on the basis of amortized cost. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE.
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<PAGE> 116
Generally, trading in foreign securities, corporate bonds, U.S.
Government securities and money market instruments is substantially completed
each day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of each Fund's shares are
determined at such times. Foreign currency exchange rates are also generally
determined prior the close of the NYSE. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which such values are determined and the close of the NYSE which will not be
reflected in the computation of a Fund's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by or
under the supervision of the Board of Trustees.
TAX MATTERS
Each Fund is treated as a separate association taxable as a
corporation. Each Fund intends to qualify under the Internal Revenue Code of
1986, as amended (the "Code"), as a regulated investment company ("RIC") for
each taxable year. Accordingly, each Fund must, among other things, meet the
following requirements: (A) each Fund must generally derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities, foreign
currencies, or other income derived with respect to its business of investing
in such stock, securities or currencies; and (B) each Fund must derive less
than 30% of its gross income from the sale or disposition of any of the
following held less than three months: (i) stock or securities, (ii) options,
futures or forward contracts (other than options, futures or forward contracts
on foreign currencies), or (iii) foreign currencies (or options, futures or
forward contracts on foreign currencies) but only if such currencies are not
directly related to the Fund's business of investing in stock, securities or
options and futures thereon. There are exceptions to the 30% test when a Fund,
in certain circumstances, realizes gains to satisfy abnormal redemptions.
Abnormal redemptions occur on any day when net redemptions exceed one percent
of the Fund's net asset value. Accordingly, the extent to which the Funds may
engage in futures contracts and related options may be materially limited by
this 30% test, with the exception of AIM MONEY MARKET FUND which does not
engage in such transactions. Each Fund must diversify its holdings so that, at
the end of each fiscal quarter: (i) at least 50% of the market value of the
Fund's assets is represented by cash, U.S. Government securities and other
securities, with such other securities limited, with respect to any one issuer,
to an amount not greater than 5% of the Fund's assets and not more than 10% of
the outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its assets is invested in the securities of any one issuer (other
than U.S. Government securities).
As a RIC, each Fund will generally not be subject to FIT on its income
and gains distributed to shareholders if it currently distributes the sum of
(i) at least 90% of its investment company taxable income for the taxable year
and (ii) at least 90% of the excess of its tax-exempt interest income under
Code Section 103(a) over its deductions disallowed under Code Sections 265 and
171(a)(2) (the "Distribution Requirement"). Distributions made by a Fund during
its taxable year, or under certain circumstances within 12 months after the end
of its taxable year, will be considered distributions made during the taxable
year and will therefore satisfy the Distribution Requirement.
Each Fund is subject to a nondeductible 4% excise tax if it does not
meet certain distribution requirements under the Code. To avoid this excise
tax, during each calendar year, each Fund must distribute: (1) at least 98% of
its ordinary income (not taking into account any capital gains or losses) for
the calendar year (except that any foreign currency gain or loss occurring
after October 31 shall be taken into account the following year), (2) at least
98% of its capital gains in excess of its capital losses for the 12-month
period ending on October 31, and (3) all ordinary income and capital gains from
previous calendar years that were not distributed during such years. Dividends
declared to shareholders of record on a date in October, November or December
will be taxable to shareholders on December 31 in the year declared as long as
the Fund pays the dividends no later than January 31 of the following year.
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The Code and the regulations promulgated thereunder are constantly
subject to change, and interpretations of the Code and the regulations may be
modified or affected at any time by Congress, the Department of the Treasury or
judicial decision. It should be noted that any such change could be applied
retroactively.
All Funds except AIM MONEY MARKET FUND: Section 1092 of the Code
affects the taxation of certain transactions involving futures or options
contracts. If a futures or options contract is part of a "straddle" (which
could include another futures contract or underlying stock or securities), as
defined in Section 1092 of the Code, then, generally, losses are deferred first
to the extent that the modified "wash sale" rules of the Section 1092
regulations apply, and second to the extent of unrecognized gains on offsetting
positions. Further, the Funds may be required to capitalize, rather than deduct
currently, any interest expense on indebtedness incurred or continued to
purchase or carry any positions that are part of a straddle. Sections 1092 and
246 of the Code and the Regulations thereunder also suspend the holding periods
for straddle positions with possible adverse effects regarding long-term
capital gain treatment and the corporate dividends received deduction.
Section 1256 of the Code generally requires that futures contracts and
options on future contracts be "marked-to-market" at the end of each year for
FIT purposes. Code Section 1256 further characterizes 60% of any capital gain
or loss with respect to such futures and options contracts as long-term capital
gain or loss and 40% as short-term capital gain or loss. If such a future or
option is held as an offsetting position and can be considered a straddle under
Section 1092 of the Code, such a straddle will constitute a mixed straddle. A
mixed straddle will be subject to both Section 1256 and Section 1092 unless
certain elections are made by the Fund.
The Funds may have invested in certain foreign currency transactions,
the gain or loss from which may be subject to taxation as ordinary income or
loss under Code Section 988.
AIM GLOBAL UTILITIES FUND: Pursuant to the investment objectives of
the Fund, the Fund may invest in foreign securities. Dividends and interest
received by the Fund with respect to these investments may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. If more than 50% in value of the Fund's total assets at the close of its
taxable year consists of stock or securities of foreign corporations, the Fund
will be eligible to file an election with the Internal Revenue Service pursuant
to which shareholders of the Fund will be required to include their
proportionate share of such withholding taxes in their United States income tax
returns as gross income, treat such proportionate share as taxes paid by them,
and deduct such proportionate share in computing their taxable income or,
alternatively, use them as foreign tax credits to the extent allowed against
their United States income taxes subject to certain provisions and limitations
contained in the Code. The Fund will report annually to its shareholders the
amount per share of such withholding taxes. Please note that such foreign tax
credits are non-refundable and therefore cannot be claimed by certain
retirement accounts and other persons not otherwise subject to United States
income taxation.
AIM HIGH YIELD FUND: The notes to the financial statements of the Fund
for the year ended December 31, 1996, detail the amount of capital loss
carryover for FIT purposes to which the Fund is entitled, subject to certain
limitations. To the extent losses are used to offset any future capital gains
realized during the carryover period, no capital gains tax liability will be
incurred for gains realized and not distributed.
AIM MUNICIPAL BOND FUND: With respect to interest income that is
exempt from FIT, the Fund intends to comply with Section 852(b)(5) of the Code,
which enables distributions of tax-exempt income to retain their character when
distributed to shareholders as an exempt interest dividend. Each year, the Fund
provides shareholders a statement indicating the amount of distribution that is
exempt from FIT. This statement also provides a breakdown showing the
percentage of such income that came from each state. In addition, the Fund
reports for FIT purposes any net realized capital gains and any ordinary income
from the Fund's short-term holdings. In 1996, none of the dividends paid from
income was taxable as ordinary income; however, this may
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change in future periods. Further, the Fund also reports certain interest from
"Qualified Private Activity Bonds" which shareholders may be required to
include in the alternative minimum tax calculation.
The Tax Reform Act of 1986 (the "1986 Act") divided municipal debt
obligations into three categories, only one of which ("Public Purpose Bonds")
bears interest which is exempt from both the regular income tax and the
alternative minimum tax as it applies to individuals. For corporations, some or
all of the income from Public Purpose Bonds would be includable in the
corporate alternative minimum tax base. Of the other two categories ("Qualified
Private Activity Bonds" and "Private Activity Bonds"), for both individuals and
corporations, Qualified Private Activity Bonds bear interest which is excluded
from income for purposes of the regular income tax but must generally be
included in the alternative minimum tax base, and Private Activity Bonds are
taxable under both the regular and alternative minimum taxes.
The 1986 Act also applied limitations on the issuance of bonds whose
proceeds are used by organizations exempt from tax under Code Section
501(c)(3), as well as general limitations on the amount of Qualified Private
Activity Bonds governmental units may issue.
The 1986 Act limitations on tax-exempt bonds apply generally to bonds
issued after August 16, 1986. The private activity bond rules are generally
applicable to bonds issued on or after September 1, 1986, with the alternative
minimum tax rules applicable generally to bonds issued on or after August 7,
1986. AIM MUNICIPAL BOND FUND intends to limit its investments in Qualified
Private Activity Bonds and taxable securities to no more than 20% of its total
assets in any given year, consistent with its stated investment objective.
Original issue discount on tax-exempt bonds is accrued as tax-exempt
interest (except for a portion thereof in the case of certain stripped
tax-exempt bonds), and is included in the tax basis of the security for capital
gain and loss computation purposes. Any gain or loss from the sale or other
disposition of a tax-exempt security is generally treated as either long-term
or short-term capital gain or loss, depending upon its holding period, and is
fully taxable. However, gain recognized from the sale or other disposition of a
tax-exempt security purchased after April 30, 1993, will be treated as ordinary
income to the extent of the accrued market discount on such security.
Interest on indebtedness incurred by shareholders (including financial
institutions) will not be deductible for FIT purposes to the extent that the
money was used to purchase or carry tax-exempt securities. The purchase of Fund
shares may be considered to have been made with borrowed funds even though the
borrowed funds are not directly traceable to the purchase of Fund shares.
Further, persons who are "substantial users" (or persons related thereto) of
facilities financed by private activity bonds should consult their own tax
advisor before purchasing Fund shares.
The exemption of interest income for FIT purposes does not necessarily
result in exemption under state and local laws. Shareholders should consult
their tax advisors as to the treatment of such income under state and local
laws.
PROGRAMS AND SERVICES FOR SHAREHOLDERS
The Funds provide certain services for shareholders and certain
investment or redemption programs. See "Exchange Privilege" and "How to Redeem
Shares" in the Prospectus. All inquiries concerning these programs should be
made directly to A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas
77210-4739, toll free at (800) 959-4246.
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DIVIDEND ORDER
Dividends may be paid to someone other than the registered owner, or
sent to an address other than the address of record. (Please note that signature
guarantees are required to effect this option.) An investor also may direct that
his or her dividends be invested in one of the other Funds in the Trust,
provided however, that dividends attributable to Class A shares may not be
reinvested in Class B or Class C shares, dividends attributable to Class B
shares may only be reinvested in Class B shares, dividends attributable to Class
C shares may only be reinvested in Class C shares and dividends attributable to
AIM Cash Reserve Shares may be reinvested in Class A shares or AIM Cash Reserve
Shares. There is no sales charge for these investments; initial investment
minimums apply. See "Dividends, Distributions and Tax Matters -- Dividends and
Distributions" in the Prospectus. To effect this option, please contact your
authorized dealer. For more information concerning AIM Funds other than those in
the Trust, please obtain a current prospectus by contacting your authorized
dealer, by writing to A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas
77210-4739, or by calling toll free (800) 959-4246.
REDEMPTIONS PAID IN CASH
Pursuant to Rule 18f-1 under the 1940 Act, each Fund has committed to
pay in cash all requests for redemption by any shareholder of record, limited
in amount with respect to each shareholder during any 90-day period to the
lesser of $250,000 or 1% of the net assets of the Fund at the beginning of such
period. This election is irrevocable while such Rule is in effect unless the
SEC by order upon application permits the withdrawal of the Fund's notification
of election. Redemptions by any one shareholder during any 90-day period in
excess of $250,000 or 1% of the net assets of the Fund may be made in readily
marketable securities.
DESCRIPTION OF MONEY MARKET INSTRUMENTS
U.S. Government Obligations consist of marketable securities and
instruments issued or guaranteed by the United States Government or by certain
of its agencies or instrumentalities. Direct obligations are issued by the
United States Treasury and include bills, certificates of indebtedness, notes
and bonds. Obligations of United States Government agencies and
instrumentalities ("Agencies") are issued by government-sponsored agencies and
enterprises acting under authority of Congress. Certain Agencies are backed by
the full faith and credit of the United States Government, and others are not.
MONEY MARKET OBLIGATIONS
AIM MONEY MARKET FUND will limit its investments to those securities
which at the time of purchase are "First Tier" securities as defined in Rule
2a-7 under the 1940 Act, as such Rule may be amended from time to time. Rule
2a-7 defines a "First Tier" security as any "Eligible Security" that:
(i) is rated (or that has been issued by an issuer that is
rated with respect to a class of short-term debt obligations, or any
security within that class, that is comparable in priority and
security with
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the security) by the Requisite NRSROs* in the highest rating category
for short-term debt obligations (within which there may be
sub-categories or gradations indicating relative standing); or
(ii) is a security described in paragraph (a)(5)(ii) of Rule
2a-7 (i.e. a security that at the time of issuance was a long-term
security but has a remaining maturity of 397 days or less) whose
issuer has received from the Requisite NRSROs a rating, with respect
to a class of short-term debt obligations (or any security within that
class) that now is comparable in priority and security with the
security, in the highest rating category for short-term debt
obligations (within which there may be sub-categories or gradations
indicating relative standing); or
(iii) is an Unrated Security** that is of comparable quality
to a security meeting the requirements of clauses (i) and (ii) above,
as determined by the Board of Trustees.
Subsequent to its purchase by AIM MONEY MARKET FUND, a security may
cease to be a First Tier security. Subject to certain exceptions set forth in
Rule 2a-7, such an event will not require the disposition of the security by
the Fund, but AIM will consider such an event to be relevant in its
determination of whether the Fund should continue to hold the security. To the
extent that the ratings applied by an NRSRO to a security may change as a
result of changes in these rating systems, the Funds will attempt to use
comparable ratings as standards for its investments in accordance with the
investment policies described herein.
Rule 2a-7 defines an "Eligible Security" as follows:
(i) a security with a remaining maturity of 397 calendar days or
less that has received a short-term rating (or that has been
issued by an issuer that has received a short-term rating
with respect to a class of debt obligations, or any debt
obligation within that class, that is comparable in priority
and security with the security) by the Requisite NRSROs in
one of the two highest short-term rating categories (within
which there may be sub-categories or gradations indicating
relative standing); or
(ii) a security:
(A) that at the time of issuance had a remaining
maturity of more than 397 calendar days but that has
a remaining maturity of 397 calendar days or less;
and
- --------
* "Requisite NRSRO" shall mean (a) any two nationally recognized statistical
rating organizations ("NRSROs") that have issued a rating with respect to
a security or class of debt obligations of an issuer, or (b) if only one
NRSRO has issued a rating with respect to such security or issuer at the
time the Fund purchases or rolls over the security, that NRSRO. At present
the NRSROs are: Standard & Poor's Rating Services ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), Duff and Phelps, Inc. ("Duff &
Phelps"), Fitch Investors Services, Inc. ("Fitch") and, with respect to
certain types of securities, IBCA Limited and its affiliate, IBCA Inc.
Subcategories or gradations in ratings (such as a "+" or "-") do not count
as rating categories.
** An "Unrated Security" is a security (i) issued by an issuer that does not
have a current short-term rating from any NRSRO, either as to the
particular security or as to any other short-term obligations of
comparable priority and security; (ii) that was a long-term security at
the time of issuance and whose issuer has not received from any NRSRO a
rating with respect to a class of short-term obligations now comparable in
priority and security; or (iii) that is rated but which is the subject of
an external credit support agreement not in effect when the security was
assigned its rating, provided that a security is not an unrated security
if any short-term debt obligation issued by the issuer and comparable in
priority and security is rated by any NRSRO.
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(B) whose issuer has received from the Requisite NRSROs
a rating with respect to a class of debt obligations
(or any debt obligation within that class) that is
now comparable in priority and security with the
security, in one of the two highest short-term
rating categories (within which there may be
sub-categories or gradations indicating relative
standing); or
(iii) an unrated security that is of comparable quality to a
security meeting the requirements of (i) or (ii) above, as
determined by the Trust's Board of Trustees; provided,
however, that:
(A) the Board of Trustees may base its determination
that a standby commitment that is not a demand
feature is an Eligible Security upon a finding that
the issuer of the commitment presents a minimal risk
of default;
(B) a security that at the time of issuance had a
remaining maturity of more than 397 calendar days
but that has a remaining maturity of 397 calendar
days or less and that is an unrated security is not
an Eligible Security if the security has received a
long-term rating from any NRSRO that is not within
the NRSRO's three highest long-term ratings
categories (within which there may be sub-categories
or gradations indicating relative standing);
(C) an asset backed security shall not be an Eligible
Security unless it has a debt rating from an NRSRO;
and
(D) a security that is subject to a demand feature shall
not be an Eligible Security unless:
(1) the demand feature has received a
short-term rating from an NRSRO (or the
issuer of the demand feature has received
from an NRSRO a short-term rating with
respect to a class of debt obligations or
any debt obligation within that class that
is comparable in priority and security to
the demand feature); and
(2) the issuer of the demand feature, or
another institution, undertakes to notify
promptly the holder of the security in the
event that the demand feature is
substituted with a demand feature provided
by another issuer.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each of the Funds may engage in repurchase and reverse repurchase
agreement transactions involving the types of securities in which it is
permitted to invest.
REPURCHASE AGREEMENTS under which the purchaser (for example, a Fund)
acquires ownership of a security and the seller agrees, at the time of the
sale, to repurchase the security at a mutually agreed upon time and price,
thereby determining the yield during the purchaser's holding period. A Fund
may, however, enter into a "continuing contract" or "open" repurchase agreement
under which the seller is under a continuing obligation to repurchase the
underlying obligation from the Fund on demand and the effective interest rate
is negotiated on a daily basis. In general, a Fund will enter into repurchase
agreements only with domestic banks with total assets of at least $1 billion or
with primary dealers in U.S. Government securities; however, total assets will
not be the sole determinative factor, and a Fund may enter into repurchase
agreements with other institutions which the Board of Trustees believes present
minimal credit risks. Nevertheless, if the seller of a repurchase agreement
fails to repurchase the debt instrument in accordance with the terms of the
agreement, the Fund which entered into the repurchase agreement may incur a
loss to the extent that the proceeds it realizes on the sale of the underlying
obligation are less than the repurchase price. Repurchase agreements are
considered to be loans by a Fund under the 1940 Act.
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Rule 2a-7 under the 1940 Act provides that AIM MONEY MARKET FUND may
not invest more than 5% of its total assets in securities issued by the issuer
of that security, provided that the Fund may invest more than 5% of its total
assets in the First Tier securities of a single issuer for a period of up to
three business days after the purchase thereof; provided further, that the Fund
may not make more than one investment in accordance with the foregoing proviso
at any time. Under Rule 2a-7, for purposes of determining the percentage of the
Fund's total assets that are invested in securities of an issuer, a repurchase
agreement shall be deemed to be an acquisition of the underlying securities,
provided that the obligation of the seller to repurchase the securities from
the Fund is fully collateralized. To be fully collateralized, the collateral
must, among other things, consist entirely of U.S. Government securities or
securities that, at the time the repurchase agreement is entered into, are
rated in the highest rating category by the Requisite NRSROs.
REVERSE REPURCHASE AGREEMENTS, which involve the sale of securities
held by a Fund, with an agreement that the Fund will repurchase the securities
at an agreed upon price and date. A Fund may employ reverse repurchase
agreements for temporary or emergency purposes, such as to meet unanticipated
net redemptions so as to avoid liquidating other portfolio securities during
unfavorable market conditions. At the time it enters into a reverse repurchase
agreement, a Fund will segregate cash or high-quality debt securities having a
dollar value equal to the repurchase price. A Fund will utilize reverse
repurchase agreements only when the interest income to be earned from the
investment of the proceeds of the transaction is greater than the interest
expense of the transaction. Reverse repurchase agreements are considered
borrowings by a Fund under the 1940 Act.
MISCELLANEOUS INFORMATION
AUDIT REPORTS
The Board of Trustees will issue to shareholders at least
semi-annually the Funds' financial statements. Financial statements, audited by
independent auditors, will be issued annually. The firm of Price Waterhouse LLP
served as the auditors to the Funds other than AIM BALANCED FUND and AIM MONEY
MARKET FUND for the year ended December 31, 1992. The firm of KPMG Peat Marwick
LLP served as the auditors of ACS (the predecessor of AIM BALANCED FUND) for
the year ended August 31, 1993. The firm of KPMG Peat Marwick LLP, 700
Louisiana, NationsBank Building, Houston, Texas 77002, currently serves as the
auditors of the Funds.
LEGAL MATTERS
Legal matters for the Trust have been passed upon by Ballard Spahr
Andrews & Ingersoll, Philadelphia, Pennsylvania.
CUSTODIANS AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110 is custodian of all securities and cash of
the Funds, except for AIM MUNICIPAL BOND FUND, for which the Bank of New York,
90 Washington Street, 11th Floor, New York, New York 10286, is the custodian.
Under its respective contract with the Trust, each Custodian maintains the
portfolio securities of the Funds, administers the purchases and sales of
portfolio securities, collects interest and dividends and other distributions
made on the securities held in the portfolios of the Funds and performs other
ministerial duties. A I M Fund Services, Inc. (a wholly-owned subsidiary of
AIM) (the "Transfer Agent"), P.O. Box 4739, Houston, Texas 77210-4739 acts as
transfer and dividend disbursing agent for the Funds. These services do not
include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Funds pay the Custodians and
the Transfer Agent such compensation as may be agreed upon from time to time.
Texas Commerce Bank National Association, 712 Main, Houston, Texas
77002, serves as Sub-Custodian for retail purchases of the AIM Funds.
56
<PAGE> 123
RATINGS OF SECURITIES
The following is a description of the factors underlying the
commercial paper and debt ratings of Moody's, S&P, Fitch and Duff & Phelps:
MOODY'S BOND RATINGS
Moody's describes its ratings for corporate bonds as follows:
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. These are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa to B. The modifier 1 indicates that the company
ranks in the higher end of its generic rating category; the
57
<PAGE> 124
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
company ranks in the lower end of its generic rating category.
MOODY'S MUNICIPAL BOND RATINGS
Aaa: Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa to B. The modifier 1 indicates that the issue
ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue
ranks in the lower end of its generic category.
MOODY'S SHORT-TERM LOAN RATINGS
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk.
58
<PAGE> 125
Factors affecting the liquidity of the borrower and short-term cyclical
elements are critical in short-term ratings, while other factors of major
importance in bond risk, long-term secular trends for example, may be less
important over the short run.
A short-term rating may also be assigned on an issue having a demand
feature variable rate demand obligation (VRDO). Such ratings will be designated
as VMIG or, if the demand feature is not rated, as NR. Short-term ratings on
issues with demand features are differentiated by the use of the VMIG symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in
the event the demand is not met.
A VMIG rating may also be assigned to commercial paper programs. Such
programs are characterized as having variable short-term maturities but having
neither a variable rate nor demand feature.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4.
Gradations of investment quality are indicated by rating symbols, with
each symbol representing a group in which the quality characteristics are
broadly the same.
MIG 1/VMIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3: This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG 4/VMIG 4: This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
MOODY'S COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are opinions of the ability of issues
to repay punctually promissory obligations not having an original maturity in
excess of nine months.
PRIME-1: Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return
on funds employed; conservative capitalization structures with moderate
reliance on debt and ample asset protection; broad margins in earnings coverage
of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
59
<PAGE> 126
PRIME-3: Issuers rated Prime-3 (or related supported institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
S&P BOND RATINGS
S&P describes its ratings for corporate bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation and
C the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or large exposure
to adverse conditions.
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option
or demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal
and interest as due, and the second rating addresses only the demand feature.
The long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, AAA/A-1+). With short-term demand debt, the note rating symbols are
used with the commercial paper rating symbols (for example, SP-1+/A-1+).
S&P MUNICIPAL NOTE RATINGS
An S&P note rating reflects the liquidity factors and market-access
risks unique to notes. Notes maturing in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment: amortization schedule (the larger the final maturity relative
to other maturities, the more likely the issue will be treated as a
60
<PAGE> 127
note); and source of payment (the more the issue depends is on the market for
its refinancing, the more likely it is to be treated as a note).
Note rating symbols and definitions are as follows:
SP-1: Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics are given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
S&P COMMERCIAL PAPER RATINGS
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
Rating categories are as follows:
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes
in circumstances than obligations carrying the higher designations.
B: Issues with this rating are regarded as having only speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D: Debt with this rating is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless it is believed that such
payments will be made during such grace period.
FITCH INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be
provided by insurance policies or financial guaranties unless otherwise
indicated.
61
<PAGE> 128
Bonds carrying the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any
security. Ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt nature
or taxability of payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA." Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
"F-1+."
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds
and, therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
SUSPENDED: A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or
refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
FITCHALERT: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive," indicating a potential
upgrade, "Negative," for potential downgrade, or "Evolving," where ratings may
be raised or lowered. FitchAlert is relatively short-term, and should be
resolved within 12 months.
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<PAGE> 129
RATINGS OUTLOOK
An outlook is used to describe the most likely direction of any rating
change over the intermediate term. It is described as "Positive" or "Negative."
The absence of a designation indicates a stable outlook.
FITCH SPECULATIVE GRADE BOND RATINGS
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or
liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer or possible recovery value in
bankruptcy, the current and prospective financial condition and operating
performance of the issuer and any guarantor, as well as the economic and
political environment that might affect the issuer's future financial strength.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since rating categories cannot fully reflect the
differences in degrees of credit risk.
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified, which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC: Bonds have certain identifiable characteristics that, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D"
represents the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "DDD", "DD", or "D" categories.
FITCH SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
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<PAGE> 130
The short-term rating places greater emphasis than a long-term rating
on the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as for issues assigned "F-1+" and "F-1" ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse changes could cause these securities to be rated
below investment grade.
F-S: Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are vulnerable
to near-term adverse changes in financial and economic conditions.
D: Default. Issues assigned this rating are in actual or imminent payment
default.
LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
DUFF & PHELPS LONG-TERM RATINGS
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA AND AA-: High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
A+, A AND A-: Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
BBB+, BBB AND BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB AND BB-: Below investment grade but deemed likely to meet obligations
when due. Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+, B AND B-: Below investment grade and possessing risk that obligations will
not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or
into a higher or lower rating grade.
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<PAGE> 131
CCC: Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP: Preferred stock with dividend arrearages.
DUFF & PHELPS SHORT-TERM RATINGS
D - 1+: Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding and safety is just below risk-free U.S. Treasury short-term
obligations.
D - 1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
D - 1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D - 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
D - 3: Satisfactory liquidity and other protection factors qualify issue as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
D - 4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service. Operating factors and market access
may be subject to a high degree of variation.
D - 5: Issuer failed to meet scheduled principal and/or interest payments.
65
<PAGE> 132
FINANCIAL STATEMENTS
FS-1
<PAGE> 133
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Balanced Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Balanced Fund (a portfolio of AIM Funds
Group), including the schedule of investments, as of
December 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net
assets for each of the years in the two-year period then
ended, and the financial highlights for each of the years
in the three-year period then ended, the four-month period
ended December 31, 1993, and each of the years in the six-
year period ended August 31, 1993. These financial
statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Balanced
Fund as of December 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended, and
the financial highlights for each of the years in the
three-year period then ended, the four-month period ended
December 31, 1993, and each of the years in the six-year
period ended August 31, 1993, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
--------------------------
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1997
FS-2
<PAGE> 134
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC BONDS & NOTES-21.52%
ADVERTISING/BROADCASTING-0.60%
Omnicom Group, Inc., Conv. Sub.
Deb., 4.25%, 01/03/07(a)
(Acquired 12/11/96; Cost
$1,000,000) $ 1,000,000 $ 1,037,000
- ---------------------------------------------------------------
Time Warner, Inc.,
Deb., 8.18%, 08/15/07 925,000 964,405
- ---------------------------------------------------------------
Deb., 6.85%, 01/15/26 1,500,000 1,474,785
- ---------------------------------------------------------------
3,476,190
- ---------------------------------------------------------------
AIRLINES-1.41%
Airplanes Pass Through Trust, Sub.
Bonds, 10.875%, 03/15/19 500,000 555,315
- ---------------------------------------------------------------
America West Airlines Inc., Pass
Through Ctf.,
6.93%, 01/02/08 3,000,000 2,981,220
- ---------------------------------------------------------------
Continental Airlines, Inc., Conv.
Sub. Notes, 6.75%, 04/15/06(a)
(Acquired 02/27/96; Cost
$499,825) 500,000 561,065
- ---------------------------------------------------------------
Delta Air Lines, Inc.
Medium Term Notes, 8.52%,
01/30/04 2,000,000 2,143,620
- ---------------------------------------------------------------
Series 92-E Equipment Trust
Ctf., 8.54%, 01/02/07 677,749 716,367
- ---------------------------------------------------------------
Greenwich Air Services, Inc., Sr.
Notes, 10.50%, 06/01/06 1,000,000 1,075,000
- ---------------------------------------------------------------
8,032,587
- ---------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.11%
Chrysler Financial Corp., Deb.,
8.50%, 02/01/18 150,000 155,217
- ---------------------------------------------------------------
General Motors Corp., Deb., 8.80%,
03/01/21 400,000 462,572
- ---------------------------------------------------------------
617,789
- ---------------------------------------------------------------
BANKING-3.67%
Bankers Trust New York Corp., Sub.
Notes, 7.50%, 11/15/15 3,000,000 2,971,650
- ---------------------------------------------------------------
Bankers Trust New York Corp., Gtd.
Notes, 7.75%, 12/01/26(a)
(Acquired 11/22/96; Cost
$2,932,770) 3,000,000 2,884,245
- ---------------------------------------------------------------
Deutsche Bank Financial, Gtd.
Notes, 6.70%, 12/13/06 3,500,000 3,439,590
- ---------------------------------------------------------------
First Union Bancorp, Sub. Deb.,
7.50%, 04/15/35 3,000,000 3,162,570
- ---------------------------------------------------------------
First Union Corp., Sub. Notes,
6.375%, 01/15/09 800,000 748,240
- ---------------------------------------------------------------
HSBC Americas Inc., Sub. Notes,
7.00%, 11/01/06 3,000,000 2,967,600
- ---------------------------------------------------------------
Mercantile Bank, Sub. Notes,
6.375%, 01/15/04 700,000 676,186
- ---------------------------------------------------------------
Sovereign Bancorp, Inc., Sub.
Notes, 8.00%, 03/15/03 3,325,000 3,393,495
- ---------------------------------------------------------------
Wachovia Corp., Sub. Notes,
6.375%, 02/01/09 800,000 756,792
- ---------------------------------------------------------------
21,000,368
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BEVERAGES (SOFT DRINKS)-0.51%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.24%,
06/20/20(b) $15,000,000 $ 2,920,050
- ---------------------------------------------------------------
BUSINESS SERVICES-0.09%
Career Horizons, Inc., Conv.
Bonds, 7.00%, 11/01/02 250,000 494,412
- ---------------------------------------------------------------
CABLE TELEVISION-0.13%
Viacom, Inc., Sr. Notes,
7.75%, 06/01/05 750,000 736,500
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.13%
Hexcel Corp., Conv. Sub. Notes,
7.00%, 08/01/03 600,000 744,000
- ---------------------------------------------------------------
COMPUTER MINI/PCS-0.26%
Apple Computer, Inc., Conv. Sub.
Notes, 6.00%, 06/01/01 1,500,000 1,514,925
- ---------------------------------------------------------------
COMPUTER NETWORKING-0.31%
3Com Corp., Conv. Sub. Notes,
10.25%, 11/01/01(a)
(Acquired 11/08/94-09/25/96;
Cost $1,235,438) 800,000 1,781,304
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.18%
First Financial Management Corp.,
Conv. Deb., 5.00%, 12/15/99 600,000 1,038,342
- ---------------------------------------------------------------
CONGLOMERATES-0.10%
General Electric Capital Corp.,
Notes, 8.30%, 09/20/09 500,000 558,230
- ---------------------------------------------------------------
ELECTRIC POWER-1.09%
El Paso Electric Co., First
Mortgage Bonds, 8.90%, 02/01/06 1,500,000 1,566,795
- ---------------------------------------------------------------
Indiana Michigan Power, Secured
Lease Obligation Bonds,
9.82%, 12/07/22 1,357,789 1,638,200
- ---------------------------------------------------------------
UtiliCorp United, Inc., Sr. Notes,
6.70%, 10/15/06 3,000,000 3,005,040
- ---------------------------------------------------------------
6,210,035
- ---------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.30%
Checkpoint Systems, Inc., Conv.
Sub. Deb., 5.25%, 11/01/05(a)
(Acquired 10/07/96-10/31/96;
Cost $1,054,250) 700,000 1,003,625
- ---------------------------------------------------------------
SCI Systems, Inc., Conv. Sub.
Notes, 5.00%, 05/01/06(a)
(Acquired 04/17/96; Cost
$600,000) 600,000 700,722
- ---------------------------------------------------------------
1,704,347
- ---------------------------------------------------------------
ENERGY (ALTERNATE SOURCES)-0.19%
AES Corp., Sr. Sub. Notes,
10.25%, 07/15/06 1,000,000 1,075,000
- ---------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 135
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FINANCE (CONSUMER CREDIT)-2.78%
Associates Corp. of North America,
Series B Sr. Deb., 7.95%,
02/15/10 $ 3,650,000 $ 3,937,656
- ---------------------------------------------------------------
Cityscape Financial Corp., Conv.
Sub. Deb., 6.00%, 05/01/06(a)
(Acquired 04/26/96-09/27/96;
Cost $805,250) 800,000 814,000
- ---------------------------------------------------------------
Countrywide Funding Corp., Sub.
Notes, 8.25%, 07/15/02 500,000 530,970
- ---------------------------------------------------------------
Ford Motor Credit,
Notes, 6.125%, 01/09/06 1,500,000 1,408,560
- ---------------------------------------------------------------
Notes, 6.75%, 08/15/08 800,000 776,952
- ---------------------------------------------------------------
GMAC, Notes, 9.00%, 10/15/02 750,000 825,758
- ---------------------------------------------------------------
Grand Metro Investment, Gtd.
Bonds, 7.45%, 04/15/35 3,000,000 3,198,060
- ---------------------------------------------------------------
Household Finance Corp., Notes,
7.125%, 09/01/05 3,000,000 3,033,150
- ---------------------------------------------------------------
Southern Pacific Funding Corp.,
Conv. Sub. Notes, 6.75%,
10/15/06 1,250,000 1,343,750
- ---------------------------------------------------------------
15,868,856
- ---------------------------------------------------------------
GAS DISTRIBUTION-0.18%
Ferrellgas Partners, Sr. Notes,
9.375%, 06/15/06 1,000,000 1,021,250
- ---------------------------------------------------------------
HOTELS/MOTELS-0.40%
ITT Corp., Gtd. Deb., 7.375%,
11/15/15 750,000 720,855
- ---------------------------------------------------------------
Marriott International, Inc.,
Conv. Notes, 4.25%,
03/25/11(a)(b)
(Acquired 03/19/96; Cost
$931,263) 1,750,000 983,710
- ---------------------------------------------------------------
Prime Hospitality Corp., Conv.
Sub. Notes, 7.00%, 04/15/02 400,000 594,832
- ---------------------------------------------------------------
2,299,397
- ---------------------------------------------------------------
MEDICAL (DRUGS)-0.36%
North American Vaccine, Inc.,
Conv. Sub.
Notes, 6.50%, 05/01/03(a)
(Acquired 07/31/96-10/30/96;
Cost $1,881,250) 2,000,000 2,070,000
- ---------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-0.70%
Uromed Corp., Conv. Sub. Notes,
6.00%, 10/15/03(a)
(Acquired 10/08/96-12/04/96;
Cost $2,594,000) 2,600,000 2,446,262
- ---------------------------------------------------------------
Ventritex, Inc., Conv. Sub. Notes,
5.75%, 08/15/01 1,000,000 1,551,250
- ---------------------------------------------------------------
3,997,512
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.37%
ARV Assisted Living, Inc., Conv.
Sub. Notes, 6.75%, 04/01/06(a)
(Acquired 03/28/96-03/29/96;
Cost $500,400) 500,000 436,560
- ---------------------------------------------------------------
HEALTHSOUTH Rehabilitation Corp.,
Conv. Sub. Deb., 5.00%, 04/01/01 300,000 604,005
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-(CONTINUED)
Physicians Resource Group, Inc.,
Conv. Sub. Deb., 6.00%,
12/01/01(a)
(Acquired 12/06/96; Cost
$1,100,000) $ 1,100,000 $ 1,078,242
- ---------------------------------------------------------------
2,118,807
- ---------------------------------------------------------------
NATURAL GAS PIPELINE-0.28%
Enron Corp., Sr. Sub. Deb.,
6.75%, 07/01/05 800,000 792,096
- ---------------------------------------------------------------
PanEnergy Corp., Deb.,
7.875%, 08/15/04 750,000 792,308
- ---------------------------------------------------------------
1,584,404
- ---------------------------------------------------------------
OFFICE PRODUCTS-0.18%
U.S. Office Products Co., Conv.
Sub. Notes, 5.50%, 02/01/01 800,000 1,032,632
- ---------------------------------------------------------------
OIL & GAS (DRILLING)-0.46%
Nabors Industries, Inc., Conv.
Sub. Notes, 5.00%, 05/15/06 1,500,000 1,910,775
- ---------------------------------------------------------------
Swift Energy Co., Conv. Sub.
Notes, 6.25%, 11/15/06 650,000 710,125
- ---------------------------------------------------------------
2,620,900
- ---------------------------------------------------------------
OIL & GAS (EQUIPMENT & SUPPLIES)-0.45%
Pride Petroleum Services, Inc.,
Conv. Sub. Deb., 6.25%, 02/15/06 1,400,000 2,569,000
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.18%
Pogo Producing Co., Conv. Sub.
Notes, 5.50%, 06/15/06 800,000 1,006,768
- ---------------------------------------------------------------
POLLUTION CONTROL-1.33%
Thermo Instrument Systems, Inc.,
Conv. Deb., 4.50%, 10/15/03(a)
(Acquired 10/10/96-12/16/96;
Cost $1,210,750) 1,200,000 1,248,948
- ---------------------------------------------------------------
U.S. Filter Corp., Conv. Sub.
Notes, 4.50%, 12/15/01 1,500,000 1,527,060
- ---------------------------------------------------------------
United Waste Systems, Inc., Conv.
Sub. Notes, 4.50%, 06/01/01(a)
(Acquired 05/31/96-08/07/96;
Cost $1,013,000) 1,000,000 1,191,300
- ---------------------------------------------------------------
WMX Technologies, Inc., Notes,
7.10%, 08/01/26 3,500,000 3,617,320
- ---------------------------------------------------------------
7,584,628
- ---------------------------------------------------------------
PUBLISHING-0.18%
News America Holdings, Inc., Sr.
Gtd. Deb., 9.25%, 02/01/13 900,000 1,012,005
- ---------------------------------------------------------------
RAILROADS-0.98%
Union Pacific Corp., Notes, 7.25%,
11/01/08 3,000,000 3,024,840
- ---------------------------------------------------------------
Union Pacific Resources Group
Inc., Deb., 7.50%, 10/15/26 2,500,000 2,548,150
- ---------------------------------------------------------------
5,572,990
- ---------------------------------------------------------------
REAL ESTATE-0.53%
Finova Capital Corp., Notes,
7.40%, 05/06/06 3,000,000 3,061,710
- ---------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 136
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RETAIL (STORES)-0.76%
Federated Department Stores, Conv.
Notes, 5.00%, 10/01/03 $ 1,000,000 $ 1,168,750
- ---------------------------------------------------------------
J.C. Penney Co., Inc., Notes,
6.50%, 06/15/02 2,015,000 2,004,683
- ---------------------------------------------------------------
Pier 1 Imports, Inc., Conv. Sub.
Notes, 5.75%, 10/01/03 1,000,000 1,152,500
- ---------------------------------------------------------------
4,325,933
- ---------------------------------------------------------------
SEMICONDUCTORS-0.50%
Cirrus Logic, Inc., Conv. Sub.
Notes, 6.00%, 12/15/03(a)
(Acquired 12/12/96; Cost
$2,000,000) 2,000,000 1,830,000
- ---------------------------------------------------------------
Sanmina Corp., Conv. Sub. Notes,
5.50%, 08/15/02(a)
(Acquired 08/10/95-04/16/96;
Cost $560,525) 500,000 1,024,745
- ---------------------------------------------------------------
2,854,745
- ---------------------------------------------------------------
SHOES & RELATED APPAREL-0.35%
Nine West Group, Inc., Conv. Sub.
Notes, 5.50%, 07/15/03(a)
(Acquired 06/20/96-10/22/96;
Cost $2,048,750) 2,000,000 1,992,440
- ---------------------------------------------------------------
TELECOMMUNICATIONS-0.52%
TCI Communications Inc., Sr.
Notes, 8.00%, 08/01/05 1,000,000 980,440
- ---------------------------------------------------------------
360 Communications Co., Sr. Notes,
7.50%, 03/01/06 2,000,000 1,985,180
- ---------------------------------------------------------------
2,965,620
- ---------------------------------------------------------------
TELEPHONE-0.70%
BellSouth Capital Funding, Deb.,
6.04%, 11/15/26 4,000,000 3,980,760
- ---------------------------------------------------------------
TRANSPORTATION-0.25%
Seacor Holdings Inc., Conv. Sub.
Notes, 5.375%, 11/15/06 1,250,000 1,456,788
- ---------------------------------------------------------------
Total Domestic Bonds & Notes 122,901,224
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
DOMESTIC COMMON STOCKS-42.22%
ADVERTISING/BROADCASTING-1.20%
Lamar Advertising Co.(c) 42,000 1,018,500
- ---------------------------------------------------------------
Leap Group, Inc. (The)(c) 90,000 618,750
- ---------------------------------------------------------------
Meredith Corp. 13,000 685,750
- ---------------------------------------------------------------
Metro Networks, Inc.(c) 43,100 1,088,275
- ---------------------------------------------------------------
Outdoor Systems, Inc.(c) 77,400 2,176,875
- ---------------------------------------------------------------
Univision Communications, Inc.(c) 34,900 1,291,300
- ---------------------------------------------------------------
6,879,450
- ---------------------------------------------------------------
AEROSPACE/DEFENSE-0.77%
Boeing Co. (The) 15,000 1,595,625
- ---------------------------------------------------------------
Gulfstream Aerospace Corp.(c) 60,300 1,462,275
- ---------------------------------------------------------------
United Technologies Corp. 20,000 1,320,000
- ---------------------------------------------------------------
4,377,900
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION> MARKET
SHARES VALUE
<S> <C> <C>
AIRLINES-0.19%
Greenwich Air Services, Inc.-Class B 50,000 $ 1,112,500
- ---------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.42%
Chrysler Corp. 48,000 1,584,000
- ---------------------------------------------------------------
United Auto Group, Inc.(c) 31,000 798,250
- ---------------------------------------------------------------
2,382,250
- ---------------------------------------------------------------
BANKING-0.17%
Commercial Federal Corp. 20,000 960,000
- ---------------------------------------------------------------
BANKING (MONEY CENTER)-0.78%
Chase Manhattan Corp. 30,000 2,677,500
- ---------------------------------------------------------------
Citicorp 17,500 1,802,500
- ---------------------------------------------------------------
4,480,000
- ---------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.34%
PepsiCo, Inc. 66,000 1,930,500
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.14%
AMGEN, Inc.(c) 15,000 815,625
- ---------------------------------------------------------------
BUSINESS SERVICES-1.69%
Abacus Direct Corp.(c) 42,400 795,000
- ---------------------------------------------------------------
Advanced Health Corp.(c) 85,000 1,062,500
- ---------------------------------------------------------------
Corestaff, Inc.(c) 43,875 1,039,289
- ---------------------------------------------------------------
Diebold, Inc. 17,000 1,068,875
- ---------------------------------------------------------------
Equifax, Inc. 27,000 826,875
- ---------------------------------------------------------------
International Telecommunication
Data Systems, Inc.(c) 30,000 727,500
- ---------------------------------------------------------------
Learning Tree International,
Inc.(c) 49,050 1,446,975
- ---------------------------------------------------------------
Metzler Group, Inc.(c) 46,100 1,463,675
- ---------------------------------------------------------------
Sitel Corp.(c) 86,800 1,226,050
- ---------------------------------------------------------------
9,656,739
- ---------------------------------------------------------------
CHEMICALS-0.25%
Pioneer Hi-Bred International,
Inc. 20,000 1,400,000
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.30%
IMC Global, Inc. 18,500 723,812
- ---------------------------------------------------------------
Praxair, Inc. 22,000 1,014,750
- ---------------------------------------------------------------
1,738,562
- ---------------------------------------------------------------
COMPUTER MAINFRAMES-0.14%
ViaSat, Inc.(c) 90,000 810,000
- ---------------------------------------------------------------
COMPUTER MINI/PCS-0.36%
COMPAQ Computer Corp.(c) 15,000 1,113,750
- ---------------------------------------------------------------
Sun Microsystems, Inc.(c) 36,000 924,750
- ---------------------------------------------------------------
2,038,500
- ---------------------------------------------------------------
COMPUTER NETWORKING-0.93%
Ascend Communications, Inc.(c) 28,000 1,739,500
- ---------------------------------------------------------------
Cabletron Systems, Inc.(c) 24,000 798,000
- ---------------------------------------------------------------
Cisco Systems, Inc.(c) 14,000 890,750
- ---------------------------------------------------------------
</TABLE>
FS-5
<PAGE> 137
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING-(CONTINUED)
Comverse Technology, Inc.(c) 50,000 $ 1,890,625
- ---------------------------------------------------------------
5,318,875
- ---------------------------------------------------------------
COMPUTER PERIPHERALS-0.33%
Accent Color Sciences, Inc.(c) 80,000 680,000
- ---------------------------------------------------------------
U.S. Robotics Corp.(c) 17,000 1,224,000
- ---------------------------------------------------------------
1,904,000
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-2.09%
Computer Associates International, Inc. 8,500 422,875
- ---------------------------------------------------------------
DST Systems, Inc.(c) 45,000 1,411,875
- ---------------------------------------------------------------
Electronic Data Systems Corp. 25,000 1,081,250
- ---------------------------------------------------------------
FactSet Research Systems, Inc.(c) 40,400 848,400
- ---------------------------------------------------------------
Forrester Research, Inc.(c) 20,200 520,150
- ---------------------------------------------------------------
Intelligroup, Inc.(c) 50,000 550,000
- ---------------------------------------------------------------
Mechanical Dynamics, Inc.(c) 18,200 252,525
- ---------------------------------------------------------------
Microsoft Corp.(c) 20,000 1,652,500
- ---------------------------------------------------------------
Midway Games Inc.(c) 71,900 1,455,975
- ---------------------------------------------------------------
National Data Corp. 16,900 735,150
- ---------------------------------------------------------------
Oracle Corp.(c) 18,750 782,813
- ---------------------------------------------------------------
S3 Inc.(c) 50,000 812,500
- ---------------------------------------------------------------
Viisage Technology, Inc.(c) 73,500 1,065,750
- ---------------------------------------------------------------
White Pine Software, Inc.(c) 50,000 362,500
- ---------------------------------------------------------------
11,954,263
- ---------------------------------------------------------------
CONGLOMERATES-0.39%
Allied-Signal Inc. 12,000 804,000
- ---------------------------------------------------------------
Olin Corp. 16,000 602,000
- ---------------------------------------------------------------
Textron, Inc. 9,000 848,250
- ---------------------------------------------------------------
2,254,250
- ---------------------------------------------------------------
COSMETICS & TOILETRIES-2.35%
Avon Products, Inc. 20,000 1,142,500
- ---------------------------------------------------------------
Carson, Inc.(c) 60,000 832,500
- ---------------------------------------------------------------
Colgate-Palmolive Co. 17,000 1,568,250
- ---------------------------------------------------------------
Estee Lauder Co. 25,000 1,271,875
- ---------------------------------------------------------------
French Fragrances, Inc.(c) 100,000 775,000
- ---------------------------------------------------------------
Gillette Co. 20,000 1,555,000
- ---------------------------------------------------------------
Nature's Sunshine Products, Inc. 50,000 900,000
- ---------------------------------------------------------------
Procter & Gamble Co. 25,000 2,687,500
- ---------------------------------------------------------------
Rexall Sundown, Inc.(c) 29,100 791,156
- ---------------------------------------------------------------
Warner-Lambert Co. 25,000 1,875,000
- ---------------------------------------------------------------
13,398,781
- ---------------------------------------------------------------
ELECTRIC POWER-0.46%
AES Corp.(c) 23,000 1,069,500
- ---------------------------------------------------------------
Destec Energy, Inc.(c) 100,000 1,562,500
- ---------------------------------------------------------------
2,632,000
- ---------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.27%
SBS Technologies, Inc.(c) 35,000 1,295,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONIC COMPONENTS/MISCELLANEOUS-(CONTINUED)
SCI Systems, Inc.(c) 5,000 $ 223,125
- ---------------------------------------------------------------
1,518,125
- ---------------------------------------------------------------
ENERGY (ALTERNATIVE SOURCES)-0.16%
Calenergy, Inc.(c) 28,000 941,500
- ---------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.53%
Hambrecht & Quist Group(c) 50,000 1,081,250
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc. 15,000 1,222,500
- ---------------------------------------------------------------
Morgan Stanley Group, Inc. 13,000 742,625
- ---------------------------------------------------------------
3,046,375
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-2.18%
AAMES Financial Corp. 55,000 1,973,125
- ---------------------------------------------------------------
American Express Co. 20,000 1,130,000
- ---------------------------------------------------------------
Federal Home Loan Mortgage Corp. 17,000 1,872,125
- ---------------------------------------------------------------
Federal National Mortgage
Association 40,000 1,490,000
- ---------------------------------------------------------------
Finova Group, Inc. 25,000 1,606,250
- ---------------------------------------------------------------
Green Tree Financial Corp. 31,000 1,197,375
- ---------------------------------------------------------------
MBNA Corp. 25,000 1,037,500
- ---------------------------------------------------------------
Medallion Financial Corp. 50,400 768,600
- ---------------------------------------------------------------
Student Loan Marketing Association 15,000 1,396,875
- ---------------------------------------------------------------
12,471,850
- ---------------------------------------------------------------
FINANCE (SAVINGS & LOANS)-0.30%
Washington Mutual, Inc. 39,000 1,689,188
- ---------------------------------------------------------------
FOOD/PROCESSING-0.61%
ConAgra, Inc. 22,500 1,119,375
- ---------------------------------------------------------------
Dean Foods Co. 39,000 1,257,750
- ---------------------------------------------------------------
Ralston-Ralston Purina Group 15,000 1,100,625
- ---------------------------------------------------------------
3,477,750
- ---------------------------------------------------------------
FURNITURE-0.25%
Ethan Allen Interiors, Inc. 37,000 1,424,500
- ---------------------------------------------------------------
GAS DISTRIBUTION-0.50%
Consolidated Natural Gas Co. 25,000 1,381,250
- ---------------------------------------------------------------
KN Energy, Inc. 18,000 706,500
- ---------------------------------------------------------------
MarkWest Hydrocarbon, Inc.(c) 50,000 775,000
- ---------------------------------------------------------------
2,862,750
- ---------------------------------------------------------------
HOTELS/MOTELS-0.52%
HFS, Inc.(c) 24,000 1,434,000
- ---------------------------------------------------------------
Hilton Hotels Corp. 44,000 1,149,500
- ---------------------------------------------------------------
U.S. Franchise Systems, Inc.(c) 40,000 405,000
- ---------------------------------------------------------------
2,988,500
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-2.11%
Aetna Inc. 18,000 1,440,000
- ---------------------------------------------------------------
Capital Re Corp. 15,500 722,687
- ---------------------------------------------------------------
Capmac Holdings Inc. 51,500 1,705,938
- ---------------------------------------------------------------
Chubb Corp. 20,300 1,091,125
- ---------------------------------------------------------------
</TABLE>
FS-6
<PAGE> 138
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE PROPERTY)-(CONTINUED)
CIGNA Corp. 15,500 $ 2,117,687
- ---------------------------------------------------------------
Everest Re Holdings, Inc. 40,000 1,150,000
- ---------------------------------------------------------------
Travelers Group, Inc. 41,333 1,875,485
- ---------------------------------------------------------------
Travelers/Aetna Property Casualty
Corp. 55,000 1,945,625
- ---------------------------------------------------------------
12,048,547
- ---------------------------------------------------------------
LEISURE & RECREATION-0.70%
Eastman Kodak Co. 13,000 1,043,250
- ---------------------------------------------------------------
Galoob Toys, Inc.(c) 60,000 840,000
- ---------------------------------------------------------------
Steinway Musical Instruments(c) 60,000 1,042,500
- ---------------------------------------------------------------
Ticketmaster Group, Inc.(c) 90,000 1,091,250
- ---------------------------------------------------------------
4,017,000
- ---------------------------------------------------------------
MACHINERY (HEAVY)-1.03%
Briggs & Stratton Corp. 32,500 1,430,000
- ---------------------------------------------------------------
Case Corp. 26,000 1,417,000
- ---------------------------------------------------------------
Caterpillar Inc. 25,000 1,881,250
- ---------------------------------------------------------------
Deere & Co. 29,000 1,178,125
- ---------------------------------------------------------------
5,906,375
- ---------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.22%
Thermo Electron Corp.(c) 30,000 1,237,500
- ---------------------------------------------------------------
MEDICAL (DRUGS)-2.89%
Abbott Laboratories 18,500 938,875
- ---------------------------------------------------------------
American Home Products Corp. 26,000 1,524,250
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 14,000 1,522,500
- ---------------------------------------------------------------
Cardinal Health, Inc. 24,000 1,398,000
- ---------------------------------------------------------------
Dura Pharmaceuticals, Inc.(c) 50,000 2,387,500
- ---------------------------------------------------------------
Johnson & Johnson 35,000 1,741,250
- ---------------------------------------------------------------
Lilly (Eli) & Co. 32,000 2,336,000
- ---------------------------------------------------------------
Merck & Co., Inc. 19,000 1,505,750
- ---------------------------------------------------------------
Pfizer, Inc. 24,000 1,989,000
- ---------------------------------------------------------------
Schering-Plough Corp. 18,000 1,165,500
- ---------------------------------------------------------------
16,508,625
- ---------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-1.21%
Baxter International Inc. 30,000 1,230,000
- ---------------------------------------------------------------
Becton, Dickinson & Co. 20,000 867,500
- ---------------------------------------------------------------
Medtronic, Inc. 27,000 1,836,000
- ---------------------------------------------------------------
Omnicare Inc. 38,000 1,220,750
- ---------------------------------------------------------------
Quintiles Transnational Corp.(c) 20,000 1,325,000
- ---------------------------------------------------------------
Xomed Surgical Products, Inc.(c) 20,900 418,000
- ---------------------------------------------------------------
6,897,250
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.34%
American Medical Response, Inc.(c) 70,000 2,275,000
- ---------------------------------------------------------------
Columbia/HCA Healthcare Corp. 25,500 1,039,125
- ---------------------------------------------------------------
PhyCor, Inc.(c) 25,000 709,375
- ---------------------------------------------------------------
RoTech Medical Corp.(c) 60,000 1,260,000
- ---------------------------------------------------------------
Sunrise Assisted Living, Inc.(c) 49,000 1,365,875
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-(CONTINUED)
Tenet Healthcare Corp.(c) 45,000 $ 984,375
- ---------------------------------------------------------------
7,633,750
- ---------------------------------------------------------------
METALS-0.12%
Titanium Metals Corp.(c) 20,000 657,500
- ---------------------------------------------------------------
NATURAL GAS PIPELINE-1.39%
Columbia Gas System, Inc. 9,000 572,625
- ---------------------------------------------------------------
El Paso Natural Gas Co. 28,500 1,439,250
- ---------------------------------------------------------------
Enron Corp. 28,000 1,207,500
- ---------------------------------------------------------------
PanEnergy Corp. 23,000 1,035,000
- ---------------------------------------------------------------
Sonat, Inc. 32,000 1,648,000
- ---------------------------------------------------------------
Williams Companies, Inc. (The) 54,000 2,025,000
- ---------------------------------------------------------------
7,927,375
- ---------------------------------------------------------------
OFFICE PRODUCTS-0.16%
Avery-Dennison Corp. 20,000 707,500
- ---------------------------------------------------------------
Ingram Micro, Inc.-Class A(c) 9,800 225,400
- ---------------------------------------------------------------
932,900
- ---------------------------------------------------------------
OIL & GAS (DRILLING)-0.35%
Costilla Energy, Inc.(c) 102,000 1,389,750
- ---------------------------------------------------------------
TransOcean Offshore 10,000 626,250
- ---------------------------------------------------------------
2,016,000
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.41%
Houston Exploration Co. (The)(c) 33,200 581,000
- ---------------------------------------------------------------
Titan Exploration, Inc.(c) 145,400 1,744,800
- ---------------------------------------------------------------
2,325,800
- ---------------------------------------------------------------
OIL & GAS (SERVICES)-0.99%
Chesapeake Energy Corp.(c) 12,000 667,500
- ---------------------------------------------------------------
Exxon Corp. 8,000 784,000
- ---------------------------------------------------------------
Louisiana Land & Exploration Co. 27,000 1,447,875
- ---------------------------------------------------------------
Mobil Corp. 13,500 1,650,375
- ---------------------------------------------------------------
TPC Corp.(c) 125,000 1,125,000
- ---------------------------------------------------------------
5,674,750
- ---------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.21%
Coastal Corp. 25,000 1,221,875
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.38%
American Pad & Paper Co.(c) 45,000 1,018,125
- ---------------------------------------------------------------
Kimberly-Clark Corp. 12,000 1,143,000
- ---------------------------------------------------------------
2,161,125
- ---------------------------------------------------------------
REAL ESTATE-0.27%
Cali Realty Corp. 50,000 1,543,750
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-1.13%
Bay Apartment Communities, Inc. 40,000 1,440,000
- ---------------------------------------------------------------
Crescent Real Estate Equities, Inc. 20,000 1,055,000
- ---------------------------------------------------------------
FelCor Suite Hotels, Inc. 18,000 636,750
- ---------------------------------------------------------------
Omega Healthcare Investors, Inc. 29,000 964,250
- ---------------------------------------------------------------
</TABLE>
FS-7
<PAGE> 139
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS-(CONTINUED)
Patriot American Hospitality, Inc. 29,000 $ 1,250,625
- ---------------------------------------------------------------
Starwood Lodging Trust 20,000 1,102,500
- ---------------------------------------------------------------
6,449,125
- ---------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.15%
American Stores Co. 33,500 1,369,312
- ---------------------------------------------------------------
Dominick's Supermarkets, Inc.(c) 84,000 1,827,000
- ---------------------------------------------------------------
Safeway, Inc.(c) 55,000 2,351,250
- ---------------------------------------------------------------
Twinlab Corp.(c) 82,800 1,003,950
- ---------------------------------------------------------------
6,551,512
- ---------------------------------------------------------------
RETAIL (STORES)-1.90%
Blyth Industries, Inc.(c) 30,000 1,368,750
- ---------------------------------------------------------------
Consolidated Stores Corp.(c) 31,250 1,003,906
- ---------------------------------------------------------------
Gap, Inc. (The) 47,000 1,415,875
- ---------------------------------------------------------------
Hibbett Sporting Goods, Inc.(c) 41,200 597,400
- ---------------------------------------------------------------
Linens 'N Things, Inc.(c) 70,000 1,373,750
- ---------------------------------------------------------------
Neiman Marcus Group, Inc. (The)(c) 32,500 828,750
- ---------------------------------------------------------------
Pier 1 Imports, Inc. 40,000 705,000
- ---------------------------------------------------------------
Saks Holdings, Inc.(c) 60,500 1,633,500
- ---------------------------------------------------------------
Sears, Roebuck & Co. 27,000 1,245,375
- ---------------------------------------------------------------
Staples, Inc.(c) 10,500 189,656
- ---------------------------------------------------------------
Stein Mart, Inc.(c) 25,000 506,250
- ---------------------------------------------------------------
10,868,212
- ---------------------------------------------------------------
SECURITY & SAFETY SERVICES-0.19%
Cornell Corrections, Inc.(c) 70,000 621,250
- ---------------------------------------------------------------
O'Gara Co. (The)(c) 50,000 487,500
- ---------------------------------------------------------------
1,108,750
- ---------------------------------------------------------------
SEMICONDUCTORS-0.66%
Analog Devices, Inc.(c) 25,000 846,875
- ---------------------------------------------------------------
Intel Corp. 22,000 2,880,625
- ---------------------------------------------------------------
3,727,500
- ---------------------------------------------------------------
SHOES & RELATED APPAREL-0.35%
Nike, Inc.-Class B 33,000 1,971,750
- ---------------------------------------------------------------
TELECOMMUNICATIONS-2.12%
ADC Telecommunications, Inc.(c) 53,500 1,665,187
- ---------------------------------------------------------------
CellNet Data Systems Inc.(c) 36,100 527,962
- ---------------------------------------------------------------
Frontier Corp. 30,000 678,750
- ---------------------------------------------------------------
LCC International, Inc.-Class A(c) 45,000 832,500
- ---------------------------------------------------------------
Lucent Technologies, Inc. 41,102 1,900,968
- ---------------------------------------------------------------
McLeod, Inc.(c) 45,000 1,147,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS-(CONTINUED)
Superior Telecom Inc.(c) 76,000 $ 1,548,500
- ---------------------------------------------------------------
Teleport Communications Group
Inc.- Class A(c) 30,000 915,000
- ---------------------------------------------------------------
360 Communications Co.(c) 35,000 809,375
- ---------------------------------------------------------------
West TeleServices Corp.(c) 60,000 1,365,000
- ---------------------------------------------------------------
WorldCom, Inc.(c) 26,267 684,584
- ---------------------------------------------------------------
12,075,326
- ---------------------------------------------------------------
TELEPHONE-0.87%
Ameritech Corp. 21,500 1,303,437
- ---------------------------------------------------------------
Cincinnati Bell, Inc. 25,300 1,559,113
- ---------------------------------------------------------------
GTE Corp. 23,000 1,046,500
- ---------------------------------------------------------------
SBC Communications, Inc. 20,000 1,035,000
- ---------------------------------------------------------------
4,944,050
- ---------------------------------------------------------------
TEXTILES-0.32%
Guess, Inc.(c) 55,000 790,625
- ---------------------------------------------------------------
Liz Claiborne, Inc. 27,000 1,042,875
- ---------------------------------------------------------------
1,833,500
- ---------------------------------------------------------------
TOBACCO-0.49%
Philip Morris Companies, Inc. 25,000 2,815,625
- ---------------------------------------------------------------
TRANSPORTATION-0.64%
AirNet Systems, Inc.(c) 80,100 1,181,475
- ---------------------------------------------------------------
Coach USA, Inc.(c) 85,200 2,470,800
- ---------------------------------------------------------------
3,652,275
- ---------------------------------------------------------------
Total Domestic Common Stocks 241,172,480
- ---------------------------------------------------------------
DOMESTIC PREFERRED STOCKS-5.72%
ADVERTISING/BROADCASTING-0.12%
Time Warner Inc.-Series M $102.50
Conv. PIK Pfd. 629 673,112
- ---------------------------------------------------------------
AEROSPACE/DEFENSE-0.22%
Loral Space & Communications-$3.00
Conv. Pfd.(a)
(Acquired 11/01/96; Cost
$1,117,500) 22,350 1,271,156
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.58%
Microsoft Corp.-$2.196 Conv. Pfd. 25,000 2,003,125
- ---------------------------------------------------------------
Vanstar Financing Trust-$3.375
Conv. Pfd.(a)
(Acquired 09/27/96; Cost
$1,240,000) 24,800 1,320,377
- ---------------------------------------------------------------
3,323,502
- ---------------------------------------------------------------
ELECTRIC POWER-0.13%
Citizens Utilities Co.-$2.50 Conv. Pfd. 15,000 716,250
- ---------------------------------------------------------------
</TABLE>
FS-8
<PAGE> 140
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (CONSUMER CREDIT)-0.99%
First USA, Inc.-$1.9925 Conv.
PRIDES 10,500 $ 619,500
- ---------------------------------------------------------------
Money Store, Inc. (The)-$1.72
Conv. Pfd. 55,000 1,505,625
- ---------------------------------------------------------------
Penncorp Financial Group,
Inc.-$3.50 Conv. Pfd.(a)
(Acquired 08/02/96-11/15/96;
Cost $2,072,500) 40,000 2,380,000
- ---------------------------------------------------------------
SunAmerica, Inc.-Series E $3.10
Conv. Dep. Pfd. 12,000 1,167,000
- ---------------------------------------------------------------
5,672,125
- ---------------------------------------------------------------
FUNERAL SERVICES-0.16%
SCI Financial LLC-Series A, $3.125
Conv. Pfd. 10,000 941,250
- ---------------------------------------------------------------
GAS UTILITY-0.22%
MCN Corp.-$2.013 Conv. PRIDES 46,000 1,270,750
- ---------------------------------------------------------------
HOTELS/MOTELS-0.29%
Host Marriott Financial
Trust-$3.375 Conv. Pfd.(a)
(Acquired 11/25/96; Cost
$1,500,000) 30,000 1,634,910
- ---------------------------------------------------------------
INSURANCE (BROKER)-0.21%
American Bankers Insurance
Group-$3.125 Conv. Pfd. 20,000 1,195,000
- ---------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.32%
Conseco Inc.-$4.278 Conv. Pfd. 16,000 1,820,000
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-0.59%
Allstate Inc.-$2.299 Conv. PRIDES 16,000 756,000
- ---------------------------------------------------------------
Frontier Financing Trust-$3.125
Conv. Pfd.(a)
(Acquired 10/09/96; Cost
$2,500,000) 50,000 2,588,600
- ---------------------------------------------------------------
3,344,600
- ---------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-0.23%
US Surgical Corp.-$2.20 Conv. Pfd. 35,000 1,338,750
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.40%
Nuevo Financing I-$2.875 Series A
Conv. Pfd. 42,500 2,279,063
- ---------------------------------------------------------------
OIL & GAS (REFINING/MARKETING)-0.18%
Tosco Financing Trust-$2.875 Conv.
Pfd.(a)
(Acquired 12/10/96-12/11/96;
Cost $1,003,625) 20,000 1,042,500
- ---------------------------------------------------------------
PUBLISHING-0.20%
Golden Books Financial
Trust-$4.375 Conv. Pfd.(a)
(Acquired 08/14/96; Cost
$1,000,000) 20,000 1,137,260
- ---------------------------------------------------------------
RETAIL (STORES)-0.31%
Ann Taylor Finance Trust-$4.25
Conv. Pfd.(a)
(Acquired 04/18/96-04/29/96;
Cost $999,000) 20,000 1,069,240
- ---------------------------------------------------------------
Kmart Financing, Inc.-$3.875 Conv.
Pfd. 14,000 682,500
- ---------------------------------------------------------------
1,751,740
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TELECOMMUNICATIONS-0.30%
MFS Communications Co.,
Inc.,-$2.68 Conv. Dep. Pfd. 19,000 $ 1,733,750
- ---------------------------------------------------------------
TELEPHONE-0.15%
Salomon Inc.-$3.48 Conv. Pfd. 14,600 879,650
- ---------------------------------------------------------------
TRANSPORTATION-0.12%
Continental Airlines Finance
Trust-$4.25 Conv. Pfd.(a)
(Acquired 11/21/95-11/22/95;
Cost $500,350) 10,000 666,250
- ---------------------------------------------------------------
Total Domestic Preferred
Stocks 32,691,618
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. DOLLAR DENOMINATED FOREIGN
BONDS & NOTES-4.38%
CANADA-2.38%
Bell Canada (Telecommunications),
Yankee Deb., 9.50%, 10/15/10 $ 1,750,000 2,111,095
- ---------------------------------------------------------------
Great Atlantic & Pacific Tea Co.,
Inc. (Retail-Food & Drug),
Yankee Notes, 7.78%, 11/01/00(a)
(Acquired 10/18/95; Cost
$500,000) 500,000 509,622
- ---------------------------------------------------------------
Husky Oil Ltd. (Oil &
Gas-Integrated), Yankee Sr.
Notes, 7.125%, 11/15/06 3,000,000 2,976,720
- ---------------------------------------------------------------
Nova Chemicals Ltd. (Oil &
Gas-Specialty), Deb., 7.00%,
08/15/26(a)
(Acquired 08/13/96; Cost
$2,000,000) 2,000,000 2,016,400
- ---------------------------------------------------------------
Province of Manitoba (Foreign
Governments), Yankee Bonds,
7.75%, 07/17/16 1,500,000 1,568,415
- ---------------------------------------------------------------
Royal Bank of Canada (Banking),
Yankee Sub. Notes,
6.75%, 10/24/11 3,000,000 2,935,500
- ---------------------------------------------------------------
Talisman Energy, Inc. (Oil &
Gas-Exploration & Production),
Yankee Deb.,
7.125%, 06/01/07 1,500,000 1,477,380
- ---------------------------------------------------------------
13,595,132
- ---------------------------------------------------------------
GERMANY-0.92%
Dresdner Bank A.G. (Banking), Sub.
Bonds,
6.00%, 11/03/08 4,000,000 3,717,480
- ---------------------------------------------------------------
Tarkett Pegulan AG (Textiles),
Yankee Sr. Sub. Notes, 9.00%,
03/01/02 1,500,000 1,548,750
- ---------------------------------------------------------------
5,266,230
- ---------------------------------------------------------------
MALAYSIA-0.18%
Sungei Way Holdings Berhad
(Building Materials), Conv.
Bonds,
1.25%, 12/11/01 1,000,000 1,020,000
- ---------------------------------------------------------------
NETHERLANDS-0.35%
Baan Co., N.V. (Computer
Software/Services), Conv. Sub.
Notes,
4.50%, 12/15/01(a)
(Acquired 12/12/96; Cost
$2,000,000) 2,000,000 2,008,920
- ---------------------------------------------------------------
</TABLE>
FS-9
<PAGE> 141
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SWITZERLAND-0.24%
Sandoz Capital BVI Ltd.
(Chemicals), Yankee Sr. Conv.
Deb.,
2.00%, 10/06/02(a)
(Acquired 03/07/96-06/05/96;
Cost $1,306,500) $ 1,250,000 $ 1,343,750
- ---------------------------------------------------------------
UNITED KINGDOM-0.31%
Danka Business Systems PLC (Office
Automation), Yankee Conv. Sub.
Deb., 6.75%, 04/01/02 300,000 406,320
- ---------------------------------------------------------------
Royal Bank of Scotland Group PLC
(Banking), Yankee Sub. Notes,
6.375%, 02/01/11 1,500,000 1,381,635
- ---------------------------------------------------------------
1,787,955
- ---------------------------------------------------------------
Total U.S. Dollar
Denominated Foreign Bonds
& Notes 25,021,987
- ---------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
FOREIGN BONDS & NOTES(d)-3.22%
AUSTRALIA-1.21%
Australian Government (Foreign
Governments), Bonds,
10.00%, 10/15/07 AUD 2,500,000 2,361,110
- ---------------------------------------------------------------
Treasury Corp. of Victoria
(Foreign Governments) Gtd. Deb.,
12.00%, 09/22/01 4,800,000 4,564,559
- ---------------------------------------------------------------
6,925,669
- ---------------------------------------------------------------
CANADA-2.01%
Bank of Montreal (Banking), Sub.
Deb.
7.92%, 07/31/12 CAD 1,850,000 1,471,975
- ---------------------------------------------------------------
Canadian Oil Debco Inc. (Oil &
Gas-Services), Deb.,
11.00%, 10/31/00 1,500,000 1,283,868
- ---------------------------------------------------------------
NAV Canada (Transportation),
Bonds, 7.40%, 06/01/27 3,500,000 2,535,091
- ---------------------------------------------------------------
Ontario (Province of) (Foreign
Governments), Sr. Unsubordinated
Notes,
8.00%, 03/11/03 2,300,000 1,849,675
- ---------------------------------------------------------------
Teleglobe Inc.
(Telecommunications), Deb.,
8.35%, 06/20/03 1,000,000 806,032
- ---------------------------------------------------------------
Trans Canada Pipeline (Oil &
Gas-Services), Notes, 10.625%,
10/20/09 1,500,000 1,405,134
- ---------------------------------------------------------------
Westcoast Energy, Inc. (Electric
Power), Deb., 6.45%, 12/18/06(a)
(Acquired 12/03/96; Cost
$2,217,508) 3,000,000 2,137,004
- ---------------------------------------------------------------
11,488,779
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Foreign Bonds
& Notes 18,414,448
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-5.10%
AUSTRALIA-0.16%
News Corp. Ltd.-$5.00 Conv.
Pfd.(a)
(Advertising/Broadcasting)
(Acquired 11/04/96; Cost
$1,000,000) 10,000 943,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
BERMUDA-0.19%
Terra Nova Holdings Ltd.-Class A
(Insurance-Multi-Line Property) 50,200 $ 1,079,300
- ---------------------------------------------------------------
BRAZIL-0.14%
Telecomunicacoes Brasileiras S.A.
Telebras-ADR
(Telecommunications) 10,500 803,250
- ---------------------------------------------------------------
FRANCE-0.49%
AXA-ADR (Insurance-Life &
Health)(c) 40,000 1,260,000
- ---------------------------------------------------------------
Scor S.A.-ADR
(Insurance-Multi-Line
Property)(c) 45,000 1,546,875
- ---------------------------------------------------------------
2,806,875
- ---------------------------------------------------------------
GERMANY-0.11%
Veba A.G. (Electric Power) 10,750 621,751
- ---------------------------------------------------------------
ISRAEL-0.95%
ECI Telecommunications Ltd.
Designs (Computer Networking) 24,000 510,000
- ---------------------------------------------------------------
Tadiran Telecommunications Ltd.
(Telecommunications) 48,000 1,074,000
- ---------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Medical-Drugs) 30,000 1,507,500
- ---------------------------------------------------------------
TTI Team Telecom International
Ltd. (Telecommunications)(c) 109,000 681,250
- ---------------------------------------------------------------
Zag Industries Ltd. (Consumer Non-
Durables)(c) 100,000 1,650,000
- ---------------------------------------------------------------
5,422,750
- ---------------------------------------------------------------
ITALY-0.20%
Fila Holding S.p.A.-ADR
(Retail-Stores) 20,000 1,162,500
- ---------------------------------------------------------------
NETHERLANDS-1.03%
Gucci Group N.V. (Textiles) 34,200 2,184,525
- ---------------------------------------------------------------
Koninklijke Ahold N.V.-ADR
(Retail-Food & Drug) 20,200 1,247,350
- ---------------------------------------------------------------
New Holland N.V.
(Machinery-Heavy)(c) 75,000 1,565,625
- ---------------------------------------------------------------
Unilever N.V.-New York shares
(Food/Processing) 5,000 876,250
- ---------------------------------------------------------------
5,873,750
- ---------------------------------------------------------------
NORWAY-0.14%
Petroleum Geo-Services ASA-ADR
(Oil & Gas-Services)(c) 20,000 780,000
- ---------------------------------------------------------------
PORTUGAL-0.11%
Telecel-Comunicacaoes Pessoais,
S.A. (Telecommunications)(c) 10,300 641,175
- ---------------------------------------------------------------
SPAIN-0.20%
Autopistas, Concesionaria
Espanola, S.A. (Engineering &
Construction) 82,000 1,130,599
- ---------------------------------------------------------------
SWEDEN-0.08%
Telefonaktiebolaget LM
Ericsson-ADR
(Telecommunications) 15,000 452,813
- ---------------------------------------------------------------
</TABLE>
FS-10
<PAGE> 142
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-1.30%
Bass PLC (Beverages-Alcoholic) 64,350 $ 905,111
- ---------------------------------------------------------------
British Sky Broadcasting Group
PLC-ADR
(Advertising/Broadcasting) 6,500 341,250
- ---------------------------------------------------------------
Dr. Solomon's Group PLC-ADR
(Computer Software/Services)(c) 31,900 546,288
- ---------------------------------------------------------------
GCR Holdings, Ltd.
(Insurance-Multi-Line Property) 35,000 778,750
- ---------------------------------------------------------------
National Power PLC-ADR (Electric
Power) 8,000 271,000
- ---------------------------------------------------------------
Nynex CableComms Group PLC-ADR
(Telecommunications)(c) 17,300 313,563
- ---------------------------------------------------------------
PowerGen PLC-ADR (Electric Power) 11,000 434,500
- ---------------------------------------------------------------
Railtrack Group PLC (Railroads) 300,000 1,991,605
- ---------------------------------------------------------------
SELECT Software Tools-ADR
(Computer Software/Services)(c) 38,000 693,500
- ---------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Medical-Drugs) 17,000 1,156,000
- ---------------------------------------------------------------
7,431,567
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 29,150,080
- ---------------------------------------------------------------
PRINCIPAL
AMOUNT
U.S. TREASURY SECURITIES-12.47%
U.S. TREASURY NOTES & BONDS-12.47%
7.125%, 02/29/00 $ 2,500,000 2,575,250
- ---------------------------------------------------------------
U.S. TREASURY NOTES & BONDS-(CONTINUED)
6.25%, 08/31/00 $ 3,000,000 $ 3,013,470
- ---------------------------------------------------------------
6.125%, 09/30/00 5,000,000 5,001,550
- ---------------------------------------------------------------
6.375%, 03/31/01 5,000,000 5,037,950
- ---------------------------------------------------------------
6.50%, 05/31/01 17,000,000 17,201,960
- ---------------------------------------------------------------
6.625%, 06/30/01 10,000,000 10,167,100
- ---------------------------------------------------------------
7.25%, 08/15/04 2,500,000 2,629,225
- ---------------------------------------------------------------
7.50%, 02/15/05 3,000,000 3,207,000
- ---------------------------------------------------------------
6.50%, 10/15/06 5,000,000 5,029,650
- ---------------------------------------------------------------
6.75%, 08/15/26 8,000,000 8,064,240
- ---------------------------------------------------------------
6.50%, 11/15/26 9,500,000 9,326,530
- ---------------------------------------------------------------
Total U.S. Treasury Securities 71,253,925
- ---------------------------------------------------------------
U.S. GOVERNMENT AGENCY-0.71%
Tennessee Valley Authority, Bonds,
5.98%, 04/01/36 4,000,000 4,054,200
- ---------------------------------------------------------------
REPURCHASE AGREEMENT-2.59%(e)
UBS Securities Inc., 7.05%,
01/02/97(f) 14,800,000 14,800,000
- ---------------------------------------------------------------
TOTAL INVESTMENTS-97.93% 559,459,962
- ---------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.07% 11,811,032
- ---------------------------------------------------------------
NET ASSETS-100.00% $ 571,270,994
===============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Restricted security. May be sold to qualified institutional buyers under
Rule 144A of the Securities Act of 1933, as amended. The valuation of these
securities has been determined in accordance with procedures established by
the Board of Trustees. The aggregate market value of these securities at
December 31, 1996 was $45,153,907, which represented 7.90% of the Fund's net
assets.
(b) Zero coupon bonds issued at a discount. The interest rate shown represents
the rate of original issue discount.
(c) Non-income producing security.
(d) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(e) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$550,215,417. Collateralized by $732,485,305 U.S. Government agency
obligations, 0% to 9.50% due 01/01/98 to 12/15/26.
Abbreviations:
ADR American Depository Receipt
AUD Australian Dollar
CAD Canadian Dollar
Conv. Convertible
Ctf. Certificates
Deb. Debentures
Dep. Depository
Gtd. Guaranteed
Pfd. Preferred
PIK Payment in kind
PRIDES Preferred Redeemable Increased Dividend Equity Securities
Sr. Senior
Sub. Subordinated
See Notes to Financial Statements.
FS-11
<PAGE> 143
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$498,250,491) $559,459,962
- ---------------------------------------------------------
Cash 2,999,866
- ---------------------------------------------------------
Foreign currencies, at value (cost
$1,315,940) 1,346,533
- ---------------------------------------------------------
Receivables for:
Investments sold 3,607,046
- ---------------------------------------------------------
Fund shares sold 3,452,526
- ---------------------------------------------------------
Interest and dividends 4,093,040
- ---------------------------------------------------------
Investment for deferred compensation plan 12,568
- ---------------------------------------------------------
Other assets 30,358
- ---------------------------------------------------------
Total assets 575,001,899
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,424,827
- ---------------------------------------------------------
Fund shares reacquired 268,531
- ---------------------------------------------------------
Deferred compensation plan 12,568
- ---------------------------------------------------------
Accrued advisory fees 267,735
- ---------------------------------------------------------
Accrued administrative service fees 7,360
- ---------------------------------------------------------
Accrued distribution fees 407,435
- ---------------------------------------------------------
Accrued transfer agent fees 135,599
- ---------------------------------------------------------
Accrued trustees' fees 2,326
- ---------------------------------------------------------
Accrued operating expenses 204,524
- ---------------------------------------------------------
Total liabilities 3,730,905
- ---------------------------------------------------------
Net assets applicable to shares outstanding $571,270,994
- ---------------------------------------------------------
NET ASSETS:
Class A $334,188,942
- ---------------------------------------------------------
Class B $237,082,052
- ---------------------------------------------------------
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 15,302,713
- ---------------------------------------------------------
Class B 10,858,135
- ---------------------------------------------------------
Class A:
Net asset value and redemption price per
share $ 21.84
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $21.84 divided
by 95.25%) $ 22.93
- ---------------------------------------------------------
Class B:
Net asset value and offering price per
share $ 21.83
- ---------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $11,408,100
- --------------------------------------------------------
Dividends (net of $80,119 foreign
withholding tax) 3,218,786
- --------------------------------------------------------
Total investment income 14,626,886
- --------------------------------------------------------
EXPENSES:
Advisory fees 2,151,655
- --------------------------------------------------------
Custodian fees 87,018
- --------------------------------------------------------
Distribution fees-Class A 513,190
- --------------------------------------------------------
Distribution fees-Class B 1,496,606
- --------------------------------------------------------
Administrative service fees 72,493
- --------------------------------------------------------
Trustees' fees 7,695
- --------------------------------------------------------
Transfer agent fees-Class A 346,494
- --------------------------------------------------------
Transfer agent fees-Class B 345,863
- --------------------------------------------------------
Other 290,311
- --------------------------------------------------------
Total expenses 5,311,325
- --------------------------------------------------------
Less: Expenses paid indirectly (6,056)
- --------------------------------------------------------
Net expenses 5,305,269
- --------------------------------------------------------
Net investment income 9,321,617
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCY
TRANSACTIONS AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 10,964,707
- --------------------------------------------------------
Foreign currency transactions (48,145)
- --------------------------------------------------------
Futures contracts 1,800,020
- --------------------------------------------------------
12,716,582
- --------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 41,945,636
- --------------------------------------------------------
Foreign currencies 35,607
- --------------------------------------------------------
Futures contracts (15,850)
- --------------------------------------------------------
41,965,393
- --------------------------------------------------------
Net gain from investment securities,
foreign currencies and futures contracts 54,681,975
- --------------------------------------------------------
Net increase in net assets resulting from
operations $64,003,592
========================================================
</TABLE>
See Notes to Financial Statements.
FS-12
<PAGE> 144
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 9,321,617 $ 2,293,374
- -----------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currency transactions and futures contracts 12,716,582 3,819,964
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and futures contracts 41,965,393 20,162,424
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 64,003,592 26,275,762
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (6,033,635) (1,509,535)
- -----------------------------------------------------------------------------------------
Class B (3,100,998) (772,889)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (6,912,890) --
- -----------------------------------------------------------------------------------------
Class B (4,888,186) --
- -----------------------------------------------------------------------------------------
Net equalization credits 7,707,610 1,435,649
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 212,483,093 39,846,397
- -----------------------------------------------------------------------------------------
Class B 143,138,052 41,781,556
- -----------------------------------------------------------------------------------------
Net increase in net assets 406,396,638 107,056,940
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 164,874,356 57,817,416
- -----------------------------------------------------------------------------------------
End of period $571,270,994 $164,874,356
- -----------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Shares of beneficial interest $496,452,940 $140,831,795
- -----------------------------------------------------------------------------------------
Undistributed net investment income 10,459,581 2,564,987
- -----------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currency transactions and futures
contracts 3,118,901 2,203,395
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and futures contracts 61,239,572 19,274,179
- -----------------------------------------------------------------------------------------
$571,270,994 $164,874,356
=========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Balanced Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund. The Fund's objective is to achieve as high a total
return to investors as possible, consistent with preservation of capital, by
investing in a broadly diversified portfolio of high-yielding securities,
including common stocks, preferred stocks, convertible securities and bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales
FS-13
<PAGE> 145
price on the exchange where the security is principally traded, or lacking
any sales on a particular day, the security is valued at the mean between the
closing bid and asked prices on that day. Each security traded in the
over-the-counter market (but not including securities reported on the NASDAQ
National Market System) is valued at the mean between the last bid and asked
prices based upon quotes furnished by market makers for such securities. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the mean
between the closing bid and asked prices. If a mean is not available, as is
the case in some foreign markets, the closing bid will be used absent a last
sales price. Debt obligations (including convertible bonds) are valued on the
basis of prices provided by an independent pricing service. Prices provided
by the pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as institution-size trading
in similar groups of securities, developments related to special securities,
yield, quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Securities for which market quotations
either are not readily available or are questionable are valued at fair value
as determined in good faith by or under the supervision of the Trust's
officers in a manner specifically authorized by the Board of Trustees.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in foreign
securities is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of such
times. Foreign currency exchange rates are also generally determined prior to
the close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which they are determined and the close of the New York Stock Exchange
which will not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Trustees.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Bond Premiums -- It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
E. Equalization -- The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and the costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
income when the transaction is recorded so the undistributed net investment
income per share is unaffected by sales or redemptions of Fund shares.
F. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
G. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
H. Foreign Currency Contracts -- A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
I. Stock Index Futures Contracts -- The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the
Fund's basis in the contract. Risks include the possibility of an illiquid
market and the change in the value of the contracts may not correlate with
changes in the value of the Fund's portfolio being hedged.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays AIM an advisory fee at an annual rate of 0.75% of the
first $150 million of the Fund's average daily net assets, plus 0.50% of the
Fund's average daily net assets in excess of $150 million.
FS-14
<PAGE> 146
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1996, AIM
was reimbursed $72,493 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended December 31, 1996, AFS
was paid $385,524 for such services.
The Fund received reductions in transfer agency fees payable to AFS of $5,514
from dividends received on balances in cash management bank accounts. In
addition, pricing service expenses in the amount of $542 were paid through
directed brokerage commissions paid by the Fund. The above arrangements resulted
in a reduction in the Fund's total expenses of $6,056 during the year ended
December 31, 1996.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the respective classes. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more assignees, its rights to all or a designated
portion of (a) compensation received by AIM Distributors from the Fund pursuant
to the Class B Plan (but not AIM Distributors' duties and obligations pursuant
to the Class B Plan) and (b) contingent deferred sales charges payable to AIM
Distributors related to the Class B shares. During the year ended December 31,
1996, the Class A shares and the Class B shares paid AIM Distributors $513,190
and $1,496,606, respectively, as compensation under the Plans.
AIM Distributors received commissions of $611,603 from sales of the Class A
shares of the Fund during the year ended December 31, 1996. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1996,
AIM Distributors received $50,028 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1996, the Fund paid legal fees of $3,320
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $1,100,000. During the year ended December 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.08% on the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1996 was
$573,899,491 and $232,187,528, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $67,286,915
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (6,085,031)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $61,201,884
=========================================================
Cost of investments for tax purposes is $498,258,078.
</TABLE>
FS-15
<PAGE> 147
NOTE 6-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------- ---------------------------
SHARES VALUE SHARES VALUE
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 11,936,333 $241,163,392 2,972,256 $ 52,107,491
- ---------------------------------------------------------------------------------------------------------------------------
Class B 7,608,028 153,665,571 2,739,743 47,601,025
- ---------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 571,269 11,884,617 76,297 1,334,447
- ---------------------------------------------------------------------------------------------------------------------------
Class B 347,628 7,257,995 38,541 678,897
- ---------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (2,004,527) (40,564,916) (819,551) (13,595,541)
- ---------------------------------------------------------------------------------------------------------------------------
Class B (876,383) (17,785,514) (384,332) (6,498,366)
- ---------------------------------------------------------------------------------------------------------------------------
17,582,348 $355,621,145 4,622,954 $ 81,627,953
===========================================================================================================================
</TABLE>
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the three-year period ended December 31, 1996, the four
months ended December 31, 1993 and each of the years in the six-year period
ended August 31, 1993 and for a Class B share outstanding during each of the
years in the three-year period ended December 31, 1996 and the period October
18, 1993 (date sales commenced) through December 31, 1993. Prior to October 15,
1993, the Fund was known as AIM Convertible Securities, Inc. and had a different
investment objective.
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
---------------------------------------------- -----------------------------------------
1996 1995 1994 1993 1993 1992 1991 1990
CLASS A: -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 19.22 $ 14.62 $ 16.10 $ 15.97 $ 12.77 $ 12.04 $ 9.73 $ 10.67
- ----------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.66 0.49 0.44 0.10 0.32 0.29 0.28 0.32
- ----------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) 2.99 4.57 (1.31) 0.18 3.18 0.74 2.33 (0.91)
- ----------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations 3.65 5.06 (0.87) 0.28 3.50 1.03 2.61 (0.59)
- ----------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.55) (0.46) (0.39) (0.15) (0.30) (0.30) (0.30) (0.35)
- ----------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Distributions from net realized
capital gains (0.48) -- (0.22) -- -- -- -- --
- ----------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions (1.03) (0.46) (0.61) (0.15) (0.30) (0.30) (0.30) (0.35)
- ----------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 21.84 $ 19.22 $ 14.62 $ 16.10 $ 15.97 $ 12.77 $ 12.04 $ 9.73
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Total return(a) 19.25% 34.97% (5.44)% 1.76% 27.75% 8.66% 27.41% (5.67)%
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $334,189 $ 92,241 $ 37,572 $ 23,520 $ 19,497 $ 11,796 $ 11,750 $ 10,965
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets 1.15%(b)(c) 1.43%(d) 1.25%(e) 2.17%(f) 2.07% 2.12% 2.39% 2.15%
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 2.97%(b) 2.81%(d) 3.07%(e) 1.81%(f) 2.23% 2.32% 2.74% 3.18%
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 71.90% 76.63% 76.18% 233.10% 154.47% 165.53% 208.11% 307.08%
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Average broker commission rate(g) $ 0.0558 N/A N/A N/A N/A N/A N/A N/A
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Borrowings for the period:
Amount of debt outstanding at end
of period -- -- -- -- -- -- -- --
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Average amount of debt outstanding
during the period(h) -- -- -- -- -- -- -- $138,181
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Average number of shares
outstanding during the period
(000s omitted)(h) 9,778 3,173 2,061 1,305 1,046 939 1,051 1,238
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Average amount of debt per share
during the period -- -- -- -- -- -- -- $ 0.110
=================================== ======== ======== ======== ======== ======== ======== ======== ========
<CAPTION>
AUGUST 31,
-------------------
1989 1988
CLASS A: -------- --------
<S> <C> <C>
Net asset value, beginning of
period $ 9.08 $ 11.89
- ----------------------------------- -------- --------
Income from investment operations:
Net investment income 0.39 0.42
- ----------------------------------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) 1.63 (2.65)
- ----------------------------------- -------- --------
Total from investment operations 2.02 (2.23)
- ----------------------------------- -------- --------
Less distributions:
Dividends from net investment
income (0.43) (0.50)
- ----------------------------------- -------- --------
Distributions from net realized
capital gains -- (0.08)
- ----------------------------------- -------- --------
Total distributions (0.43) (0.58)
- ----------------------------------- -------- --------
Net asset value, end of period $ 10.67 $ 9.08
=================================== ======== ========
Total return(a) 22.96% (18.57)%
=================================== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $ 14,405 $ 16,789
=================================== ======== ========
Ratio of expenses to average net
assets 1.94% 2.31%
=================================== ======== ========
Ratio of net investment income to
average net assets 3.99% 4.50%
=================================== ======== ========
Portfolio turnover rate 149.42% 117.73%
=================================== ======== ========
Average broker commission rate(g) N/A N/A
=================================== ======== ========
Borrowings for the period:
Amount of debt outstanding at end
of period $260,000 --
=================================== ======== ========
Average amount of debt outstanding
during the period(h) $ 83,195 --
=================================== ======== ========
Average number of shares
outstanding during the period
(000s omitted)(h) 1,589 2,131
=================================== ======== ========
Average amount of debt per share
during the period $ 0.052 --
=================================== ======== ========
</TABLE>
(a) Total returns do not deduct sales charges and are not annualized for periods
less than one year.
(b) Ratios are based on average net assets of $205,275,849.
(c) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have remained the same.
(d) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees are 1.46% and 2.78%,
respectively.
(e) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees are 1.68% and 2.64%,
respectively.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
(h) Averages computed on a daily basis.
FS-16
<PAGE> 148
NOTE 7-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993
CLASS B: -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.22 $ 14.62 $ 16.11 $ 16.69
- ------------------------------------------------------------ -------- -------- -------- --------
Income from investment operations:
Net investment income 0.48 0.31 0.31 0.04
- ------------------------------------------------------------ -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 2.99 4.61 (1.31) (0.58)
- ------------------------------------------------------------ -------- -------- -------- --------
Total from investment operations 3.47 4.92 (1.00) (0.54)
- ------------------------------------------------------------ -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.38) (0.32) (0.27) (0.04)
- ------------------------------------------------------------ -------- -------- -------- --------
Distributions from net realized capital gains (0.48) -- (0.22) --
- ------------------------------------------------------------ -------- -------- -------- --------
Total distributions (0.86) (0.32) (0.49) (0.04)
- ------------------------------------------------------------ -------- -------- -------- --------
Net asset value, end of period $ 21.83 $ 19.22 $ 14.62 $ 16.11
============================================================ ======== ======== ======== ========
Total return(a) 18.28% 33.93% (6.23)% (3.23)%
============================================================ ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $237,082 $ 72,634 $ 20,245 $ 2,754
============================================================ ======== ======== ======== ========
Ratio of expenses to average net assets 1.97%(b)(c) 2.21%(d) 1.98%(e) 2.83%(f)
============================================================ ======== ======== ======== ========
Ratio of net investment income to average net assets 2.15%(b) 2.03%(d) 2.34%(e) 1.15%(f)
============================================================ ======== ======== ======== ========
Portfolio turnover rate 71.90% 76.63% 76.18% 233.10%
============================================================ ======== ======== ======== ========
Average broker commission rate(g) $ 0.0558 N/A N/A N/A
============================================================ ======== ======== ======== ========
</TABLE>
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods less than one year.
(b) Ratios are based on average net assets of $149,660,567.
(c) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have remained the same.
(d) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees are 2.23% and 2.01%,
respectively.
(e) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees are 2.45% and 1.87%,
respectively.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
NOTE 8 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO plc. AIM Management is the parent company of the Fund's advisor. The
merger is expected to take place during the first quarter of 1997.
FS-17
<PAGE> 149
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Global Utilities Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Global Utilities Fund (a portfolio of
AIM Funds Group), including the schedule of investments, as
of December 31, 1996, and the related statement of
operations for the year then ended, the statement of
changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of
the years in the four-year period then ended. These
financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Global
Utilities Fund as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in
the four-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
---------------------
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1997
FS-18
<PAGE> 150
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-51.90%
ADVERTISING/BROADCASTING-0.33%
Univision Communications, Inc.(a) 21,800 $ 806,600
- --------------------------------------------------------------
COMPUTER MAINFRAMES-0.21%
ViaSat, Inc.(a) 57,000 513,000
- --------------------------------------------------------------
COMPUTER NETWORKING-0.88%
Ascend Communications, Inc.(a) 34,600 2,149,525
- --------------------------------------------------------------
COMPUTER PERIPHERALS-0.25%
U.S. Robotics Corp.(a) 8,500 612,000
- --------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES-0.40%
Puma Technology, Inc.(a) 34,700 598,575
- --------------------------------------------------------------
White Pine Software, Inc.(a) 50,000 362,500
- --------------------------------------------------------------
961,075
- --------------------------------------------------------------
ELECTRIC POWER-18.36%
AES Corp.(a) 17,500 813,750
- --------------------------------------------------------------
Allegheny Power System, Inc. 141,500 4,298,063
- --------------------------------------------------------------
Carolina Power & Light Co. 70,000 2,555,000
- --------------------------------------------------------------
Destec Energy, Inc.(a) 50,000 781,250
- --------------------------------------------------------------
DQE, Inc. 110,000 3,190,000
- --------------------------------------------------------------
Edison International 67,000 1,331,625
- --------------------------------------------------------------
FPL Group, Inc. 94,700 4,356,200
- --------------------------------------------------------------
GPU, Inc. 107,500 3,614,687
- --------------------------------------------------------------
Houston Industries, Inc. 94,400 2,135,800
- --------------------------------------------------------------
Illinova Corp. 95,500 2,626,250
- --------------------------------------------------------------
NIPSCO Industries, Inc. 100,000 3,962,500
- --------------------------------------------------------------
Pinnacle West Capital Corp. 200,000 6,350,000
- --------------------------------------------------------------
Sierra Pacific Resources 45,500 1,308,125
- --------------------------------------------------------------
Southern Co. 185,000 4,185,625
- --------------------------------------------------------------
Texas Utilities Co. 78,300 3,190,725
- --------------------------------------------------------------
44,699,600
- --------------------------------------------------------------
ENERGY (ALTERNATE SOURCES)-1.62%
Calenergy, Inc.(a) 48,888 1,643,859
- --------------------------------------------------------------
Teco Energy, Inc. 95,000 2,291,875
- --------------------------------------------------------------
3,935,734
- --------------------------------------------------------------
GAS DISTRIBUTION-1.55%
KN Energy, Inc. 31,600 1,240,300
- --------------------------------------------------------------
Public Service Co. of Colorado 65,200 2,534,650
- --------------------------------------------------------------
3,774,950
- --------------------------------------------------------------
NATURAL GAS PIPELINE-10.82%
Columbia Gas System, Inc. 30,700 1,953,287
- --------------------------------------------------------------
El Paso Natural Gas Co. 139,500 7,044,750
- --------------------------------------------------------------
Enron Corp. 94,500 4,075,312
- --------------------------------------------------------------
PanEnergy Corp. 76,200 3,429,000
- --------------------------------------------------------------
Sonat, Inc. 82,300 4,238,450
- --------------------------------------------------------------
Williams Companies, Inc. (The) 149,700 5,613,750
- --------------------------------------------------------------
26,354,549
- --------------------------------------------------------------
OIL & GAS (SERVICES)-0.22%
TPC Corp.(a) 60,000 540,000
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE-0.57%
Cali Realty Corp. 45,000 $ 1,389,375
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-2.30%
Crescent Real Estate Equities, Inc. 15,500 817,625
- --------------------------------------------------------------
Meditrust Corp. 24,400 976,000
- --------------------------------------------------------------
OMEGA Healthcare Investors, Inc. 32,000 1,064,000
- --------------------------------------------------------------
Patriot American Hospitality, Inc. 30,400 1,311,000
- --------------------------------------------------------------
Public Storage, Inc. 27,000 837,000
- --------------------------------------------------------------
Starwood Lodging Trust 11,000 606,375
- --------------------------------------------------------------
5,612,000
- --------------------------------------------------------------
TELECOMMUNICATIONS-4.70%
ADC Telecommunications, Inc.(a) 56,600 1,761,675
- --------------------------------------------------------------
AT&T Corp. 27,000 1,174,500
- --------------------------------------------------------------
CellNet Data Systems Inc.(a) 42,000 614,250
- --------------------------------------------------------------
Frontier Corp. 80,000 1,810,000
- --------------------------------------------------------------
Lucent Technologies, Inc. 29,000 1,341,250
- --------------------------------------------------------------
McLeod, Inc.-Class A(a) 40,000 1,020,000
- --------------------------------------------------------------
MFS Communications Company, Inc.(a) 1,343 73,193
- --------------------------------------------------------------
Superior Telecom Inc.(a) 45,000 916,875
- --------------------------------------------------------------
Teleport Communications Group
Inc.-Class A(a) 25,000 762,500
- --------------------------------------------------------------
360 Communications Co.(a) 26,000 601,250
- --------------------------------------------------------------
WorldCom, Inc.(a) 52,534 1,369,167
- --------------------------------------------------------------
11,444,660
- --------------------------------------------------------------
TELEPHONE-9.69%
Ameritech Corp. 75,200 4,559,000
- --------------------------------------------------------------
BellSouth Corp. 102,600 4,142,475
- --------------------------------------------------------------
Century Telephone Enterprises 66,800 2,062,450
- --------------------------------------------------------------
Cincinnati Bell, Inc. 117,000 7,210,125
- --------------------------------------------------------------
GTE Corp. 40,000 1,820,000
- --------------------------------------------------------------
SBC Communications, Inc. 73,500 3,803,625
- --------------------------------------------------------------
23,597,675
- --------------------------------------------------------------
Total Domestic Common Stocks 126,390,743
- --------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-2.82%
ADVERTISING/BROADCASTING-0.34%
Time Warner Inc.-Series M,
10.25% Conv. PIK Pfd 806 862,913
- --------------------------------------------------------------
ELECTRIC SERVICES-0.48%
Citizens Utilities Co.-$2.50 Conv.
Pfd. 24,400 1,165,100
- --------------------------------------------------------------
GAS UTILITY-0.66%
MCN Corp.-$2.01 Conv. Pfd. PRIDES 57,000 1,574,625
- --------------------------------------------------------------
OIL & GAS (SERVICES)-0.29%
Enron Corp.-$1.36 Conv. Pfd. 30,000 720,000
- --------------------------------------------------------------
TELECOMMUNICATIONS-0.88%
MFS Communications Company,
Inc.-$2.68 Conv. Pfd. 23,500 2,144,375
- --------------------------------------------------------------
TELEPHONE-0.17%
Salomon Inc.-$3.48 Conv. Pfd. 6,700 403,675
- --------------------------------------------------------------
Total Domestic Convertible
Preferred Stocks 6,870,688
- --------------------------------------------------------------
</TABLE>
FS-19
<PAGE> 151
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-26.98%
ARGENTINA-0.79%
Central Costanera S.A.-Class B
(Electric Power) 475,200 $ 1,454,403
- --------------------------------------------------------------
Telefonica de Argentina S.A.-ADR
(Telephone) 18,300 473,513
- --------------------------------------------------------------
1,927,916
- --------------------------------------------------------------
AUSTRALIA-0.19%
News Corp. Ltd.-$5.00 Conv. Pfd.(b)
(Advertising/Broadcasting)
(Acquired 11/04/96; Cost $500,000) 5,000 471,875
- --------------------------------------------------------------
AUSTRIA-0.39%
Oesterreichische
Elektrizitaetswirtschafts A.G.-
Class A (Electric Power) 12,500 935,610
- --------------------------------------------------------------
BRAZIL-1.03%
Eletricidade de Sao Paulo S.A.(a)
(Electric Power) 3,990 589,419
- --------------------------------------------------------------
Telecomunicacoes Brasileiras S.A.
Telebras-ADR (Telecommunications) 25,000 1,912,500
- --------------------------------------------------------------
2,501,919
- --------------------------------------------------------------
CANADA-1.43%
Manitoba Telephone System(a)
(Telecommunications) 95,000 901,921
- --------------------------------------------------------------
TELUS Corp. (Telecommunications) 95,000 1,380,632
- --------------------------------------------------------------
Westcoast Energy, Inc. (Natural Gas
Pipeline) 71,900 1,204,325
- --------------------------------------------------------------
3,486,878
- --------------------------------------------------------------
CHILE-1.54%
Cia. de Telecomunicaciones de Chile
S.A.-ADR (Telecommunications) 19,000 1,921,375
- --------------------------------------------------------------
Empresa Nacional de Electricidad
S.A.-ADR (Electric Power) 29,800 461,900
- --------------------------------------------------------------
Enersis S.A.-ADR (Electric Power) 49,600 1,376,400
- --------------------------------------------------------------
3,759,675
- --------------------------------------------------------------
GERMANY-1.66%
Deutsche Telekom-ADR(a) (Telephone) 66,500 1,354,938
- --------------------------------------------------------------
VEBA A.G. (Electric Power) 46,500 2,689,433
- --------------------------------------------------------------
4,044,371
- --------------------------------------------------------------
HONG KONG-0.24%
Asia Satellite Telecommunications
Holdings Ltd.- ADR(a)
(Telecommunications) 24,800 579,700
- --------------------------------------------------------------
INDONESIA-0.31%
PT Indosat-ADR (Telecommunications) 27,700 758,288
- --------------------------------------------------------------
ISRAEL-0.78%
ECI Telecommunications Ltd. Designs
(Computer Networking) 33,200 705,500
- --------------------------------------------------------------
Tadiran Telecommunications Ltd.
(Telecommunications) 40,000 895,000
- --------------------------------------------------------------
TTI Team Telecom International
Ltd.(a) (Telecommunications) 48,500 303,125
- --------------------------------------------------------------
1,903,625
- --------------------------------------------------------------
ITALY-1.37%
Telecom Italia Mobile S.p.A.
(Telecommunications) 578,300 1,465,764
- --------------------------------------------------------------
Telecom Italia S.p.A.
(Telecommunications) 717,000 1,862,215
- --------------------------------------------------------------
3,327,979
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN-0.27%
Nippon Telegraph & Telephone
(Telecommunications) 85 $ 644,418
- --------------------------------------------------------------
NETHERLANDS-0.84%
Royal PTT Nederland N.V.-ADR
(Telephone) 54,170 2,051,689
- --------------------------------------------------------------
NEW ZEALAND-1.42%
Telecom Corp. of New Zealand
Ltd.-ADR (Telecommunications) 42,800 3,466,800
- --------------------------------------------------------------
PERU-0.49%
Luz del Sur S.A.(a) (Electric Power) 32,000 578,000
- --------------------------------------------------------------
Telefonica del Peru S.A.-ADR(b)
(Telecommunications) 33,000 622,875
- --------------------------------------------------------------
1,200,875
- --------------------------------------------------------------
PORTUGAL-0.88%
Portugal Telecom S.A.-ADR
(Telecommunications) 65,700 1,856,025
- --------------------------------------------------------------
Telecel-Comunicacaoes Pessoais,
S.A.(a) (Telecommunications) 4,600 286,350
- --------------------------------------------------------------
2,142,375
- --------------------------------------------------------------
SOUTH KOREA-0.36%
Korea Electric Power Corp.-ADR
(Electric Power) 42,600 873,300
- --------------------------------------------------------------
SPAIN-3.13%
Autopistas Concesionaria Espanola
S.A. (Engineering & Construction) 77,000 1,061,660
- --------------------------------------------------------------
Empresa Nacional de Electricidad
S.A.-ADR (Electric Power) 20,000 1,400,000
- --------------------------------------------------------------
Iberdrola S.A. (Electric Power) 233,000 3,302,292
- --------------------------------------------------------------
Telefonica de Espana-ADR
(Telecommunications) 26,800 1,855,900
- --------------------------------------------------------------
7,619,852
- --------------------------------------------------------------
SWEDEN-0.49%
Telefonaktiebolaget LM Ericsson-ADR
(Telecommunications) 39,500 1,192,406
- --------------------------------------------------------------
UNITED KINGDOM-7.97%
British Sky Broadcasting Group
PLC-ADR (Advertising/Broadcasting) 10,000 525,000
- --------------------------------------------------------------
Hyder PLC (Water Supply) 53,955 687,263
- --------------------------------------------------------------
London Electricity PLC (Electric
Power) 137,057 1,597,863
- --------------------------------------------------------------
National Grid Group PLC (Electric
Power) 102,537 343,430
- --------------------------------------------------------------
National Power PLC (Electric Power) 175,000 1,466,078
- --------------------------------------------------------------
National Power PLC-ADR (Electric
Power) 40,000 1,355,000
- --------------------------------------------------------------
Nynex CableComms Group-ADR(a)
(Telecommunications) 37,500 679,688
- --------------------------------------------------------------
PowerGen PLC (Electrical Power) 209,500 2,060,185
- --------------------------------------------------------------
PowerGen PLC-ADR (Electric Power) 40,900 1,615,550
- --------------------------------------------------------------
Scottish Power PLC (Electrical
Power) 201,550 1,218,899
- --------------------------------------------------------------
Southern Electric PLC(a) (Electric
Power) 67,200 916,416
- --------------------------------------------------------------
United Utilities PLC (Water Supply) 197,100 2,096,952
- --------------------------------------------------------------
Wessex Water PLC (Water Supply) 169,750 1,081,840
- --------------------------------------------------------------
Yorkshire Electricity Group PLC
(Electric Power) 144,941 1,998,929
- --------------------------------------------------------------
Yorkshire Water PLC (Water Supply) 145,800 1,760,990
- --------------------------------------------------------------
19,404,083
- --------------------------------------------------------------
</TABLE>
FS-20
<PAGE> 152
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
VENEZUELA-1.40%
Cia. Anonima Nacional Telefonos de
Venezuela(a) (Telephone) 121,400 $ 3,414,375
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 65,708,009
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC CONVERTIBLE BONDS-1.00%
CABLE TELEVISION-0.57%
International Cabletel Inc.,
Conv. Sub. Notes, 7.00%, 06/15/08 $1,500,000 1,376,250
- --------------------------------------------------------------
SEMICONDUCTORS-0.43%
Analog Devices,
Conv. Sub. Notes, 3.50%, 12/01/00 750,000 1,047,660
- --------------------------------------------------------------
Total Domestic Convertible Bonds 2,423,910
- --------------------------------------------------------------
DOMESTIC NON-CONVERTIBLE BONDS-8.51%
ADVERTISING/BROADCASTING-1.28%
Comcast Corp.,
Sr. Sub. Deb., 9.50%, 01/15/08 900,000 936,000
- --------------------------------------------------------------
Time Warner, Inc.,
Deb., 6.85%, 01/15/26 1,000,000 983,190
- --------------------------------------------------------------
Time Warner, Inc.,
Notes, 8.18%, 08/15/07 1,150,000 1,198,990
- --------------------------------------------------------------
3,118,180
- --------------------------------------------------------------
ELECTRIC POWER-2.10%
El Paso Electric Co.,
First Mortgage Bonds, 8.90%,
02/01/06 1,425,000 1,488,455
- --------------------------------------------------------------
Indiana Michigan Power,
Deb., 9.82%, 12/07/22 3,021,728 3,645,775
- --------------------------------------------------------------
5,134,230
- --------------------------------------------------------------
ENERGY (ALTERNATE SOURCES)-1.02%
AES Corp.,
Sr. Sub. Notes, 10.25%, 07/15/06 925,000 994,375
- --------------------------------------------------------------
California Energy Co.,
Disc. Notes, 10.25%, 01/15/04(c) 1,400,000 1,484,000
- --------------------------------------------------------------
2,478,375
- --------------------------------------------------------------
GAS DISTRIBUTION-0.42%
Ferrellgas Partners,
Sr. Notes, 9.375%, 06/15/06 1,000,000 1,021,250
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
NATURAL GAS PIPELINE-2.48%
Enron Corp.,
Sr. Sub. Deb., 6.75%, 07/01/05 $3,750,000 $ 3,712,950
- --------------------------------------------------------------
PanEnergy Corp.,
Notes, 7.875%, 08/15/04 2,205,000 2,329,384
- --------------------------------------------------------------
6,042,334
- --------------------------------------------------------------
TELECOMMUNICATIONS-1.21%
AT&T Corp.,
Sr. Notes, 7.75%, 03/01/07 1,850,000 1,961,315
- --------------------------------------------------------------
TCI Communications Inc.,
Sr. Notes, 8.00%, 08/01/05 1,000,000 980,440
- --------------------------------------------------------------
2,941,755
- --------------------------------------------------------------
Total Domestic Non-Convertible
Bonds 20,736,124
- --------------------------------------------------------------
FOREIGN NON-CONVERTIBLE BONDS-4.63%
CANADA-4.63%(d)
Bell Canada (Telecommunications),
Deb., 10.875%, 10/11/04 1,700,000 1,550,398
- --------------------------------------------------------------
Bell Canada (Telecommunications),
Deb., Series EW, 8.80%, 08/17/05 950,000 791,956
- --------------------------------------------------------------
Canadian Oil Debco Inc.
(Oil & Gas-Services), Deb.,
11.00%, 10/31/00 1,750,000 1,497,846
- --------------------------------------------------------------
Ontario Hydro (Electric Power),
Global Bonds,
9.00%, 06/24/02 2,500,000 2,097,422
- --------------------------------------------------------------
Teleglobe Canada Inc.
(Telecommunications),
Deb., 8.35%, 06/20/03 2,400,000 1,934,477
- --------------------------------------------------------------
Trans-Canada Pipelines
(Oil & Gas-Services),
Series MTN, 8.55%, 02/01/06 2,150,000 1,759,662
- --------------------------------------------------------------
Trans-Canada Pipelines
(Oil & Gas-Services),
Series Q Deb., 10.625%, 10/20/09 1,750,000 1,639,323
- --------------------------------------------------------------
Total Foreign Non-Convertible
Bonds 11,271,084
- --------------------------------------------------------------
REPURCHASE AGREEMENT-1.67%(e)
UBS Securities Inc., 7.05%,
01/02/97(f) 4,071,574 4,071,574
- --------------------------------------------------------------
TOTAL INVESTMENT SECURITIES-97.51% 237,472,132
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.49% 6,059,347
- --------------------------------------------------------------
NET ASSETS-100.00% $243,531,479
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933, as
amended. The valuation of these securities has been determined in accordance
with procedures established by the Board of Trustees. The market value of
this security at December 31, 1996 was $471,875 which represented 0.21% of
the Fund's net assets.
(c) Discounted bond at purchase. Interest rate shown represents coupon rate at
which the bond will accrue at a specified future date.
(d) Foreign denominated security. Par value and coupon are denominated in
Canadian dollars.
(e) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$550,215,417. Collateralized by $732,485,305 U.S. Government agency
obligations, 0% to 9.50% due 01/01/98 to 12/15/26.
Abbreviations:
<TABLE>
<S> <C>
ADR - American Depository Receipt PIK - Payment in Kind
Conv. - Convertible PRIDES - Preferred Redeemable Increased
Deb. - Debentures Dividend Equity Securities
MTN - Medium Term Notes Sr. - Senior
Pfd. - Preferred Sub. - Subordinated
</TABLE>
See Notes to Financial Statements.
FS-21
<PAGE> 153
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$186,366,979) $237,472,132
- ---------------------------------------------------------
Foreign currencies, at market value (cost
$296,186) 300,364
- ---------------------------------------------------------
Receivables for:
Investments sold 5,994,069
- ---------------------------------------------------------
Fund shares sold 335,450
- ---------------------------------------------------------
Dividends and interest 1,284,171
- ---------------------------------------------------------
Investment for deferred compensation plan 15,551
- ---------------------------------------------------------
Other assets 15,665
- ---------------------------------------------------------
Total assets 245,417,402
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 922,062
- ---------------------------------------------------------
Fund shares reacquired 170,722
- ---------------------------------------------------------
Dividends 288,972
- ---------------------------------------------------------
Deferred compensation 15,551
- ---------------------------------------------------------
Accrued advisory fees 118,710
- ---------------------------------------------------------
Accrued administrative service fees 7,045
- ---------------------------------------------------------
Accrued distribution fees 196,866
- ---------------------------------------------------------
Accrued trustees' fees 1,702
- ---------------------------------------------------------
Accrued transfer agent fees 64,046
- ---------------------------------------------------------
Accrued operating expenses 100,247
- ---------------------------------------------------------
Total liabilities 1,885,923
- ---------------------------------------------------------
Net assets applicable to shares outstanding $243,531,479
=========================================================
NET ASSETS:
Class A $164,001,056
=========================================================
Class B $ 79,530,423
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 10,244,650
=========================================================
Class B 4,967,904
=========================================================
Class A:
Net asset value and redemption price
per share $ 16.01
=========================================================
Offering price per share:
(Net asset value of $16.01 divided
by 94.50%) $ 16.94
=========================================================
Class B:
Net asset value and offering price
per share $ 16.01
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $490,882 foreign
withholding tax) $ 8,553,274
- ---------------------------------------------------------
Interest 2,922,874
- ---------------------------------------------------------
Total investment income 11,476,148
- ---------------------------------------------------------
EXPENSES:
Advisory fees 1,397,762
- ---------------------------------------------------------
Administrative service fees 80,256
- ---------------------------------------------------------
Custodian fees 91,811
- ---------------------------------------------------------
Trustees' fees 7,354
- ---------------------------------------------------------
Distribution fees -- Class A 409,087
- ---------------------------------------------------------
Distribution fees -- Class B 759,491
- ---------------------------------------------------------
Transfer agent fees -- Class A 334,220
- ---------------------------------------------------------
Transfer agent fees -- Class B 185,241
- ---------------------------------------------------------
Other 147,813
- ---------------------------------------------------------
Total expenses 3,413,035
- ---------------------------------------------------------
Less: Expenses paid indirectly (3,909)
- ---------------------------------------------------------
Net expenses 3,409,126
- ---------------------------------------------------------
Net investment income 8,067,022
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain from:
Investment securities 9,910,387
- ---------------------------------------------------------
Foreign currency transactions 31,633
- ---------------------------------------------------------
9,942,020
- ---------------------------------------------------------
Unrealized appreciation of:
Investment securities 12,235,592
- ---------------------------------------------------------
Foreign currencies 12,071
- ---------------------------------------------------------
12,247,663
- ---------------------------------------------------------
Net gain from investment securities and
foreign currencies 22,189,683
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $30,256,705
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-22
<PAGE> 154
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 8,067,022 $ 8,470,013
- ------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities and
foreign currencies 9,942,020 937,755
- ------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 12,247,663 42,939,910
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 30,256,705 52,347,678
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (6,101,120) (6,295,577)
- ------------------------------------------------------------------------------------------
Class B (2,294,587) (1,690,557)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A (21,359,001) (12,765,899)
- ------------------------------------------------------------------------------------------
Class B 1,711,797 16,638,939
- ------------------------------------------------------------------------------------------
Net increase in net assets 2,213,794 48,234,584
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 241,317,685 193,083,101
- ------------------------------------------------------------------------------------------
End of period $243,531,479 $241,317,685
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $201,870,971 $221,523,475
- ------------------------------------------------------------------------------------------
Undistributed net investment income 112,764 404,516
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities and foreign currencies (9,567,151) (19,477,538)
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 51,114,895 38,867,232
- ------------------------------------------------------------------------------------------
$243,531,479 $241,317,685
==========================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Utilities Fund (the "Fund") is a series portfolio of AIM Funds Group
(the "Trust"). The Trust is a Delaware business trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of nine separate series
portfolios, each having an unlimited number of shares of beneficial interest.
The Fund currently offers two different classes of shares: the Class A shares
and the Class B shares. Class A shares are sold with a front-end sales charge.
Class B shares are sold with a contingent deferred sales charge. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The Fund's objective is to
achieve a high level of current income, and as a secondary objective the Fund
seeks to achieve capital appreciation, by investing primarily in the common and
preferred stocks of public utility companies.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- Securities listed or traded on an exchange (except
convertible bonds) are valued at the last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the mean between the closing bid and asked prices
on that day. If a mean is not available, as is the case in some foreign
markets, the closing bid will be used absent a last sales price. Each
security traded in the over-the-counter market (but not including securities
reported on the NASDAQ National Market System) is valued at the mean between
the last bid and asked prices based upon quotes furnished by market makers
for such securities. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a
last sales price, at the closing bid and asked
FS-23
<PAGE> 155
prices. Debt securities (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as institution-size trading
in similar groups of securities, developments related to special securities,
yield, quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Securities for which market quotations
either are not readily available or are questionable are valued at fair value
as determined in good faith by or under the supervision of the Trust's
officers in a manner specifically authorized by the Board of Trustees.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in foreign
securities is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of such
times. Foreign currency exchange rates are also generally determined prior to
the close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which they are determined and the close of the New York Stock Exchange
which will not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during the
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Trustees.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. It is the policy of the Fund to declare daily dividends
from net investment income. Such dividends are paid monthly. Distributions
from net realized capital gains, if any, are recorded on ex-dividend date and
are paid annually. On December 31, 1996, undistributed net investment income
was increased by $36,933, paid-in capital reduced by $5,300 and undistributed
net realized gains increased by $31,633 in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
C. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
D. Foreign Currency Contracts -- A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
E. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $9,488,489 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized, in
the year 2003. The Fund cannot distribute capital gains to shareholders until
the tax loss carryforwards have been utilized.
F. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2- ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.60% of
the first $200 million of the Fund's average daily net assets, plus 0.50% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.40% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.30% of the Fund's average daily net
assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1996, AIM
was reimbursed $80,256 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended December 31, 1996, AFS
was paid $325,229 for such services.
The Fund received reductions in transfer agency fees payable to AFS of $3,649
from dividends received on balances in cash management bank accounts. In
addition, pricing service expenses in the amount of $260 were paid through
directed brokerage commissions paid by the Fund. The above arrangements resulted
in a reduction in the Fund's total expenses of $3,909 during the year ended
December 31, 1996.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund,
FS-24
<PAGE> 156
pursuant to the Class A Plan, pays AIM Distributors compensation at an annual
rate of 0.25% of the average daily net assets attributable to the Class A
shares. The Class A Plan is designed to compensate AIM Distributors for certain
promotional and other sales related costs and provides for payments to selected
dealers and financial institutions who furnish continuing personal shareholder
services to their customers who purchase and own Class A shares of the Fund. The
Fund, pursuant to the Class B Plan, pays AIM Distributors compensation at an
annual rate of 1.00% of the average daily net assets attributable to the Class B
shares. Of this amount, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class B shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class B shares of the Fund. Any amounts not paid
as a service fee under such Plans would constitute an asset-based sales charge.
The Plans also impose a cap on the total sales charges, including asset-based
sales charges, that may be paid by the respective classes. AIM Distributors may,
from time to time, assign, transfer or pledge to one or more assignees, its
rights to all or a designated portion of (a) compensation received by AIM
Distributors from the Fund pursuant to the Class B Plan (but not AIM
Distributors' duties and obligations pursuant to the Class B Plan) and (b) any
contingent deferred sales charges payable to AIM Distributors related to the
Class B shares. During the year ended December 31, 1996, the Class A shares and
the Class B shares paid AIM Distributors $409,087 and $759,491, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $95,058 from sales of the Class A
shares of the Fund during the year ended December 31, 1996. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1996,
AIM Distributors received $145,184 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1996, the Fund paid legal fees of $3,406
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $3,600,000. During the year ended December 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.08% on the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1996 was
$112,908,079 and $136,028,500, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $52,730,707
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (1,747,178)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $50,983,529
=========================================================
</TABLE>
Cost of investments for tax purposes is $186,488,603.
NOTE 6-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 2,473,508 $36,689,173 3,040,993 $39,908,471
- ------------------------------------------------------------------------
Class B 1,424,455 21,097,067 2,223,714 29,286,592
- ------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 353,355 5,316,653 417,851 5,505,279
- ------------------------------------------------------------------------
Class B 127,578 1,926,340 106,557 1,413,598
- ------------------------------------------------------------------------
Reacquired:
Class A (4,274,871) (63,364,827) (4,470,353) (58,179,649)
- ------------------------------------------------------------------------
Class B (1,425,633) (21,311,610) (1,083,006) (14,061,251)
- ------------------------------------------------------------------------
(1,321,608) $(19,647,204) 235,756 $ 3,873,040
========================================================================
</TABLE>
FS-25
<PAGE> 157
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the eight-year period ended December 31, 1996 and the
period January 18, 1988 (date operations commenced) through December 31, 1988
and for a Class B share outstanding during each of the years in the three-year
period ended December 31, 1996 and the period September 1, 1993 (date sales
commenced) through December 31, 1993.
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992(a) 1991 1990 1989
-------- -------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 14.59 $ 11.85 $ 14.09 $ 13.31 $ 13.75 $ 12.45 $ 13.73 $ 10.99
- ----------------------- -------- -------- -------- -------- -------- ------- ------- -------
Income from investment
operations:
Net investment income 0.55 0.55 0.59 0.60 0.67 0.70 0.66 0.77
- ----------------------- -------- -------- -------- -------- -------- ------- ------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 1.43 2.71 (2.20) 1.02 0.36 2.12 (1.10) 3.06
- ----------------------- -------- -------- -------- -------- -------- ------- ------- -------
Total from
investment
operations 1.98 3.26 (1.61) 1.62 1.03 2.82 (0.44) 3.83
- ----------------------- -------- -------- -------- -------- -------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.56) (0.52) (0.60) (0.61) (0.68) (0.66) (0.70) (0.69)
- ----------------------- -------- -------- -------- -------- -------- ------- ------- -------
Distributions from net
realized capital
gains -- -- -- (0.23) (0.79) (0.86) (0.14) (0.40)
- ----------------------- -------- -------- -------- -------- -------- ------- ------- -------
Returns of capital -- -- (0.03) -- -- -- -- --
- ----------------------- -------- -------- -------- -------- -------- ------- ------- -------
Total distributions (0.56) (0.52) (0.63) (0.84) (1.47) (1.52) (0.84) (1.09)
- ----------------------- -------- -------- -------- -------- -------- ------- ------- -------
Net asset value, end of
period $ 16.01 $ 14.59 $ 11.85 $ 14.09 $ 13.31 $ 13.75 $ 12.45 $ 13.73
======================= ======== ======== ======== ======== ======== ======= ======= =======
Total return(b) 13.88% 28.07% (11.57)% 12.32% 7.92% 23.65% (2.98)% 36.11%
======================= ======== ======== ======== ======== ======== ======= ======= =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $164,001 $170,624 $150,515 $200,016 $111,771 $91,939 $69,541 $58,307
======================= ======== ======== ======== ======== ======== ======= ======= =======
Ratio of expenses to
average net assets 1.17%(c)(d) 1.21% 1.18% 1.16% 1.17% 1.23% 1.21%(e) 1.05%(e)
======================= ======== ======== ======== ======== ======== ======= ======= =======
Ratio of net investment
income to average net
assets 3.62%(c) 4.20% 4.67% 4.21% 4.96% 5.36% 5.21%(f) 6.13%(f)
======================= ======== ======== ======== ======== ======== ======= ======= =======
Portfolio turnover rate 48% 88% 101% 76% 148% 169% 123% 115%
======================= ======== ======== ======== ======== ======== ======= ======= =======
Average broker
commission rate(h) $0.0460 N/A N/A N/A N/A N/A N/A N/A
======================= ======== ======== ======== ======== ======== ======= ======= =======
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------- ----------------------------------------------------
1988 1996 1995 1994 1993
------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.00 $ 14.60 $ 11.84 $ 14.08 $ 15.30
- ----------------------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.82 0.42 0.44 0.47 0.17
- ----------------------- ------- ------- ------- ------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 0.83 1.44 2.73 (2.19) (0.98)
- ----------------------- ------- ------- ------- ------- -------
Total from
investment
operations 1.65 1.86 3.17 (1.72) (0.81)
- ----------------------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.66) (0.45) (0.41) (0.49) (0.17)
- ----------------------- ------- ------- ------- ------- -------
Distributions from net
realized capital
gains -- -- -- -- (0.24)
- ----------------------- ------- ------- ------- ------- -------
Returns of capital -- -- -- (0.03) --
- ----------------------- ------- ------- ------- ------- -------
Total distributions (0.66) (0.45) (0.41) (0.52) (0.41)
- ----------------------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 10.99 $ 16.01 $ 14.60 $ 11.84 $ 14.08
======================= ======= ======= ======= ======= =======
Total return(b) 17.03% 12.98% 27.16% (12.35)% (5.32)%
======================= ======= ======= ======= ======= =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $20,104 $79,530 $70,693 $42,568 $23,892
======================= ======= ======= ======= ======= =======
Ratio of expenses to
average net assets 1.22%(e)(g) 1.96%(c)(d) 1.97% 2.07% 1.99%(g)
======================= ======= ======= ======= ======= =======
Ratio of net investment
income to average net
assets 7.63%(f)(g) 2.83%(c) 3.44% 3.78% 3.38%(g)
======================= ======= ======= ======= ======= =======
Portfolio turnover rate 87% 48% 88% 101% 76%
======================= ======= ======= ======= ======= =======
Average broker
commission rate(h) N/A $0.0460 N/A N/A N/A
======================= ======= ======= ======= ======= =======
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Total returns do not deduct sales charges and for periods less than one year
are not annualized.
(c) Ratios for Class A are based on average daily net assets of $163,634,721.
Ratios for Class B are based on average daily net assets of $75,949,144.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22%, 1.11% and 1.69% (annualized) for 1990-88, respectively.
(f) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 5.20%, 6.07% and 7.16% (annualized) for 1990-88,
respectively.
(g) Annualized.
(h) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
NOTE 8-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO plc. AIM Management is the parent company of the Fund's advisor. The
merger is expected to take place during the first quarter of 1997.
FS-26
<PAGE> 158
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Growth Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Growth Fund (a portfolio of AIM Funds
Group), including the schedule of investments, as of
December 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in
the four-year period then ended. These financial statements
and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an
opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Growth
Fund as of December 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended and the
financial highlights for each of the years in the four-year
period then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
-------------------------
Houston, Texas KPMG Peat Marwick LLP
February 7, 1997
FS-27
<PAGE> 159
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-77.00%
ADVERTISING/BROADCASTING-0.72%
American Radio Systems Corp.(a) 8,000 $ 218,000
- --------------------------------------------------------------
Catalina Marketing Corp.(a) 2,000 110,250
- --------------------------------------------------------------
Chancellor Corp.-Class A(a) 10,000 237,500
- --------------------------------------------------------------
Clear Channel Communications, Inc.(a) 30,400 1,098,200
- --------------------------------------------------------------
Interpublic Group of Cos., Inc. 25,000 1,187,500
- --------------------------------------------------------------
Jacor Communications, Inc.(a) 20,000 547,500
- --------------------------------------------------------------
Paxson Communications Corp.(a) 10,000 78,750
- --------------------------------------------------------------
True North Communications, Inc. 7,500 164,063
- --------------------------------------------------------------
3,641,763
- --------------------------------------------------------------
AEROSPACE/DEFENSE-0.40%
Gulfstream Aerospace Corp.(a) 40,000 970,000
- --------------------------------------------------------------
United Technologies Corp. 16,000 1,056,000
- --------------------------------------------------------------
2,026,000
- --------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.14%
Mark IV Industries, Inc. 31,500 712,687
- --------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-0.19%
Chrysler Corp. 30,000 990,000
- --------------------------------------------------------------
BANKING-0.16%
Bank of Boston Corp. 12,500 803,125
- --------------------------------------------------------------
BANKING (MONEY CENTER)-0.21%
Citicorp 10,500 1,081,500
- --------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.18%
PepsiCo, Inc. 32,000 936,000
- --------------------------------------------------------------
BIOTECHNOLOGY-0.56%
AMGEN, Inc.(a) 30,300 1,647,561
- --------------------------------------------------------------
Guidant Corp. 21,000 1,197,000
- --------------------------------------------------------------
2,844,561
- --------------------------------------------------------------
BUSINESS SERVICES-1.47%
AccuStaff, Inc.(a) 54,792 1,157,481
- --------------------------------------------------------------
APAC Teleservices, Inc.(a) 8,000 307,000
- --------------------------------------------------------------
Cognizant Corp. 80,000 2,640,000
- --------------------------------------------------------------
Corrections Corp. of America(a) 2,200 67,375
- --------------------------------------------------------------
CUC International, Inc.(a) 45,750 1,086,562
- --------------------------------------------------------------
Diebold, Inc. 12,200 767,075
- --------------------------------------------------------------
Equifax, Inc. 26,000 796,250
- --------------------------------------------------------------
Olsten Corp. 24,750 374,344
- --------------------------------------------------------------
Paychex, Inc. 5,000 257,187
- --------------------------------------------------------------
7,453,274
- --------------------------------------------------------------
CHEMICALS-0.10%
Monsanto Co. 13,300 517,038
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.30%
Airgas, Inc.(a) 34,400 756,800
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CHEMICALS (SPECIALTY)-(CONTINUED)
IMC Global, Inc. 20,000 $ 782,500
- --------------------------------------------------------------
1,539,300
- --------------------------------------------------------------
COMPUTER MAINFRAMES-0.53%
International Business Machines
Corp. 18,000 2,718,000
- --------------------------------------------------------------
COMPUTER MINI/PCS-3.07%
Apple Computer, Inc.(a) 40,000 835,000
- --------------------------------------------------------------
COMPAQ Computer Corp.(a) 53,000 3,935,250
- --------------------------------------------------------------
Dell Computer Corp.(a) 60,000 3,187,500
- --------------------------------------------------------------
Gateway 2000, Inc.(a) 44,000 2,356,750
- --------------------------------------------------------------
Hewlett-Packard Co. 10,100 507,525
- --------------------------------------------------------------
Rational Software Corp.(a) 31,900 1,262,043
- --------------------------------------------------------------
Sun Microsystems, Inc.(a) 138,000 3,544,875
- --------------------------------------------------------------
15,628,943
- --------------------------------------------------------------
COMPUTER NETWORKING-4.05%
Ascend Communications, Inc.(a) 54,400 3,379,600
- --------------------------------------------------------------
Cabletron Systems, Inc.(a) 80,000 2,660,000
- --------------------------------------------------------------
Cascade Communications Corp.(a) 61,800 3,406,725
- --------------------------------------------------------------
Cisco Systems, Inc.(a) 70,000 4,453,750
- --------------------------------------------------------------
FORE Systems, Inc.(a) 30,100 989,538
- --------------------------------------------------------------
Shiva Corp.(a) 4,200 146,475
- --------------------------------------------------------------
Sync Research, Inc.(a) 4,500 61,875
- --------------------------------------------------------------
3Com Corp.(a) 75,000 5,503,125
- --------------------------------------------------------------
20,601,088
- --------------------------------------------------------------
COMPUTER PERIPHERALS-1.70%
Adaptec, Inc.(a) 32,000 1,280,000
- --------------------------------------------------------------
American Power Conversion Corp.(a) 12,500 340,625
- --------------------------------------------------------------
EMC Corp.(a) 58,600 1,941,125
- --------------------------------------------------------------
Microchip Technology, Inc.(a) 25,600 1,302,400
- --------------------------------------------------------------
Storage Technology Corp.(a) 39,600 1,885,950
- --------------------------------------------------------------
U.S. Robotics Corp.(a) 26,200 1,886,400
- --------------------------------------------------------------
8,636,500
- --------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-8.23%
Affiliated Computer Services, Inc.(a) 10,200 303,450
- --------------------------------------------------------------
BISYS Group, Inc. (The)(a) 10,000 370,625
- --------------------------------------------------------------
BMC Software, Inc.(a) 90,000 3,723,750
- --------------------------------------------------------------
Cadence Design Systems, Inc.(a) 50,000 1,987,500
- --------------------------------------------------------------
Ceridian Corp.(a) 35,000 1,417,500
- --------------------------------------------------------------
Computer Associates International, Inc. 68,150 3,390,462
- --------------------------------------------------------------
CompuWare Corp.(a) 52,000 2,606,500
- --------------------------------------------------------------
CSG Systems International, Inc.(a) 11,200 172,200
- --------------------------------------------------------------
DST Systems, Inc.(a) 19,500 611,813
- --------------------------------------------------------------
Electronic Arts, Inc.(a) 17,900 535,881
- --------------------------------------------------------------
Electronic Data Systems Corp. 20,000 865,000
- --------------------------------------------------------------
First Data Corp. 16,500 602,250
- --------------------------------------------------------------
Fiserv, Inc.(a) 32,000 1,176,000
- --------------------------------------------------------------
</TABLE>
FS-28
<PAGE> 160
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
HBO & Co. 19,900 $ 1,181,563
- --------------------------------------------------------------
HPR, Inc.(a) 10,000 137,500
- --------------------------------------------------------------
Intuit, Inc.(a) 17,700 557,550
- --------------------------------------------------------------
McAfee Associates, Inc.(a) 31,200 1,372,800
- --------------------------------------------------------------
Medic Computer Systems, Inc.(a) 8,200 330,562
- --------------------------------------------------------------
Microsoft Corp.(a) 78,800 6,510,850
- --------------------------------------------------------------
National Data Corp. 20,000 870,000
- --------------------------------------------------------------
Network General Corp.(a) 43,400 1,312,850
- --------------------------------------------------------------
Oracle Corp.(a) 57,250 2,390,188
- --------------------------------------------------------------
Parametric Technology Co.(a) 66,000 3,390,750
- --------------------------------------------------------------
Physician Computer Network, Inc.(a) 30,000 255,000
- --------------------------------------------------------------
Pure Atria Corp.(a) 2,300 56,925
- --------------------------------------------------------------
Sterling Commerce, Inc.(a) 38,814 1,368,193
- --------------------------------------------------------------
Sterling Software, Inc.(a) 11,500 363,688
- --------------------------------------------------------------
SunGard Data Systems Inc.(a) 10,400 410,800
- --------------------------------------------------------------
Synopsys, Inc.(a) 27,700 1,281,125
- --------------------------------------------------------------
Systemsoft Corp.(a) 4,200 62,475
- --------------------------------------------------------------
Transition Systems, Inc.(a) 400 5,650
- --------------------------------------------------------------
Wallace Computer Services, Inc. 55,000 1,897,500
- --------------------------------------------------------------
Wind River Systems(a) 7,000 331,625
- --------------------------------------------------------------
41,850,525
- --------------------------------------------------------------
CONGLOMERATES-1.56%
Allied-Signal Inc. 14,600 978,200
- --------------------------------------------------------------
Corning, Inc. 19,000 878,750
- --------------------------------------------------------------
Du Pont (E.I.) de Nemours & Co. 11,000 1,038,125
- --------------------------------------------------------------
Loews Corp. 22,100 2,082,925
- --------------------------------------------------------------
Tyco International Ltd. 35,000 1,850,625
- --------------------------------------------------------------
U.S. Industries, Inc.(a) 31,500 1,082,812
- --------------------------------------------------------------
7,911,437
- --------------------------------------------------------------
CONSUMER NON-DURABLES-0.04%
Central Garden and Pet Co.(a) 10,000 210,625
- --------------------------------------------------------------
CONTAINERS-0.13%
Sealed Air Corp.(a) 16,000 666,000
- --------------------------------------------------------------
COSMETICS & TOILETRIES-0.50%
Rexall Sundown, Inc.(a) 11,000 299,062
- --------------------------------------------------------------
Warner-Lambert Co. 30,000 2,250,000
- --------------------------------------------------------------
2,549,062
- --------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.72%
Berg Electronics Corp.(a) 9,800 287,875
- --------------------------------------------------------------
BMC Industries, Inc. 9,700 305,550
- --------------------------------------------------------------
Checkpoint Systems, Inc.(a) 38,000 940,500
- --------------------------------------------------------------
Raychem Corp. 7,700 616,963
- --------------------------------------------------------------
SCI Systems, Inc.(a) 7,000 312,375
- --------------------------------------------------------------
Symbol Technologies, Inc.(a) 10,600 469,050
- --------------------------------------------------------------
Thermo Instrument Systems, Inc.(a) 22,000 728,750
- --------------------------------------------------------------
3,661,063
- --------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.60%
Bear Stearns Cos., Inc. 14,500 404,188
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (ASSET MANAGEMENT)-(CONTINUED)
Franklin Resources, Inc. 12,700 $ 868,362
- --------------------------------------------------------------
Imperial Credit Industries, Inc.(a) 30,000 630,000
- --------------------------------------------------------------
Schwab (Charles) Corp. 24,700 790,400
- --------------------------------------------------------------
T. Rowe Price Associates 7,900 343,650
- --------------------------------------------------------------
3,036,600
- --------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-4.17%
Aames Financial Corp. 20,000 717,500
- --------------------------------------------------------------
Beneficial Corp. 8,000 507,000
- --------------------------------------------------------------
Capital One Financial Corp. 30,800 1,108,800
- --------------------------------------------------------------
Concord EFS, Inc.(a) 12,800 361,600
- --------------------------------------------------------------
Credit Acceptance Corp.(a) 24,000 564,000
- --------------------------------------------------------------
Federal Home Loan Mortgage Corp. 10,000 1,101,250
- --------------------------------------------------------------
Federal National Mortgage Association 35,000 1,303,750
- --------------------------------------------------------------
Finova Group, Inc. 9,500 610,375
- --------------------------------------------------------------
First USA, Inc. 16,000 554,000
- --------------------------------------------------------------
Green Tree Financial Corp. 70,900 2,738,512
- --------------------------------------------------------------
Household International, Inc. 20,000 1,845,000
- --------------------------------------------------------------
MBNA Corp. 30,000 1,245,000
- --------------------------------------------------------------
Money Store, Inc. (The) 25,700 709,963
- --------------------------------------------------------------
Olympic Financial Ltd.(a) 49,900 717,312
- --------------------------------------------------------------
PMI Group, Inc. (The) 20,100 1,113,038
- --------------------------------------------------------------
PMT Services, Inc.(a) 20,500 358,750
- --------------------------------------------------------------
Student Loan Marketing Association 46,000 4,283,750
- --------------------------------------------------------------
SunAmerica, Inc. 31,200 1,384,500
- --------------------------------------------------------------
21,224,100
- --------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-0.40%
Ahmanson (H.F.) & Co. 35,000 1,137,500
- --------------------------------------------------------------
Washington Mutual, Inc. 21,200 918,225
- --------------------------------------------------------------
2,055,725
- --------------------------------------------------------------
FOOD/PROCESSING-0.62%
ConAgra, Inc. 18,800 935,300
- --------------------------------------------------------------
Dean Foods Co. 35,000 1,128,750
- --------------------------------------------------------------
Lancaster Colony Corp. 11,400 524,400
- --------------------------------------------------------------
Richfood Holdings, Inc. 24,000 582,000
- --------------------------------------------------------------
3,170,450
- --------------------------------------------------------------
FUNERAL SERVICES-0.40%
Service Corp. International 62,900 1,761,200
- --------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 7,650 260,100
- --------------------------------------------------------------
2,021,300
- --------------------------------------------------------------
FURNITURE-0.13%
Leggett & Platt, Inc. 19,000 657,875
- --------------------------------------------------------------
GAMING-0.81%
Circus Circus Enterprises(a) 25,000 859,375
- --------------------------------------------------------------
GTECH Holdings Corp.(a) 15,800 505,600
- --------------------------------------------------------------
International Game Technology 150,000 2,737,500
- --------------------------------------------------------------
4,102,475
- --------------------------------------------------------------
</TABLE>
FS-29
<PAGE> 161
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOME BUILDING-0.03%
Oakwood Homes Corp. 6,000 $ 137,250
- --------------------------------------------------------------
HOTELS/MOTELS-1.16%
Choice Hotels International, Inc.(a) 31,900 562,238
- --------------------------------------------------------------
Doubletree Corp.(a) 3,100 139,500
- --------------------------------------------------------------
HFS, Inc.(a) 39,000 2,330,250
- --------------------------------------------------------------
Hilton Hotels Corp. 24,000 627,000
- --------------------------------------------------------------
Host Marriott Corp.(a) 62,500 1,000,000
- --------------------------------------------------------------
Marriot International, Inc. 8,600 475,150
- --------------------------------------------------------------
Promus Hotel Corp.(a) 13,000 385,125
- --------------------------------------------------------------
Sun International Hotels Ltd.(a) 10,300 375,950
- --------------------------------------------------------------
5,895,213
- --------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.76%
Compdent Corp.(a) 10,600 373,650
- --------------------------------------------------------------
Conseco Inc. 47,500 3,028,125
- --------------------------------------------------------------
Provident Companies, Inc. 1,700 82,237
- --------------------------------------------------------------
United Companies Financial Corp. 15,000 399,375
- --------------------------------------------------------------
3,883,387
- --------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-2.37%
Allstate Corp. 27,900 1,614,713
- --------------------------------------------------------------
American International Group, Inc. 11,500 1,244,875
- --------------------------------------------------------------
CapMAC Holdings, Inc. 18,100 599,562
- --------------------------------------------------------------
CIGNA Corp. 9,700 1,325,263
- --------------------------------------------------------------
Everest Re Holdings, Inc. 36,300 1,043,625
- --------------------------------------------------------------
ITT Hartford Group, Inc. 16,000 1,080,000
- --------------------------------------------------------------
MGIC Investment Corp. 34,600 2,629,600
- --------------------------------------------------------------
Old Republic International Corp. 13,000 347,750
- --------------------------------------------------------------
Progressive Corp. 1,300 87,587
- --------------------------------------------------------------
Travelers Group, Inc. 45,666 2,072,095
- --------------------------------------------------------------
12,045,070
- --------------------------------------------------------------
LEISURE & RECREATION-0.80%
Callaway Golf Co. 22,100 635,375
- --------------------------------------------------------------
Carnival Corp.-Class A 29,200 963,600
- --------------------------------------------------------------
Coleman Co., Inc.(a) 17,000 233,750
- --------------------------------------------------------------
Harley-Davidson, Inc. 41,400 1,945,800
- --------------------------------------------------------------
Mattel, Inc. 5,187 143,939
- --------------------------------------------------------------
Speedway Motorsports, Inc.(a) 7,200 151,200
- --------------------------------------------------------------
4,073,664
- --------------------------------------------------------------
MACHINERY (HEAVY)-0.21%
Caterpillar Inc. 14,000 1,053,500
- --------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.63%
Pentair, Inc. 10,000 322,500
- --------------------------------------------------------------
Thermo Electron Corp.(a) 69,750 2,877,188
- --------------------------------------------------------------
3,199,688
- --------------------------------------------------------------
MEDICAL (DRUGS)-3.82%
Abbott Laboratories 19,000 964,250
- --------------------------------------------------------------
American Home Products Corp. 18,000 1,055,250
- --------------------------------------------------------------
AmeriSource Health Corp.(a) 12,000 579,000
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (DRUGS)-(CONTINUED)
Bristol-Myers Squibb Co. 18,000 $ 1,957,500
- --------------------------------------------------------------
Cardinal Health, Inc. 52,950 3,084,337
- --------------------------------------------------------------
Curative Technologies, Inc.(a) 500 13,844
- --------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 15,000 716,250
- --------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 15,200 545,300
- --------------------------------------------------------------
ICN Pharmaceuticals, Inc. 21,500 421,937
- --------------------------------------------------------------
Johnson & Johnson 35,300 1,756,175
- --------------------------------------------------------------
Jones Medical Industries, Inc. 15,900 582,338
- --------------------------------------------------------------
Lilly (Eli) & Co. 11,100 810,300
- --------------------------------------------------------------
Merck & Co., Inc. 19,000 1,505,750
- --------------------------------------------------------------
Parexel International Corp.(a) 4,400 227,150
- --------------------------------------------------------------
Pharmacia & Upjohn, Inc. 23,000 911,375
- --------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 28,500 2,226,562
- --------------------------------------------------------------
Schering-Plough Corp. 14,300 925,925
- --------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 26,000 1,168,375
- --------------------------------------------------------------
19,451,618
- --------------------------------------------------------------
MEDICA (INSTRUMENTS/PRODUCTS)-3.98%
Advanced Technology Laboratories,
Inc.(a) 10,000 310,000
- --------------------------------------------------------------
Baxter International Inc. 24,900 1,020,900
- --------------------------------------------------------------
Becton, Dickinson & Co. 31,000 1,344,625
- --------------------------------------------------------------
Boston Scientific Corp.(a) 34,540 2,072,400
- --------------------------------------------------------------
Dentsply International, Inc. 10,800 513,000
- --------------------------------------------------------------
Gulf South Medical Supply, Inc.(a) 25,300 648,313
- --------------------------------------------------------------
IDEXX Laboratories, Inc.(a) 17,900 644,400
- --------------------------------------------------------------
Invacare Corp. 18,700 514,250
- --------------------------------------------------------------
Medtronic, Inc. 22,000 1,496,000
- --------------------------------------------------------------
Nellcor Puritan Bennett, Inc.(a) 9,200 201,250
- --------------------------------------------------------------
Omnicare, Inc. 54,100 1,737,962
- --------------------------------------------------------------
Physician Sales & Service, Inc.(a) 14,000 201,250
- --------------------------------------------------------------
Quintiles Transnational Corp.(a) 21,400 1,417,750
- --------------------------------------------------------------
St. Jude Medical, Inc.(a) 71,000 3,026,375
- --------------------------------------------------------------
Steris Corp.(a) 20,000 870,000
- --------------------------------------------------------------
Stryker Corp. 40,000 1,195,000
- --------------------------------------------------------------
Sybron International Corp.(a) 55,900 1,844,700
- --------------------------------------------------------------
U.S. Surgical Corp. 30,300 1,193,063
- --------------------------------------------------------------
20,251,238
- --------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-4.75%
American Medical Response, Inc.(a) 10,200 331,500
- --------------------------------------------------------------
American Oncology Resources, Inc.(a) 4,900 50,225
- --------------------------------------------------------------
ClinTrials Research Inc.(a) 14,850 337,837
- --------------------------------------------------------------
Columbia/HCA Healthcare Corp. 58,880 2,399,360
- --------------------------------------------------------------
FPA Medical Management, Inc.(a) 15,000 335,625
- --------------------------------------------------------------
Genesis Health Ventures, Inc.(a) 21,750 676,969
- --------------------------------------------------------------
Health Care & Retirement Corp.(a) 46,350 1,326,768
- --------------------------------------------------------------
Health Management Associates,
Inc.-Class A(a) 65,925 1,483,313
- --------------------------------------------------------------
HEALTHSOUTH Corp.(a) 93,200 3,599,850
- --------------------------------------------------------------
Lincare Holdings, Inc.(a) 20,000 820,000
- --------------------------------------------------------------
MedPartners, Inc.(a) 97,780 2,053,380
- --------------------------------------------------------------
Multicare Companies, Inc.(a) 17,200 348,300
- --------------------------------------------------------------
</TABLE>
FS-30
<PAGE> 162
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-(CONTINUED)
OccuSystems, Inc.(a) 8,600 $ 232,200
- --------------------------------------------------------------
OrNda HealthCorp (a) 40,200 1,175,850
- --------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 15,800 252,800
- --------------------------------------------------------------
Oxford Health Plans, Inc.(a) 25,600 1,499,200
- --------------------------------------------------------------
PhyCor, Inc.(a) 14,700 417,112
- --------------------------------------------------------------
Quorum Health Group, Inc.(a) 45,000 1,338,750
- --------------------------------------------------------------
Tenet Healthcare Corp.(a) 91,600 2,003,750
- --------------------------------------------------------------
Total Renal Care Holdings, Inc.(a) 11,000 398,750
- --------------------------------------------------------------
United Healthcare Corp. 13,200 594,000
- --------------------------------------------------------------
Universal Health Services,
Inc.-Class B (a) 31,000 887,375
- --------------------------------------------------------------
Vencor, Inc.(a) 50,000 1,581,250
- --------------------------------------------------------------
24,144,164
- --------------------------------------------------------------
NATURAL GAS PIPELINE-0.18%
Columbia Gas System, Inc. 14,700 935,288
- --------------------------------------------------------------
OFFICE AUTOMATION-0.21%
Xerox Corp. 20,000 1,052,500
- --------------------------------------------------------------
OFFICE PRODUCTS-0.62%
Avery Dennison Corp. 24,200 856,075
- --------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 38,400 883,200
- --------------------------------------------------------------
Reynolds & Reynolds Co.-Class A 54,600 1,419,600
- --------------------------------------------------------------
3,158,875
- --------------------------------------------------------------
OIL & GAS (DRILLING)-0.26%
Reading & Bates Corp.(a) 50,000 1,325,000
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.26%
Burlington Resources, Inc. 15,400 775,775
- --------------------------------------------------------------
Transocean Offshore Inc. 8,500 532,312
- --------------------------------------------------------------
1,308,087
- --------------------------------------------------------------
OIL & GAS (SERVICES)-0.61%
Energy Ventures, Inc.(a) 5,400 274,725
- --------------------------------------------------------------
Global Marine, Inc.(a) 35,000 721,875
- --------------------------------------------------------------
Halliburton Co. 21,000 1,265,250
- --------------------------------------------------------------
Louisiana Land & Exploration Co. 14,500 777,563
- --------------------------------------------------------------
NorAm Energy Corp. 4,300 66,112
- --------------------------------------------------------------
3,105,525
- --------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-2.31%
Baker Hughes, Inc. 45,000 1,552,500
- --------------------------------------------------------------
BJ Services Co.(a) 10,000 510,000
- --------------------------------------------------------------
Cooper Cameron Corp.(a) 12,000 918,000
- --------------------------------------------------------------
Diamond Offshore Drilling, Inc.(a) 21,100 1,202,700
- --------------------------------------------------------------
Dresser Industries, Inc. 17,000 527,000
- --------------------------------------------------------------
ENSCO International, Inc.(a) 15,000 727,500
- --------------------------------------------------------------
Marine Drilling Co., Inc.(a) 50,000 984,375
- --------------------------------------------------------------
Nabors Industries, Inc.(a) 10,000 192,500
- --------------------------------------------------------------
Rowan Companies, Inc.(a) 80,000 1,810,000
- --------------------------------------------------------------
Schlumberger Ltd. 6,000 599,250
- --------------------------------------------------------------
Smith International, Inc.(a) 16,500 740,438
- --------------------------------------------------------------
Tidewater, Inc. 24,000 1,086,000
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL EQUIPMENT & SUPPLIES-(CONTINUED)
Varco International, Inc.(a) 38,100 $ 881,062
- --------------------------------------------------------------
11,731,325
- --------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.19%
Kimberly-Clark Corp. 10,000 952,500
- --------------------------------------------------------------
POLLUTION CONTROL-0.35%
U.S. Filter Corp.(a) 14,300 454,025
- --------------------------------------------------------------
USA Waste Services, Inc.(a) 19,000 605,625
- --------------------------------------------------------------
United Waste Systems, Inc.(a) 21,000 721,875
- --------------------------------------------------------------
1,781,525
- --------------------------------------------------------------
PUBLISHING-0.27%
Gartner Group, Inc.(a) 5,400 210,262
- --------------------------------------------------------------
New York Times Co.-Class A 24,000 912,000
- --------------------------------------------------------------
Times Mirror Co.-Class A 5,300 263,675
- --------------------------------------------------------------
1,385,937
- --------------------------------------------------------------
RESTAURANTS-1.04%
Applebee's International, Inc. 58,900 1,619,750
- --------------------------------------------------------------
Brinker International, Inc.(a) 40,000 640,000
- --------------------------------------------------------------
Cracker Barrel Old Country Store,
Inc. 33,100 839,913
- --------------------------------------------------------------
Lone Star Steakhouse & Saloon, Inc.(a) 30,000 802,500
- --------------------------------------------------------------
Outback Steakhouse, Inc.(a) 20,000 535,000
- --------------------------------------------------------------
Planet Hollywood International,
Inc.-Class A (a) 15,500 306,125
- --------------------------------------------------------------
Rainforest Cafe, Inc.(a) 7,500 176,250
- --------------------------------------------------------------
Starbucks Corp.(a) 12,100 346,362
- --------------------------------------------------------------
5,265,900
- --------------------------------------------------------------
RETAIL (FOOD & DRUGS)-1.67%
American Stores Co. 44,600 1,823,025
- --------------------------------------------------------------
Eckerd Corp. (The)(a) 7,383 236,256
- --------------------------------------------------------------
Kroger Co.(a) 12,400 576,600
- --------------------------------------------------------------
Revco D.S., Inc.(a) 22,700 839,900
- --------------------------------------------------------------
Rite Aid Corp. 18,200 723,450
- --------------------------------------------------------------
Safeway, Inc.(a) 100,000 4,275,000
- --------------------------------------------------------------
8,474,231
- --------------------------------------------------------------
RETAIL (STORES)-7.54%
Bed Bath & Beyond, Inc.(a) 28,200 683,850
- --------------------------------------------------------------
Boise Cascade Office Products
Corp.(a) 6,000 126,000
- --------------------------------------------------------------
CDW Computer Centers, Inc.(a) 13,150 779,959
- --------------------------------------------------------------
CompUSA, Inc.(a) 30,500 629,063
- --------------------------------------------------------------
Consolidated Stores Corp.(a) 87,375 2,806,921
- --------------------------------------------------------------
Corporate Express, Inc.(a) 21,400 629,963
- --------------------------------------------------------------
Dayton Hudson Corp. 75,700 2,971,225
- --------------------------------------------------------------
Dollar General Corp. 19,575 626,400
- --------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 12,500 478,125
- --------------------------------------------------------------
Finish Line, Inc. (The)-Class A(a) 20,000 422,500
- --------------------------------------------------------------
Gap, Inc. (The) 43,000 1,295,375
- --------------------------------------------------------------
Global DirectMail Corp.(a) 12,800 558,400
- --------------------------------------------------------------
Gymboree Corp.(a) 27,600 631,350
- --------------------------------------------------------------
Home Depot, Inc. 21,000 1,052,625
- --------------------------------------------------------------
Jones Apparel Group, Inc.(a) 15,000 560,625
- --------------------------------------------------------------
</TABLE>
FS-31
<PAGE> 163
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
RETAIL (STORES)-(CONTINUED)
<S> <C> <C>
Kohl's Corp.(a) 15,800 $ 620,150
- --------------------------------------------------------------
Lowe's Companies, Inc. 70,000 2,485,000
- --------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 30,400 744,800
- --------------------------------------------------------------
Meyer (Fred), Inc.(a) 14,300 507,650
- --------------------------------------------------------------
Micro Warehouse, Inc.(a) 23,900 280,825
- --------------------------------------------------------------
Neiman Marcus Group, Inc. (The)(a) 6,500 165,750
- --------------------------------------------------------------
Oakley, Inc.(a) 38,800 421,950
- --------------------------------------------------------------
Pep Boys-Manny, Moe & Jack 130,100 4,000,575
- --------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 18,000 373,500
- --------------------------------------------------------------
PETsMART, Inc.(a) 40,900 894,688
- --------------------------------------------------------------
Ross Stores, Inc. 8,400 420,000
- --------------------------------------------------------------
Saks Holdings, Inc.(a) 5,500 148,500
- --------------------------------------------------------------
Sports Authority, Inc. (The)(a) 38,400 835,200
- --------------------------------------------------------------
Staples, Inc.(a) 161,450 2,916,191
- --------------------------------------------------------------
Sunglass Hut International, Inc.(a) 16,400 118,900
- --------------------------------------------------------------
Sysco Corp. 35,000 1,141,875
- --------------------------------------------------------------
Tech Data Corp.(a) 33,400 914,325
- --------------------------------------------------------------
Tiffany & Co. 14,500 531,062
- --------------------------------------------------------------
TJX Companies, Inc. 16,900 800,638
- --------------------------------------------------------------
Toys "R" Us, Inc.(a) 130,000 3,900,000
- --------------------------------------------------------------
Viking Office Products, Inc.(a) 57,900 1,545,206
- --------------------------------------------------------------
Williams-Sonoma, Inc.(a) 9,000 327,375
- --------------------------------------------------------------
38,346,541
- --------------------------------------------------------------
SCIENTIFIC INSTRUMENTS-0.02%
Input/Output, Inc.(a) 6,600 122,100
- --------------------------------------------------------------
SEMICONDUCTORS-3.11%
Advanced Micro Devices, Inc.(a) 26,400 679,800
- --------------------------------------------------------------
Altera Corp.(a) 34,700 2,522,256
- --------------------------------------------------------------
Applied Materials, Inc.(a) 65,000 2,335,938
- --------------------------------------------------------------
Intel Corp. 44,600 5,839,812
- --------------------------------------------------------------
KLA Instruments Corp.(a) 21,000 745,500
- --------------------------------------------------------------
Micron Technology, Inc. 30,000 873,750
- --------------------------------------------------------------
National Semiconductor Corp.(a) 37,500 914,063
- --------------------------------------------------------------
Novellus Systems, Inc.(a) 2,400 130,050
- --------------------------------------------------------------
Solectron Corp.(a) 6,100 325,588
- --------------------------------------------------------------
Tencor Instruments(a) 5,800 152,975
- --------------------------------------------------------------
Texas Instruments, Inc. 17,000 1,083,750
- --------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 5,000 227,500
- --------------------------------------------------------------
15,830,982
- --------------------------------------------------------------
SHOES & RELATED APPAREL-0.79%
Nike, Inc.-Class B 38,000 2,270,500
- --------------------------------------------------------------
Nine West Group, Inc.(a) 30,800 1,428,350
- --------------------------------------------------------------
Wolverine World Wide, Inc. 11,250 326,250
- --------------------------------------------------------------
4,025,100
- --------------------------------------------------------------
TELECOMMUNICATIONS-4.02%
ACC Corp. 9,000 272,250
- --------------------------------------------------------------
ADC Telecommunications, Inc. 105,600 3,286,800
- --------------------------------------------------------------
Andrew Corp.(a) 49,400 2,621,287
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TELECOMMUNICATIONS-(CONTINUED)
Aspect Telecommunications Corp.(a) 10,000 $ 635,000
- ---------------------------------------------------------------
Billing Information Concepts(a) 12,000 345,000
- ---------------------------------------------------------------
Frontier Corp. 17,900 404,988
- ---------------------------------------------------------------
Lucent Technologies, Inc. 29,300 1,355,125
- ---------------------------------------------------------------
MFS Communications Co., Inc.(a) 33,000 1,798,500
- ---------------------------------------------------------------
PairGain Technologies, Inc.(a) 100,000 3,043,750
- ---------------------------------------------------------------
Premisys Communications, Inc.(a) 21,200 715,500
- ---------------------------------------------------------------
QUALCOMM, Inc.(a) 11,000 438,625
- ---------------------------------------------------------------
Tellabs, Inc.(a) 65,200 2,453,150
- ---------------------------------------------------------------
360 Communications Co.(a) 45,700 1,056,812
- ---------------------------------------------------------------
U.S. Long Distance Corp.(a) 8,400 67,200
- ---------------------------------------------------------------
WorldCom, Inc.(a) 75,800 1,975,538
- ---------------------------------------------------------------
20,469,525
- ---------------------------------------------------------------
TELEPHONE-0.31%
Cincinnati Bell, Inc. 26,000 1,602,250
- ---------------------------------------------------------------
TEXTILES-1.13%
Designer Holdings Ltd.(a) 5,000 80,625
- ---------------------------------------------------------------
Fruit of The Loom, Inc.-Class A(a) 30,000 1,136,250
- ---------------------------------------------------------------
Liz Claiborne, Inc. 45,000 1,738,125
- ---------------------------------------------------------------
Nautica Enterprises, Inc.(a) 20,000 505,000
- ---------------------------------------------------------------
Russell Corp. 19,300 574,175
- ---------------------------------------------------------------
Tommy Hilfiger Corp.(a) 22,800 1,094,400
- ---------------------------------------------------------------
Unifi, Inc. 19,700 632,863
- ---------------------------------------------------------------
5,761,438
- ---------------------------------------------------------------
TOBACCO-1.40%
Philip Morris Companies, Inc. 27,000 3,040,875
- ---------------------------------------------------------------
RJR Nabisco Holdings Corp. 58,000 1,972,000
- ---------------------------------------------------------------
UST, Inc. 65,000 2,104,375
- ---------------------------------------------------------------
7,117,250
- ---------------------------------------------------------------
TRANSPORTATION (MISCELLANEOUS)-0.05%
Rural/Metro Corp.(a) 7,500 270,000
- ---------------------------------------------------------------
TRUCKING-0.06%
US Freightways Corp. 11,100 304,556
- ---------------------------------------------------------------
Total Domestic Common Stocks 391,708,243
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-4.78%
CANADA-0.67%
Agrium, Inc. (Chemicals) 20,000 275,000
- ---------------------------------------------------------------
Newbridge Networks Corp. (Computer
Networking)(a) 44,200 1,248,650
- ---------------------------------------------------------------
Northern Telecom Ltd.
(Telecommunications) 17,000 1,051,875
- ---------------------------------------------------------------
Potash Corp. of Saskatchewan Inc.
(Chemicals) 10,000 850,000
- ---------------------------------------------------------------
3,425,525
- ---------------------------------------------------------------
FINLAND-0.68%
Nokia Oy A.B.-Class A
(Telecommunications) 3,050 177,033
- ---------------------------------------------------------------
Nokia Oy A.B.-Class A-ADR
(Telecommunications) 56,950 3,281,744
- ---------------------------------------------------------------
3,458,777
- ---------------------------------------------------------------
</TABLE>
FS-32
<PAGE> 164
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE-0.05%
SGS-Thomson Microelectronics
N.V.-New York Shares
(Semiconductors)(a) 3,400 $ 238,000
- --------------------------------------------------------------
IRELAND-0.40%
CBT Group PLC-ADR (Computer
Software & Services)(a) 1,600 86,800
- --------------------------------------------------------------
Elan Corp. PLC-ADR
(Medical-Drugs)(a) 59,400 1,975,050
- --------------------------------------------------------------
2,061,850
- --------------------------------------------------------------
ISRAEL-0.38%
ECI Telecommunications Ltd. Designs
(Computer Networking) 32,900 699,125
- --------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Medical-Drugs) 24,500 1,231,125
- --------------------------------------------------------------
1,930,250
- --------------------------------------------------------------
JAPAN-0.25%
Honda Motor Co., Ltd. (Automobile-
Manufacturers) 45,000 1,286,158
- --------------------------------------------------------------
NETHERLANDS-0.61%
Baan Co., N.V.(Computer Software &
Services)(a) 16,400 569,900
- --------------------------------------------------------------
Gucci Group N.V.-ADR (Textiles) 22,000 1,405,250
- --------------------------------------------------------------
Royal Dutch Petroleum Co. (Oil &
Gas-Services) 6,500 1,109,875
- --------------------------------------------------------------
3,085,025
- --------------------------------------------------------------
SWEDEN-0.94%
Astra A.B.-Class A Shares
(Medical-Drugs) 12,000 592,971
- --------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR
(Telecommunications) 139,040 4,197,270
- --------------------------------------------------------------
4,790,241
- --------------------------------------------------------------
UNITED KINGDOM-0.80%
Danka Business Systems PLC-ADR
(Office Automation) 60,800 2,150,800
- --------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Medical-Drugs) 28,000 1,904,000
- --------------------------------------------------------------
4,054,800
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 24,330,626
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC CONVERTIBLE CORPORATE
BONDS-0.40%
FINANCE (CONSUMER CREDIT)-0.04%
Cityscape Financial Corp.,
Conv. Sub. Deb., 6.00%, 05/01/06
(Acquired 08/06/96-08/29/96; Cost
$273,697)(b) $ 205,000 $ 208,587
- --------------------------------------------------------------
RESTAURANTS-0.36%
Boston Chicken, Inc.,
Conv. Liquid Yield Option
Notes, 8.00%, 06/01/15(c) 5,690,000 1,809,648
- --------------------------------------------------------------
Total Domestic Convertible
Corporate Bonds 2,018,235
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-14.98%
U.S. TREASURY BILLS(d)-14.98%
5.57%, 01/02/97(e) 29,515,000 29,510,942
- --------------------------------------------------------------
5.58%, 01/02/97(e) 33,000,000 32,995,490
- --------------------------------------------------------------
4.72%, 02/06/97 3,100,000 3,085,926
- --------------------------------------------------------------
4.84%, 02/06/97 1,765,000 1,756,987
- --------------------------------------------------------------
4.98%, 03/27/97(e) 8,820,000 8,719,981
- --------------------------------------------------------------
4.96%, 03/27/97(e) 110,000 108,753
- --------------------------------------------------------------
Total U.S. Treasury Securities 76,178,079
- --------------------------------------------------------------
REPURCHASE AGREEMENT(f)-2.97%
SBC Capital Markets, Inc.,
6.25%, 01/02/97(g) 15,114,433 15,114,433
- --------------------------------------------------------------
TOTAL INVESTMENTS-100.13% 509,349,616
- --------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS-(0.13%) (660,077)
- --------------------------------------------------------------
NET ASSETS-100.00% $508,689,539
==============================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The market
value of this security at December 31, 1996 was $208,587 which represented
0.04% of the Fund's net assets.
(c) Zero coupon bond. The interest rate represents the rate of original issue
discount.
(d) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(e) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(f) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(g) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$400,138,889. Collateralized by $44,915,000 U.S. Treasury obligations, 0%
due 02/15/09 to 11/15/13 and $473,268,844 U.S. Government obligations, 5.035
to 7.679% due 03/03/97 to 03/01/33.
Investment Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debentures
Sub. - Subordinated
See Notes to Financial Statements.
FS-33
<PAGE> 165
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$421,625,299) $509,349,616
- ---------------------------------------------------------
Foreign currencies, at market value (cost $46) 48
- ---------------------------------------------------------
Receivables for:
Investments sold 1,062,946
- ---------------------------------------------------------
Fund shares sold 2,589,385
- ---------------------------------------------------------
Dividends and interest 242,279
- ---------------------------------------------------------
Investment for deferred compensation plan 59,847
- ---------------------------------------------------------
Other assets 19,160
- ---------------------------------------------------------
Total assets 513,323,281
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,294,708
- ---------------------------------------------------------
Fund shares reacquired 852,765
- ---------------------------------------------------------
Variation margin 1,511,100
- ---------------------------------------------------------
Deferred compensation plan 59,847
- ---------------------------------------------------------
Accrued advisory fees 292,551
- ---------------------------------------------------------
Accrued administrative service fees 6,524
- ---------------------------------------------------------
Accrued distribution fees 438,846
- ---------------------------------------------------------
Accrued trustees' fees 2,000
- ---------------------------------------------------------
Accrued transfer agent fees 85,083
- ---------------------------------------------------------
Accrued operating expenses 90,318
- ---------------------------------------------------------
Total liabilities 4,633,742
- ---------------------------------------------------------
Net assets applicable to shares outstanding $508,689,539
=========================================================
NET ASSETS:
Class A $227,882,039
=========================================================
Class B $280,807,500
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 15,416,223
=========================================================
Class B 19,603,569
=========================================================
Class A:
Net asset value and redemption price per
share $ 14.78
=========================================================
Offering price per share:
(Net asset value of $14.78 divided
by 94.50%) $ 15.64
=========================================================
Class B:
Net asset value and offering price per
share $ 14.32
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $22,195 foreign
withholding tax) $ 2,226,881
- ---------------------------------------------------------
Interest 4,640,218
- ---------------------------------------------------------
Total investment income 6,867,099
- ---------------------------------------------------------
EXPENSES:
Advisory fees 2,874,943
- ---------------------------------------------------------
Custodian fees 106,199
- ---------------------------------------------------------
Transfer agent fees-Class A 286,486
- ---------------------------------------------------------
Transfer agent fees-Class B 538,049
- ---------------------------------------------------------
Administrative service fees 72,903
- ---------------------------------------------------------
Trustees' fees 7,946
- ---------------------------------------------------------
Distribution fees-Class A 511,145
- ---------------------------------------------------------
Distribution fees-Class B 2,133,271
- ---------------------------------------------------------
Other 218,314
- ---------------------------------------------------------
Total expenses 6,749,256
- ---------------------------------------------------------
Less: Expenses paid indirectly (6,910)
- ---------------------------------------------------------
Net expenses 6,742,346
- ---------------------------------------------------------
Net investment income 124,753
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 16,117,722
- ---------------------------------------------------------
Foreign currency transactions (6,446)
- ---------------------------------------------------------
Futures contracts 9,704,155
- ---------------------------------------------------------
25,815,431
- ---------------------------------------------------------
Unrealized appreciation of:
Investment securities 40,419,895
- ---------------------------------------------------------
Futures contracts 585,412
- ---------------------------------------------------------
Foreign currencies 56
- ---------------------------------------------------------
41,005,363
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies and futures
contracts 66,820,794
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $66,945,547
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-34
<PAGE> 166
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ 124,753 $ (245,146)
- --------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and futures contracts 25,815,431 23,173,371
- --------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies and futures contracts 41,005,363 36,741,565
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 66,945,547 59,669,790
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (9,939,277) (9,550,061)
- --------------------------------------------------------------------------------------------
Class B (12,535,665) (7,736,264)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 35,293,722 13,074,357
- --------------------------------------------------------------------------------------------
Class B 122,675,148 89,072,917
- --------------------------------------------------------------------------------------------
Net increase in net assets 202,439,475 144,530,739
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 306,250,064 161,719,325
- --------------------------------------------------------------------------------------------
End of period $508,689,539 $306,250,064
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $412,932,159 $254,963,289
- --------------------------------------------------------------------------------------------
Undistributed net investment income (loss) 66,315 (58,438)
- --------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and futures contracts 6,948,040 3,607,551
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and futures contracts 88,743,025 47,737,662
- --------------------------------------------------------------------------------------------
$508,689,539 $306,250,064
============================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Growth Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class are voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund. The Fund's objective is to achieve long-term growth
of capital by investing primarily in the common stocks of established medium- to
large-size companies with prospects for above-average, long-term earnings
growth. Realization of current income is an incidental consideration.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the mean between the closing bid and asked prices
on that day. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued
at the mean between the last bid and asked prices based upon quotes furnished
by market makers for such securities. If a mean is not available, as is the
case in some foreign markets, the closing bid will be used absent a last
sales price. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the mean of the closing bid and asked prices. Debt obligations
(including convertible bonds)
FS-35
<PAGE> 167
are valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices and may reflect appropriate factors such as yield,
type of issue, coupon rate and maturity date. Securities for which market
prices are not provided by any of the above methods are valued at the mean
between last bid and asked prices based upon quotes furnished by independent
sources. Securities for which market quotations either are not readily
available or are questionable are valued at fair value as determined in good
faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events affecting the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Trustees.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
D. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
E. Stock Index Futures Contracts -- The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to market"
on a daily basis to reflect the market value of the contracts at the end of
each day's trading. Variation margin payments are made or received depending
upon whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and the change in the value of the contracts may not correlate with changes
in the value of the Fund's portfolio being hedged.
NOTE 2- ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $150 million.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1996, AIM
was reimbursed $72,903 for such services.
The Fund, pursuant to a transfer agency and shareholder service agreement, has
agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer
agency and shareholder services to the Fund. During the year ended December 31,
1996, AFS was paid $502,473 for such services.
The Fund received reductions in transfer agency fees payable to AFS of $6,391
from dividends received on balances in cash management bank accounts. In
addition, pricing service expenses in the amount of $519 were paid through
directed brokerage commissions paid by the Fund. The above arrangements resulted
in a reduction in the Fund's total expenses of $6,910 during the year ended
December 31, 1996.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides for payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the respective classes. AIM Distributors may, from time to time, assign,
transfer or pledge to
FS-36
<PAGE> 168
one or more assignees, its rights to all or a portion of (a) compensation
received by AIM Distributors from the Fund pursuant to the Class B Plan (but not
AIM Distributors' duties and obligations pursuant to Class B Plan) and (b) any
contingent deferred sales charges payable to AIM Distributors related to Class B
shares. During the year ended December 31, 1996, the Class A shares and the
Class B shares paid AIM Distributors $511,145 and $2,133,271, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $219,373 from sales of the Class A
shares of the Fund during the year ended December 31, 1996. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1996,
AIM Distributors received $105,215 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1996, the Fund paid legal fees of $3,719
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $3,400,000. During the year ended December 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.08% on the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1996 was
$433,485,417 and $319,852,010, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $95,659,038
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (8,547,044)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $87,111,994
=========================================================
Cost of investments for tax purposes is
$422,245,355.
</TABLE>
NOTE 6-SHARE INFORMATION
Changes in shares outstanding during years ended December 31, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- ---------------------------
SHARES VALUE SHARES VALUE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 10,862,824 $ 152,766,558 11,797,896 $ 152,090,445
- --------------------------------------------------------------------------------
Class B 12,013,218 167,088,540 7,675,619 97,224,008
- --------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 657,046 9,474,936 714,727 9,127,169
- --------------------------------------------------------------------------------
Class B 845,350 11,809,495 577,277 7,221,770
- --------------------------------------------------------------------------------
Reacquired:
Class A (8,993,672) (126,947,772) (11,562,734) (148,143,257)
- --------------------------------------------------------------------------------
Class B (4,060,745) (56,222,887) (1,213,971) (15,372,861)
- --------------------------------------------------------------------------------
11,324,021 $ 157,968,870 7,988,814 $ 102,147,274
================================================================================
</TABLE>
NOTE 7-OPEN FUTURES CONTRACTS
On December 31, 1996, $3,105,000 principal amount of U.S. Treasury bills were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
NO. OF UNREALIZED
CONTRACT CONTRACTS MONTH COMMITMENT APPRECIATION
<S> <C> <C> <C> <C>
207
S&P 500 Index contracts Mar 97 Buy $1,018,602
==================================================================
</TABLE>
FS-37
<PAGE> 169
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the ten-year period ended December 31, 1996 and for a Class
B share outstanding during each of the years in the three-year period ended
December 31, 1996 and the period September 1, 1993 (date sales commenced)
through December 31, 1993.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992(a) 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 13.05 $ 10.32 $ 11.32 $ 12.28 $ 14.73 $ 12.35 $ 13.92
- --------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.07 0.02 -- -- 0.06 0.11 0.21
- --------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 2.34 3.50 (0.57) 0.41 (0.04) 4.33 (0.91)
- --------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations 2.41 3.52 (0.57) 0.41 0.02 4.44 (0.70)
- --------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income -- -- -- -- (0.06) (0.13) (0.20)
- --------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Distributions from capital gains (0.68) (0.79) (0.43) (1.37) (2.41) (1.93) (0.67)
- --------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.68) (0.79) (0.43) (1.37) (2.47) (2.06) (0.87)
- --------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 14.78 $ 13.05 $ 10.32 $ 11.32 $ 12.28 $ 14.73 $ 12.35
============================================= ======== ======== ======== ======== ======== ======== ========
Total return(b) 18.61% 34.31% (4.99)% 3.64% 0.19% 37.05% (5.04)%
============================================= ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $227,882 $168,217 $123,271 $146,723 $168,395 $185,461 $153,245
============================================= ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.18%(c)(d) 1.28% 1.22% 1.17% 1.17% 1.21% 1.16%
============================================= ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average net
assets 0.46%(c) 0.20% 0.02% 0.02% 0.42% 0.73% 1.41%
============================================= ======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 97% 87% 201% 192% 133% 73% 61%
============================================= ======== ======== ======== ======== ======== ======== ========
Average broker commission rate(e) $ 0.0621 N/A N/A N/A N/A N/A N/A
============================================= ======== ======== ======== ======== ======== ======== ========
<CAPTION>
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 11.93 $ 11.04 $ 12.91
- --------------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income 0.25 0.23 0.24
- --------------------------------------------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 3.16 0.89 0.30
- --------------------------------------------- -------- -------- --------
Total from investment operations 3.41 1.12 0.54
- --------------------------------------------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.27) (0.23) (0.31)
- --------------------------------------------- -------- -------- --------
Distributions from capital gains (1.15) -- (2.10)
- --------------------------------------------- -------- -------- --------
Total distributions (1.42) (0.23) (2.41)
- --------------------------------------------- -------- -------- --------
Net asset value, end of period $ 13.92 $ 11.93 $ 11.04
============================================= ======== ======== ========
Total return(b) 28.87% 10.13% 3.62%
============================================= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $187,805 $180,793 $203,329
============================================= ======== ======== ========
Ratio of expenses to average net assets 1.00% 0.98% 0.84%
============================================= ======== ======== ========
Ratio of net investment income to average net
assets 1.62% 1.73% 1.51%
============================================= ======== ======== ========
Portfolio turnover rate 53% 38% 78%
============================================= ======== ======== ========
Average broker commission rate(e) N/A N/A N/A
============================================= ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Total returns do not deduct sales charges.
(c) Ratios are based on average net assets of $204,456,793.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
<TABLE>
<CAPTION>
1996 1995 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 12.77 $ 10.21 $ 11.31 $ 12.83
- ------------------------------------------------------------ -------- -------- ------- -------
Income from investment operations:
Net investment income (loss) (0.05) (0.08)(a) (0.06) (0.01)
- ------------------------------------------------------------ -------- -------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 2.28 3.43(a) (0.61) (0.14)
- ------------------------------------------------------------ -------- -------- ------- -------
Total from investment operations 2.23 3.35 (0.67) (0.15)
- ------------------------------------------------------------ -------- -------- ------- -------
Less distributions:
Distributions from capital gains (0.68) (0.79) (0.43) (1.37)
- ------------------------------------------------------------ -------- -------- ------- -------
Total distributions (0.68) (0.79) (0.43) (1.37)
- ------------------------------------------------------------ -------- -------- ------- -------
Net asset value, end of period $ 14.32 $ 12.77 $ 10.21 $ 11.31
============================================================ ======== ======== ======= =======
Total return(b) 17.60% 33.00% (5.88)% (0.92)%
============================================================ ======== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $280,807 $138,034 $38,448 $11,053
============================================================ ======== ======== ======= =======
Ratio of expenses to average net assets 2.03%(c)(d) 2.13% 2.18% 1.91%(e)
============================================================ ======== ======== ======= =======
Ratio of net investment income (loss) to average net assets (0.39)%(c) (0.65)% (0.94)% (0.72)%(e)
============================================================ ======== ======== ======= =======
Portfolio turnover rate 97% 87% 201% 192%
============================================================ ======== ======== ======= =======
Average broker commission rate(f) $ 0.0621 N/A N/A N/A
============================================================ ======== ======== ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns do not reflect deduction of contingent deferred sales charges
and are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $213,327,146.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) Annualized.
(f) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
NOTE 9-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO plc. AIM Management is the parent company of the Fund's advisor. The
merger is expected to take place during the first quarter of 1997.
FS-38
<PAGE> 170
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM High Yield Fund:
We have audited the accompanying statement of assets and
liabilities of AIM High Yield Fund (a portfolio of AIM
Funds Group), including the schedule of investments, as of
December 31, 1996, the related statement of operations for
the year then ended, the statement of changes in its net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in
the four-year period then ended. These financial statements
and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an
opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM High Yield
Fund as of December 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended and the
financial highlights for each of the years in the four-year
period then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
---------------------
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1997
FS-39
<PAGE> 171
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS & NOTES-90.81%
ADVERTISING/BROADCASTING-3.63%
Echostar Satellite Broadcasting,
Sr. Disc. Notes, 13.125%,
03/15/04(a) $23,180,000 $ 17,616,800
- ---------------------------------------------------------------
Katz Media Corp.,
Sr. Sub. Notes, 10.50%,
01/15/07(b)
(Acquired 12/13/96; Cost
$7,850,000) 7,850,000 8,056,062
- ---------------------------------------------------------------
Omnicom Group, Inc.,
Conv. Sub. Deb., 4.25%,
01/03/07(b)
(Acquired 12/11/96; Cost
$1,500,000) 1,500,000 1,555,500
- ---------------------------------------------------------------
SFX Broadcasting, Inc.,
Series B Sr. Sub. Notes, 10.75%,
05/15/06 15,430,000 16,317,225
- ---------------------------------------------------------------
Sinclair Broadcast Group, Inc.,
Sr. Sub. Notes, 10.00%, 09/30/05 13,850,000 14,196,250
- ---------------------------------------------------------------
United International Holdings, Inc.,
Sr. Secured Disc. Notes,
14.00%, 11/15/99(c) 2,400,000 1,731,000
- ---------------------------------------------------------------
14.00%, 11/15/99(c)(d) 9,250,000 6,821,875
- ---------------------------------------------------------------
United International Holdings, Inc.,
Series B Sr. Secured Disc. Notes,
14.00%, 11/15/99 15,160,000 10,934,150
- ---------------------------------------------------------------
Viacom, Inc.,
Sub. Deb., 8.00%, 07/07/06 8,000,000 7,740,000
- ---------------------------------------------------------------
84,968,862
- ---------------------------------------------------------------
AIRLINES-1.15%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 12,550,000 13,938,407
- ---------------------------------------------------------------
Continental Airlines, Inc.,
Conv. Sr. Sub. Notes, 6.75%,
04/15/06(b)
(Acquired 02/27/96; Cost
$1,999,275) 2,000,000 2,244,260
- ---------------------------------------------------------------
Greenwich Air Services, Inc.,
Sr. Notes, 10.50%, 06/01/06 9,910,000 10,653,250
- ---------------------------------------------------------------
26,835,917
- ---------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS &
TIRES-1.33%
Blue Bird Body Co.,
Sr. Sub. Notes, 10.75%,
11/15/06(b)
(Acquired 11/13/96-11/20/96;
Cost $12,739,986) 12,520,000 13,114,700
- ---------------------------------------------------------------
CSK Auto Inc.,
Sr. Sub. Notes, 11.00%,
11/01/06(b)
(Acquired 10/23/96; Cost
$13,060,000) 13,060,000 13,566,075
- ---------------------------------------------------------------
Exide Corp.,
Conv. Sr. Sub. Notes, 2.90%,
12/15/05(b)
(Acquired 12/19/96; Cost
$4,518,750) 7,500,000 4,518,750
- ---------------------------------------------------------------
31,199,525
- ---------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-1.04%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.24%,
06/20/20(c) 125,000,000 24,333,750
- ---------------------------------------------------------------
BUSINESS SERVICES-0.59%
Neodata Services, Inc.,
Series B Sr. Deferred Coupon
Notes, 12.00%, 05/01/03 13,000,000 13,715,000
- ---------------------------------------------------------------
CABLE TELEVISION-7.39%
Cablevision Systems Corp.,
Sr. Sub. Deb., 10.75%, 04/01/04 7,000,000 7,262,500
- ---------------------------------------------------------------
Century Communications Corp.,
Sr. Sub. Notes., 11.875%,
10/15/03 10,900,000 11,676,625
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CABLE TELEVISION-(CONTINUED)
Comcast UK Cable Partners Ltd.,
(United Kingdom), Sr. Yankee
Disc. Deb., 11.20%, 11/15/07(a) $20,100,000 $ 14,271,000
- ---------------------------------------------------------------
Diamond Cable Communications PLC,
(United Kingdom), Sr. Yankee
Disc. Notes,
11.75%, 12/15/05(a) 22,000,000 15,675,000
- ---------------------------------------------------------------
Fundy Cable Ltd., (Canada),
Sr. Yankee Secured Second
Priority Notes, 11.00%, 11/15/05 11,400,000 12,112,500
- ---------------------------------------------------------------
Heartland Wireless Communications
Inc.,
Sr. Notes, 14.00%, 10/15/04(b)
(Acquired 12/17/96; Cost
$14,880,000) 14,880,000 15,475,200
- ---------------------------------------------------------------
International CableTel, Inc.,
Sr. Notes, 11.50%, 02/01/06(a) 21,200,000 14,469,000
- ---------------------------------------------------------------
Kabelmedia Holdings GmbH, (Germany),
Sr. Disc. Yankee Notes,
13.625%, 08/01/06(a) 26,000,000 14,430,000
- ---------------------------------------------------------------
Marcus Cable Co., L.P.,
Sr. Deb., 11.875%, 10/01/05 12,475,000 13,441,813
- ---------------------------------------------------------------
Sr. Disc. Notes, 14.25%,
12/15/05(a) 12,500,000 9,031,250
- ---------------------------------------------------------------
Rifkin Acquisition Partners L.L.P.,
Sr. Sub. Notes, 11.125%,
01/15/06 12,495,000 12,994,800
- ---------------------------------------------------------------
TeleWest Communications PLC,
(United Kingdom), Sr. Yankee
Disc. Deb., 11.00%, 10/01/07(a) 23,970,000 16,689,112
- ---------------------------------------------------------------
Wireless One, Inc.,
Sr. Notes, 13.00%, 10/15/03 15,740,000 15,425,200
- ---------------------------------------------------------------
172,954,000
- ---------------------------------------------------------------
CHEMICALS-5.28%
Berry Plastics Corp.,
Sr. Sub. Notes, 12.25%, 04/15/04 9,000,000 9,911,250
- ---------------------------------------------------------------
BPC Holding Corp.,
Series B Sr. Notes, 12.50%,
06/15/06 7,750,000 8,185,938
- ---------------------------------------------------------------
Crain Industries, Inc.,
Sr. Sub. Notes, 13.50%, 08/15/05 14,500,000 16,421,250
- ---------------------------------------------------------------
LaRoche Industries, Inc.,
Sr. Sub. Notes, 13.00%, 08/15/04 16,145,000 17,436,600
- ---------------------------------------------------------------
Pioneer Americas Acquisition Corp.,
Sr. Notes, 13.375%, 04/01/05 9,000,000 10,282,500
- ---------------------------------------------------------------
Polymer Group, Inc.,
Sr. Notes, 12.25%, 07/15/02 13,634,000 14,861,060
- ---------------------------------------------------------------
PrintPack Inc.,
Sr. Sub. Notes, 10.625%,
08/15/06(b)
(Acquired 08/15/96-09/23/96;
Cost $10,508,500) 10,450,000 10,868,000
- ---------------------------------------------------------------
Sterling Chemicals Holdings,
Sr. Secured Disc. Notes,
13.50%, 08/15/08(a) 10,500,000 6,090,000
- ---------------------------------------------------------------
Sterling Chemicals, Inc.,
Sr. Sub. Notes, 11.75%, 08/15/06 10,000,000 10,600,000
- ---------------------------------------------------------------
Tri Polyta Finance B.V.,
(Indonesia),
Yankee Secured Gtd. Notes,
11.375%, 12/01/03 18,330,000 19,154,850
- ---------------------------------------------------------------
123,811,448
- ---------------------------------------------------------------
</TABLE>
FS-40
<PAGE> 172
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
COMPUTER NETWORKING-0.12%
3Com Corp.,
Conv. Sub. Notes, 10.25%,
11/01/01(b)
(Acquired 11/08/94-01/04/95;
Cost $1,314,250) $ 1,300,000 $ 2,894,619
- ---------------------------------------------------------------
COMPUTER PERIPHERALS-0.89%
Exide Electronics Group, Inc.,
Sr. Sub. Notes, 11.50%, 03/15/06 13,000,000 13,926,250
- ---------------------------------------------------------------
Sanmina Corp.,
Conv. Sub. Notes, 5.50%,
08/15/02(b)
(Acquired 08/10/95; Cost
$1,000,000) 1,000,000 2,049,490
- ---------------------------------------------------------------
Storage Technology Corp.,
Conv. Deb., 8.00%, 05/31/15 3,500,000 4,783,485
- ---------------------------------------------------------------
20,759,225
- ---------------------------------------------------------------
CONSUMER NON-DURABLES-0.71%
Hines Horticulture, Inc.,
Sr. Sub. Notes, 11.75%, 10/15/05 15,670,000 16,688,550
- ---------------------------------------------------------------
CONTAINERS-2.59%
Ivex Holdings Corp.,
Series B Sr. Disc. Deb.,
13.25%, 03/15/05(a) 20,000,000 15,825,000
- ---------------------------------------------------------------
Ivex Packaging Corp.,
Sr. Sub. Notes, 12.50%, 12/15/02 6,500,000 7,085,000
- ---------------------------------------------------------------
MVE Inc.,
Sr. Secured Notes, 12.50%,
02/15/02 17,250,000 18,392,812
- ---------------------------------------------------------------
National Fiberstok Corp.,
Series B Sr. Notes, 11.625%,
06/15/02 18,530,000 19,363,850
- ---------------------------------------------------------------
60,666,662
- ---------------------------------------------------------------
ELECTRIC POWER-0.43%
Panda Funding Corp.,
Pooled Project Bonds,
11.625%, 08/20/12(b)
(Acquired 07/26/96; Cost
$9,800,000) 9,800,000 10,167,500
- ---------------------------------------------------------------
ENERGY (ALTERNATE SOURCES)-0.47%
CE Casecnan Water & Energy Co.,
Inc., (Philippines), Series A
Sr. Yankee Secured Notes,
11.45%, 11/15/05 10,000,000 11,025,000
- ---------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.08%
Berkshire Hathaway, Inc.,
Conv. Sr. Notes, 3.00%, 12/02/01 2,000,000 1,863,140
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.48%
Aames Financial Corp.,
Conv. Sub. Deb., 5.50%,
03/15/06(b)
(Acquired 02/16/96; Cost
$505,000) 500,000 663,655
- ---------------------------------------------------------------
Outsourcing Solutions Inc.,
Sr. Sub. Notes, 11.00%,
11/01/06(b)
(Acquired 10/31/96; Cost
$10,050,000) 10,050,000 10,552,500
- ---------------------------------------------------------------
11,216,155
- ---------------------------------------------------------------
FINANCE (LEASING COMPANIES)-0.74%
Sea Containers, Ltd., (Bermuda),
Series A Sr. Yankee Sub. Deb.,
12.50%, 12/01/04 5,350,000 5,938,500
- ---------------------------------------------------------------
Series B Sr. Yankee Sub. Deb.,
(Bermuda),
12.50%, 12/01/04 10,220,000 11,293,100
- ---------------------------------------------------------------
17,231,600
- ---------------------------------------------------------------
FOOD/PROCESSING-2.10%
American Rice, Inc.,
Secured Mortgage Notes, 13.00%,
07/31/02 11,513,000 11,167,610
- ---------------------------------------------------------------
Chiquita Brands International, Inc.,
Sr. Notes, 10.25%, 11/01/06 11,520,000 12,326,400
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FOOD/PROCESSING-(CONTINUED)
International Home Foods Inc.,
Sr. Sub. Notes, 10.375%,
11/01/06(b)
(Acquired 10/29/96; Cost
$10,450,000) $10,450,000 $ 10,920,250
- ---------------------------------------------------------------
Pilgrim's Pride Corp.,
Sr. Sub. Notes, 10.875%,
08/01/03 14,805,000 14,823,506
- ---------------------------------------------------------------
49,237,766
- ---------------------------------------------------------------
FURNITURE-0.76%
Simmons Co.,
Sr. Sub. Notes, 10.75%, 04/15/06 16,800,000 17,766,000
- ---------------------------------------------------------------
GAMING-4.76%
Aztar Corp.,
Sr. Sub. Notes, 13.75%, 10/01/04 19,710,000 21,188,250
- ---------------------------------------------------------------
Coast Hotels & Casinos Inc.,
Series B Secured First Mortgage
Gtd. Notes, 13.00%, 12/15/02 16,510,000 18,284,825
- ---------------------------------------------------------------
Harvey Casinos Resorts,
Sr. Sub. Notes, 10.625%,
06/01/06 10,400,000 11,154,000
- ---------------------------------------------------------------
Showboat Marina Casino Partnership
& Showboat Marina Financial
Corp., First Mortgage Notes,
13.50%, 03/15/03 20,100,000 22,210,500
- ---------------------------------------------------------------
Trump Atlantic City Associates,
Secured First Mortgage Gtd. Notes,
11.25%, 05/01/06 26,340,000 26,208,300
- ---------------------------------------------------------------
Trump Castle Funding, Inc.,
Mortgage Notes, 11.75%, 11/15/03 14,000,000 12,460,000
- ---------------------------------------------------------------
111,505,875
- ---------------------------------------------------------------
HOME BUILDING-0.72%
Continental Homes Holding Corp.,
Sr. Notes, 10.00%, 04/15/06 16,340,000 16,911,900
- ---------------------------------------------------------------
HOTELS/MOTELS-0.18%
HFS, Inc.,
Conv. Sr. Notes, 4.50%, 10/01/99 750,000 2,407,402
- ---------------------------------------------------------------
Prime Hospitality Corp.,
Conv. Sub. Notes, 7.00%,
04/15/02 1,200,000 1,784,496
- ---------------------------------------------------------------
4,191,898
- ---------------------------------------------------------------
LEISURE & RECREATION-3.07%
American Skiing Corp.,
Sr. Sub. Notes, 12.00%,
07/15/06(b)
(Acquired 06/25/96; Cost
$14,574,750) 15,000,000 15,862,500
- ---------------------------------------------------------------
Cobblestone Golf Group Inc.,
Series B Sr. Notes, 11.50%,
06/01/03 5,000,000 5,231,250
- ---------------------------------------------------------------
Cobblestone Holdings Inc.,
Series B Sr. Notes, 13.50%,
06/01/04(c) 23,250,000 9,706,875
- ---------------------------------------------------------------
Icon Fitness Corp.,
Sr. Disc. Notes, 14.00%,
11/15/06(a)(b)
(Acquired 11/15/96; Cost
$7,130,340) 14,000,000 7,542,500
- ---------------------------------------------------------------
Icon Health & Fitness,
Sr. Sub. Notes, 13.00%, 07/15/02 7,250,000 8,237,813
- ---------------------------------------------------------------
IHF Holdings Inc.,
Sr. Sub. Disc. Notes, 15.00%,
11/15/04(a) 10,000,000 7,925,000
- ---------------------------------------------------------------
Stuart Entertainment, Inc.,
Sr. Sub. Notes, 12.50%,
11/15/04(b)
(Acquired 11/07/96; Cost
$17,000,000) 17,000,000 17,340,000
- ---------------------------------------------------------------
71,845,938
- ---------------------------------------------------------------
MACHINERY (HEAVY)-1.41%
Fairfield Manufacturing Co., Inc.,
Sr. Sub. Notes, 11.375%,
07/01/01 13,725,000 14,411,250
- ---------------------------------------------------------------
</TABLE>
FS-41
<PAGE> 173
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
MACHINERY (HEAVY)-(CONTINUED)
PrimeCo Inc.,
Sr. Sub. Notes, 12.75%, 03/01/05 $16,202,000 $ 18,551,290
- ---------------------------------------------------------------
32,962,540
- ---------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-3.91%
AM General Corp.,
Sr. Notes, 12.875%, 05/01/02 12,665,000 12,110,905
- ---------------------------------------------------------------
Calmar Inc.,
Sr. Sub. Notes, 11.50%, 08/15/05 10,500,000 10,893,750
- ---------------------------------------------------------------
Coinmach Corp.,
Series B Sr. Notes, 11.75%,
11/15/05 16,500,000 17,861,250
- ---------------------------------------------------------------
Interlake Corp.,
Sr. Notes, 12.00%, 11/15/01 8,300,000 8,932,875
- ---------------------------------------------------------------
Sr. Sub. Deb., 12.125%, 03/01/02 10,870,000 11,399,913
- ---------------------------------------------------------------
Spinnaker Industries Inc.,
Sr. Secured Notes, 10.75%,
10/15/06(b)
(Acquired 10/18/96-11/13/96;
Cost $11,151,188) 11,100,000 11,571,750
- ---------------------------------------------------------------
Thermo Electron Corp.,
Conv. Deb., 5.00%, 04/15/01(b)
(Acquired 04/07/94; Cost
$1,508,000) 1,500,000 2,770,830
- ---------------------------------------------------------------
Tokheim Corp.,
Sr. Sub. Notes, 11.50%, 08/01/06 14,975,000 15,985,813
- ---------------------------------------------------------------
91,527,086
- ---------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-1.68%
Dade International Inc.,
Series B Sr. Sub. Notes,
11.125%, 05/01/06 12,360,000 13,441,500
- ---------------------------------------------------------------
Graphic Controls Corp.,
Series A Sr. Sub. Notes, 12.00%,
09/15/05 10,790,000 12,003,875
- ---------------------------------------------------------------
IMED Corp.,
Sr. Sub. Notes, 9.75%,
12/01/06(b)
(Acquired 11/19/96; Cost
$13,680,000) 13,680,000 13,970,700
- ---------------------------------------------------------------
39,416,075
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.68%
American Medical Response, Inc.,
Conv. Sub. Notes, 5.25%,
02/01/01(b) (Acquired
01/03/96-02/08/96; Cost
$2,054,375) 2,000,000 2,162,500
- ---------------------------------------------------------------
Dynacare Inc., (Canada),
Sr. Yankee Notes, 10.75%,
01/15/06 11,550,000 11,723,250
- ---------------------------------------------------------------
HEALTHSOUTH Rehabilitation Corp.,
Conv. Sub. Deb., 5.00%, 04/01/01 1,700,000 3,422,695
- ---------------------------------------------------------------
Multicare Companies Inc.,
Conv. Sub. Deb., 7.00%,
03/15/03(b) (Acquired 03/09/95;
Cost $500,000) 500,000 612,500
- ---------------------------------------------------------------
PhyCor, Inc.,
Conv. Sub. Deb., 4.50%, 02/15/03 3,000,000 2,980,860
- ---------------------------------------------------------------
Tenet Healthcare Corp.,
Conv. Sub. Notes, 6.00%,
12/01/05 1,000,000 1,050,630
- ---------------------------------------------------------------
Sr. Sub. Notes, 10.125%,
03/01/05 15,600,000 17,316,000
- ---------------------------------------------------------------
39,268,435
- ---------------------------------------------------------------
METALS-0.94%
GS Industries, Inc.,
Sr. Notes, 12.00%, 09/01/04 9,475,000 9,889,531
- ---------------------------------------------------------------
Sr. Notes, 12.25%, 10/01/05 11,525,000 12,130,063
- ---------------------------------------------------------------
22,019,594
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)-4.83%
Abraxas Petroleum Corp.,
Sr. Notes, 11.50%, 11/01/04(b)
(Acquired 11/05/96-12/03/96;
Cost $22,868,950) $22,630,000 $ 24,270,675
- ---------------------------------------------------------------
CODA Energy, Inc.,
Series B Sr. Gtd. Sub. Notes,
10.50%, 04/01/06 12,150,000 12,909,375
- ---------------------------------------------------------------
Forest Oil Corp.,
Sr. Sub. Notes, 11.25%, 09/01/03 15,702,000 17,036,670
- ---------------------------------------------------------------
Gerrity Oil & Gas Corp.,
Sr. Sub. Notes, 11.75%, 07/15/04 14,750,000 16,114,375
- ---------------------------------------------------------------
Mariner Energy Corp.,
Sr. Sub. Notes, 10.50%,
08/01/06(b) (Acquired
08/12/96-09/04/96; Cost
$14,000,750) 13,950,000 14,856,750
- ---------------------------------------------------------------
Maxus Energy Corp.,
Deb., 11.50%, 11/15/15 12,200,000 12,871,000
- ---------------------------------------------------------------
Plains Resources, Inc.,
Series B Sr. Gtd. Sub. Notes,
10.25%, 03/15/06 11,630,000 12,473,175
- ---------------------------------------------------------------
Pogo Producing Co.,
Conv. Sub. Notes, 5.50%,
06/15/06 2,000,000 2,516,920
- ---------------------------------------------------------------
113,048,940
- ---------------------------------------------------------------
OIL & GAS (INTEGRATED)-0.48%
Wainoco Oil Corp.,
Sr. Notes, 12.00%, 08/01/02 10,995,000 11,324,850
- ---------------------------------------------------------------
OIL & GAS (REFINING/MARKETING)-1.03%
Petroleum Heat & Power Co., Inc.,
Sub. Deb., 12.25%, 02/01/05 21,575,000 24,029,156
- ---------------------------------------------------------------
OIL & GAS (SERVICES)-1.26%
Falcon Drilling Co., Inc.,
Series B Sr. Notes, 9.75%,
01/15/01 10,100,000 10,630,250
- ---------------------------------------------------------------
Series B Sr. Sub. Notes, 12.50%,
03/15/05 8,500,000 9,530,625
- ---------------------------------------------------------------
Kelley Oil & Gas Corp.,
Sr. Sub. Notes, 10.375%,
10/15/06(b)
(Acquired 10/25/96; Cost
$8,985,000) 9,000,000 9,405,000
- ---------------------------------------------------------------
29,565,875
- ---------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.08%
Pride Petroleum Services, Inc.,
Conv. Sub. Deb., 6.25%, 02/15/06 1,000,000 1,835,000
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-4.53%
American Pad & Paper Co.,
Series B Sr. Sub. Notes, 13.00%,
11/15/05 14,906,000 17,514,550
- ---------------------------------------------------------------
RAPP International Finance,
(Indonesia),
Gtd. Yankee Secured Notes,
11.50%, 12/15/00 13,920,000 14,790,000
- ---------------------------------------------------------------
Repap New Brunswick, (Canada),
Sr. Yankee Second Priority
Secured Notes, 10.625%, 04/15/05 14,420,000 15,141,000
- ---------------------------------------------------------------
Riverwood International Corp.,
Sr. Gtd. Sub. Notes, 10.875%,
04/01/08 12,890,000 11,987,700
- ---------------------------------------------------------------
Tjiwi Kimia International Global
Co., B.V., (Indonesia), Sr. Gtd.
Notes, 13.25%, 08/01/01 14,040,000 15,917,850
- ---------------------------------------------------------------
Uniforet Inc., (Canada),
Sr. Yankee Gtd. Notes, 11.125%, 10/15/06(b)
(Acquired 10/07/96-12/19/96;
Cost $17,573,231) 17,885,000 16,722,475
- ---------------------------------------------------------------
</TABLE>
FS-42
<PAGE> 174
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
PAPER & FOREST PRODUCTS-(CONTINUED)
United Stationer Supply,
Sr. Sub. Notes, 12.75%, 05/01/05 $12,500,000 $ 13,937,500
- ---------------------------------------------------------------
106,011,075
- ---------------------------------------------------------------
POLLUTION CONTROL-0.79%
Norcal Waste Systems Inc.,
Series B Sr. Gtd. Notes, 13.00%,
11/15/05 12,910,000 14,394,650
- ---------------------------------------------------------------
U.S. Filter Corp.,
Conv. Sub. Notes, 4.50%,
12/15/01 2,250,000 2,290,590
- ---------------------------------------------------------------
Conv. Sub. Notes, 6.00%,
09/15/05 1,000,000 1,776,690
- ---------------------------------------------------------------
18,461,930
- ---------------------------------------------------------------
PUBLISHING-1.54%
Affiliated Newspaper Investments,
Sr. Disc. Notes, 13.25%,
07/01/06(a) 15,826,000 13,056,450
- ---------------------------------------------------------------
Garden State Newspapers, Inc.,
Sr. Sub. Secured Notes, 12.00%,
07/01/04 11,500,000 12,592,500
- ---------------------------------------------------------------
MDC Communications Corp., (Canada),
Sr. Sub. Yankee Notes, 10.50%,
12/01/06 10,040,000 10,378,850
- ---------------------------------------------------------------
36,027,800
- ---------------------------------------------------------------
RAILROADS-0.40%
Johnstown America Industries, Inc.,
Sr. Sub. Notes, 11.75%, 08/15/05 9,820,000 9,476,300
- ---------------------------------------------------------------
RETAIL (FOOD & DRUG)-2.92%
Carr-Gottstein Foods Co.,
Sr. Sub. Notes, 12.00%, 11/15/05 19,475,000 20,765,218
- ---------------------------------------------------------------
Core-Mark International, Inc.,
Sr. Sub. Notes, 11.375%,
09/15/03(b)
(Acquired 09/24/96-11/07/96;
Cost $13,643,950) 13,510,000 13,847,750
- ---------------------------------------------------------------
Cumberland Farms,
Secured Notes, 10.50%, 10/01/03 15,004,000 14,553,880
- ---------------------------------------------------------------
Jitney-Jungle Stores of America Inc.,
Sr. Gtd. Notes, 12.00%, 03/01/06 18,000,000 19,102,500
- ---------------------------------------------------------------
68,269,348
- ---------------------------------------------------------------
RESTAURANTS-0.03%
Starbucks Corp.,
Conv. Sub. Deb., 4.25%, 11/01/02 500,000 672,500
- ---------------------------------------------------------------
RETAIL (STORES)-3.87%
Guitar Center Management Co.,
Sr. Notes, 11.00%, 07/01/06 10,200,000 10,824,750
- ---------------------------------------------------------------
Home Depot, Inc.,
Conv. Sub. Notes, 3.25%,
10/01/01 2,000,000 1,953,600
- ---------------------------------------------------------------
Loehmann's Holdings, Inc.,
Sr. Notes, 11.875%, 05/15/03 14,420,000 15,681,750
- ---------------------------------------------------------------
Pamida Inc.,
Sr. Sub. Notes, 11.75%, 03/15/03 14,950,000 12,558,000
- ---------------------------------------------------------------
Saks Holdings, Inc.,
Conv. Sub. Notes, 5.50%,
09/15/06 2,000,000 1,842,500
- ---------------------------------------------------------------
Samsonite Corp.,
Sr. Sub. Notes, 11.125%,
07/15/05 13,590,000 15,373,688
- ---------------------------------------------------------------
Specialty Retailers Inc.,
Sr. Secured Notes, 12.50%,
12/15/00(b)
(Acquired 05/23/96; Cost
$10,000,000) 10,000,000 10,475,000
- ---------------------------------------------------------------
Sr. Sub. Notes, 11.00%, 08/15/03 11,520,000 12,153,600
- ---------------------------------------------------------------
Series D Sr. Sub. Notes, 11.00%,
08/15/03 8,250,000 8,641,875
- ---------------------------------------------------------------
Staples Inc.,
Conv. Sub. Deb., 4.50%,
10/01/00(b)
(Acquired 09/12/95; Cost
$1,000,000) 1,000,000 1,029,160
- ---------------------------------------------------------------
90,533,923
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SCHOOLS-1.96%
Herff Jones Inc.,
Sr. Sub. Notes, 11.00%, 08/15/05 $13,040,000 $ 14,099,500
- ---------------------------------------------------------------
Scholastic Brands Inc.,
Sr. Sub. Notes, 11.00%,
01/15/07(b)
(Acquired 12/10/96-12/12/96;
Cost $14,062,906) 13,955,000 14,268,988
- ---------------------------------------------------------------
Selmer Co., Inc.,
Sr. Gtd. Sub. Notes, 11.00%,
05/15/05 15,920,000 17,432,400
- ---------------------------------------------------------------
45,800,888
- ---------------------------------------------------------------
SECURITY (SAFETY SERVICES)-0.67%
Cabot Safety Corp.,
Sr. Sub. Notes, 12.50%, 07/15/05 13,975,000 15,652,000
- ---------------------------------------------------------------
SEMICONDUCTORS-0.88%
Advanced Micro Devices, Inc.,
Sr. Secured Notes, 11.00%,
08/01/03 18,965,000 20,671,850
- ---------------------------------------------------------------
STEEL-1.11%
Gulf States Steel Corp.,
First Mortgage Notes, 13.50%,
04/15/03 15,990,000 15,270,450
- ---------------------------------------------------------------
Weirton Steel Corp.,
Sr. Notes, 11.375%, 07/01/04 10,400,000 10,608,000
- ---------------------------------------------------------------
25,878,450
- ---------------------------------------------------------------
TELECOMMUNICATIONS-12.77%
Arch Communications Group, Inc.,
Sr. Disc. Notes, 10.875%,
03/15/08(a) 25,000,000 14,437,500
- ---------------------------------------------------------------
Celcaribe S.A.,
Sr. Secured Notes, 13.50%,
03/15/04 14,500,000 12,687,500
- ---------------------------------------------------------------
Sr. Secured Notes, 13.50%,
03/15/04(a)(b)(e)
(Acquired 05/17/94-05/26/94;
Cost $6,429,128) 8,000,000 9,100,000
- ---------------------------------------------------------------
Clearnet Communications Inc.,
(Canada),
Sr. Yankee Disc. Notes, 14.75%,
12/15/05(a) 30,520,000 19,113,150
- ---------------------------------------------------------------
Colt Telecom Group PLC, (United
Kingdom),
Sr. Yankee Disc. Notes, 12.00%,
12/15/06(f) 20,510,000 12,229,087
- ---------------------------------------------------------------
fONOROLA Inc., (Canada),
Sr. Yankee Secured Notes,
12.50%, 08/15/02 12,500,000 13,671,874
- ---------------------------------------------------------------
GST USA Inc.,
Secured Sr. Disc. Notes,
13.875%, 12/15/05(a) 25,320,000 15,286,950
- ---------------------------------------------------------------
InterCel, Inc.,
Sr. Disc. Notes, 12.00%,
02/01/06(a) 13,330,000 8,597,850
- ---------------------------------------------------------------
Sr. Disc. Notes, 12.00%,
05/01/06(a) 10,000,000 6,250,000
- ---------------------------------------------------------------
Microcell Telecommunications Inc.,
Sr. Disc. Notes, 14.00%,
06/01/06(a) 41,500,000 22,928,750
- ---------------------------------------------------------------
Nextlink Communications Inc.,
Sr. Notes, 12.50%, 04/15/06 19,350,000 20,849,625
- ---------------------------------------------------------------
Omnipoint Corp.,
Series A Sr. Notes, 11.625%,
08/15/06(b)
(Acquired 11/21/96; Cost
$8,149,245) 7,800,000 8,170,500
- ---------------------------------------------------------------
Sr. Notes, 11.625%, 08/15/06 11,550,000 12,098,625
- ---------------------------------------------------------------
Packaging Resources Inc.,
Sr. Notes, 11.625%, 05/01/03 6,648,060 6,153,112
- ---------------------------------------------------------------
Paging Network, Inc.,
Sr. Sub. Notes, 10.00%,
10/15/08(b)
(Acquired 10/10/96-12/04/96;
Cost $15,164,250) 15,150,000 15,396,188
- ---------------------------------------------------------------
</TABLE>
FS-43
<PAGE> 175
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS-(CONTINUED)
PriCellular Wireless Corp.,
Sr. Disc. Notes, 14.00%,
11/15/01(a) $15,200,000 $ 15,124,000
- ---------------------------------------------------------------
Sr. Notes, 10.75%, 11/01/04(b)
(Acquired 10/30/96; Cost
$5,710,000) 5,710,000 5,974,088
- ---------------------------------------------------------------
ProNet, Inc.,
Sr. Sub. Notes, 11.875%,
06/15/05 14,500,000 13,775,000
- ---------------------------------------------------------------
RSL Communications, Ltd.,
Sr. Notes, 12.25%,
11/15/06(b)(g)
(Acquired 09/30/96-12/03/96;
Cost $17,623,538) 17,620,000 17,884,300
- ---------------------------------------------------------------
Sprint Spectrum L.P.,
Sr. Notes, 11.00%, 08/15/06 12,800,000 13,920,000
- ---------------------------------------------------------------
Sygnet Wireless Inc.,
Sr. Notes, 11.50%, 10/01/06 14,080,000 14,608,000
- ---------------------------------------------------------------
Teleport Communications Group Inc.,
Sr. Disc. Notes, 11.125%,
07/01/07(a) 30,000,000 20,775,000
- ---------------------------------------------------------------
299,031,099
- ---------------------------------------------------------------
TELEPHONE-0.66%
PhoneTel Technologies, Inc.,
Sr. Notes, 12.00%, 12/15/06 14,840,000 15,396,500
- ---------------------------------------------------------------
TRANSPORTATION-2.02%
Gearbulk Holding Ltd.,
Sr. Notes, 11.25%, 12/01/04 13,550,000 14,972,750
- ---------------------------------------------------------------
Stena A.B., (Sweden),
Sr. Yankee Notes, 10.50%,
12/15/05 15,980,000 17,338,300
- ---------------------------------------------------------------
Transportacion Maritima Mexicana
S.A. de CV, (Mexico), Sr. Yankee
Notes, 10.00%, 11/15/06 14,680,000 14,900,200
- ---------------------------------------------------------------
47,211,250
- ---------------------------------------------------------------
TRUCKING-0.85%
AmeriTruck Distribution Corp.,
Sr. Sub. Notes, 12.25%, 11/15/05 19,800,000 19,998,000
- ---------------------------------------------------------------
Total Corporate Bonds & Notes 2,125,880,794
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS-0.77%
AUTOMOBILE/TRUCK PARTS &
TIRES-0.11%
Lear Corp.(h) 72,600 2,477,475
- ---------------------------------------------------------------
LEISURE & RECREATION-0.02%
Cobblestone Holdings Inc.(h) 23,250 465,000
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.15%
Genesis Health Ventures, Inc.(h) 86,069 2,678,909
- ---------------------------------------------------------------
Total Renal Care Holdings, Inc.(h) 24,000 870,000
- ---------------------------------------------------------------
3,548,909
- ---------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-0.20%
Omnicare, Inc. 138,520 4,449,955
- ---------------------------------------------------------------
OIL & GAS (DRILLING)-0.08%
Reading & Bates Corp.(h) 72,475 1,920,588
- ---------------------------------------------------------------
OIL & GAS (SERVICES)-0.08%
Kelley Oil & Gas Corp.(h) 781,250 1,904,297
- ---------------------------------------------------------------
PUBLISHING-0.03%
Affiliated Newspaper
Investments(h) 13,826 691,300
- ---------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.04%
Rite Aid Corp. 24,083 957,279
- ---------------------------------------------------------------
TELECOMMUNICATIONS-0.06%
MFS Communications Co., Inc.(h) 2,001 109,050
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS-(CONTINUED)
WorldCom, Inc.(h) 52,534 $ 1,369,167
- ---------------------------------------------------------------
1,478,217
- ---------------------------------------------------------------
Total Common Stocks 17,893,020
- ---------------------------------------------------------------
PREFERRED STOCKS-4.84%
ADVERTISING/BROADCASTING-0.12%
News Corp. Ltd., (Australia),
$5.00 Conv. Pfd.(b)
(Acquired 11/04/96; Cost
$2,980,000) 29,800 2,812,375
- ---------------------------------------------------------------
Time Warner Inc.,
Series M, $102.50 PIK Conv. Pfd. 1 740
- ---------------------------------------------------------------
2,813,115
- ---------------------------------------------------------------
AEROSPACE/DEFENSE-0.16%
Loral Space & Communications,
$3.00 Conv. Pfd.(b)
(Acquired 11/01/96; Cost
$3,232,500) 64,650 3,676,969
- ---------------------------------------------------------------
CABLE TELEVISION-0.83%
Cablevision Systems Corp.,
Series M, $11.125 PIK Conv. Pfd. 216,572 19,491,457
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.36%
Microsoft Corp.,
Series A, $2.196 Conv. Pfd. 105,000 8,413,125
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.26%
PennCorp Financial Group, Inc.,
$3.375 Conv. Pfd. 20,000 1,680,150
- ---------------------------------------------------------------
SunAmerica, Inc., $3.188 Conv. Pfd. 106,650 4,505,963
- ---------------------------------------------------------------
6,186,113
- ---------------------------------------------------------------
FOOD/PROCESSING-0.23%
Chiquita Brands International,
Inc., Series B, $3.75 Conv. Pfd. 100,000 5,325,000
- ---------------------------------------------------------------
FUNERAL SERVICES-0.08%
SCI Financial LLC,
Series A, $3.125 Conv. Pfd. 20,000 1,882,500
- ---------------------------------------------------------------
GAS DISTRIBUTION-0.09%
NorAm Financing,
$3.125 Conv. Pfd. 35,000 2,222,500
- ---------------------------------------------------------------
HOTELS/MOTELS-0.12%
Host Marriott Financial Trust,
$3.375 Conv. Pfd.(b) (Acquired
11/25/96; Cost $2,500,000) 50,000 2,724,850
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-0.13%
Frontier Financing Trust,
$3.125 Conv. Pfd.(b) (Acquired
10/09/96; Cost $3,000,000) 60,000 3,106,320
- ---------------------------------------------------------------
MACHINERY (HEAVY)-0.06%
Case Corp.,
Series A, $4.50 Conv. Pfd. 10,000 1,329,780
- ---------------------------------------------------------------
OIL & GAS (REFINING/MARKETING)-0.09%
Tosco Financing Trust,
$2.875 Conv. Pfd.(b) (Acquired
12/10/96; Cost $2,000,000) 40,000 2,085,000
- ---------------------------------------------------------------
OIL & GAS (SERVICES)-0.13%
Enron Corp.,
$1.36 Conv. Pfd. 30,000 720,000
- ---------------------------------------------------------------
Kelley Oil & Gas Corp.,
$2.625 Conv. Pfd. 100,000 2,387,500
- ---------------------------------------------------------------
3,107,500
- ---------------------------------------------------------------
</TABLE>
FS-44
<PAGE> 176
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PUBLISHING-1.11%
K-III Communications Corp.,
$2.875 Pfd. 300,000 $ 8,062,500
- ---------------------------------------------------------------
$10.00 Series D Pfd.(b)
(Acquired 01/19/96-12/10/96;
Cost $17,930,000) 180,000 17,685,000
- ---------------------------------------------------------------
25,747,500
- ---------------------------------------------------------------
RETAIL (STORES)-0.04%
Kmart Financing,
$3.875 Conv. Pfd. 20,000 975,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS-1.03%
ICG Holdings, Inc.,
$14.25 Pfd. 19,000 20,995,000
- ---------------------------------------------------------------
MFS Communications Co., Inc.,
$2.68 Conv. Pfd. 35,000 3,193,750
- ---------------------------------------------------------------
24,188,750
- ---------------------------------------------------------------
Total Preferred Stocks 113,275,479
- ---------------------------------------------------------------
WARRANTS-0.24%
CABLE TELEVISION-0.00%
Wireless One Inc.,
expiring 10/19/00(h) 37,560 37,560
- ---------------------------------------------------------------
CHEMICALS-0.02%
Berry Plastics Corp.,
expiring 04/15/04(h) 6,000 270,120
- ---------------------------------------------------------------
Sterling Chemicals Holdings,
expiring 08/15/08(h) 7,500 262,500
- ---------------------------------------------------------------
532,620
- ---------------------------------------------------------------
COMPUTER PERIPHERALS-0.02%
Exide Electronics Group Inc.,
expiring 03/15/06(h) 13,000 390,000
- ---------------------------------------------------------------
CONTAINERS-0.01%
MVE Inc.,
expiring 02/15/02(h) 6,750 202,500
- ---------------------------------------------------------------
LEISURE & RECREATION-0.06%
IHF Capital Inc.,
Series H, expiring 11/14/99(h) 8,000 1,040,000
- ---------------------------------------------------------------
Series I, expiring 11/14/99(h) 7,250 290,000
- ---------------------------------------------------------------
1,330,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-0.01%
Republic Health Corp.,
expiring 04/03/00(h) 17,500 $ 315,000
- ---------------------------------------------------------------
STEEL-0.00%
Bar Technologies Inc.,
expiring 04/01/01(h) 6,000 33,000
- ---------------------------------------------------------------
Gulf States Steel Inc.,
expiring 04/15/03(h) 15,990 79,950
- ---------------------------------------------------------------
112,950
- ---------------------------------------------------------------
TELECOMMUNICATIONS-0.12%
Clearnet Communications Inc.,
(Canada),
expiring 09/15/05(h) 100,715 604,296
- ---------------------------------------------------------------
ICG Communications Inc.,
expiring 09/15/05(h) 39,600 574,200
- ---------------------------------------------------------------
InterCel Inc.,
expiring 02/01/06(h) 42,656 341,248
- ---------------------------------------------------------------
Intermedia Communications Inc.,
expiring 06/01/00(h) 1,500 52,500
- ---------------------------------------------------------------
Microcell Telecommunications Inc.,
Conditional Wts., expiring
12/31/97(b)(h) (Acquired
12/18/96; Cost $35,744) 166,000 41,500
- ---------------------------------------------------------------
expiring 12/31/97(b)(h)
(Acquired 12/18/96; Cost $992,888) 166,000 1,120,500
- ---------------------------------------------------------------
2,734,244
- ---------------------------------------------------------------
Total Warrants 5,654,874
- ---------------------------------------------------------------
REPURCHASE AGREEMENT(i)-1.97%
UBS Securities, Inc., 7.05%,
01/02/97(j) 46,218,974 46,218,974
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.63% 2,308,923,141
- ---------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.37% 32,111,225
- ---------------------------------------------------------------
NET ASSETS-100.00% $2,341,034,366
===============================================================
</TABLE>
Abbreviations:
Conv. - Convertible
Deb. - Debentures
Disc. - Discounted
Gtd. - Guaranteed
PIK - Payment in Kind
Pfd. - Preferred
Sr. - Senior
Sub. - Subordinated
Wts. - Warrants
Notes to Schedule of Investments:
(a) Discounted bond at purchase. Interest rate shown represents coupon rate at
which the bond will accrue at a specified future date.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at December 31, 1996 was
$373,133,229 which represented 15.94% of the Fund's net assets.
(c) Zero coupon bonds. Interest rate shown represents the rate of original issue
discount.
(d) Issued as a unit. This unit also includes 9,250 warrants to purchase 4.535
shares of common stock per warrant.
(e) Issued as a unit. This unit also includes 1,300,800 Celcaribe Ordinary Trust
Certificates.
(f) Issued as a unit. This unit also includes 20,510 warrants to purchase
ordinary shares at 302.5 pence per share.
(g) Issued as a unit. This unit also includes 17,620 warrants to purchase 1.815
shares of common stock per warrant.
(h) Non-income producing security.
(i) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$550,215,417. Collateralized by $732,485,305 U.S. Government agency
obligations, 0% to 9.50% due 1/01/98 to 12/15/26.
See Notes to Financial Statements.
FS-45
<PAGE> 177
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$2,185,508,189) $2,308,923,141
- ----------------------------------------------------------
Receivables for:
Fund shares sold 9,648,445
- ----------------------------------------------------------
Dividends and interest 46,166,949
- ----------------------------------------------------------
Investment for deferred compensation plan 48,098
- ----------------------------------------------------------
Other assets 86,032
- ----------------------------------------------------------
Total assets 2,364,872,665
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 6,541,806
- ----------------------------------------------------------
Fund shares reacquired 2,455,637
- ----------------------------------------------------------
Dividends 11,121,120
- ----------------------------------------------------------
Deferred compensation plan 48,098
- ----------------------------------------------------------
Accrued advisory fees 953,278
- ----------------------------------------------------------
Accrued administrative service fees 9,349
- ----------------------------------------------------------
Accrued distribution fees 1,821,348
- ----------------------------------------------------------
Accrued trustees' fees 3,683
- ----------------------------------------------------------
Accrued transfer agent fees 311,688
- ----------------------------------------------------------
Accrued operating expenses 572,292
- ----------------------------------------------------------
Total liabilities 23,838,299
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $2,341,034,366
==========================================================
NET ASSETS:
Class A $1,272,974,132
==========================================================
Class B $1,068,060,234
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 128,791,474
==========================================================
Class B 108,065,310
==========================================================
Class A:
Net asset value and redemption price per
share $ 9.88
==========================================================
Offering price per share:
(Net asset value of $9.88
divided by 95.25%) $ 10.37
==========================================================
Class B:
Net asset value and offering price per
share $ 9.88
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 194,640,314
- ----------------------------------------------------------
Dividends 3,281,146
- ----------------------------------------------------------
Total investment income 197,921,460
- ----------------------------------------------------------
EXPENSES:
Advisory fees 9,277,005
- ----------------------------------------------------------
Custodian fees 203,583
- ----------------------------------------------------------
Transfer agent fees -- Class A 1,643,305
- ----------------------------------------------------------
Transfer agent fees -- Class B 1,068,773
- ----------------------------------------------------------
Administrative service fees 98,734
- ----------------------------------------------------------
Trustees' fees 18,914
- ----------------------------------------------------------
Distribution fees -- Class A 2,631,156
- ----------------------------------------------------------
Distribution fees -- Class B 8,083,368
- ----------------------------------------------------------
Other 789,703
- ----------------------------------------------------------
Total expenses 23,814,541
- ----------------------------------------------------------
Less: Expenses paid indirectly (30,911)
- ----------------------------------------------------------
Net expenses 23,783,630
- ----------------------------------------------------------
Net investment income 174,137,830
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
SECURITIES:
Net realized gain on sales of investment
securities 17,869,656
- ----------------------------------------------------------
Unrealized appreciation of investment
securities 86,550,248
- ----------------------------------------------------------
Net gain on investment securities 104,419,904
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $ 278,557,734
==========================================================
</TABLE>
See Notes to Financial Statements.
FS-46
<PAGE> 178
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 174,137,830 $ 103,866,411
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities 17,869,656 (13,744,221)
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 86,550,248 64,363,354
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 278,557,734 154,485,544
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (102,842,087) (72,863,770)
- ----------------------------------------------------------------------------------------------
Class B (72,629,856) (31,951,946)
- ----------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A -- (436,906)
- ----------------------------------------------------------------------------------------------
Class B -- (191,590)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 327,466,596 271,933,588
- ----------------------------------------------------------------------------------------------
Class B 466,449,407 352,760,393
- ----------------------------------------------------------------------------------------------
Net increase in net assets 897,001,794 673,735,313
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,444,032,572 770,297,259
- ----------------------------------------------------------------------------------------------
End of period $2,341,034,366 $1,444,032,572
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,295,988,395 $1,505,053,545
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 2,868,653 1,688,456
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (81,237,634) (99,574,133)
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 123,414,952 36,864,704
- ----------------------------------------------------------------------------------------------
$2,341,034,366 $1,444,032,572
==============================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM High Yield Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class are voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund. The Fund's objective is to achieve a high level of
current income by investing primarily in publicly traded non-investment grade
debt securities. The Fund will also consider the possibility of capital growth
when it purchases and sells securities. Debt securities of less than investment
grade are considered "high risk" securities (commonly referred to as junk
bonds). These bonds may involve special risks in addition to the risks
associated with investment in higher rated debt securities. High yield bonds may
be more susceptible to real or perceived adverse economic and competitive
industry conditions than higher grade bonds. Also, the secondary market in which
high yield bonds are traded may be less liquid than the market for higher grade
bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- Debt securities (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing
FS-47
<PAGE> 179
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as institution-size trading in similar
groups of securities, developments related to special securities, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Investment securities for which prices
are not provided by the pricing service and which are listed or traded on an
exchange (except convertible bonds) are valued at the last sales price on the
exchange where principally traded or, lacking any sales on a particular day,
at the mean between the closing bid and asked prices on that day unless the
Board of Trustees, or persons designated by the Board of Trustees, determines
that over-the-counter quotations more closely reflect the current market
value of the security. Securities traded in the over-the-counter market,
except (i) securities priced by the pricing service, (ii) securities for
which representative exchange prices are available, and (iii) securities
reported in the NASDAQ National Market System, are valued at the mean between
representative last bid and asked prices obtained from an electronic
quotation reporting system, if such prices are available, or from established
market makers. Each security reported in the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the mean between the closing bid and asked prices. Securities for
which market quotations either are not readily available or are questionable
are valued at fair value as determined in good faith by or under the
supervision of the Trust's officers in a manner specifically authorized by
the Board of Trustees. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. It is the policy of the Fund to declare daily dividends
from net investment income. Such dividends are paid monthly. Distributions
from net realized capital gains, if any, are recorded on ex-dividend date and
are paid annually subject to restrictions noted in section "C" below. On
December 31, 1996, undistributed net investment income was increased by
$2,514,310, paid-in capital reduced by $2,981,153 and undistributed net
realized gains increased by $466,843 in order to comply with the requirements
of the American Institute of Certified Public Accountants Statement of
Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $81,020,316 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2003. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
D. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2- ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.625% of
the first $200 million of the Fund's average daily net assets, plus 0.55% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.50% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.45% of the Fund's average daily net
assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1996, AIM
was reimbursed $98,734 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended December 31, 1996, the
Fund paid AFS $1,723,833 for such services.
The Fund received reductions in transfer agency fees payable to AFS of $28,580
from dividends received on balances in cash management bank accounts. In
addition, pricing service expenses in the amount of $2,331 were paid through
directed brokerage commissions paid by the Fund. The effect of the above
arrangements resulted in a reduction in the Fund's total expenses of $30,911
during the year ended December 31, 1996.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
FS-48
<PAGE> 180
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the respective classes. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more assignees, its rights to all or a designated
portion of (a) compensation received by AIM Distributors from the Fund pursuant
to the Class B Plan (but not AIM Distributors' duties and obligations pursuant
to the Class B Plan) and (b) any contingent deferred sales charges payable to
AIM Distributors related to the Class B shares. During the year ended December
31, 1996, the Class A shares and the Class B shares paid AIM Distributors
$2,631,156 and $8,083,368, respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,965,594 from sales of the Class A
shares of the Fund during the year ended December 31, 1996. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1996,
AIM Distributors received $976,702 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1996, the Fund paid legal fees of $7,485
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $17,000,000. During the year ended December 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.08% on the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1996 was
$2,230,898,049 and $1,381,114,077, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $132,068,761
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (9,004,639)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $123,064,122
=========================================================
Cost of investments for tax purposes is
$2,185,859,019.
</TABLE>
NOTE 6-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- -----------------------------
SHARES VALUE SHARES VALUE
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 76,485,479 $ 725,785,892 49,241,443 $ 458,547,804
- ----------------------- --------------------------- -----------------------------
Class B 63,383,789 605,130,108 42,866,225 400,172,189
- ----------------------- --------------------------- -----------------------------
Issued as reinvestment
of dividends:
Class A 6,674,252 64,083,963 4,955,465 46,216,100
- ----------------------- --------------------------- -----------------------------
Class B 3,798,909 36,390,618 1,597,343 14,918,822
- ----------------------- --------------------------- -----------------------------
Reacquired:
Class A (48,380,296) (462,403,259) (25,047,265) (232,830,316)
- ----------------------- --------------------------- -----------------------------
Class B (18,351,224) (175,071,319) (6,678,316) (62,330,618)
- ----------------------- --------------------------- -----------------------------
83,610,909 $ 793,916,003 66,934,895 $ 624,693,981
======================= =========================== =============================
</TABLE>
FS-49
<PAGE> 181
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the ten-year period ended December 31, 1996 and for a Class
B share outstanding during each of the years in the three-year period ended
December 31, 1996 and the period September 1, 1993 (date sales commenced)
through December 31, 1993.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992(a) 1991 1990
---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07 $ 8.94
- -------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.92 0.93 0.96 0.97 1.04 1.02 1.09
- -------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 0.46 0.52 (1.12) 0.69 0.55 1.81 (1.84)
- -------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Total from investment operations 1.38 1.45 (0.16) 1.66 1.59 2.83 (0.75)
- -------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.93) (0.95) (0.96) (1.01) (1.05) (1.04) (1.12)
- -------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.88 $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07
============================================ ========== ======== ======== ======== ======== ======== ========
Total return(b) 15.44% 16.86% (1.67)% 18.40% 18.60% 42.18% (9.03)%
============================================ ========== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,272,974 $886,106 $578,959 $550,760 $324,518 $259,677 $204,932
============================================ ========== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97%(c)(d) 0.96% 1.00% 1.12% 1.15% 1.22% 1.21%(e)
============================================ ========== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average
net assets 9.67%(c) 9.95% 10.07% 9.82% 11.00% 12.67% 13.59%(f)
============================================ ========== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 77% 61% 53% 53% 56% 61% 27%
============================================ ========== ======== ======== ======== ======== ======== ========
<CAPTION>
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 10.01 $ 9.67 $ 10.54
- -------------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income 1.21 1.18 1.16
- -------------------------------------------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) (1.07) 0.34 (0.83)
- -------------------------------------------- -------- -------- --------
Total from investment operations 0.14 1.52 0.33
- -------------------------------------------- -------- -------- --------
Less distributions:
Dividends from net investment income (1.21) (1.18) (1.20)
- -------------------------------------------- -------- -------- --------
Net asset value, end of period $ 8.94 $ 10.01 $ 9.67
============================================ ======== ======== ========
Total return(b) 1.18% 16.41% 3.07%
============================================ ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $261,920 $274,631 $242,858
============================================ ======== ======== ========
Ratio of expenses to average net assets 0.99% 0.96%(e) 0.92%
============================================ ======== ======== ========
Ratio of net investment income to average
net assets 12.40% 11.84%(f) 11.21%
============================================ ======== ======== ========
Portfolio turnover rate 36% 76% 81%
============================================ ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Total returns do not deduct sales charges.
(c) Ratios are based on average net assets of $1,052,462,336.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly
the ratio of expenses to average net assets would have been the same.
(e) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22% and 1.00% for years 1990 and 1988, respectively.
(f) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 13.58% and 11.80% for years 1990 and 1988, respectively.
<TABLE>
<CAPTION>
1996 1995 1994 1993
---------- -------- -------- -------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 9.42 $ 8.92 $ 10.04 $ 9.96
- ------------------------------------------------------------ ---------- -------- -------- -------
Income from investment operations:
Net investment income 0.85 0.85 0.87 0.32
- ------------------------------------------------------------ ---------- -------- -------- -------
Net gains (losses) on securities (both realized and
unrealized) 0.47 0.52 (1.10) 0.07
- ------------------------------------------------------------ ---------- -------- -------- -------
Total from investment operations 1.32 1.37 (0.23) 0.39
- ------------------------------------------------------------ ---------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.86) (0.87) (0.89) (0.31)
- ------------------------------------------------------------ ---------- -------- -------- -------
Net asset value, end of period $ 9.88 $ 9.42 $ 8.92 $ 10.04
============================================================ ========== ======== ======== =======
Total return(a) 14.68% 15.91% (2.48)% 4.00%
============================================================ ========== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,068,060 $557,926 $191,338 $31,264
============================================================ ========== ======== ======== =======
Ratio of expenses to average net assets 1.68%(b)(c) 1.73% 1.80% 1.93%(d)
============================================================ ========== ======== ======== =======
Ratio of net investment income to average net assets 8.95%(b) 9.18% 9.27% 8.99%(d)
============================================================ ========== ======== ======== =======
Portfolio turnover rate 77% 61% 53% 53%
============================================================ ========== ======== ======== =======
</TABLE>
(a) Total returns do not deduct contingent deferred sales charges and is not
annualized for periods less than one year.
(b) Ratios are based on average net assets of $808,336,751.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly
the ratio of expenses to average net assets would have been the same.
(d) Annualized.
NOTE 8-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO plc. AIM Management is the parent company of the Fund's advisor. The
merger is expected to take place during the first quarter of 1997.
FS-50
<PAGE> 182
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Income Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Income Fund (a portfolio of AIM Funds
Group), including the schedule of investments, as of
December 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net
assets for each of the years in the two-year period then
ended, and the financial highlights for each of the years
in the four-year period then ended. These financial
statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Income
Fund as of December 31, 1996, the results of its operations
for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended, and
the financial highlights for each of the years in the
four-year period then ended, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1997
FS-51
<PAGE> 183
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED NON-
CONVERTIBLE BONDS & NOTES-61.41%
ADVERTISING/BROADCASTING-5.08%
Echostar Satellite Broadcasting,
Sr. Disc. Notes, 13.125%,
03/15/04(b) $ 3,000,000 $ 2,280,000
- ---------------------------------------------------------------
Katz Media Corp.,
Sr. Sub. Notes, 10.50%, 01/15/07
(acquired 12/13/96; cost
$400,000)(c) 400,000 410,500
- ---------------------------------------------------------------
SFX Broadcasting, Inc.,
Series B Sr. Sub. Notes, 10.75%,
05/15/06 1,000,000 1,057,500
- ---------------------------------------------------------------
Time Warner, Inc.,
Deb., 9.15%, 02/01/23 8,500,000 9,454,805
- ---------------------------------------------------------------
Deb., 6.85%, 01/15/26 4,300,000 4,227,717
- ---------------------------------------------------------------
United International Holdings, Inc.,
Sr. Disc. Notes, 12.78%,
11/15/99(d) 2,000,000 1,442,500
- ---------------------------------------------------------------
18,873,022
- ---------------------------------------------------------------
AIRLINES-2.34%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 1,810,000 2,010,240
- ---------------------------------------------------------------
Delta Air Lines, Inc.,
Equipment Trust Certificates,
10.50%, 04/30/16 5,000,000 6,108,200
- ---------------------------------------------------------------
Greenwich Air Services, Inc.,
Sr. Notes, 10.50%, 06/01/06 530,000 569,750
- ---------------------------------------------------------------
8,688,190
- ---------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-2.09%
General Motors Corp.,
Deb., 8.80%, 03/01/21 6,700,000 7,748,081
- ---------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.18%
CSK Auto Inc.,
Sr. Sub. Notes, 11.00%, 11/01/06
(acquired 10/23/96; cost
$650,000)(c) 650,000 675,188
- ---------------------------------------------------------------
BANKING-3.50%
Bankers Trust New York Corp.,
Gtd. Notes, 7.75%, 12/01/26
(acquired 11/22/96; cost
$2,932,770)(c) 3,000,000 2,884,245
- ---------------------------------------------------------------
First Union Bancorp,
Sub. Deb., 7.50%, 04/15/35 5,300,000 5,587,207
- ---------------------------------------------------------------
HSBC Americas Inc.,
Sub. Notes, 7.00%, 11/01/06 2,000,000 1,978,400
- ---------------------------------------------------------------
Sovereign Bancorp, Inc.,
Sub. Notes, 8.00%, 03/15/03 2,500,000 2,551,500
- ---------------------------------------------------------------
13,001,352
- ---------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-3.88%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.24%, 06/20/20(d) 74,000,000 14,405,580
- ---------------------------------------------------------------
CABLE TELEVISION-3.47%
Comcast UK Cable Partners Ltd.,
Sr. Yankee Disc. Deb., 11.20%,
11/15/07(b) 5,000,000 3,550,000
- ---------------------------------------------------------------
Fundy Cable Ltd.,
Sr. Yankee Sec. Second Priority
Notes, 11.00%, 11/15/05 410,000 435,625
- ---------------------------------------------------------------
Heartland Wireless Communications
Inc.,
Sr. Notes, 14.00%, 10/15/04
(acquired 12/17/96; cost
$720,000)(c) 720,000 748,800
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CABLE TELEVISION-(CONTINUED)
Kabelmedia Holdings GmbH,
Sr. Yankee Disc. Notes, 13.625%,
08/01/06(b) $ 1,400,000 $ 777,000
- ---------------------------------------------------------------
Marcus Cable Operating Co.,
Sr. Disc. Notes, 13.50%,
08/01/04(b) 1,690,000 1,390,025
- ---------------------------------------------------------------
Rifkin Acquisition Partners L.L.P.,
Sr. Sub. Notes, 11.125%, 01/15/06 630,000 655,200
- ---------------------------------------------------------------
TeleWest Communications PLC,
Sr. Yankee Disc. Deb., 11.00%,
10/01/07(b) 1,100,000 765,875
- ---------------------------------------------------------------
Viacom, Inc.,
Sr. Notes, 7.75%, 06/01/05 3,650,000 3,584,300
- ---------------------------------------------------------------
Wireless One, Inc.,
Sr. Notes, 13.00%, 10/15/03 1,000,000 980,000
- ---------------------------------------------------------------
12,886,825
- ---------------------------------------------------------------
CHEMICALS-1.38%
BPC Holding Corp.,
Series B Sr. Notes, 12.50%,
06/15/06 1,000,000 1,056,250
- ---------------------------------------------------------------
Crain Industries, Inc.,
Sr. Sub. Notes, 13.50%, 08/15/05 1,070,000 1,211,775
- ---------------------------------------------------------------
LaRoche Industries, Inc.,
Sr. Sub. Notes, 13.00%, 08/15/04 1,000,000 1,080,000
- ---------------------------------------------------------------
PrintPack Inc.,
Sr. Sub. Notes, 10.625%, 08/15/06
(acquired 08/15/96-09/04/96; cost
$1,035,625)(c) 1,030,000 1,071,200
- ---------------------------------------------------------------
Sterling Chemicals, Inc.,
Sr. Sub. Notes, 11.75%, 08/15/06 680,000 720,800
- ---------------------------------------------------------------
5,140,025
- ---------------------------------------------------------------
CONSUMER NON-DURABLES-0.29%
Hines Horticulture, Inc.,
Sr. Sub. Notes, 11.75%, 10/15/05 1,000,000 1,065,000
- ---------------------------------------------------------------
CONTAINERS-1.01%
Ivex Packaging Corp.,
Sr. Sub. Notes, 12.50%, 12/15/02 1,500,000 1,635,000
- ---------------------------------------------------------------
MVE Inc.,
Sr. Secured Notes, 12.50%,
02/15/02 1,000,000 1,066,250
- ---------------------------------------------------------------
Owens-Illinois, Inc.,
Sr. Sub. Notes, 10.00%, 08/01/02 1,000,000 1,050,000
- ---------------------------------------------------------------
3,751,250
- ---------------------------------------------------------------
ELECTRIC POWER-3.62%
AES China Generating Co.,
Sr. Yankee Notes, 10.125%,
12/15/06 220,000 229,350
- ---------------------------------------------------------------
El Paso Electric Co.,
First Mortgage Bonds, 8.90%,
02/01/06 2,500,000 2,611,325
- ---------------------------------------------------------------
First Mortgage Bonds, 9.40%,
05/01/11 4,000,000 4,255,920
- ---------------------------------------------------------------
Indiana Michigan Power, Secured
Lease
Obligation Bonds, 9.82%, 12/07/22 4,969,949 5,996,343
- ---------------------------------------------------------------
Southern California Edison Co.,
First Mortgage Notes, 8.875%,
05/01/23 357,000 373,036
- ---------------------------------------------------------------
13,465,974
- ---------------------------------------------------------------
ENERGY (ALTERNATE SOURCES)-0.29%
AES Corp.,
Sr. Sub. Notes, 10.25%, 07/15/06 1,000,000 1,075,000
- ---------------------------------------------------------------
</TABLE>
FS-52
<PAGE> 184
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
FINANCE (CONSUMER CREDIT)-2.76%
Associates Corp. of North America,
Series B Sr. Deb., 7.95%, 02/15/10 $ 6,000,000 $ 6,472,860
- ---------------------------------------------------------------
GMAC,
Notes, 9.00%, 10/15/02 3,425,000 3,770,959
- ---------------------------------------------------------------
10,243,819
- ---------------------------------------------------------------
FINANCE (LEASING COMPANIES)-0.55%
Sea Containers, Ltd.,
Series B Sr. Yankee Sub. Deb.,
12.50%, 12/01/04 1,825,000 2,025,750
- ---------------------------------------------------------------
FOOD/PROCESSING-0.85%
Chiquita Brands International, Inc.,
Sr. Notes, 10.25%, 11/01/06 860,000 920,200
- ---------------------------------------------------------------
International Home Foods Inc.,
Sr. Sub. Notes, 10.375%, 11/01/06
(acquired 10/29/96; cost
$520,000)(c) 520,000 543,400
- ---------------------------------------------------------------
Pilgrim's Pride Corp.,
Sr. Sub. Notes, 10.875%, 08/01/03 1,380,000 1,381,725
- ---------------------------------------------------------------
Ralston-Ralston Purina Co.,
Deb., 7.875%, 06/15/25 300,000 307,839
- ---------------------------------------------------------------
3,153,164
- ---------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES-3.27%
Province Of Manitoba,
Yankee Bonds, 7.75%, 07/17/16 7,500,000 7,842,075
- ---------------------------------------------------------------
Province of Ontario,
Sr. Notes, 8.00%, 03/11/03 5,350,000 4,302,505
- ---------------------------------------------------------------
12,144,580
- ---------------------------------------------------------------
GAMING-1.08%
Coast Hotels & Casinos Inc.,
Series B Secured First Mortgage
Gtd. Notes, 13.00%, 12/15/02 1,160,000 1,284,700
- ---------------------------------------------------------------
Showboat, Inc.,
First Mortgage Notes, 9.25%,
05/01/08 2,000,000 1,977,500
- ---------------------------------------------------------------
Trump Atlantic City Associates,
Secured First Mortgage Gtd. Notes,
11.25%, 05/01/06 760,000 756,200
- ---------------------------------------------------------------
4,018,400
- ---------------------------------------------------------------
GAS DISTRIBUTION-0.58%
Ferrellgas Partners, Sr.
Notes, 9.375%, 06/15/06 2,100,000 2,144,625
- ---------------------------------------------------------------
HOME BUILDING-0.21%
Continental Homes Holdings Corp.,
Sr. Notes, 10.00%, 04/15/06 745,000 771,075
- ---------------------------------------------------------------
HOTELS/MOTELS-1.42%
ITT Corp.,
Gtd. Deb., 7.375%, 11/15/15 3,350,000 3,219,819
- ---------------------------------------------------------------
John Q. Hammons Hotels Inc.,
Gtd. First Mortgage Notes, 9.75%,
10/01/05 2,000,000 2,045,000
- ---------------------------------------------------------------
5,264,819
- ---------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.27%
Americo Life Inc.,
Sr. Sub. Notes, 9.25%, 06/01/05 1,000,000 1,000,000
- ---------------------------------------------------------------
LEISURE & RECREATION-0.65%
Cobblestone Golf Group Inc.,
Series B Sr. Notes, 11.50%,
06/01/03 1,000,000 1,046,250
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
LEISURE & RECREATION-(CONTINUED)
Icon Health & Fitness Inc.,
Sr. Sub. Notes, 13.00%, 07/15/02 $ 1,200,000 $ 1,363,500
- ---------------------------------------------------------------
2,409,750
- ---------------------------------------------------------------
MACHINERY (HEAVY)-2.09%
Caterpillar Inc.,
Deb., 9.375%, 08/15/11 5,000,000 5,999,900
- ---------------------------------------------------------------
Fairfield Manufacturing Co., Inc.,
Sr. Sub. Notes, 11.375%, 07/01/01 1,000,000 1,050,000
- ---------------------------------------------------------------
PrimeCo. Inc.,
Sr. Sub. Notes, 12.75%, 03/01/05 627,000 717,915
- ---------------------------------------------------------------
7,767,815
- ---------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.57%
AM General Corp.,
Sr. Notes, 12.875%, 05/01/02 1,100,000 1,051,875
- ---------------------------------------------------------------
Interlake Corp.,
Sr. Notes, 12.00%, 11/15/01 1,000,000 1,076,250
- ---------------------------------------------------------------
2,128,125
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.31%
Dynacare Inc.,
Sr. Yankee Notes, 10.75%, 01/15/06 1,140,000 1,157,100
- ---------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-0.59%
Dade International Inc.,
Series B Sr. Sub. Notes, 11.125%,
05/01/06 1,000,000 1,087,500
- ---------------------------------------------------------------
Graphic Controls Corp., Series A
Sr. Sub. Notes, 12.00%, 09/15/05 980,000 1,090,250
- ---------------------------------------------------------------
2,177,750
- ---------------------------------------------------------------
METALS-0.65%
Rio Algom Ltd.,
Yankee Deb., 7.05%, 11/01/05 2,500,000 2,430,650
- ---------------------------------------------------------------
NATURAL GAS PIPELINE-1.69%
Transco Energy Co.,
Deb., 9.875%, 06/15/20 5,000,000 6,294,200
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-3.01%
Abraxas Petroleum Corp.,
Sr. Notes, 11.50%, 11/01/04
(acquired 11/05/96-12/03/96; cost
$1,135,850)(c) 1,130,000 1,211,925
- ---------------------------------------------------------------
Anadarko Petroleum Corp.,
Deb., 7.25%, 03/15/25 5,000,000 5,152,050
- ---------------------------------------------------------------
Mariner Energy Corp.,
Sr. Sub. Notes, 10.50%, 08/01/06
(acquired 08/12/96-09/04/96; cost
$1,043,294)(c) 1,040,000 1,107,600
- ---------------------------------------------------------------
Talisman Energy, Inc.,
Yankee Deb., 7.125%, 06/01/07 3,750,000 3,693,450
- ---------------------------------------------------------------
11,165,025
- ---------------------------------------------------------------
OIL & GAS (INTEGRATED)-0.81%
Husky Oil Ltd.,
Sr. Yankee Notes, 7.125%, 11/15/06 2,000,000 1,984,480
- ---------------------------------------------------------------
Wainoco Oil Corp.,
Sr. Notes, 12.00%, 08/01/02 1,000,000 1,030,000
- ---------------------------------------------------------------
3,014,480
- ---------------------------------------------------------------
OIL & GAS (REFINING/MARKETING)-0.27%
Petroleum Heat & Power Co., Inc.,
Sub. Deb., 12.25%, 02/01/05 890,000 991,238
- ---------------------------------------------------------------
</TABLE>
FS-53
<PAGE> 185
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
OIL & GAS (SERVICES)-1.34%
Falcon Drilling Co., Inc.,
Series B Sr. Notes, 9.75%,
01/15/01 $ 410,000 $ 431,525
- ---------------------------------------------------------------
Sun Co., Inc.,
Deb., 9.00%, 11/01/24 4,000,000 4,536,880
- ---------------------------------------------------------------
4,968,405
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.93%
RAPP International Finance, Gtd.
Yankee Sec. Notes, 11.50%,
12/15/00 970,000 1,030,625
- ---------------------------------------------------------------
Repap New Brunswick,
Sr. Yankee Second Priority Sec.
Notes, 10.625%, 04/15/05 1,110,000 1,165,500
- ---------------------------------------------------------------
Riverwood International Corp.,
Sr. Gtd. Sub. Notes, 10.875%,
04/01/08 1,360,000 1,264,800
- ---------------------------------------------------------------
3,460,925
- ---------------------------------------------------------------
POLLUTION CONTROL-0.30%
Norcal Waste Systems Inc.,
Series B Sr. Gtd. Notes, 13.00%,
11/15/05 1,000,000 1,115,000
- ---------------------------------------------------------------
PUBLISHING-2.15%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 7,100,000 7,983,595
- ---------------------------------------------------------------
RAILROADS-0.26%
Johnstown America Industries, Inc.,
Sr. Sub. Notes, 11.75%, 08/15/05 1,000,000 965,000
- ---------------------------------------------------------------
REAL ESTATE-0.21%
Finova Capital Corp.,
Notes, 7.40%, 05/06/06 750,000 765,428
- ---------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.07%
Great Atlantic & Pacific Tea Co.,
Inc., Yankee Notes, 7.78%, 11/01/00
(acquired 10/18/95; cost
$3,900,000)(c) 3,900,000 3,975,056
- ---------------------------------------------------------------
RETAIL (STORES)-1.14%
Samsonite Corp.,
Sr. Sub. Notes, 11.125%, 07/15/05 900,000 1,018,125
- ---------------------------------------------------------------
Specialty Retailers Inc.,
Sr. Sub. Notes, 11.00%, 08/15/03 2,000,000 2,110,000
- ---------------------------------------------------------------
United Stationer Supply,
Sr. Sub. Notes, 12.75%, 05/01/05 1,000,000 1,115,000
- ---------------------------------------------------------------
4,243,125
- ---------------------------------------------------------------
SCHOOLS-0.48%
Herff Jones Inc.,
Sr. Sub. Notes, 11.00%, 08/15/05 1,000,000 1,081,250
- ---------------------------------------------------------------
Scholastic Brands Inc.,
Sr. Sub. Notes, 11.00%, 01/15/07
(acquired 12/10/96-12/12/96; cost
$710,494)(c) 705,000 720,862
- ---------------------------------------------------------------
1,802,112
- ---------------------------------------------------------------
SEMICONDUCTORS-0.32%
Advanced Micro Devices, Inc.,
Sr. Notes, 11.00%, 08/01/03 1,100,000 1,199,000
- ---------------------------------------------------------------
STEEL-0.71%
Gulf States Steel Corp.,
First Mortgage Notes, 13.50%,
04/15/03 1,650,000 1,575,750
- ---------------------------------------------------------------
GS Industries, Inc.,
Sr. Notes, 12.00%, 09/01/04 1,000,000 1,043,750
- ---------------------------------------------------------------
2,619,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TELECOMMUNICATIONS-2.81%
Arch Communications Group, Inc.,
Sr. Disc. Notes, 10.875%,
03/15/08(b) $ 630,000 $ 363,825
- ---------------------------------------------------------------
Clearnet Communications Inc.,
Sr. Yankee Disc. Notes, 14.75%,
12/15/05(b) 1,780,000 1,114,725
- ---------------------------------------------------------------
PriCellular Wireless Corp.,
Sr. Notes, 10.75%, 11/01/04
(acquired 10/30/96; cost
$430,000)(c) 430,000 449,887
- ---------------------------------------------------------------
ProNet, Inc.,
Sr. Sub. Notes, 11.875%, 06/15/05 1,000,000 950,000
- ---------------------------------------------------------------
Sygnet Wireless Inc.,
Sr. Notes, 11.50%, 10/01/06 580,000 601,750
- ---------------------------------------------------------------
TCI Communications Inc.,
Deb., 8.75%, 08/01/15 6,000,000 5,946,660
- ---------------------------------------------------------------
Teleport Communications Group Inc.,
Sr. Disc. Notes, 11.125%,
07/01/07(b) 1,500,000 1,038,750
- ---------------------------------------------------------------
10,465,597
- ---------------------------------------------------------------
TELEPHONE-0.20%
Phonetel Technologies, Inc.,
Sr. Notes, 12.00%, 12/15/06 740,000 767,750
- ---------------------------------------------------------------
TRANSPORTATION-0.73%
Gearbulk Holdings, Ltd.,
Sr. Notes, 11.25%, 12/01/04 1,000,000 1,105,000
- ---------------------------------------------------------------
Stena A.B.,
Sr. Yankee Notes, 10.50%, 12/15/05 1,500,000 1,627,500
- ---------------------------------------------------------------
2,732,500
- ---------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds & Notes 228,140,845
- ---------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE
BONDS & NOTES-2.63%
ADVERTISING/BROADCASTING-0.14%
Omnicom Group, Inc.,
Conv. Sub. Deb., 4.25%, 01/03/07
(acquired 12/11/96; cost
$500,000)(c) 500,000 518,500
- ---------------------------------------------------------------
AIRLINES-0.60%
Continental Airlines, Inc.,
Conv. Sub. Notes, 6.75%, 04/15/06
(acquired 02/27/96; cost
$1,999,275)(c) 2,000,000 2,244,260
- ---------------------------------------------------------------
COMPUTER NETWORKING-0.48%
3Com Corp.,
Conv. Sub. Notes, 10.25%, 11/01/01
(acquired 11/08/94; cost
$800,000)(c) 800,000 1,781,304
- ---------------------------------------------------------------
POLLUTION CONTROL-0.33%
U.S. Filter Corp.,
Conv. Sub. Notes, 4.50%, 12/15/01 1,200,000 1,221,648
- ---------------------------------------------------------------
TRANSPORTATION-1.08%
Laidlaw, Inc.,
Yankee Conv. Deb., 6.00%, 01/15/99
(acquired 08/19/96-08/23/96; Cost
$3,955,000)(c) 3,000,000 4,005,000
- ---------------------------------------------------------------
Total U.S. Dollar Denominated
Convertible Bonds & Notes 9,770,712
- ---------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES(e)-8.07%
CANADA-5.82%
Bank of Montreal (Banking),
Sub. Deb., 7.92%, 07/31/12 CAD 4,000,000 3,182,648
- ---------------------------------------------------------------
</TABLE>
FS-54
<PAGE> 186
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Bell Canada (Telecommunications),
Deb., 10.875, 10/11/04 CAD 3,000,000 $ 2,735,996
- ---------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas),
Deb., 11.00%, 10/31/00 4,495,000 3,847,323
- ---------------------------------------------------------------
NAV Canada (Transportation),
Bonds, 7.40%, 06/01/27 2,500,000 1,810,779
- ---------------------------------------------------------------
Rogers Cablesystems (Cable Television),
Sr. Sec. Priority Deb., 9.65%,
01/15/14 1,750,000 1,226,904
- ---------------------------------------------------------------
Teleglobe Canada, Inc.
(Telecommunications),
Deb., 8.35%, 06/20/03 5,000,000 4,030,162
- ---------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas),
Notes, 8.55%, 02/01/06 3,000,000 2,455,342
- ---------------------------------------------------------------
Series Q Deb., 10.625%, 10/20/09 1,750,000 1,639,323
- ---------------------------------------------------------------
Westcoast Energy Inc.,
(Electric Power), Deb., 6.45%,
12/18/06 (acquired 12/03/96; cost
$739,169)(c) 1,000,000 712,336
- ---------------------------------------------------------------
21,640,813
- ---------------------------------------------------------------
GERMANY-2.25%
International Bank for
Reconstruction & Development
(Supranational Organization),
Unsub. Global Bonds, 7.125%,
04/12/05 DEM 8,800,000 6,204,126
- ---------------------------------------------------------------
LKB Global (Banking),
Gtd. Notes, 6.00%, 01/25/06 3,300,000 2,149,890
- ---------------------------------------------------------------
8,354,016
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Non-Convertible
Bonds & Notes 29,994,829
- ---------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS &
NOTES(e)-7.18%
JAPAN-4.52%
JUSCO Co. (Consumer Non-Durables),
Conv. Deb., 1.20%, 02/20/01 JPY 220,000,000 3,424,143
- ---------------------------------------------------------------
Matsushita Electric Industrial Co.
Ltd. (Electronic
Components/Miscellaneous),
Conv. Bonds, 1.30%, 03/29/02 250,000,000 2,558,069
- ---------------------------------------------------------------
Sony Corp. (Electronic Components/
Miscellaneous),
Conv. Bonds, 0.15%, 03/30/01 370,000,000 3,754,952
- ---------------------------------------------------------------
Conv. Bonds, 1.40%, 09/30/03 30,000,000 362,663
- ---------------------------------------------------------------
Toyota Motor Corp. (Automobile-Manufacturers),
Conv. Bonds, 1.20%, 01/28/98 455,000,000 6,677,079
- ---------------------------------------------------------------
16,776,906
- ---------------------------------------------------------------
SWITZERLAND-1.04%
Aderans Co. Ltd. (Cosmetics &
Toiletries),
Conv. Deb., 0.875%, 08/31/98 CHF 2,000,000 1,550,243
- ---------------------------------------------------------------
Yamada Denki Co. Ltd.
(Retail-Stores),
Conv. Notes, 0.25%, 03/31/00 2,700,000 2,309,675
- ---------------------------------------------------------------
3,859,918
- ---------------------------------------------------------------
UNITED KINGDOM-1.62%
LASMO PLC (Oil Equipment &
Supplies),
Conv. Bonds, 7.75%, 10/04/05 GBP 3,700,000 6,021,929
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Convertible Bonds
& Notes 26,658,753
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS & NOTES(e)-12.29%
AUSTRALIA-3.47%
Australian Government, Bonds, 6.75%,
11/15/06 AUD 4,000,000 $ 3,043,542
- ---------------------------------------------------------------
Bonds, 10.00%, 10/15/07 6,400,000 6,044,442
- ---------------------------------------------------------------
Treasury Corp. of Victoria
Local Government, Gtd. Deb.,
12.00%, 09/22/01 4,000,000 3,803,799
- ---------------------------------------------------------------
12,891,783
- ---------------------------------------------------------------
CANADA-0.62%
Canadian Government,
Gtd. Deb., 7.00%, 12/01/06 CAD 3,000,000 2,290,586
- ---------------------------------------------------------------
DENMARK-0.76%
Kingdom of Denmark,
Gtd. Deb., 8.00%, 11/15/01 DKK 15,000,000 2,826,441
- ---------------------------------------------------------------
GERMANY-2.94%
Bundesrepublik Deutschland Deb.,
6.00%, 09/15/03 DEM 7,000,000 4,727,775
- ---------------------------------------------------------------
Deb., 6.75%, 07/15/04 5,250,000 3,662,854
- ---------------------------------------------------------------
Deb., 6.875%, 05/12/05 3,600,000 2,520,795
- ---------------------------------------------------------------
10,911,424
- ---------------------------------------------------------------
SWEDEN-1.68%
Swedish Government
Bonds, 10.25%, 05/05/03 SEK 19,000,000 3,388,429
- ---------------------------------------------------------------
Bonds, 6.00%, 02/09/05 20,000,000 2,841,244
- ---------------------------------------------------------------
6,229,673
- ---------------------------------------------------------------
UNITED KINGDOM-2.82%
United Kingdom Treasury Notes,
8.00%, 12/07/00 GBP 1,500,000 2,641,511
- ---------------------------------------------------------------
7.00%, 11/06/01 1,500,000 2,543,087
- ---------------------------------------------------------------
7.50%, 12/07/06 3,100,000 5,306,798
- ---------------------------------------------------------------
10,491,396
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Government Bonds &
Notes 45,641,303
- ---------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE
PREFERRED STOCKS-4.23%
<CAPTION>
SHARES
<S> <C> <C>
ADVERTISING/BROADCASTING-0.51%
News Corp. Ltd.,-
$5.00 Conv. Pfd.
(acquired 11/04/96; cost
$2,000,000)(c)(f) 20,000 1,887,500
- ---------------------------------------------------------------
Time Warner Inc.-Series M
$102.50 PIK Conv. Pfd. .4 395
- ---------------------------------------------------------------
1,887,895
- ---------------------------------------------------------------
AEROSPACE/DEFENSE-0.31%
Loral Space & Communications-
$3.00 Conv. Pfd.
(acquired 11/01/96; cost
$1,000,000)(c) 20,000 1,137,500
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.39%
Microsoft Corp.-Series A,
$2.196 Conv. Pfd. 18,000 1,442,250
- ---------------------------------------------------------------
</TABLE>
FS-55
<PAGE> 187
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRIC POWER-0.58%
Citizens Utilities Co.-
$2.50 Conv. Pfd. 45,000 $ 2,148,750
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.61%
SunAmerica, Inc.-
$3.188 Conv. Pfd. 53,350 2,254,038
- ---------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.07%
Conseco Inc.-
$4.278 Conv. PRIDES 35,000 3,981,250
- ---------------------------------------------------------------
OIL & GAS (REFINING/MARKETING)-0.28%
Tosco Financing Trust-
$2.875 Conv. Pfd.
(acquired 12/10/96-12/11/96; cost
$1,006,950)(c) 20,000 1,042,500
- ---------------------------------------------------------------
RETAIL (STORES)-0.48%
Kmart Financing-
$3.875 Conv. Pfd. 37,000 1,803,750
- ---------------------------------------------------------------
Total U.S. Dollar Denominated
Convertible Preferred Stocks 15,697,933
===============================================================
COMMON STOCKS-0.40%
UTILITIES-0.40%
National Power PLC-ADR 24,300 823,162
- ---------------------------------------------------------------
PowerGen PLC-ADR 17,300 683,350
- ---------------------------------------------------------------
Total Common Stocks 1,506,512
- ---------------------------------------------------------------
WARRANTS-0.03%
CABLE TELEVISION-0.00%
Wireless One, Inc.,
expiring 10/19/00(g) 2,670 2,670
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONTAINERS-0.01%
MVE Inc.,
expiring 02/15/02(g) 1,000 $ 30,000
- ---------------------------------------------------------------
LEISURE & RECREATION-0.01%
IHF Capital Inc.,
expiring 11/14/99(g) 1,200 48,000
- ---------------------------------------------------------------
STEEL-0.00%
Gulf States Steel Corp.,
expiring 04/15/03(g) 1,650 8,250
- ---------------------------------------------------------------
TELECOMMUNICATIONS-0.01%
Clearnet Communications Inc.,
expiring 09/15/05(g) 5,874 35,244
- ---------------------------------------------------------------
Total Warrants 124,164
===============================================================
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES-0.12%
U.S. Treasury Bonds,
6.75%, 08/15/26 $ 450,000 453,614
- ---------------------------------------------------------------
REPURCHASE AGREEMENTS-1.83%(h)
HSBC Securities, Inc.,
7.05%, 01/02/97(i) 210,059 210,059
- ---------------------------------------------------------------
UBS Securities, Inc.,
7.05%, 01/02/97(j) 6,589,941 6,589,941
- ---------------------------------------------------------------
Total Repurchase Agreements 6,800,000
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.19% 364,788,665
- ---------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.81% 6,737,729
- ---------------------------------------------------------------
NET ASSETS-100.00% $371,526,394
===============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by note (e).
(b) Discounted bond at purchase. Interest rate represents coupon rate at which
the bond will accrue at a specified future date.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at December 31, 1996 was
$28,215,063 which represented 7.59% of the Fund's net assets.
(d) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(e) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(f) Issued as a unit. This unit also includes 20,000 warrants to purchase
shares of common stock.
(g) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(h) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(i) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$300,117,500. Collateralized by $633,913,662 U.S. Treasury obligations, 0%
to 8.00% due 05/01/19 to 11/01/35.
(j) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$550,215,417. Collateralized by $732,485,305 U.S. Government obligations,
0% to 9.50% due 01/01/98 to 12/15/26.
Abbreviations:
<TABLE>
<S> <C> <C>
ADR - American Depository Receipts Gtd. - Guaranteed
AUD - Australian Dollar JPY - Japanese Yen
CAD - Canadian Dollar PIK - Payment in Kind
CHF - Swiss Franc PRIDES - Preferred Redemption Increase
Conv. - Convertible Dividend Equity Security
Deb. - Debentures Sec. - Secured
DEM - German Deutschemark SEK - Swedish Krona
Disc. - Discounted Sr. - Senior
DKK - Danish Krone Sub. - Subordinated
GBP - British Pound Sterling Unsub. - Unsubordinated
</TABLE>
See Notes to Financial Statements.
FS-56
<PAGE> 188
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$349,179,780) $364,788,665
- ---------------------------------------------------------
Foreign currencies, at value (cost
$249,071) 249,969
- ---------------------------------------------------------
Receivables for:
Forward currency contracts 901,610
- ---------------------------------------------------------
Fund shares sold 712,759
- ---------------------------------------------------------
Interest 6,657,133
- ---------------------------------------------------------
Investment for deferred compensation plan 68,881
- ---------------------------------------------------------
Other assets 38,223
- ---------------------------------------------------------
Total assets 373,417,240
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 500,000
- ---------------------------------------------------------
Fund shares reacquired 207,833
- ---------------------------------------------------------
Dividends to shareholders 550,302
- ---------------------------------------------------------
Deferred compensation plan 68,881
- ---------------------------------------------------------
Accrued advisory fees 142,103
- ---------------------------------------------------------
Accrued distribution fees 260,851
- ---------------------------------------------------------
Accrued administrative service fees 7,180
- ---------------------------------------------------------
Accrued transfer agent fees 59,475
- ---------------------------------------------------------
Accrued trustees' fees 1,811
- ---------------------------------------------------------
Accrued operating expenses 92,410
- ---------------------------------------------------------
Total liabilities 1,890,846
- ---------------------------------------------------------
Net assets applicable to shares outstanding $371,526,394
- ---------------------------------------------------------
NET ASSETS:
Class A $286,182,914
=========================================================
Class B $ 85,343,480
- ---------------------------------------------------------
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE
Class A 34,717,454
=========================================================
Class B 10,374,382
=========================================================
CLASS A:
Net asset value and redemption price per
share $ 8.24
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $8.24 divided by
95.25%) $ 8.65
- ---------------------------------------------------------
CLASS B:
Net asset value and offering price per
share $ 8.23
- ---------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 26,009,436
- ---------------------------------------------------------
Dividends (net of $42,327 foreign
withholding tax) 536,443
- ---------------------------------------------------------
Total investment income 26,545,879
- ---------------------------------------------------------
EXPENSES:
Advisory fees 1,510,254
- ---------------------------------------------------------
Custodian fees 82,806
- ---------------------------------------------------------
Distribution fees -- Class A 656,254
- ---------------------------------------------------------
Distribution fees -- Class B 650,621
- ---------------------------------------------------------
Trustees' fees 7,730
- ---------------------------------------------------------
Transfer agent fees -- Class A 351,979
- ---------------------------------------------------------
Transfer agent fees -- Class B 134,221
- ---------------------------------------------------------
Administrative service fees 75,132
- ---------------------------------------------------------
Other 266,163
- ---------------------------------------------------------
Total expenses 3,735,160
- ---------------------------------------------------------
Less: Expenses paid indirectly (5,398)
- ---------------------------------------------------------
Net expenses 3,729,762
- ---------------------------------------------------------
Net investment income 22,816,117
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCY AND FORWARD CURRENCY
CONTRACT TRANSACTIONS
Net realized gain (loss) from:
Investment securities 699,083
- ---------------------------------------------------------
Foreign currency transactions (182,290)
- ---------------------------------------------------------
Forward currency contracts 1,599,434
- ---------------------------------------------------------
2,116,227
- ---------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 3,516,763
- ---------------------------------------------------------
Foreign currency transactions (74,980)
- ---------------------------------------------------------
Forward currency contracts 796,581
- ---------------------------------------------------------
4,238,364
- ---------------------------------------------------------
Net realized and unrealized gain from
investment securities, foreign currency
transactions and forward currency
contracts 6,354,591
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 29,170,708
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-57
<PAGE> 189
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 22,816,117 $ 18,156,289
- --------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currency transactions and forward currency contracts 2,116,227 9,871,598
- --------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currency transactions and forward currency
contracts 4,238,364 21,434,843
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 29,170,708 49,462,730
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (19,414,227) (16,600,806)
- --------------------------------------------------------------------------------------------
Class B (4,277,769) (1,555,483)
- --------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A -- (889,987)
- --------------------------------------------------------------------------------------------
Class B -- (95,903)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 31,245,815 22,105,318
- --------------------------------------------------------------------------------------------
Class B 39,218,171 29,160,108
- --------------------------------------------------------------------------------------------
Net increase in net assets 75,942,698 81,585,977
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 295,583,696 213,997,719
- --------------------------------------------------------------------------------------------
End of period $371,526,394 $295,583,696
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $360,736,285 $290,272,299
- --------------------------------------------------------------------------------------------
Undistributed net investment income 33,129 846,817
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from sales of
investment securities, foreign currencies and forward
contract transactions (5,745,170) (7,799,206)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and forward contract transactions 16,502,150 12,263,786
- --------------------------------------------------------------------------------------------
$371,526,394 $295,583,696
============================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Income Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. The Fund's investment objective is to seek to achieve
a high level of current income consistent with reasonable concern for safety of
principal by investing primarily in fixed rate corporate debt and U.S.
Government obligations. Information presented in these financial statements
pertains only to the Fund.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- Debt obligations are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as institution-size trading in similar
groups of securities, developments related to special securities, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Investment securities for which prices
are not provided by the pricing
FS-58
<PAGE> 190
service and which are listed or traded on an exchange are valued at the last
sales price on the exchange where the security is principally traded or,
lacking any sales on a particular day, at the mean between the closing bid
and asked prices on that day unless the Board of Trustees, or persons
designated by the Board of Trustees, determines that the over-the-counter
quotations more closely reflect the current market value of the security.
Securities traded in the over-the-counter market, except (i) securities
priced by the pricing service, (ii) securities for which representative
exchange prices are available, and (iii) securities reported in the NASDAQ
National Market System, are valued at the mean between representative last
bid and asked prices obtained from an electronic quotation reporting system,
if such prices are available, or from established market makers. Each
security reported in the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the mean
of the closing bid and asked prices. Securities for which market quotations
are either not readily available or are questionable are valued at fair value
as determined in good faith by or under the supervision of the Trust's
officers in a manner specifically authorized by the Board of Trustees.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in foreign
securities, as well as corporate bonds and U.S. Government Securities, is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events affecting the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Trustees.
B. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts -- A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract to attempt to minimize the
risk to the Fund from adverse changes in the relationship between currencies.
The Fund may also enter into a forward contract for the purchase or sale of a
security denominated in a foreign currency in order to "lock-in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
Outstanding contracts at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO UNREALIZED
SETTLEMENT ----------------------------- APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
---------- --------------- ----------- ----------- --------------
<C> <C> <C> <C> <C>
01/30/97 CHF 3,940,000 $ 3,145,709 $ 2,952,970 $192,739
03/10/97 CHF 1,000,000 774,353 752,378 21,975
01/27/97 DEM 11,200,000 7,451,763 7,291,683 160,080
02/19/97 DEM 11,200,000 7,265,179 7,302,086 (36,907)
02/03/97 JPY 630,000,000 5,742,935 5,440,212 302,723
03/05/97 JPY 360,000,000 3,214,286 3,108,817 105,469
03/17/97 JPY 546,000,000 4,870,651 4,715,120 155,531
----------- ----------- --------
$32,464,876 $31,563,266 $901,610
=========== =========== ========
</TABLE>
D. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. It is the policy of the Fund to declare daily dividends
from net investment income. Such dividends are paid monthly. Distributions
from net realized capital gains, if any, are recorded on ex-dividend date and
are paid annually subject to restrictions noted in section "E" below. On
December 31, 1996, $62,191 was reclassified from undistributed net realized
gain (loss) to undistributed net investment income as a result of permanent
book/tax differences due to the differing book/tax treatment for foreign
currency losses and market discount on securities sold. Net assets of the
Fund were unaffected by the reclassification discussed above.
E. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $4,771,102 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2003. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
F. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays AIM an advisory fee at an annual rate of 0.50% of the
first $200 million of the Fund's average daily net assets, plus 0.40% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.35% of the Fund's average daily net assets in excess of
FS-59
<PAGE> 191
$500 million to and including $1 billion, plus 0.30% of the Fund's average daily
net assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1996, AIM
was reimbursed $75,132 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended December 31, 1996, the
Fund paid AFS $305,240 for such services.
The Fund received reductions in transfer agency fees payable to AFS of $5,008
from dividends received on balances in cash management bank accounts. In
addition, pricing service expenses in the amount of $390 were paid through
directed brokerage commissions paid by the Fund. The above arrangements resulted
in a reduction in the Fund's total expenses of $5,398 during the year ended
December 31, 1996.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
Plans would constitute an asset-based sales charge. AIM Distributors may, from
time to time, assign, transfer or pledge to one or more assignees, its rights to
all or a portion of (a) compensation received by AIM Distributors from the Fund
pursuant to the Class B Plan (but not AIM Distributors' duties and obligations
pursuant to the Class B Plan) and (b) any contingent deferred sales charges
payable to AIM Distributors related to the Class B shares. The Plans also impose
a cap on the total sales charges, including asset-based sales charges, that may
be paid by the respective classes. During the year ended December 31, 1996, the
Class A shares and the Class B shares paid AIM Distributors $656,254 and
$650,621, respectively, as compensation under the Plans.
AIM Distributors received commissions of $248,078 from sales of the Class A
shares of the Fund during the year ended December 31, 1996. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1996,
AIM Distributors received $65,445 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1996, the Fund paid legal fees of $3,564
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $4,000,000. During the year ended December 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.08% on the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1996 was
$317,733,500 and $254,732,190, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $19,028,658
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (3,419,773)
- -----------------------------------------------------------
Net unrealized appreciation of investment
securities $15,608,885
===========================================================
Investments have the same cost for tax and financial
statement purposes.
</TABLE>
FS-60
<PAGE> 192
NOTE 6-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------ -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 10,956,910 $87,131,342 7,497,108 $58,558,530
- -------------------------------------------------------------------------------------- -----------------------
Class B 7,662,222 60,657,835 4,199,186 32,900,136
- -------------------------------------------------------------------------------------- -----------------------
Issued as
reinvestment of
dividends:
Class A 1,985,876 15,762,291 1,859,312 14,431,705
- -------------------------------------------------------------------------------------- -----------------------
Class B 357,055 2,833,327 131,455 1,024,904
- -------------------------------------------------------------------------------------- -----------------------
Reacquired:
Class A (8,997,073) (71,647,818) (6,603,107) (50,884,917)
- -------------------------------------------------------------------------------------- -----------------------
Class B (3,079,249) (24,272,991) (611,547) (4,764,932)
- -------------------------------------------------------------------------------------- -----------------------
8,885,741 $70,463,986 6,472,407 $51,265,426
====================================================================================== =======================
</TABLE>
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the ten-year period ended December 31, 1996 and for a Class
B share outstanding during each of the years in the three-year period ended
December 31, 1996 and the period September 7, 1993 (date sales commenced)
through December 31, 1993.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992(a) 1991 1990
CLASS A: -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41 $ 7.80
- ------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.57 0.58 0.58 0.60 0.60 0.61 0.65
- ------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 0.09 1.00 (1.22) 0.61 (0.03) 0.66 (0.39)
- ------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations 0.66 1.58 (0.64) 1.21 0.57 1.27 0.26
- ------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.59) (0.61) (0.49) (0.60) (0.61) (0.61) (0.65)
- ------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Distributions from net realized capital
gains -- -- (0.01) (0.19) -- -- --
- ------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Return of capital -- -- (0.11) -- -- -- --
- ------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.59) (0.61) (0.61) (0.79) (0.61) (0.61) (0.65)
- ------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 8.24 $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41
=========================================== ======== ======== ======== ======== ======== ======== ========
Total return(b) 8.58% 22.77% (7.65)% 15.38% 7.42% 18.00% 3.65%
=========================================== ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $286,183 $251,280 $201,677 $244,168 $218,848 $231,798 $215,987
=========================================== ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.98%(c)(d) 0.98% 0.98% 0.98% 0.99%(e) 1.00%(e) 1.00%
=========================================== ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average
net assets 7.13%(c) 7.52% 7.53% 7.01% 7.54%(e) 7.97%(e) 8.73%
=========================================== ======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 80% 227% 185% 99% 82% 67% 106%
=========================================== ======== ======== ======== ======== ======== ======== ========
<CAPTION>
1989 1988 1987
CLASS A: -------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period $ 7.53 $ 7.55 $ 8.20
- ------------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income 0.66 0.68 0.67
- ------------------------------------------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 0.32 (0.02) (0.63)
- ------------------------------------------- -------- -------- --------
Total from investment operations 0.98 0.66 0.04
- ------------------------------------------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.71) (0.68) (0.69)
- ------------------------------------------- -------- -------- --------
Distributions from net realized capital
gains -- -- --
- ------------------------------------------- -------- -------- --------
Return of capital -- -- --
- ------------------------------------------- -------- -------- --------
Total distributions (0.71) (0.68) (0.69)
- ------------------------------------------- -------- -------- --------
Net asset value, end of period $ 7.80 $ 7.53 $ 7.55
=========================================== ======== ======== ========
Total return(b) 13.56% 9.01% 0.56%
=========================================== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $229,222 $218,946 $237,466
=========================================== ======== ======== ========
Ratio of expenses to average net assets 0.96% 0.95% 0.84%
=========================================== ======== ======== ========
Ratio of net investment income to average
net assets 8.56% 8.81% 8.64%
=========================================== ======== ======== ========
Portfolio turnover rate 222% 361% 195%
=========================================== ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $262,501,383.
(d) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average daily net assets would have been 0.97%.
(e) After waiver of advisory fees and expense reimbursements. Ratios of expenses
to average net assets prior to waiver of advisory fees and expense
reimbursements were 1.00% and 1.03% for 1992-1991, respectively. Ratios of
net investment income to average net assets prior to waiver of advisory fees
and expense reimbursements were 7.53% and 7.94% for 1992-1991, respectively.
FS-61
<PAGE> 193
<TABLE>
<CAPTION>
1996 1995 1994 1993
------- ------- ------- ------
CLASS B:
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.15 $ 7.18 $ 8.43 $ 8.95
- ------------------------------------------------------------ ------- ------- ------- ------
Income from investment operations:
Net investment income 0.50 0.53 0.52 0.19
- ------------------------------------------------------------ ------- ------- ------- ------
Net gains (losses) on securities (both realized and
unrealized) 0.11 0.98 (1.23) (0.34)
- ------------------------------------------------------------ ------- ------- ------- ------
Total from investment operations 0.61 1.51 (0.71) (0.15)
- ------------------------------------------------------------ ------- ------- ------- ------
Less distributions:
Dividends from net investment income (0.53) (0.54) (0.42) (0.18)
- ------------------------------------------------------------ ------- ------- ------- ------
Distributions from net realized capital gains -- -- (0.01) (0.19)
- ------------------------------------------------------------ ------- ------- ------- ------
Return of capital -- -- (0.11) --
- ------------------------------------------------------------ ------- ------- ------- ------
Total distributions (0.53) (0.54) (0.54) (0.37)
- ------------------------------------------------------------ ------- ------- ------- ------
Net asset value, end of period $ 8.23 $ 8.15 $ 7.18 $ 8.43
============================================================ ======= ======= ======= ======
Total return(a) 7.87% 21.72% (8.46)% (0.75)%
============================================================ ======= ======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $85,343 $44,304 $12,321 $3,602
============================================================ ======= ======= ======= ======
Ratio of expenses to average net assets 1.80%(b)(c) 1.79% 1.83%(d) 1.75%(d)(e)
============================================================ ======= ======= ======= ======
Ratio of net investment income to average net assets 6.30%(b) 6.71% 6.69%(d) 6.24%(d)(e)
============================================================ ======= ======= ======= ======
Portfolio turnover rate 80% 227% 185% 99%
============================================================ ======= ======= ======= ======
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are based on average net assets of $65,062,096.
(c) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average net assets would have been the same.
(d) After expense reimbursements. Ratios of expenses to average net assets prior
to expense reimbursements were 2.04% and 2.50% (annualized) for 1994 and
1993, respectively. Ratios of net investment income to average net assets
prior to expense reimbursements were 6.48% and 5.49% (annualized) for 1994
and 1993, respectively.
(e) Annualized.
NOTE 8-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO plc. AIM Management is the parent company of the Fund's advisor. The
merger is expected to take place during the first quarter of 1997.
FS-62
<PAGE> 194
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Intermediate Government Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Intermediate Government Fund (a
portfolio of AIM Funds Group), including the schedule of
investments, as of December 31, 1996, and the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years in
the two-year period then ended and the financial highlights
for each of the years in the four-year period then ended.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly in all material
respects, the financial position of AIM Intermediate
Government Fund as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in
the four-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1997
FS-63
<PAGE> 195
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCIES-84.07%
FEDERAL HOME LOAN BANK-2.79%
Medium term notes
7.31%, 07/06/01 $ 4,000,000 $ 4,160,560
- --------------------------------------------------------------
7.36%, 07/01/04 2,800,000 2,927,176
- --------------------------------------------------------------
7,087,736
- --------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.-16.97%
Pass through certificates
9.00%, 12/01/05 to 04/01/25 12,970,540 13,693,804
- --------------------------------------------------------------
8.00%, 07/01/06 to 12/01/06 36,845 37,927
- --------------------------------------------------------------
8.50%, 07/01/07 to 05/01/26 7,571,625 7,865,307
- --------------------------------------------------------------
10.50%, 09/01/09 to 01/01/21 3,717,225 4,121,875
- --------------------------------------------------------------
7.00%, 11/01/10 to 04/01/11 2,356,430 2,358,854
- --------------------------------------------------------------
6.50%, 02/01/11 4,932,127 4,853,509
- --------------------------------------------------------------
10.00%, 11/01/11 to 02/01/16 48,261 52,810
- --------------------------------------------------------------
12.00%, 02/01/13 29,470 33,393
- --------------------------------------------------------------
9.50%, 04/01/25 9,300,140 10,043,421
- --------------------------------------------------------------
43,060,900
- --------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION-51.65%
Debentures
6.59%, 05/24/01 5,000,000 5,061,200
- --------------------------------------------------------------
8.625%, 11/10/04 3,500,000 3,688,370
- --------------------------------------------------------------
8.50%, 02/01/05 4,500,000 4,736,430
- --------------------------------------------------------------
7.875%, 02/24/05 3,000,000 3,227,790
- --------------------------------------------------------------
Pass through certificates
6.625%, 01/31/06 TBA(a) 4,500,000 4,406,580
- --------------------------------------------------------------
8.50%, 01/01/07 to 03/01/07 43,588 45,372
- --------------------------------------------------------------
7.50%, 06/01/10 to 08/01/25 29,071,654 29,360,908
- --------------------------------------------------------------
7.00%, 05/01/11 5,703,245 5,699,652
- --------------------------------------------------------------
8.00%, 09/01/11 to 07/01/26 18,464,593 18,866,082
- --------------------------------------------------------------
8.00%, 01/15/12 to 12/01/26
TBA(a)(b) 47,000,000 48,140,942
- --------------------------------------------------------------
9.50%, 07/01/16 to 08/01/22 3,685,519 3,994,423
- --------------------------------------------------------------
10.50%, 07/01/19 1,223,525 1,352,754
- --------------------------------------------------------------
10.00%, 08/01/20 2,264,208 2,495,564
- --------------------------------------------------------------
131,076,067
- --------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-10.57%
Pass through certificates
9.00%, 10/15/08 to 01/15/21 1,199,419 1,278,588
- --------------------------------------------------------------
9.50%, 06/15/09 to 03/15/23 10,151,345 11,023,608
- --------------------------------------------------------------
10.00%, 11/15/09 to 07/15/24 7,134,689 7,846,562
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION- (CONTINUED)
11.00%, 12/15/09 to 12/15/15 $ 241,254 $ 269,488
- --------------------------------------------------------------
13.50%, 07/15/10 to 04/15/15 486,215 566,671
- --------------------------------------------------------------
12.50%, 11/15/10 282,988 328,266
- --------------------------------------------------------------
13.00%, 01/15/11 to 05/15/15 515,790 600,521
- --------------------------------------------------------------
12.00%, 01/15/13 to 07/15/15 937,964 1,073,377
- --------------------------------------------------------------
10.50%, 07/15/13 to 10/15/21 2,035,778 2,257,458
- --------------------------------------------------------------
8.00%, 03/15/23 1,535,699 1,575,520
- --------------------------------------------------------------
26,820,059
- --------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY-2.09%
Debentures
5.98%, 04/01/36 5,240,000 5,311,002
- --------------------------------------------------------------
Total U.S. Government Agencies 213,355,764
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-30.59%
U.S. TREASURY NOTES & BONDS-29.78%
7.75%, 11/30/99 3,000,000 3,136,110
- --------------------------------------------------------------
6.375%, 01/15/00 to 08/15/02 17,000,000 17,146,730
- --------------------------------------------------------------
5.875%, 06/30/00 2,000,000 1,987,100
- --------------------------------------------------------------
6.25%, 08/31/00 to 04/30/01 13,000,000 13,045,570
- --------------------------------------------------------------
7.00%, 07/15/06 4,000,000 4,156,480
- --------------------------------------------------------------
6.50%, 10/15/06 to 11/15/26 6,500,000 6,478,070
- --------------------------------------------------------------
7.25%, 05/15/16 7,500,000 7,921,200
- --------------------------------------------------------------
7.50%, 11/15/16 5,500,000 5,953,090
- --------------------------------------------------------------
8.125%, 08/15/19 4,000,000 4,623,760
- --------------------------------------------------------------
6.875%, 08/15/25 4,500,000 4,587,795
- --------------------------------------------------------------
6.75%, 08/15/26 6,500,000 6,552,195
- --------------------------------------------------------------
75,588,100
- --------------------------------------------------------------
U.S. TREASURY STRIPS-0.81%(c)
6.64%, 11/15/08 4,000,000 1,835,720
- --------------------------------------------------------------
6.96%, 11/15/18 1,000,000 224,360
- --------------------------------------------------------------
2,060,080
- --------------------------------------------------------------
Total U.S. Treasury Securities 77,648,180
- --------------------------------------------------------------
REPURCHASE AGREEMENT-4.18%(d)
Daiwa Securities America Inc.
6.25%, 01/02/97(e) 10,609,102 10,609,102
- --------------------------------------------------------------
TOTAL INVESTMENTS-118.84% 301,613,046
- --------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-(18.84%) (47,825,605)
- --------------------------------------------------------------
NET ASSETS-100.00% $253,787,441
==============================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) At 12/31/96, cost of securities purchased on a when-issued basis totaled
$52,789,688.
(b) These securities are subject to dollar roll transactions. See Note 1 section
C of Notes to Financial Statements.
(c) U.S. Treasury STRIPS are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Abbreviations:
TBA - To Be Announced
See Notes to Financial Statements.
FS-64
<PAGE> 196
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$297,052,301) $301,613,046
- ---------------------------------------------------------
Receivables for:
Investments sold 2,784,823
- ---------------------------------------------------------
Fund shares sold 591,646
- ---------------------------------------------------------
Interest 3,024,660
- ---------------------------------------------------------
Investment for deferred compensation plan 20,806
- ---------------------------------------------------------
Other assets 163,213
- ---------------------------------------------------------
Total assets 308,198,194
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 52,813,703
- ---------------------------------------------------------
Fund shares redeemed 746,283
- ---------------------------------------------------------
Dividends 383,446
- ---------------------------------------------------------
Deferred compensation plan 20,806
- ---------------------------------------------------------
Accrued advisory fees 103,396
- ---------------------------------------------------------
Accrued administrative service fees 6,278
- ---------------------------------------------------------
Accrued distribution fees 197,844
- ---------------------------------------------------------
Accrued transfer agent fees 40,792
- ---------------------------------------------------------
Accrued operating expenses 98,205
- ---------------------------------------------------------
Total liabilities 54,410,753
- ---------------------------------------------------------
Net assets applicable to shares outstanding $253,787,441
=========================================================
NET ASSETS:
Class A $174,344,466
=========================================================
Class B $ 79,442,975
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 18,779,238
=========================================================
Class B 8,559,258
=========================================================
Class A:
Net asset value and redemption price per
share $ 9.28
=========================================================
Offering price per share:
(Net asset value of $9.28 divided
by 95.25%) $ 9.74
=========================================================
Class B:
Net asset value and offering price per
share $ 9.28
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 19,355,312
- ---------------------------------------------------------
EXPENSES:
Advisory fees 1,188,121
- ---------------------------------------------------------
Custodian fees 47,171
- ---------------------------------------------------------
Distribution fees -- Class A 437,596
- ---------------------------------------------------------
Distribution fees -- Class B 719,764
- ---------------------------------------------------------
Administrative service fees 71,348
- ---------------------------------------------------------
Interest 185,460
- ---------------------------------------------------------
Transfer agent fees -- Class A 256,058
- ---------------------------------------------------------
Transfer agent fees -- Class B 115,997
- ---------------------------------------------------------
Trustees' fees 7,527
- ---------------------------------------------------------
Other 175,222
- ---------------------------------------------------------
Total expenses 3,204,264
- ---------------------------------------------------------
Less: expenses paid indirectly (4,033)
- ---------------------------------------------------------
Net expenses 3,200,231
- ---------------------------------------------------------
Net investment income 16,155,081
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Net realized gain (loss) on sales of
investment securities (4,339,042)
- ---------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities (6,405,094)
- ---------------------------------------------------------
Net gain (loss) on investment securities (10,744,136)
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 5,410,945
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-65
<PAGE> 197
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
- --------------------------------------------------------------------------------------------
Net investment income $ 16,155,081 $ 14,368,900
- --------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities (4,339,042) (1,382,949)
- --------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (6,405,094) 16,712,997
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 5,410,945 29,698,948
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (11,114,092) (11,460,957)
- --------------------------------------------------------------------------------------------
Class B (3,966,734) (2,319,847)
- --------------------------------------------------------------------------------------------
Return of capital:
Class A (712,857) (693,899)
- --------------------------------------------------------------------------------------------
Class B (292,831) (162,343)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 5,857,162 5,708,304
- --------------------------------------------------------------------------------------------
Class B 20,988,143 35,091,651
- --------------------------------------------------------------------------------------------
Net increase in net assets 16,169,736 55,861,857
- --------------------------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------------------------
Beginning of period 237,617,705 181,755,848
- --------------------------------------------------------------------------------------------
End of period $253,787,441 $237,617,705
============================================================================================
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------
Shares of beneficial interest $265,272,711 $239,433,094
- --------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (19,243) (12,778)
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (16,026,772) (12,768,450)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 4,560,745 10,965,839
- --------------------------------------------------------------------------------------------
$253,787,441 $237,617,705
============================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Intermediate Government Fund (the "Fund") is a series portfolio of AIM Funds
Group (the "Trust"). The Trust is a Delaware business trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of nine separate series
portfolios, each having an unlimited number of shares of beneficial interest.
The Fund currently offers two different classes of shares: the Class A shares
and the Class B shares. Class A shares are sold with a front-end sales charge.
Class B shares are sold with a contingent deferred sales charge. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. The Fund's investment objective
is to seek to achieve a high level of current income consistent with reasonable
concern for safety of principal by investing in debt securities issued,
guaranteed or otherwise backed by the United States Government. Information
presented in these financial statements pertains only to the Fund.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations -- Debt obligations that are issued or guaranteed by the
U.S. Government, its agencies, authorities, and instrumentalities are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate, maturity and seasoning differential. Securities for which
market prices are not provided by the pricing service are valued at the mean
between the last bid and asked prices based upon quotes furnished by
FS-66
<PAGE> 198
independent sources. Securities for which market quotations are either not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividends to shareholders are declared
daily and are paid monthly. On December 31, 1996, $1,080,720 was reclassified
from undistributed net realized gain (loss) to undistributed net investment
income as a result of permanent book/tax differences due to the differing
book/tax treatment for principal paydown losses on mortgage-backed
securities. In addition, $1,005,688 was reclassified from undistributed net
investment income to paid in capital, consisting of returns of capital. Net
assets of the Fund were unaffected by the reclassifications discussed above.
C. Reverse Repurchase Agreements and Dollar Roll Transactions -- A reverse
repurchase agreement involves the sale of securities held by the Fund, with
an agreement that the Fund will repurchase such securities at an agreed-upon
price and date. Proceeds from reverse repurchase agreements are treated as
borrowings. The agreements are collateralized by the underlying securities
and are carried at the amount at which the securities will subsequently be
repurchased as specified in the agreements.
The Fund may also engage in dollar roll transactions with respect to
mortgage securities issued by GNMA, FNMA and FHLMC. In a dollar roll
transaction, the Fund sells a mortgage security held in the portfolio to a
financial institution such as a bank or broker-dealer, and simultaneously
agrees to repurchase a substantially similar security (same type, coupon and
maturity) from the institution at a later date at an agreed upon price. The
mortgage securities that are repurchased will bear the same interest rate as
those sold, but generally will be collateralized by different pools of
mortgages with different prepayment histories. During the period between the
sale and repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be
invested in short-term instruments, and the income from these investments,
together with any additional fee income received on the sale, could generate
income for the Fund exceeding the yield on the security sold.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the
securities that the Fund has sold but is obligated to repurchase under the
agreement. In the event the buyer of securities in a dollar roll transaction
files for bankruptcy or becomes insolvent, the Fund's use of the proceeds
from the sale of the securities may be restricted pending a determination by
the other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. The Fund will limit its borrowings
from banks, reverse repurchase agreements and dollar roll transactions to an
aggregate of 33 1/3% of its total assets at the time of investment. The Fund
will not purchase additional securities when any borrowings from banks
exceed 5% of the fund's total assets.
D Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $15,870,990 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2004. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
E Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2- ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays AIM an advisory fee at an annual rate of 0.50% of the
first $200 million of the Fund's average daily net assets, plus 0.40% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.35% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.30% of the Fund's average daily net
assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1996, AIM
was reimbursed $71,348 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended December 31, 1996, the
Fund paid AFS $214,797 for such services.
The Fund received reductions in transfer agency fees payable to AFS of $3,757
from dividends received on balances in cash management bank accounts. In
addition, pricing service expenses in the amount of $276 were paid through
directed brokerage commissions paid by the Fund. The above arrangements resulted
in a reduction in the Fund's total expenses of $4,033 during the year ended
December 31, 1996.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A
FS-67
<PAGE> 199
shares. The Class A Plan is designed to compensate AIM Distributors for certain
promotional and other sales related costs and provides periodic payments to
selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own Class A shares of
the Fund. The Fund, pursuant to the Class B Plan, pays AIM Distributors
compensation at an annual rate of 1.00% of the average daily net assets
attributable to the Class B shares. Of this amount, the Fund may pay a service
fee of 0.25% of the average daily net assets of the Class B shares to selected
dealers and financial institutions who furnish continuing personal shareholder
services to their customers who purchase and own Class B shares of the Fund. Any
amounts not paid as a service fee under such Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges, that may be paid by the respective
classes. AIM Distributors may, from time to time, assign, transfer or pledge to
one or more designees, its rights to all or a designated portion of (a)
compensation received by AIM Distributors from the Fund pursuant to the Class B
Plan (but not AIM Distributors' duties and obligations pursuant to the Class B
Plan) and (b) any contingent deferred sales charges received by AIM Distributors
related to the Class B shares. During the year ended December 31, 1996, the
Class A shares and the Class B shares paid AIM Distributors $437,596 and
$719,764 respectively, as compensation under the Plans.
AIM Distributors received commissions of $204,498 from sales of the Class A
shares of the Fund during the year ended December 31, 1996. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1996,
AIM Distributors received $82,525 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1996, the Fund paid legal fees of $3,411
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $3,200,000. During the year ended December 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.08% on the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1996 was
$338,127,889 and $305,224,638, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $4,952,509
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (547,546)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $4,404,963
=========================================================
Cost of investments for tax purposes is $297,208,083.
</TABLE>
NOTE 6 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 7,920,265 $74,033,231 5,766,866 $54,292,965
- --------------------- -------------------------------------------------
Class B 5,052,488 47,193,668 4,740,977 44,702,493
- --------------------- -------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 1,025,026 9,536,042 993,993 9,337,931
- --------------------- -------------------------------------------------
Class B 314,728 2,925,034 172,523 1,627,255
- --------------------- -------------------------------------------------
Reacquired:
Class A (8,340,854) (77,712,111) (6,189,567) (57,922,592)
- --------------------- -------------------------------------------------
Class B (3,132,635) (29,130,559) (1,194,246) (11,238,097)
- --------------------- -------------------------------------------------
2,839,018 $26,845,305 4,290,546 $40,799,955
=================================================
</TABLE>
FS-68
<PAGE> 200
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the nine-year period ended December 31, 1996 and the period
April 28, 1987 (date operations commenced) through December 31, 1987 and for a
Class B share outstanding during the three-year period ended December 31, 1996
and the period September 7, 1993 (date sales commenced) through December 31,
1993.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992(a) 1991 1990
CLASS A: -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.70 $ 8.99 $ 10.05 $ 10.19 $ 10.34 $ 9.95 $ 9.91
- ------------------------------------------------- -------- -------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income 0.63 0.69 0.68 0.74 0.77 0.82 0.87
- ------------------------------------------------- -------- -------- -------- -------- -------- -------- -------
Net gains (losses) on securities (both realized
and unrealized) (0.42) 0.73 (1.02) (0.04) (0.15) 0.41 0.01
- ------------------------------------------------- -------- -------- -------- -------- -------- -------- -------
Total from investment operations 0.21 1.42 (0.34) 0.70 0.62 1.23 0.88
- ------------------------------------------------- -------- -------- -------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.59) (0.67) (0.58) (0.70) (0.74) (0.84) (0.84)
- ------------------------------------------------- -------- -------- -------- -------- -------- -------- -------
Distributions from net realized capital gains -- -- (0.04) (0.14) (0.03) -- --
- ------------------------------------------------- -------- -------- -------- -------- -------- -------- -------
Return of capital (0.04) (0.04) (0.10) -- -- -- --
- ------------------------------------------------- -------- -------- -------- -------- -------- -------- -------
Total distributions (0.63) (0.71) (0.72) (0.84) (0.77) (0.84) (0.84)
- ------------------------------------------------- -------- -------- -------- -------- -------- -------- -------
Net asset value, end of period $ 9.28 $ 9.70 $ 8.99 $ 10.05 $ 10.19 $ 10.34 $ 9.95
================================================= ======== ======== ======== ======== ======== ======== =======
Total return(b) 2.35% 16.28% (3.44)% 7.07% 6.26% 12.98% 9.39%
================================================= ======== ======== ======== ======== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $174,344 $176,318 $158,341 $139,586 $123,484 $101,409 $61,463
================================================= ======== ======== ======== ======== ======== ======== =======
Ratio of expenses to average net assets
(exclusive of interest expense)(c) 1.00%(d)(e) 1.08% 1.04% 1.00% 0.98% 1.00% 1.00%
================================================= ======== ======== ======== ======== ======== ======== =======
Ratio of net investment income to average net
assets(f) 6.76%(d) 7.36% 7.34% 7.08% 7.53% 8.15% 8.85%
================================================= ======== ======== ======== ======== ======== ======== =======
Portfolio turnover rate 134% 140% 109% 110% 42% 26% 16%
================================================= ======== ======== ======== ======== ======== ======== =======
<CAPTION>
1989 1988 1987
CLASS A: ------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.70 $ 9.92 $ 10.00
- ------------------------------------------------- ------- ------- -------
Income from investment operations:
Net investment income 0.90 0.89 0.55
- ------------------------------------------------- ------- ------- -------
Net gains (losses) on securities (both realized
and unrealized) 0.15 (0.27) (0.14)
- ------------------------------------------------- ------- ------- -------
Total from investment operations 1.05 0.62 0.41
- ------------------------------------------------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.84) (0.84) (0.49)
- ------------------------------------------------- ------- ------- -------
Distributions from net realized capital gains -- -- --
- ------------------------------------------------- ------- ------- -------
Return of capital -- -- --
- ------------------------------------------------- ------- ------- -------
Total distributions (0.84) (0.84) (0.49)
- ------------------------------------------------- ------- ------- -------
Net asset value, end of period $ 9.91 $ 9.70 $ 9.92
================================================= ======== ======== ========
Total return(b) 11.28% 6.43% 4.18%
================================================= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $57,077 $48,372 $28,052
================================================= ======== ======== ========
Ratio of expenses to average net assets
(exclusive of interest expense)(c) 1.00% 1.00% 1.20%(g)
================================================= ======== ======== ========
Ratio of net investment income to average net
assets(f) 9.10% 9.11% 8.64%(g)
================================================= ======== ======== ========
Portfolio turnover rate 15% 15% 35%
================================================= ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement were 1.05%, 1.04%, 1.04%, 1.10%, 1.13%, 1.08% and
1.08% for 1994-88, respectively.
(d) Ratios are based on average net assets of $175,038,605.
(e) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have remained the same.
(f) Ratios of net investment income to average net assets prior to reduction of
advisory fee and expense reimbursement were 7.32%, 7.04%, 7.48%, 8.05%,
8.72%, 9.03% and 9.03% for 1994-88, respectively.
(g) Annualized.
<TABLE>
<CAPTION>
1996 1995 1994 1993
CLASS B: ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.69 $ 8.99 $ 10.04 $ 10.44
- ------------------------------------------------------------ ------- ------- ------- -------
Income from investment operations:
Net investment income 0.55 0.63 0.61 0.21
- ------------------------------------------------------------ ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) (0.41) 0.70 (1.02) (0.27)
- ------------------------------------------------------------ ------- ------- ------- -------
Total from investment operations 0.14 1.33 (0.41) (0.06)
- ------------------------------------------------------------ ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.51) (0.59) (0.50) (0.20)
- ------------------------------------------------------------ ------- ------- ------- -------
Distributions from net realized capital gains -- -- (0.04) (0.14)
- ------------------------------------------------------------ ------- ------- ------- -------
Return of capital (0.04) (0.04) (0.10) --
- ------------------------------------------------------------ ------- ------- ------- -------
Total distributions (0.55) (0.63) (0.64) (0.34)
- ------------------------------------------------------------ ------- ------- ------- -------
Net asset value, end of period $ 9.28 $ 9.69 $ 8.99 $ 10.04
============================================================ ======= ======= ======= =======
Total return(a) 1.61% 15.22% (4.13)% (0.52)%
============================================================ ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $79,443 $61,300 $23,415 $ 6,160
============================================================ ======= ======= ======= =======
Ratio of expenses to average net assets (exclusive of
interest expense)(b) 1.76%(c)(d) 1.86% 1.82% 1.71%(f)
============================================================ ======= ======= ======= =======
Ratio of net investment income to average net assets(e) 6.00%(c) 6.58% 6.56% 6.37%(f)
============================================================ ======= ======= ======= =======
Portfolio turnover rate 134% 140% 109% 110%
============================================================ ======= ======= ======= =======
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratio of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement for the year ended December 31, 1994 and the
period ended December 31, 1993 were 1.87% and 2.18% (annualized),
respectively.
(c) Ratios are based on average net assets of $71,976,395.
(d) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have remained the same.
(e) Ratio of net investment income to average net assets prior to reduction of
advisory fee and expense reimbursement for the year ended December 31, 1994
and the period ended December 31, 1993 were 6.50% and 5.90% (annualized),
respectively.
(f) Annualized.
NOTE 8 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO plc. AIM Management is the parent company of the Fund's advisor. The
merger is expected to take place during the first quarter of 1997.
FS-69
<PAGE> 201
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Money Market Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Money Market Fund (a portfolio of AIM
Funds Group), including the schedule of investments, as of
December 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in
the three-year period then ended and the period October 16,
1993 (date operations commenced) through December 31, 1993.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence
with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made
by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Money
Market Fund as of December 31, 1996, the results of its
operations for the year then ended, the changes in net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in
the three-year period then ended, and the period October
16, 1993 (date operations commenced) through December 31,
1993, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1997
FS-70
<PAGE> 202
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER-43.99%(a)
ASSET-BACKED SECURITIES-17.04%
Asset Securitization
Cooperative Corp.
5.33% 01/15/97 $12,000 $ 11,975,127
- ----------------------------------------------------------------
5.32% 03/11/97 15,000 14,847,050
- ----------------------------------------------------------------
5.35% 03/11/97 6,000 5,938,475
- ----------------------------------------------------------------
Delaware Funding Corp.
5.34% 01/31/97 13,000 12,942,150
- ----------------------------------------------------------------
5.40% 02/18/97 20,000 19,856,000
- ----------------------------------------------------------------
Monte Rosa Capital Corp.
5.50% 01/22/97 16,000 15,948,667
- ----------------------------------------------------------------
5.36% 03/12/97 4,000 3,958,311
- ----------------------------------------------------------------
Receivables Capital Corp.
5.46% 01/08/97 15,000 14,984,075
- ----------------------------------------------------------------
5.43% 01/16/97 7,000 6,984,162
- ----------------------------------------------------------------
Sheffield Receivables Corp.
5.37% 02/07/97 11,000 10,939,289
- ----------------------------------------------------------------
118,373,306
- ----------------------------------------------------------------
AUTOMOBILE-2.12%
Ford Motor Credit Co.
5.32% 04/28/97 15,000 14,740,650
- ----------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-5.73%
Merrill Lynch & Co., Inc.
5.35% 02/04/97 25,000 24,873,681
- ----------------------------------------------------------------
5.35% 02/10/97 15,000 14,910,833
- ----------------------------------------------------------------
39,784,514
- ----------------------------------------------------------------
FINANCE (BUSINESS CREDIT)-2.15%
National Rural Utilities
Cooperative Finance Corp.
5.29% 02/11/97 10,000 9,939,752
- ----------------------------------------------------------------
Pitney Bowes Credit Corp.
5.36% 01/16/97 5,000 4,988,833
- ----------------------------------------------------------------
14,928,585
- ----------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-3.56%
International Lease Finance
Corp.
5.31% 03/04/97 15,000 14,862,825
- ----------------------------------------------------------------
5.29% 03/26/97 10,000 9,876,566
- ----------------------------------------------------------------
24,739,391
- ----------------------------------------------------------------
FINANCE (MISCELLANEOUS)-0.71%
BTR Dunlop Finance Inc.
5.33% 03/06/97 5,000 4,952,622
- ----------------------------------------------------------------
FINANCE (PERSONAL CREDIT)-2.67%
Student Loan Corp.
5.27% 03/12/97 10,000 9,897,528
- ----------------------------------------------------------------
Transamerica Finance Corp.
5.32% 03/12/97 8,700 8,610,004
- ----------------------------------------------------------------
18,507,532
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
MEDICAL (DRUGS)-2.14%
Bayer Corp.
5.30% 03/03/97 $15,000 $ 14,865,292
- ----------------------------------------------------------------
OIL & GAS (INTEGRATED)-6.30%
Mobil Australia Finance Co. Inc.
5.30% 02/28/97 10,000 9,914,611
- ----------------------------------------------------------------
5.37% 03/18/97 24,172 23,897,970
- ----------------------------------------------------------------
Petrofina Delaware, Inc.
5.40% 01/27/97 10,000 9,961,000
- ----------------------------------------------------------------
43,773,581
- ----------------------------------------------------------------
PUBLISHING-0.71%
McGraw-Hill Inc.
5.32% 03/11/97 5,000 4,949,017
- ----------------------------------------------------------------
TELEPHONE-0.86%
MCI Communications Corp.
5.30% 02/20/97 6,000 5,955,833
- ----------------------------------------------------------------
Total Commercial Paper 305,570,323
- ----------------------------------------------------------------
MEDIUM-TERM NOTES-2.45%
FINANCE (BUSINESS CREDIT)-1.73%
CIT Group Holdings (The),
Inc.(b)
5.61% 03/19/97 12,000 11,998,297
- ----------------------------------------------------------------
OIL & GAS (INTEGRATED)-0.72%
Shell Oil Co.
6.00% 01/15/97 5,000 5,000,800
- ----------------------------------------------------------------
Total Medium-Term Notes 16,999,097
- ----------------------------------------------------------------
MASTER NOTE AGREEMENTS-13.68%
Citicorp Securities, Inc.(c)
7.25% 01/27/97 48,000 48,000,000
- ----------------------------------------------------------------
Goldman Sachs & Co.(d)
7.13% 04/23/97 19,000 19,000,000
- ----------------------------------------------------------------
Morgan (J.P.) Securities,
Inc.(e)
5.563% 04/07/97 28,000 28,000,000
- ----------------------------------------------------------------
Total Master Note
Agreements 95,000,000
- ----------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES-6.42%
Federal National Mortgage
Association
5.29%(f) 06/02/99 32,000 32,000,000
- ----------------------------------------------------------------
Student Loan Marketing
Association
5.24%(f) 08/20/98 2,600 2,600,000
- ----------------------------------------------------------------
5.26%(f) 02/08/99 10,000 10,003,558
- ----------------------------------------------------------------
Total U.S. Government
Agency Securities 44,603,558
- ----------------------------------------------------------------
Total Investments
(excluding Repurchase
Agreements) 462,172,978
- ----------------------------------------------------------------
REPURCHASE AGREEMENTS(g)-26.81%
Dresdner Securities (USA),
Inc.(h)
7.05% 01/02/97 96,167 96,166,506
- ----------------------------------------------------------------
HSBC Securities, Inc.(i)
7.05% 01/02/97 30,000 30,000,000
- ----------------------------------------------------------------
</TABLE>
FS-71
<PAGE> 203
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
</TABLE>
REPURCHASE AGREEMENTS-(CONTINUED)
SBC Capital Markets Inc.(j)
6.25% 01/02/97 $30,000 $ 30,000,000
- ----------------------------------------------------------------
UBS Securities Inc.(k)
7.05% 01/02/97 30,000 30,000,000
- ----------------------------------------------------------------
Total Repurchase
Agreements 186,166,506
- ----------------------------------------------------------------
TOTAL INVESTMENTS-93.35% 648,339,484(l)
- ----------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-6.65% 46,183,911
- ----------------------------------------------------------------
NET ASSETS-100.00% $694,523,395
================================================================
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Some commercial paper is traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(b) Interest rate is redetermined daily. Rate shown is the rate in effect on
December 31, 1996.
(c) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon three business days notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
December 31, 1996.
(d) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon notice to the issuer. Interest rates on master notes
are redetermined periodically. Rate shown is the rate in effect on December
31, 1996.
(e) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon seven calendar days notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
December 31, 1996.
(f) Interest rates are redetermined weekly. Rates shown are the rates in effect
on December 31, 1996.
(g) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(h) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$100,039,167. Collateralized by $136,515,003 U.S. Government obligations, 0%
to 9.00% due 01/01/09 to 08/01/34.
(i) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$300,117,500. Collateralized by $633,913,662 U.S. Government obligations,
0% to 8.00% due 07/16/97 to 11/01/35.
(j) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$400,138,889. Collateralized by $473,268,844 U.S. Government obligations,
5.035% to 7.679% due 03/03/97 to 03/01/33 and $44,915,000 U.S. Treasury
obligations, 0% due 02/15/09 to 11/15/13.
(k) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$550,215,417. Collateralized by $732,485,305 U.S. Government obligations, 0%
to 9.50% due 01/01/98 to 12/15/26.
(l) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-72
<PAGE> 204
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase
agreements, at value (amortized cost) $462,172,978
- ---------------------------------------------------------
Repurchase agreements 186,166,506
- ---------------------------------------------------------
Receivables for:
Capital stock sold 77,420,534
- ---------------------------------------------------------
Interest 891,168
- ---------------------------------------------------------
Investment for deferred compensation plan 85,314
- ---------------------------------------------------------
Other assets 139,530
- ---------------------------------------------------------
Total assets 726,876,030
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 31,044,304
- ---------------------------------------------------------
Dividends 186,678
- ---------------------------------------------------------
Deferred compensation plan 85,314
- ---------------------------------------------------------
Accrued advisory fees 306,767
- ---------------------------------------------------------
Accrued administrative service fees 6,175
- ---------------------------------------------------------
Accrued distribution fees 509,055
- ---------------------------------------------------------
Accrued operating expenses 25,729
- ---------------------------------------------------------
Accrued transfer agent fees 188,613
- ---------------------------------------------------------
Total liabilities 32,352,635
- ---------------------------------------------------------
Net assets applicable to shares outstanding $694,523,395
=========================================================
NET ASSETS:
Class A $287,905,201
=========================================================
Class B $ 91,148,487
=========================================================
Class C $315,469,707
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 287,864,283
=========================================================
Class B 91,170,897
=========================================================
Class C 315,473,235
=========================================================
Class A:
Net asset value and redemption price per
share $ 1.00
=========================================================
Offering price per share:
(Net asset value of $1.00 divided by
94.50%) $ 1.06
=========================================================
Class B:
Net asset value and offering price per
share $ 1.00
=========================================================
Class C:
Net asset value, offering and redemption
price per share $ 1.00
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $40,647,910
- ---------------------------------------------------------
EXPENSES:
Advisory fees 4,136,659
- ---------------------------------------------------------
Custodian fees 80,854
- ---------------------------------------------------------
Distribution fees -- Class A 666,569
- ---------------------------------------------------------
Distribution fees -- Class B 990,337
- ---------------------------------------------------------
Distribution fees -- Class C 964,703
- ---------------------------------------------------------
Trustees' fees 10,124
- ---------------------------------------------------------
Transfer agent fees -- Class A 582,756
- ---------------------------------------------------------
Transfer agent fees -- Class B 266,042
- ---------------------------------------------------------
Transfer agent fees -- Class C 741,975
- ---------------------------------------------------------
Administrative service fees 58,665
- ---------------------------------------------------------
Other 354,001
- ---------------------------------------------------------
Total expenses 8,852,685
- ---------------------------------------------------------
Less: Expenses paid indirectly (11,126)
- ---------------------------------------------------------
Net expenses 8,841,559
- ---------------------------------------------------------
Net investment income 31,806,351
- ---------------------------------------------------------
Net realized gain on sales of investments 108,101
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $31,914,452
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-73
<PAGE> 205
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 31,806,351 $ 22,864,306
- ------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities 108,101 (93,121)
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 31,914,452 22,771,185
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (11,567,004) (8,071,868)
- ------------------------------------------------------------------------------------------
Class B (3,560,364) (1,577,348)
- ------------------------------------------------------------------------------------------
Class C (16,678,983) (13,215,090)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 66,344,581 72,633,973
- ------------------------------------------------------------------------------------------
Class B 21,306,761 35,865,178
- ------------------------------------------------------------------------------------------
Class C 21,970,272 (66,448,589)
- ------------------------------------------------------------------------------------------
Net increase in net assets 109,729,715 41,957,441
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 584,793,680 542,836,239
- ------------------------------------------------------------------------------------------
End of period $694,523,395 $584,793,680
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $694,508,415 $584,886,801
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investments 14,980 (93,121)
- ------------------------------------------------------------------------------------------
$694,523,395 $584,793,680
==========================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Money Market Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers three different classes of shares: the Class A shares, the
Class B shares and the Class C shares. Class A shares are sold with a front-end
sales charge. Class B shares are sold with a contingent deferred sales charge.
Class C shares are sold at net asset value. Matters affecting each portfolio or
class will be voted on exclusively by the shareholders of such portfolio or
class. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund. The Fund's objective is to provide as high a level of current
income as is consistent with preservation of capital and liquidity.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- The Fund invests only in securities which have
maturities of 397 days or less from the date of purchase. The securities are
valued on the basis of amortized cost which approximates market value. This
method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is recorded as earned from settlement date and is
recorded on the accrual basis. Dividends to shareholders are declared daily
and are paid monthly.
FS-74
<PAGE> 206
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to all
classes, e.g. advisory fees, are allocated among them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.55% of
the first $1 billion of the Fund's average daily net assets plus 0.50% of the
Fund's average daily net assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1996, AIM
was reimbursed $58,665 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") for certain costs incurred in providing
transfer agency and shareholder services to the Fund. During the year ended
December 31, 1996, the Fund paid AFS $897,280 for such services.
The Fund received reductions in transfer agency fees payable to AFS of $11,126
from dividends received on balances in cash management bank accounts which
resulted in a reduction in the Fund's total expenses.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares, the Class B shares and the Class C shares of the Fund. The Trust
has adopted Plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan") and with
respect to the Fund's Class B shares (the "Class B Plan") (collectively, the
"Plans"). The Fund, pursuant to the Class A and C Plan, pays to AIM Distributors
compensation at an annual rate of 0.25% of the average daily net assets
attributable to the Class A shares and the Class C shares. The Class A and C
Plan is designed to compensate AIM Distributors for certain promotional and
other sales related costs and provides periodic payments to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own Class A shares or Class C shares of the
Fund. The Fund, pursuant to the Class B Plan, pays AIM Distributors compensation
at an annual rate of 1.00% of the average daily net assets attributable to the
Class B shares. Of this amount, the Fund may pay a service fee of 0.25% of the
average daily net assets of the Class B shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class B shares of the Fund. Any amounts not paid
as a service fee under such Plans would constitute an asset-based sales charge.
The Plans also impose a cap on the total sales charges, including asset-based
sales charges, that may be paid by the respective classes. AIM Distributors may,
from time to time, assign, transfer or pledge to one or more assignees, its
rights to all or a portion of (a) compensation received by AIM Distributors from
the Fund pursuant to the Class B Plan (but not AIM Distributors' duties and
obligations pursuant to the Class B Plan) and (b) any contingent deferred sales
charges payable to AIM Distributors related to the Class B shares. During the
year ended December 31, 1996, the Class A shares, the Class B shares and the
Class C shares paid AIM Distributors $666,569, $990,337 and $964,703,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $736,782 from sales of the Class A
shares of the Fund during the year ended December 31, 1996. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1996,
AIM Distributors received $211,316 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1996, the Fund paid legal fees of $4,488
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
FS-75
<PAGE> 207
NOTE 4-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 2,107,832,986 $ 2,107,832,986 1,236,115,617 $ 1,236,115,617
- ----------------------------------------------------- --------------------------------- ---------------------------------
Class B 334,518,591 334,518,591 150,618,548 150,618,548
- ----------------------------------------------------- --------------------------------- ---------------------------------
Class C 3,871,719,488 3,871,719,488 3,387,330,655 3,387,330,655
- ----------------------------------------------------- --------------------------------- ---------------------------------
Issued as reinvestment of dividends:
Class A 10,061,164 10,061,164 7,057,740 7,057,740
- ----------------------------------------------------- --------------------------------- ---------------------------------
Class B 3,197,896 3,197,896 1,412,061 1,412,061
- ----------------------------------------------------- --------------------------------- ---------------------------------
Class C 14,185,926 14,185,926 10,700,895 10,700,895
- ----------------------------------------------------- --------------------------------- ---------------------------------
Reacquired:
Class A (2,051,549,569) (2,051,549,569) (1,170,539,384) (1,170,539,384)
- ----------------------------------------------------- --------------------------------- ---------------------------------
Class B (316,409,726) (316,409,726) (116,165,431) (116,165,431)
- ----------------------------------------------------- --------------------------------- ---------------------------------
Class C (3,863,935,142) (3,863,935,142) (3,464,480,139) (3,464,480,139)
- ----------------------------------------------------- --------------------------------- ---------------------------------
109,621,614 $ 109,621,614 42,050,562 $ 42,050,562
===================================================== ================================= =================================
</TABLE>
NOTE 5-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share, a Class B share
and a Class C share outstanding during each of the years in the three-year
period ended December 31, 1996 and the period October 16, 1993 (date operations
commenced) through December 31, 1993.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------------------------------------- ---------------------------------------------
1996 1995 1994 1993 1996 1995 1994 1993
-------- -------- ------- -------- -------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 1.00 $ 1.00 $ 1.00 1.00 $ 1.00 $ 1.00
- ------------------------ -------- -------- ------- -------- -------- ------ -------- --------
Income from investment
operations:
Net investment income 0.0433 0.0495 0.0337 0.0048 0.0360 .0419 0.0259 0.0032
- ------------------------ -------- -------- ------- -------- -------- ------ -------- --------
Less distributions:
Dividends from net
investment income (0.0433) (0.0495) (0.0337) (0.0048) (0.0360) .0419) (0.0259) (0.0032)
- ------------------------ -------- -------- ------- -------- -------- ------- -------- --------
Net asset value, end of
period $ 1.00 $ 1.00 1.00 $ 1.00 $ 1.00 1.00 $ 1.00 $ 1.00
======================== ======== ======== ======== ======== ========= ======= ======== ========
Total return(a) 4.42% 5.06% 3.43% 2.27%(e) 3.66% 4.27% 2.62% 1.51%(e)
======================== ======== ======== ======== ======== ========= ======= ======== ========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $287,905 $221,487 148,886 $ 81,460 $ 91,148 $69,857 $ 33,999 $ 1,289
======================== ======== ======== ======== ======== ========= ======= ======== ========
Ratio of expenses to
average net assets 1.07%(b)(c) 1.03% 0.97%(d) 1.00%(d)(e) 1.81%(b)(c) 1.78% 1.78%(f) 1.75%(e)(f)
======================== ======== ======== ======== ======== ========= ======= ======== ========
Ratio of net investment
income to average net
assets 4.34%(b) 4.91% 3.53%(d) 2.27%(d)(e) 3.60%(b) 4.14% 3.14%(f) 1.54%(e)(f)
======================== ======== ======== ======== ======== ========= ======= ======== ========
<CAPTION>
CLASS C SHARES
-------------------------------------------
1996 1995 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------ -------- -------- -------- --------
Income from investment
operations:
Net investment income 0.0433 0.0493 0.0337 0.0048
- ------------------------ -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.0433) (0.0493) (0.0337) (0.0048)
- ------------------------ -------- -------- -------- --------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================== ======== ======== ======== ========
Total return(a) 4.41% 5.04% 3.42% 2.27%(e)
======================== ======== ======== ======== ========
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $315,470 $293,450 $359,952 $241,778
======================== ======== ======== ======== ========
Ratio of expenses to
average net assets 1.08%(b)(c) 1.04% 0.99%(g) 1.00%(e)
======================== ======== ======== ======== ========
Ratio of net investment
income to average net
assets 4.32%(b) 4.92% 3.49%(g) 2.27%(e)
======================== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges or contingent deferred sales charges, where
applicable.
(b) Ratios are based on average daily net assets as follows: Class A Shares -
$266,627,474, Class B Shares - $99,033,713 and Class C Shares -
$385,881,111.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly
the ratio of expenses to average daily net assets would have been the same.
(d) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.06% and 3.44% for 1994 and 1.20%
(annualized) and 2.07% (annualized) for 1993.
(e) Annualized.
(f) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.87% and 3.05% for 1994 and 1.95%
(annualized) and 1.34% (annualized) for 1993.
(g) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.08% and 3.40% for 1994 and 1.20%
(annualized) and 2.07% (annualized) for 1993.
NOTE 6-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO plc. AIM Management is the parent company of the Fund's advisor. The
merger is expected to take place during the first quarter of 1997.
FS-76
<PAGE> 208
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Municipal Bond Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Municipal Bond Fund (a portfolio of AIM
Funds Group), including the schedule of investments, as of
December 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in
the four-year period then ended. These financial statements
and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an
opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Municipal
Bond Fund as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in
the four-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1997
FS-77
<PAGE> 209
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ALABAMA-0.74%
Courtland Industrial Development
Board (Champion International
Corp. Project); Refunding
Series 1996 RB
6.40%, 11/01/26(b) -- Baa1 $2,315 $ 2,320,417
- -----------------------------------------------------------------------
ALASKA-1.79%
Alaska (State of) Housing Finance
Corp.; Collateralized First
Veterans' Home Mortgage Series
A-2 RB
6.75%, 12/01/24(b) AAA Aaa 3,755 3,891,569
- -----------------------------------------------------------------------
Alaska (State of) Housing Finance
Corp.; Collateralized Mortgage
Program First Series RB
6.875%, 06/01/33 AAA Aaa 1,635 1,707,349
- -----------------------------------------------------------------------
5,598,918
- -----------------------------------------------------------------------
ARKANSAS-1.71%
Fayetteville (City of); Water and
Sewer Refunding and Improvement
Series 1992 RB
6.15%, 08/15/12 A A 2,000 2,069,660
- -----------------------------------------------------------------------
Little Rock (City of); Sewer
Improvement Series B RB
5.75%, 02/01/06 AA+ Aa 2,000 2,050,100
- -----------------------------------------------------------------------
North Little Rock Health
Facilities Board (Baptist
Health); Series 1996 A RB
5.40%, 12/01/16(c) AAA Aaa 1,250 1,233,425
- -----------------------------------------------------------------------
5,353,185
- -----------------------------------------------------------------------
ARIZONA-2.07%
Arizona (State of) Educational
Loan Marketing Corp.; RB
6.125%, 09/01/02(b) -- Aa 1,900 1,984,968
- -----------------------------------------------------------------------
Mohave (County of) Unified School
District #1 (Lake Havasu);
Series 1996 A GO
5.90%, 07/01/15(c) AAA Aaa 1,000 1,036,300
- -----------------------------------------------------------------------
Pima (County of) Unified School
District #10 (Amphitheater);
School Improvement Series 1992
E GO
6.50%, 07/01/05 A+ A 3,100 3,456,903
- -----------------------------------------------------------------------
6,478,171
- -----------------------------------------------------------------------
CALIFORNIA-0.77%
California (State of) Housing
Finance Agency; RB
7.45%, 08/01/11(b) AA- Aa 690 730,020
- -----------------------------------------------------------------------
Sacramento (City of) California
Cogeneration Authority (Procter
& Gamble Project); Series 1995
RB
7.00%, 07/01/04 BBB- -- 500 551,635
- -----------------------------------------------------------------------
San Francisco (City and County
of) Parking Authority; Parking
Meter Series 1994 RB
7.00%, 06/01/13(c) AAA Aaa 1,000 1,137,140
- -----------------------------------------------------------------------
2,418,795
- -----------------------------------------------------------------------
COLORADO-1.26%
Adams County Building Authority;
Refunding Series 1987 A RB
10.00%, 02/01/97(c)(d)(e) -- -- 1,344 1,339,432
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
COLORADO-(CONTINUED)
Adams County School District
Number 1; Unlimited Tax
Building Series 1992-A GO
6.625%, 12/01/02(f)(g) AAA Aaa $ 500 $ 555,615
- -----------------------------------------------------------------------
Colorado (State of) Housing
Finance Authority (Single
Family Residential Housing);
Series 1987 B RB
9.00%, 09/01/17 -- Aa1 430 445,592
- -----------------------------------------------------------------------
Mesa County School District #51;
1989 Series B Certificates of
Participation
6.875%, 12/01/05(c) AAA Aaa 1,465 1,600,542
- -----------------------------------------------------------------------
3,941,181
- -----------------------------------------------------------------------
CONNECTICUT-3.36%
Connecticut (State of); General
Purpose Public Improvement
Series 1992-A GO
6.50%, 03/15/02(f)(g) NRR NRR 5,500 6,064,135
- -----------------------------------------------------------------------
Connecticut (State of)
Development Authority
(Connecticut Power & Light);
Series 1993 A RB
3.15%, 09/01/28(h)(i) A-1+ VMIG-1 335 335,000
- -----------------------------------------------------------------------
Connecticut (State of) Housing
Finance Authority; Series 1990
B-1, Sub-Series
B-1 RB
7.55%, 11/15/08 AA Aa 190 198,255
- -----------------------------------------------------------------------
Connecticut Resource Recovery
Authority (American Ref-Fuel
Co.) (Southeastern Connecticut
Project); Corporate Credit
Series 1988 RB
8.10%, 11/15/15(b) A A2 925 1,001,026
- -----------------------------------------------------------------------
Connecticut Resource Recovery
Authority (American Ref-Fuel
Co.) (Southeastern Connecticut
Project); Series 1988 A RB
7.875%, 11/15/06(b) AA- Baa1 1,700 1,833,025
- -----------------------------------------------------------------------
8.00%, 11/15/15(b) AA- Baa1 1,000 1,080,440
- -----------------------------------------------------------------------
10,511,881
- -----------------------------------------------------------------------
FLORIDA-1.32%
Escambia (County of) (Champion
International Corp. Project);
PCR
6.90%, 08/01/22(b) BBB Baa1 1,125 1,191,116
- -----------------------------------------------------------------------
Leon (County of); Certificates of
Participation Series A RB
5.875%, 01/01/98 -- Baa1 1,700 1,719,992
- -----------------------------------------------------------------------
Miami (City of) Parking System;
Series 1992 A RB
6.70%, 10/01/06 A A 1,120 1,222,491
- -----------------------------------------------------------------------
4,133,599
- -----------------------------------------------------------------------
GEORGIA-1.35%
Georgia (State of) Housing and
Finance Authority (Home
Ownership Opportunity Program);
Series C RB
6.50%, 12/01/11 AA+ Aa 975 1,025,271
- -----------------------------------------------------------------------
Georgia Municipal Electric
Authority; Series P RB
8.00%, 01/01/98(f)(g) AAA Aaa 2,000 2,121,080
- -----------------------------------------------------------------------
</TABLE>
FS-78
<PAGE> 210
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GEORGIA-(CONTINUED)
Savannah (City of) Economic
Development Authority (Hershey
Foods Corp. Project); IDR
6.60%, 06/01/12 AA- -- $1,000 $ 1,075,390
- -----------------------------------------------------------------------
4,221,741
- -----------------------------------------------------------------------
ILLINOIS-9.08%
Berwyn (City of) (Macneal
Memorial Hospital Association);
Hospital Series 1991 RB
7.00%, 06/01/01(f)(g) AAA Aaa 3,250 3,631,420
- -----------------------------------------------------------------------
Chicago (City of); Series 1995
A-1 GO
5.25%, 01/01/15(c) AAA Aaa 1,100 1,043,559
- -----------------------------------------------------------------------
Cook (County of); Series 1992 B
GO
5.75%, 11/15/02(f)(g) AAA Aaa 2,000 2,147,440
- -----------------------------------------------------------------------
Illinois (State of); Sales Tax
Series 1993 B RB
6.50%, 06/15/13 AAA A1 1,500 1,597,185
- -----------------------------------------------------------------------
Illinois (State of) Development
Finance Authority (Chicago
Symphony Project); RB
3.45%, 06/01/31(h)(i) A-1+ VMIG-1 3,960 3,960,374
- -----------------------------------------------------------------------
Illinois (State of) Development
Finance Authority (CPC
International Project); PCR
6.75%, 05/01/16 -- A2 2,500 2,644,325
- -----------------------------------------------------------------------
Illinois Health Facilities
Authority (Evangelical Hospital
Corp.); RB
6.25%, Series A 04/15/22 AA- A1 1,000 1,016,800
- -----------------------------------------------------------------------
6.25%, Series 1992-C 04/15/22 AA- A1 1,150 1,169,320
- -----------------------------------------------------------------------
Illinois Health Facilities
Authority (Franciscan Sisters
Health Care); Refunding Series
1992 RB
6.40%, 09/01/04(c) AAA Aaa 2,475 2,728,712
- -----------------------------------------------------------------------
Illinois Health Facilities
Authority (Ravenswood Hospital
Medical Center); Refunding
Series 1987 A RB
8.80%, 06/01/06 -- Baa1 1,000 1,032,050
- -----------------------------------------------------------------------
Metropolitan Fair and Exposition
Authority; Series 1986 RB
6.00%, 06/01/14(c) AAA Aaa 2,500 2,504,600
- -----------------------------------------------------------------------
Peoria and Pekin and Waukegan
(Cities of); GNMA
Collateralized Mortgage Series
1990 RB
7.875%, 08/01/22(b) AAA -- 135 141,776
- -----------------------------------------------------------------------
University of Illinois Auxiliary
Facilities System; Series 1991
RB
5.75%, 04/01/22 AA- Aa 4,750 4,766,767
- -----------------------------------------------------------------------
28,384,328
- -----------------------------------------------------------------------
INDIANA-0.32%
Concord Independent School
District (Community Schools
Building Corp.); Refunding
First Mortgage RB
5.60%, 01/01/15(c) AAA Aaa 1,000 985,510
- -----------------------------------------------------------------------
KENTUCKY-1.30%
Kenton (County of) Public
Properties Corp. (Parking
Facilities Project); First
Mortgage RB
5.625%, 12/01/12 -- A 1,000 990,100
- -----------------------------------------------------------------------
Mount Sterling (City of); Lease
Funding Series 1993 A RB
6.15%, 03/01/13 -- Aa 3,000 3,069,120
- -----------------------------------------------------------------------
4,059,220
- -----------------------------------------------------------------------
</TABLE>
<TABLE> RATING(a) PAR MARKET
<CAPTION> S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
LOUISIANA-3.25%
Louisiana Public Facilities
Authority (Louisiana Department
of Health and Hospital Medical
Center of Louisiana at New
Orleans Project); Series 1992
RB
6.125%, 10/15/07(c) AAA -- $2,775 $ 2,898,543
- -----------------------------------------------------------------------
Louisiana Public Facilities
Authority
(Our Lady of Lake Regional
Hospital); Hospital Refunding
Series C RB
6.00%, 12/01/07(c) AAA Aaa 2,500 2,619,025
- -----------------------------------------------------------------------
Louisiana Public Facilities
Authority (Tulane University of
Louisiana); RB
6.00%, 10/01/16(c) AAA Aaa 2,500 2,582,725
- -----------------------------------------------------------------------
New Orleans Levee District;
Series 1995 A RB
5.95%, 11/01/07(c) AAA Aaa 1,000 1,069,920
- -----------------------------------------------------------------------
Ouachita Parish Hospital Service
District
No 1 (Glenwood Regional Medical
Center); Refunding Series 1996
RB
5.70%, 05/15/16(c) AAA Aaa 1,000 998,750
- -----------------------------------------------------------------------
10,168,963
- -----------------------------------------------------------------------
MAINE-0.35%
Maine (State of) Education Loan
Authority; Education Loan
Series A-2 RB
6.95%, 12/01/07(b) -- A 1,020 1,091,869
- -----------------------------------------------------------------------
MARYLAND-0.65%
Maryland Health and Higher
Education Facilities Authority
(Doctors Community Hospital
Inc.); Series 1990 RB
8.75%, 07/01/00(f)(g) AAA Aaa 1,000 1,158,110
- -----------------------------------------------------------------------
Maryland State Community
Development Administration
(Department of Economic and
Community Development); Single
Family Housing Refunding Series
5 RB
7.70%, 04/01/15(b) -- Aa 830 873,509
- -----------------------------------------------------------------------
2,031,619
- -----------------------------------------------------------------------
MASSACHUSETTS-4.29%
Massachusetts (State of);
Consolidated Loan Series 1991 C
GO
7.00%, 08/01/01(f)(g) NRR NRR 2,450 2,740,301
- -----------------------------------------------------------------------
Massachusetts Health and
Education Facilities Authority
(Lowell General Hospital);
Series 1991 A RB
8.40%, 06/01/01(f)(g) NRR NRR 3,550 3,918,170
- -----------------------------------------------------------------------
Massachusetts Health and
Education Facilities Authority
(Valley Regional Health System
Issue); Series 1990 B RB
8.00%, 07/01/00(f)(g) NRR Aaa 3,000 3,402,270
- -----------------------------------------------------------------------
Massachusetts Municipal Wholesale
Electric Cooperative Power
Supply; System Series 1992 A RB
6.75%, 07/01/08(c) AAA Aaa 3,000 3,343,920
- -----------------------------------------------------------------------
13,404,661
- -----------------------------------------------------------------------
MICHIGAN-5.71%
Detroit (City of) School
District; School Building and
Site (Unlimited Tax) Series
1992 GO
6.00%, 05/01/05 AA Aa 1,000 1,059,700
- -----------------------------------------------------------------------
6.15%, 05/01/07 AA Aa 1,300 1,374,672
- -----------------------------------------------------------------------
Lake Orion Community School
District; School Building and
Site (Unlimited Tax) Refunding
Series 1994 GO
7.00%, 05/01/05(f)(g) AAA Aaa 2,500 2,890,200
- -----------------------------------------------------------------------
</TABLE>
FS-79
<PAGE> 211
<TABLE>
<CAPTION>
RATING(a) PAR MARKE
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MICHIGAN-(CONTINUED)
Lakeview Community School
District; Unlimited Tax Series
1996 GO
5.75%, 05/01/16(b) AAA Aaa $1,000 $ 1,009,980
- -----------------------------------------------------------------------
Lincoln Park (City of) School
District; Unlimited Tax Series
1996 GO
6.00%, 05/01/12(b) AAA Aaa 1,210 1,269,871
- -----------------------------------------------------------------------
Michigan (State of) Housing
Development Authority;
Refunding Series A RB
6.60%, 04/01/12 A+ -- 1,000 1,032,210
- -----------------------------------------------------------------------
Michigan Strategic Fund
(Consumer's Power Corp.); PCR
3.55%, 04/15/18(h)(i) -- P-1 4,883 4,883,000
- -----------------------------------------------------------------------
Ypsilanti (City of) School
District; Refunding Unlimited
Tax Series 1996 GO
5.75%, 05/01/15(b) AAA Aaa 2,100 2,127,510
- -----------------------------------------------------------------------
5.75%, 05/01/16(b) AAA Aaa 2,175 2,195,010
- -----------------------------------------------------------------------
17,842,153
- -----------------------------------------------------------------------
MISSISSIPPI-1.71%
Mississippi Higher Education
Assistance Corp.; Student Loan
Series 1994 C RB
7.50%, 09/01/09(b) -- A 5,000 5,340,550
- -----------------------------------------------------------------------
MISSOURI-1.02%
Kansas City Industrial
Development Authority (General
Motors Corp. Project); PCR
6.05%, 04/01/06 A- A3 1,435 1,481,365
- -----------------------------------------------------------------------
Kansas City Municipal Assistance
Corp.
(Truman Medical Center
Charitable Foundation);
Leasehold Improvement Series
1991 A RB
7.00%, 11/01/08 A A 605 654,580
- -----------------------------------------------------------------------
Missouri (State of) Environmental
Improvement and Energy
Resources; Series 1995 C PCR
5.85%, 01/01/10 -- Aa 1,000 1,045,330
- -----------------------------------------------------------------------
3,181,275
- -----------------------------------------------------------------------
NEVADA-1.39%
Humboldt (County of) (Sierra
Pacific Project); Series 1987
PCR
6.55%, 10/01/13(c) AAA Aaa 3,000 3,228,570
- -----------------------------------------------------------------------
Las Vegas (City of); Refunding
1992 Limited Tax GO
6.50%, 04/01/02(f)(g) AAA Aaa 1,000 1,085,140
- -----------------------------------------------------------------------
4,313,710
- -----------------------------------------------------------------------
NEW HAMPSHIRE-1.85%
New Hampshire Housing Finance
Authority; Single Family
Residential Mortgage Series
1987 B RB
8.625%, 07/01/13(b) A+ Aa 1,475 1,526,123
- -----------------------------------------------------------------------
New Hampshire State Turnpike
System; Series 1990 RB
7.40%, 04/01/00(f)(g) AAA Aaa 3,850 4,267,533
- -----------------------------------------------------------------------
5,793,656
- -----------------------------------------------------------------------
NEW JERSEY-2.70%
Camden (County of) Municipal
Utilities Authority; Series
1987 RB
8.25%, 12/01/97(f)(g) AAA Aaa 750 795,532
- -----------------------------------------------------------------------
8.25%, 12/01/17 AAA Aaa 1,250 1,321,375
- -----------------------------------------------------------------------
Hudson County Correctional
Facility; Certificate of
Participation Series 1992 RB
6.60%, 12/01/21(c) AAA Aaa 1,250 1,347,475
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW JERSEY-(CONTINUED)
Lacey School District; Unlimited
Tax Series 1996 GO
5.30%, 11/01/06(c) -- Aaa $1,000 $ 1,035,540
- -----------------------------------------------------------------------
New Jersey City Economic
Development Authority (Atlantic
City Sewer Co.); Sewer Facility
Series 1991 RB
7.25%, 12/01/11(b)(d) -- -- 1,865 2,047,248
- -----------------------------------------------------------------------
New Jersey Health Care Facility
Financing Authority (St. Peters
Medical Center); Series 1987 C
RB
8.60%, 07/01/97(f)(g) AAA Aaa 1,050 1,096,746
- -----------------------------------------------------------------------
8.60%, 07/01/17(c) AAA Aaa 200 208,734
- -----------------------------------------------------------------------
New Jersey State Housing and
Mortgage Finance Agency; Home
Buyer Series M RB
6.95%, 10/01/22(b)(c) AAA Aaa 550 574,833
- -----------------------------------------------------------------------
8,427,483
- -----------------------------------------------------------------------
NEW MEXICO-1.88%
Albuquerque (City of)
(Albuquerque Academy Project);
Educational Facilities Series
1995 RB
5.75%, 10/15/15 AA- Aa 915 933,401
- -----------------------------------------------------------------------
Las Cruces South Central Solid
Waste Authority; Environmental
Services RB
5.65%, 06/01/09 -- A 575 576,104
- -----------------------------------------------------------------------
Los Alamos (County of); Utility
Series A RB
6.00%, 07/01/15(c) AAA Aaa 2,000 2,056,740
- -----------------------------------------------------------------------
Santa Fe (City of); Series 1994 A
RB
6.25%, 06/01/04(f)(g) AAA Aaa 2,100 2,294,544
- -----------------------------------------------------------------------
5,860,789
- -----------------------------------------------------------------------
NEW YORK-10.98%
New York (City of); GO
8.25%, Unlimited Tax Series
1991 F
11/15/01(f)(g) NRR Aaa 1,840 2,160,178
- -----------------------------------------------------------------------
7.00%, Unlimited Tax Series C,
Sub-Series C-1 08/01/02(f)(g) NRR NRR 55 62,058
- -----------------------------------------------------------------------
7.65%, Series 1992 F 02/01/06 BBB+ Baa1 4,775 5,311,567
- -----------------------------------------------------------------------
7.70%, Series D 02/01/09 BBB+ Baa1 2,000 2,250,940
- -----------------------------------------------------------------------
7.20%, Unlimited Tax Series H
02/01/15 BBB+ Baa1 500 538,230
- -----------------------------------------------------------------------
8.25%, Unlimited Tax Series
1991 F
11/15/15 -- Aaa 160 183,981
- -----------------------------------------------------------------------
6.25%, Unlimited Tax Series A
08/01/17 BBB+ Baa1 3,035 3,052,178
- -----------------------------------------------------------------------
7.00%, Unlimited Tax Series C,
Sub-Series C-1 08/01/17 BBB+ Baa1 1,945 2,078,699
- -----------------------------------------------------------------------
7.00%, Series B 02/01/18(c) AAA Aaa 1,000 1,100,210
- -----------------------------------------------------------------------
7.00%, Unlimited Tax Series H
02/01/20 BBB+ Baa1 350 373,398
- -----------------------------------------------------------------------
New York City Industrial
Development Agency (The
Lighthouse Inc. Project);
Series 1992 RB
6.50%, 07/01/22(i) AA Aa2 1,500 1,573,215
- -----------------------------------------------------------------------
New York State Environmental
Facility Corp.;
Water Revenue Series E PCR
6.875%, 06/15/10 A Aa 3,400 3,741,326
- -----------------------------------------------------------------------
New York State Medical Care
Facilities Authority (Mental
Health Services); Refunding
Series 1987 A RB
8.875%, 08/15/97(f)(g) AAA Aaa 940 989,086
- -----------------------------------------------------------------------
New York State Municipal Water
Finance Authority; Water and
Sewer Systems Series 1996 A RB
5.625%, 06/15/19 A- A 2,000 1,956,280
- -----------------------------------------------------------------------
</TABLE>
FS-80
<PAGE> 212
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW YORK-(CONTINUED)
New York State Urban Development
Corp.; Capital Facilities 1991
Series 3 RB
7.375%, 01/01/02(f)(g) NRR Aaa $7,850 $ 8,954,731
- -----------------------------------------------------------------------
34,326,077
- -----------------------------------------------------------------------
NORTH CAROLINA-3.55%
North Carolina Eastern Municipal
Power Agency; Series 1988 A RB
8.00%, 01/01/98(f)(g) NRR Aaa 3,000 3,181,620
- -----------------------------------------------------------------------
North Carolina Eastern Municipal
Power Agency; Series A RB
6.125%, 01/01/10(c) AAA Aaa 1,500 1,590,720
- -----------------------------------------------------------------------
North Carolina Eastern Municipal
Power Agency; Refunding Series
1996 A RB
5.00%, 01/01/98 BBB Baa1 1,000 1,003,610
- -----------------------------------------------------------------------
North Carolina Housing Finance
Agency; Single Family-Series II
RB
6.20%, 03/01/16(c) AA Aa 725 736,592
- -----------------------------------------------------------------------
North Carolina Municipal Power
Agency (No. 1 Catawba Electric
Project); Refunding RB
7.25%, 01/01/07 A A 2,750 3,122,763
- -----------------------------------------------------------------------
North Carolina Municipal Power
Agency (No. 1 Catawba Electric
Project); Series 1990 RB
6.50%, 01/01/10(c) AAA Aaa 1,115 1,181,041
- -----------------------------------------------------------------------
6.50%, 01/01/10(f) AAA Aaa 260 283,143
- -----------------------------------------------------------------------
11,099,489
- -----------------------------------------------------------------------
OHIO-3.03%
Akron Bath Copley Joint Township
(Akron City Hospital); Series
1987 RB
8.875%, 11/15/97(f)(g) NRR Aaa 1,610 1,713,668
- -----------------------------------------------------------------------
Fairfield (City of) School
District; Unlimited Tax Series
1995 GO
6.10%, 12/01/15(c) AAA Aaa 1,000 1,051,060
- -----------------------------------------------------------------------
Findlay (City of); Limited Tax
Series
1996 GO
5.875%, 07/01/17 AA- A1 1,000 1,020,500
- -----------------------------------------------------------------------
Hamilton (County of); Electric
System Mortgage Series 1998 RB
8.00%, 10/15/98(f)(g) AAA Aaa 1,000 1,086,420
- -----------------------------------------------------------------------
Mason (City of) Health Care
Facilities
(MCV Health Care Facilities,
Inc.);
Series 1990 RB
7.625%, 02/01/40(c) AAA -- 2,170 2,388,996
- -----------------------------------------------------------------------
Ohio Department of Transportation
(Panhandle Rail Line Project);
Series 1992 Certificates of
Participation
6.50%, 04/15/12(c) AAA Aaa 1,100 1,179,266
- -----------------------------------------------------------------------
Washington (County of) (Marietta
Memorial Hospital); Series B RB
7.00%, 09/01/12 AAA Aaa 1,000 1,020,390
- -----------------------------------------------------------------------
9,460,300
- -----------------------------------------------------------------------
OKLAHOMA-1.82%
McAlester (City of) Public Works
Authority; Refunding and
Improvement
Series 1995 RB
5.50%, 12/01/10(c) AAA Aaa 975 987,246
- -----------------------------------------------------------------------
Southern Oklahoma Memorial
Hospital Authority; Series 1993
A RB
5.60%, 02/01/00 A A 1,250 1,280,325
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
OKLAHOMA-(CONTINUED)
Tulsa (City of) Industrial
Authority (Medical Center
Project-St. Johns Hospital); RB
6.25%, 02/15/14 AA Aa $2,000 $ 2,078,600
- -----------------------------------------------------------------------
Tulsa Public Facilities
Authority-Capital
Improvements-Water System;
Series 1988 B RB
6.00%, 03/01/08 A+ -- 1,305 1,353,363
- -----------------------------------------------------------------------
5,699,534
- -----------------------------------------------------------------------
OREGON-1.06%
Klamath Falls (City of) (Salt
Caves Hydroelectric Project);
Series D RB
4.50%, 05/01/98(f)(g) SP1+ -- 1,000 1,008,590
- -----------------------------------------------------------------------
Portland (City of) Sewer System;
Series 1994 A RB
6.20%, 06/01/12 A+ A1 1,200 1,266,708
- -----------------------------------------------------------------------
6.25%, 06/01/15 A+ A1 1,000 1,052,350
- -----------------------------------------------------------------------
3,327,648
- -----------------------------------------------------------------------
PENNSYLVANIA-2.60%
Lancaster (County of) Solid Waste
Management Authority; Resource
Recovery System Series 1988 A
RB
8.50%, 12/15/10(b) BBB A 3,500 3,707,130
- -----------------------------------------------------------------------
Pennsylvania (State of); Third
Series GO
6.75%, 11/15/13(c) AAA Aaa 1,250 1,388,663
- -----------------------------------------------------------------------
Pennsylvania Economic Development
Finance Authority (Colver
Project); Resource Recovery
Series 1994 D RB
7.05%, 12/01/10(b) BBB- -- 2,900 3,040,766
- -----------------------------------------------------------------------
8,136,559
- -----------------------------------------------------------------------
PUERTO RICO-1.77%
Puerto Rico (Commonwealth of)
Electric Power Authority; RB
7.00%, Series 1991 P
07/01/01(f)(g) A- Baa1 1,325 1,488,545
- -----------------------------------------------------------------------
6.00%, Series 1989 07/01/10 A- Baa1 4,000 4,040,280
- -----------------------------------------------------------------------
5,528,825
- -----------------------------------------------------------------------
RHODE ISLAND-0.78%
Rhode Island Depositors Economic
Protection Corp.; Special
Obligation Series 1992 A RB
6.95%, 08/01/02(f)(g) AAA Aaa 1,250 1,412,225
- -----------------------------------------------------------------------
Rhode Island Housing and Mortgage
Finance Agency; Homeownership
Opportunity Series 15 B RB
6.00%, 10/01/04 AA+ Aa 1,000 1,040,640
- -----------------------------------------------------------------------
2,452,865
- -----------------------------------------------------------------------
SOUTH CAROLINA-0.34%
South Carolina State Education
Assistance Authority;
Guaranteed Student Loan Series
1990 RB
6.60%, 09/01/01(b) AA -- 500 531,715
- -----------------------------------------------------------------------
South Carolina State Housing
Finance and Development
Authority; Homeownership
Mortgage Series 1990 C RB
7.50%, 07/01/05(b) AA Aa 500 527,690
- -----------------------------------------------------------------------
1,059,405
- -----------------------------------------------------------------------
</TABLE>
FS-81
<PAGE> 213
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TENNESSEE-1.15%
Davidson (County of) Madison
Suburban Utility District;
Water Refunding RB
5.70%, 02/01/11(c) AAA Aaa $1,180 $ 1,206,184
- -----------------------------------------------------------------------
Franklin Industrial Development
Board (Landings Apartment
Project); Multifamily Housing
Series A RB
5.75%, 04/01/10(c) -- Aaa 1,200 1,198,777
- -----------------------------------------------------------------------
Nashville and Davidson (Counties
of) Metropolitan Government;
Water and Sewer Refunding
Series 1986 RB
7.25%, 01/01/06 A A1 145 147,482
- -----------------------------------------------------------------------
Shelby (County of); Unlimited Tax
School GO
6.00%, 03/01/17 AA+ Aa 1,000 1,031,000
- -----------------------------------------------------------------------
3,583,443
- -----------------------------------------------------------------------
TEXAS-14.96%
Arlington Independent School
District; Refunding Series 1995
GO
5.75%, 02/15/21(c) -- Aaa 1,000 1,012,190
- -----------------------------------------------------------------------
Austin (City of); Utility System
RB
6.50%, 05/15/11(c) AAA Aaa 1,380 1,510,755
- -----------------------------------------------------------------------
Austin Community College
District; Combined Fee Revenue
Building and Refunding Series
1995 RB
6.10%, 02/01/13(c) AAA Aaa 1,115 1,160,280
- -----------------------------------------------------------------------
Bellville Independent School
District; Unlimited Tax School
Building and Refunding Series
1995 GO
6.125%, 02/01/20(c) -- Aaa 830 863,009
- -----------------------------------------------------------------------
Brazos Higher Education Loan
Authority Inc.; Student Loan
Refunding RB
6.30%, Refunding Series 1992
C-1
11/01/01(b) -- Aa 325 336,817
- -----------------------------------------------------------------------
6.45%, Series 1992 C-1
11/01/02(b) -- Aa 1,135 1,186,234
- -----------------------------------------------------------------------
6.50%, Series 1994 B-1
06/01/04(b) -- A 700 738,570
- -----------------------------------------------------------------------
Brazos River Authority (Houston
Lighting and Power Project);
Collateralized Series 1986 A RB
7.875%, 11/01/18(b)(c) AAA Aaa 2,825 2,912,745
- -----------------------------------------------------------------------
Carrollton (City of); GO
5.75%, 08/15/16 AA- Aa 1,000 1,010,960
- -----------------------------------------------------------------------
Comal County Industrial
Development Authority (The
Coleman Company, Inc. Project);
Industrial Development Series
1980 RB
9.25%, 08/01/00(f) NRR NRR 1,135 1,240,827
- -----------------------------------------------------------------------
Dallas (City of); Waterworks and
Sewer System Series 1994 A RB
6.00%, 10/01/14 AA Aa 2,030 2,094,331
- -----------------------------------------------------------------------
Dallas-Fort Worth Regional
Airport Authority; Airport
Series 1985 RB
6.10%, 11/01/07(c) AAA Aaa 430 432,593
- -----------------------------------------------------------------------
6.10%, 11/01/07 A A1 200 200,172
- -----------------------------------------------------------------------
Georgetown (City of); Utility
System Series 1995 A RB
6.20%, 08/15/15(c) AAA Aaa 1,500 1,560,690
- -----------------------------------------------------------------------
Hallsville Independent School
District; Unlimited Tax Series
1996 GO
5.375%, 02/15/17(b) -- Aaa 1,830 1,787,032
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS-(CONTINUED)
Harris County; Toll Road
Unlimited Tax General
Obligation and Subordinate Lien
Refunding Series 1991 RB
6.75%, 08/01/14 AA Aa $3,850 $ 4,176,865
- -----------------------------------------------------------------------
Harris County Health Facilities
Development Corp. (Saint Luke's
Episcopal Hospital Project);
Series 1991 RB
6.70%, 02/15/03 AA Aa 1,000 1,087,250
- -----------------------------------------------------------------------
Harris County Mental Health and
Mental Retardation Authority;
Refunding Series 1992 RB
6.25%, 9/15/10(c) AAA Aaa 4,500 4,716,225
- -----------------------------------------------------------------------
Harris County Utilities District
No. 10; Waterworks and Sewer
Systems Unlimited Tax Series
1996 GO
5.50%, 10/01/21(c) AAA Aaa 520 512,346
- -----------------------------------------------------------------------
Houston (City of); Refunding
Series 1992 C GO
6.25%, 03/01/02(f)(g) NRR NRR 1,470 1,576,560
- -----------------------------------------------------------------------
Hurst, Euless, Bedford, Texas
Independent School District;
Refunding RB
6.50%, 08/15/04(f)(g) AAA Aaa 640 708,620
- -----------------------------------------------------------------------
6.50%, 08/15/24(c) AAA Aaa 360 386,734
- -----------------------------------------------------------------------
Keller (City of) Independent
School District; Certificates
of Participation Series 1994 RB
6.00%, 08/15/05(c) AAA Aaa 1,000 1,083,010
- -----------------------------------------------------------------------
Lockhart (City of); Certificates
of Participation Tax and
Utility Systems Series 1996 GO
5.85%, 08/01/11(c) AAA Aaa 605 617,402
- -----------------------------------------------------------------------
5.90%, 08/01/16(c) AAA Aaa 1,100 1,118,425
- -----------------------------------------------------------------------
North Texas Higher Education
Authority Inc.; Student Loan
Refunding Series D RB
6.10%, 04/01/08(b) -- Aa 1,000 1,009,540
- -----------------------------------------------------------------------
6.30%, 04/01/09(b) -- A 500 507,955
- -----------------------------------------------------------------------
Plano (City of) Independent
School District; Unlimited Tax
Series 1991 B GO
5.625%, 02/15/01(f)(g) AAA Aaa 2,500 2,604,275
- -----------------------------------------------------------------------
Texas (State of); Unlimited Tax
Veteran's Land GO
6.40%, 12/01/24(b) AA Aa 2,000 2,058,480
- -----------------------------------------------------------------------
Texas (State of) Department of
Housing and Community Affairs
(Asmara Project); Multifamily
Housing Series 1996 A RB
6.30%, 01/01/16 A -- 310 311,029
- -----------------------------------------------------------------------
Texas (State of) Housing Agency;
Residential Development
Mortgage Series 1987 D RB
8.40%, 07/01/20(b) A+ Aa 3,265 3,418,063
- -----------------------------------------------------------------------
Texas National Research
Laboratory Community Financing
Corp. (Superconducting Super
Collider); Lease RB
7.10%, 12/01/01(f)(g) AAA Aaa 600 677,562
- -----------------------------------------------------------------------
Victoria (County of) Texas
Hospital Citizens Medical
Center; RB
6.20%, 01/01/10(c) AAA Aaa 1,000 1,062,940
- -----------------------------------------------------------------------
Weatherford (City of) Independent
School District; Refunding
Series 1994 GO
6.40%, 02/15/12(c) AAA Aaa 1,000 1,070,990
- -----------------------------------------------------------------------
46,751,476
- -----------------------------------------------------------------------
</TABLE>
FS-82
<PAGE> 214
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
UTAH-1.36%
Utah (State of) Housing Finance
Agency; Federally Insured Term
Subordinate Single Family
Mortgage RB
6.30%, Series 1994 E-1,
07/01/06 A+ A1 $ 915 $ 956,147
- -----------------------------------------------------------------------
7.15%, Series 1994 G-1,
07/01/06 A+ A1 915 984,778
- -----------------------------------------------------------------------
Utah (State of) Housing Finance
Agency; Series 1994 C RB
6.05%, 07/01/06 -- A1 930 954,952
- -----------------------------------------------------------------------
Utah (State of) Housing Finance
Agency; Single Family Mortgage
RB
6.45%, Series G2, 07/01/27(b) AAA Aaa 1,330 1,355,124
- -----------------------------------------------------------------------
4,251,001
- -----------------------------------------------------------------------
VIRGIN ISLANDS-1.29%
Virgin Islands Public Finance
Authority; Matching Fund Loan
Notes Series A RB
7.25%, 10/01/18(d) -- -- 1,000 1,068,490
- -----------------------------------------------------------------------
Virgin Islands Territory (Hugo
Insurance Claims Fund); Special
Tax Bond Series 1991 GO
7.75%, 10/01/06(d) -- -- 2,730 2,958,255
- -----------------------------------------------------------------------
4,026,745
- -----------------------------------------------------------------------
VIRGINIA-0.71%
Henrico (County of) Industrial
Development Authority
(Hermitage Project); RB
3.70%, 05/01/24(h)(i) -- VMIG-1 134 134,000
- -----------------------------------------------------------------------
Richmond (City of); Public
Improvement Refunding Series B
GO
6.25%, 01/15/18 AA A1 2,000 2,084,320
- -----------------------------------------------------------------------
2,218,320
- -----------------------------------------------------------------------
WASHINGTON-2.37%
Clark (County of) Gamas School
District #117; GO
6.00%, 12/01/14(c) AAA Aaa 1,000 1,045,500
- -----------------------------------------------------------------------
King (County of); Unlimited Tax
GO
5.50%, 07/01/07(f) AAA Aaa 500 516,080
- -----------------------------------------------------------------------
King (County of); Unlimited Tax
Refunding GO
6.50%, 12/01/11 AA+ Aa1 500 504,020
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATING(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WASHINGTON-(CONTINUED)
Pend Oreille (County of) Public
Utility District #1; Electric
Series B RB
6.30%, 01/01/17 BBB+ A $1,400 $ 1,422,162
- -----------------------------------------------------------------------
Seattle (City of) Metropolitan
Sewer District; Series T RB
6.80%, 01/01/11 AA- A1 1,780 1,905,223
- -----------------------------------------------------------------------
Washington State Public Power
Supply System (Nuclear Project
No. 1); Refunding Series A RB
5.75%, 07/01/12(c) AAA Aaa 2,000 2,023,440
- -----------------------------------------------------------------------
7,416,425
- -----------------------------------------------------------------------
WISCONSIN-1.00%
Wisconsin Housing and Economic
Development Authority; Home
Ownership RB
7.40%, Series 1994 F
07/01/13(b) AA Aa 1,000 1,067,130
- -----------------------------------------------------------------------
8.00%, Series 1990 E
03/01/21(b) A+ Aa 525 549,985
- -----------------------------------------------------------------------
Wisconsin Health and Educational
Facilities Authority (Sinai
Samaritan Medical Center); RB
5.75%, Series 1994 F
08/15/16(c) AA Aa 1,500 1,504,935
- -----------------------------------------------------------------------
3,122,050
=======================================================================
WYOMING-0.66%
Natrona (County of) Wyoming
Medical Center; RB
6.00%, 09/15/11(c) AAA Aaa 1,000 1,038,730
- -----------------------------------------------------------------------
Sweetwater (County of) (Idaho
Power Company Project);
Pollution Control Refunding
Series 1996 A RB
6.05%, 07/15/26 A A3 1,000 1,024,160
- -----------------------------------------------------------------------
2,062,890
- -----------------------------------------------------------------------
TOTAL INVESTMENTS-99.30% 310,386,726
- -----------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.70% 2,195,076
- -----------------------------------------------------------------------
NET ASSETS-100.00% $312,581,802
=======================================================================
</TABLE>
Investment Abbreviations:
GO - General Obligation Bonds
IDR - Industrial Development Revenue Bonds
NRR - Not Re-Rated
PCR - Pollution Control Revenue Bonds
RB - Revenue Bonds
Notes to Schedule of Investments:
(a) Ratings assigned by Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Corporation ("S&P"). NRR
indicates a security that is not re-rated subsequent to
funding of an escrow fund (consisting of U.S. Treasury
obligations); this funding is pursuant to an advance
refunding of the security. Ratings are not covered by
Independent Auditors' Report.
(b) Security subject to the alternative minimum tax.
(c) Secured by bond insurance.
(d) Unrated security; determined by the investment advisor to be
of comparable quality to the rated securities in which the
Fund may invest pursuant to guidelines of quality adopted by
the Board of Trustees and followed by the investment
advisor.
(e) Zero coupon bonds. The interest rate shown represents the
rate of original issue discount.
(f) Secured by an escrow fund of U.S. Treasury obligations.
(g) Security has an irrevocable call or mandatory put by the
issuer. Maturity date reflects such call or put.
(h) Demand security; payable upon demand by the Fund with
usually no more than seven calendar days' notice. Interest
rates are redetermined periodically. Rates shown are in
effect on December 31, 1996.
(i) Secured by a letter of credit.
See Notes to Financial Statements.
FS-83
<PAGE> 215
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$292,806,066) $310,386,726
- ----------------------------------------------------------
Receivables for:
Fund shares sold 146,870
- ----------------------------------------------------------
Interest 5,581,407
- ----------------------------------------------------------
Investment for deferred compensation plan 61,435
- ----------------------------------------------------------
Other assets 16,396
- ----------------------------------------------------------
Total assets 316,192,834
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,787,782
- ----------------------------------------------------------
Fund shares reacquired 885,081
- ----------------------------------------------------------
Dividends 562,525
- ----------------------------------------------------------
Accrued advisory fees 123,518
- ----------------------------------------------------------
Accrued administrative service fees 6,634
- ----------------------------------------------------------
Accrued distribution fees 211,478
- ----------------------------------------------------------
Accrued trustees' fees 2,026
- ----------------------------------------------------------
Accrued transfer agent fees 10,694
- ----------------------------------------------------------
Accrued operating expenses and other
payables 21,294
- ----------------------------------------------------------
Total liabilities 3,611,032
- ----------------------------------------------------------
Net assets applicable to shares outstanding $312,581,802
==========================================================
NET ASSETS:
Class A $278,812,285
==========================================================
Class B $ 33,769,517
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 34,050,982
==========================================================
Class B 4,122,096
==========================================================
Class A:
Net asset value and redemption price per
share $ 8.19
==========================================================
Offering price per share:
(Net asset value of $8.19 divided
by 95.25%) $ 8.60
==========================================================
Class B:
Net asset value and offering price per
share $ 8.19
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $18,543,407
- ----------------------------------------------------------
EXPENSES:
Advisory fees 1,417,007
- ----------------------------------------------------------
Custodian fees 11,493
- ----------------------------------------------------------
Transfer agent fees - Class A 129,670
- ----------------------------------------------------------
Transfer agent fees - Class B 21,248
- ----------------------------------------------------------
Administrative service fees 71,857
- ----------------------------------------------------------
Trustees' fees 7,795
- ----------------------------------------------------------
Distribution fees - Class A 691,812
- ----------------------------------------------------------
Distribution fees - Class B 275,301
- ----------------------------------------------------------
Other 50,454
- ----------------------------------------------------------
Total expenses 2,676,637
- ----------------------------------------------------------
Less: Expenses paid indirectly (4,978)
- ----------------------------------------------------------
Net expenses 2,671,659
- ----------------------------------------------------------
Net investment income 15,871,748
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES:
Realized gain on sales of investment
securities 118,748
- ----------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities (4,496,798)
- ----------------------------------------------------------
Net gain (loss) on investment securities (4,378,050)
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $11,493,698
==========================================================
</TABLE>
See Notes to Financial Statements.
FS-84
<PAGE> 216
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 15,871,748 $ 15,091,309
- ------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 118,748 674,681
- ------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (4,496,798) 19,230,259
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 11,493,698 34,996,249
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (14,634,820) (14,621,874)
- ------------------------------------------------------------------------------------------
Class B (1,210,672) (654,391)
- ------------------------------------------------------------------------------------------
Return of capital:
Class A -- (1,011,782)
- ------------------------------------------------------------------------------------------
Class B -- (45,282)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A (1,870,211) 9,550,157
- ------------------------------------------------------------------------------------------
Class B 12,523,478 11,436,172
- ------------------------------------------------------------------------------------------
Net increase in net assets 6,301,473 39,649,249
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 306,280,329 266,631,080
- ------------------------------------------------------------------------------------------
End of period $312,581,802 $306,280,329
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $296,629,932 $285,976,665
- ------------------------------------------------------------------------------------------
Undistributed net investment income (34,765) (61,021)
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on investment
securities (1,594,025) (1,712,773)
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 17,580,660 22,077,458
- ------------------------------------------------------------------------------------------
$312,581,802 $306,280,329
==========================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Municipal Bond Fund (the "Fund") is a series portfolio of AIM Funds Group
(the "Trust"). The Trust is a Delaware business trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of nine separate series
portfolios, each having an unlimited number of shares of beneficial interest.
The Fund currently offers two different classes of shares: the Class A shares
and the Class B shares. Class A shares are sold with a front-end sales charge.
Class B shares are sold with a contingent deferred sales charge. Matters
affecting each portfolio or class are voted on exclusively by the shareholders
of such portfolio or class. The assets, liabilities and operations of each
portfolio are accounted for separately. Information presented in these financial
statements pertains only to the Fund. The Fund's objective is to achieve a high
level of current income exempt from federal income taxes consistent with the
preservation of principal by investing in a diversified portfolio of municipal
bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- Portfolio securities are valued based on market
quotations or at fair value determined by a pricing service approved by the
Board of Trustees, provided that securities with a demand feature exercisable
within one to seven days will be valued at par. Prices provided by the
pricing service may be determined without exclusive reliance on quoted prices
and may reflect appropriate factors such as institution-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, individual trading characteristics and other market data. Portfolio
securities for which prices are not provided by the pricing service are
valued at the mean between the last available bid and asked prices, unless
the Board of Trustees, or persons designated by the Board of Trustees,
determines that the mean between the last available bid and asked prices does
not accurately reflect the current market value of the security. Securities
for which market quotations either are not readily available or are
questionable
FS-85
<PAGE> 217
are valued at fair value as determined in good faith by or under the
supervision of the Trust's officers in a manner specifically authorized by
the Board of Trustees. Notwithstanding the above, short-term obligations with
maturities of 60 days or less are valued at amortized cost.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. It is the policy of the Fund to declare
daily dividends from net investment income. Such dividends are paid monthly.
Distributions from net realized capital gains, if any, are recorded on
ex-dividend date and are paid annually.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $1,594,025 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized, in
the year 2002. The Fund cannot distribute capital gains to shareholders until
the tax loss carryforwards have been utilized.
D. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.50% of
the first $200 million of the Fund's average daily net assets, plus 0.40% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.35% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.30% of the Fund's average daily net
assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1996, AIM
was reimbursed $71,857 for such services.
The Fund, pursuant to a transfer agent and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended December 31, 1996, AFS
was paid $104,022 for such services.
The Fund received reductions in transfer agency fees payable to AFS of $4,641
from dividends received on balances in cash management accounts. In addition,
pricing service expenses in the amount of $337 were paid through directed
brokerage commissions paid by the Fund. The above arrangements resulted in a
reduction of the Fund's total expenses of $4,978 during the year ended December
31, 1996.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides for periodic payments to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own Class A shares of the Fund. The Fund,
pursuant to the Class B Plan, pays AIM Distributors compensation at an annual
rate of 1.00% of the average daily net assets attributable to the Class B
shares. Of this amount, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class B shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class B shares of the Fund. Any amounts not paid
as a service fee under such Plans would constitute an asset-based sales charge.
The Plans also impose a cap on the total sales charges, including asset-based
sales charges, that may be paid by the respective classes. AIM Distributors may,
from time to time, assign, transfer or pledge to one or more assignees, its
rights to all or a designated portion of (a) compensation payable to AIM
Distributors from the Fund pursuant to the Class B Plan (but not AIM
Distributors' duties and obligations pursuant to the Class B Plan) and (b) any
contingent deferred sales charges received by AIM Distributors related to the
Class B shares. During the year ended December 31, 1996, the Class A shares and
the Class B shares paid AIM Distributors $691,812 and $275,301, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $122,269 from sales of the Class A
shares of the Fund during the year ended December 31, 1996. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1996,
AIM Distributors received $49,906 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1996, the Fund paid legal fees of $3,549
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $4,900,000. During the year ended December 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.08% on the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
FS-86
<PAGE> 218
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1996 was
$83,704,766 and $73,917,831, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $17,589,340
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (8,680)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $17,580,660
=========================================================================
Investments have the same cost for tax and financial statement purposes.
</TABLE>
NOTE 6-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------- ---------------------------
SHARES VALUE SHARES VALUE
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 5,797,996 $ 47,332,136 6,038,257 $ 48,938,165
- ------------------------------------------------------------ -------------------------- ---------------------------
Class B 2,660,265 21,695,791 1,963,653 15,985,997
- ------------------------------------------------------------ -------------------------- ---------------------------
Issued as reinvestment of dividends:
Class A 1,054,624 8,611,381 1,117,182 9,074,834
- ------------------------------------------------------------ -------------------------- ---------------------------
Class B 85,876 701,022 50,725 412,983
- ------------------------------------------------------------ -------------------------- ---------------------------
Reacquired:
Class A (7,075,891) (57,813,728) (5,965,522) (48,462,842)
- ------------------------------------------------------------ -------------------------- ---------------------------
Class B (1,208,742) (9,873,335) (608,842) (4,962,808)
- ------------------------------------------------------------ -------------------------- ---------------------------
1,314,128 $ 10,653,267 2,595,453 $ 20,986,329
============================================================ ========================= ===========================
</TABLE>
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the ten-year period ended December 31, 1996 and for a
Class B share outstanding during each of the years in the three-year period
ended December 31, 1996 and the period September 1, 1993 (date sales commenced)
through December 31, 1993.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992(a) 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 8.31 $ 7.78 $ 8.61 $ 8.27 $ 8.13 $ 7.66 $ 7.81
- -------------------------------------------- ------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.43 0.43 0.46 0.48 0.51 0.52 0.53
- -------------------------------------------- ------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) (0.12) 0.56 (0.78) 0.46 0.21 0.46 (0.14)
- -------------------------------------------- ------- -------- -------- -------- -------- -------- --------
Total from investment operations 0.31 0.99 (0.32) 0.94 0.72 0.98 0.39
- -------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.43) (0.43) (0.45) (0.48) (0.51) (0.51) (0.53)
- -------------------------------------------- ------- -------- -------- -------- -------- -------- --------
Distributions from net realized capital
gains -- -- (0.03) (0.11) (0.07) -- --
- -------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Returns of capital -- (0.03) (0.03) (0.01) -- -- (0.01)
- -------------------------------------------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.43) (0.46) (0.51) (0.60) (0.58) (0.51) (0.54)
- -------------------------------------------- ------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 8.19 $ 8.31 $ 7.78 $ 8.61 $ 8.27 $ 8.13 $ 7.66
============================================ ======= ======== ======== ======== ======== ======== ========
Total return(b) 3.90% 13.05% (3.79)% 11.66% 9.10% 13.30% 5.27%
============================================ ======= ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $278,812 $284,803 $257,456 $294,209 $271,205 $273,037 $258,194
============================================ ======= ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.80%(c)(d) 0.88% 0.89% 0.91% 0.90% 0.94% 0.91%
============================================ ======= ======== ======== ======== ======== ======== ========
Ratio of net investment income to average
net assets 5.29%(c) 5.26% 5.61% 5.65% 6.15% 6.58% 6.91%
============================================ ======= ======== ======== ======== ======== ======== ========
Portfolio turnover rate 26% 36% 43% 24% 160% 289% 230%
============================================ ======= ======== ======== ======== ======== ======== ========
<CAPTION>
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 7.64 $ 7.32 $ 8.41
- -------------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income 0.54 0.53 0.51
- -------------------------------------------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) 0.18 0.34 (0.65)
- -------------------------------------------- -------- -------- --------
Total from investment operations 0.72 0.87 (0.14)
- -------------------------------------------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.55) (0.55) (0.49)
- -------------------------------------------- -------- -------- --------
Distributions from net realized capital
gains -- -- (0.46)
- -------------------------------------------- -------- -------- --------
Returns of capital -- -- --
- -------------------------------------------- -------- -------- --------
Total distributions (0.55) (0.55) (0.95)
- -------------------------------------------- -------- -------- --------
Net asset value, end of period $ 7.81 $ 7.64 $ 7.32
============================================ ======== ======== ========
Total return(b) 9.70% 12.33% (1.88)%
============================================ ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $262,997 $243,480 $237,225
============================================ ======== ======== ========
Ratio of expenses to average net assets 0.89% 0.87% 0.80%
============================================ ======== ======== ========
Ratio of net investment income to average
net assets 6.97% 7.11% 6.71%
============================================ ======== ======== ========
Portfolio turnover rate 305% 381% 392%
============================================ ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Total returns do not deduct sales charges.
(c) Ratios are based on average daily net assets of $276,724,764.
(d) Ratio included expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
FS-87
<PAGE> 219
<TABLE>
<CAPTION>
1996 1995 1994 1993
------- ------- ------ ------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 8.31 $ 7.78 $ 8.61 $ 8.71
- ------------------------------------------------------------ ------- ------- ------ ------
Income from investment operations:
Net investment income 0.37 0.39 0.39 0.14
- ------------------------------------------------------------ ------- ------- ------ ------
Net gains (losses) on securities (both realized and
unrealized) (0.13) 0.54 (0.78) 0.01
- ------------------------------------------------------------ ------- ------- ------ ------
Total from investment operations 0.24 0.93 (0.39) 0.15
- ------------------------------------------------------------ ------- ------- ------ ------
Less distributions:
Dividends from net investment income (0.36) (0.37) (0.38) (0.13)
- ------------------------------------------------------------ ------- ------- ------ ------
Distributions from net realized capital gains -- -- (0.03) (0.11)
- ------------------------------------------------------------ ------- ------- ------ ------
Returns of capital -- (0.03) (0.03) (0.01)
- ------------------------------------------------------------ ------- ------- ------ ------
Total distributions (0.36) (0.40) (0.44) (0.25)
- ------------------------------------------------------------ ------- ------- ------ ------
Net asset value, end of period $ 8.19 $ 8.31 $ 7.78 $ 8.61
============================================================ ======= ======= ====== ======
Total return(a) 2.99% 12.14% (4.57)% 1.95%
============================================================ ======= ======= ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $33,770 $21,478 $9,175 $2,319
============================================================ ======= ======= ====== ======
Ratio of expenses to average net assets(b) 1.61%(d)(e) 1.68% 1.67% 1.65%(f)
============================================================ ======= ======= ====== ======
Ratio of net investment income to average net assets(c) 4.49%(d) 4.46% 4.83% 4.91%(f)
============================================================ ======= ======= ====== ======
Portfolio turnover rate 26% 36% 43% 24%
============================================================ ======= ======= ====== ======
</TABLE>
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods less than one year.
(b) Ratios of expenses to average daily net assets prior to expense
reimbursements are 1.77%, 1.84% and 3.08% (annualized) for the period
1995-1993, respectively.
(c) Ratios of net investment income to average daily net assets prior to expense
reimbursements are 4.37%, 4.66% and 3.48% (annualized) for the period
1995-1993, respectively.
(d) Ratios are based on average daily net assets of $27,530,145.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(f) Annualized.
NOTE 8-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO plc. AIM Management is the parent company of the Fund's advisor. The
merger is expected to take place during the first quarter of 1997.
FS-88
<PAGE> 220
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Value Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Value Fund (a portfolio of AIM Funds
Group), including the schedule of investments, as of
December 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in
the four-year period then ended. These financial statements
and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an
opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence
with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Value Fund
as of December 31, 1996, the results of its operations for
the year then ended, the changes in its net assets for each
of the years in the two-year period then ended and the
financial highlights for each of the years in the four-year
period then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1997
FS-89
<PAGE> 221
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-67.69%
AEROSPACE/DEFENSE-0.85%
Boeing Co. 550,000 $ 58,506,250
- ---------------------------------------------------------------
United Technologies Corp. 399,800 26,386,800
- ---------------------------------------------------------------
84,893,050
- ---------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.17%
Borg-Warner Automotive, Inc. 450,000 17,325,000
- ---------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.29%
PepsiCo, Inc. 1,000,000 29,250,000
- ---------------------------------------------------------------
BIOTECHNOLOGY-1.17%
Biogen, Inc.(a) 1,095,100 42,435,125
- ---------------------------------------------------------------
Guidant Corp. 1,300,000 74,100,000
- ---------------------------------------------------------------
116,535,125
- ---------------------------------------------------------------
BUSINESS SERVICES-0.10%
Cognizant Corp. 300,000 9,900,000
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.84%
IMC Global, Inc. 1,200,000 46,950,000
- ---------------------------------------------------------------
Praxair, Inc. 800,000 36,900,000
- ---------------------------------------------------------------
83,850,000
- ---------------------------------------------------------------
COMPUTER MAINFRAMES-0.19%
International Business Machines
Corp. 125,000 18,875,000
- ---------------------------------------------------------------
COMPUTER MINI/PCS-0.45%
Sun Microsystems, Inc.(a) 600,000 15,412,500
- ---------------------------------------------------------------
Wang Laboratories, Inc.(a) 1,448,500 29,332,125
- ---------------------------------------------------------------
44,744,625
- ---------------------------------------------------------------
COMPUTER NETWORKING-0.52%
Cisco Systems, Inc.(a) 400,000 25,450,000
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 687,700 26,003,656
- ---------------------------------------------------------------
51,453,656
- ---------------------------------------------------------------
COMPUTER PERIPHERALS-0.76%
Seagate Technology, Inc.(a) 800,000 31,600,000
- ---------------------------------------------------------------
U.S. Robotics Corp.(a) 343,100 24,703,200
- ---------------------------------------------------------------
Western Digital Corp.(a) 350,000 19,906,250
- ---------------------------------------------------------------
76,209,450
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-2.09%
American Management Systems, Inc.(a) 1,400,000 34,300,000
- ---------------------------------------------------------------
Computer Associates International,
Inc. 600,000 29,850,000
- ---------------------------------------------------------------
CompuWare Corp.(a) 277,600 13,914,700
- ---------------------------------------------------------------
Informix Corp.(a) 1,000,000 20,375,000
- ---------------------------------------------------------------
National Data Corp. 300,000 13,050,000
- ---------------------------------------------------------------
Network General Corp.(a) 800,000 24,200,000
- ---------------------------------------------------------------
Wallace Computer Services, Inc. 2,100,000 72,450,000
- ---------------------------------------------------------------
208,139,700
- ---------------------------------------------------------------
CONGLOMERATES-0.39%
Loews Corp. 362,300 34,146,775
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONGLOMERATES-(CONTINUED)
U.S. Industries, Inc.(a) 135,500 $ 4,657,813
- ---------------------------------------------------------------
38,804,588
- ---------------------------------------------------------------
CONTAINERS-0.28%
First Brands Corp. 1,000,000 28,375,000
- ---------------------------------------------------------------
COSMETICS & TOILETRIES-0.20%
Clorox Co. 200,000 20,075,000
- ---------------------------------------------------------------
ELECTRIC POWER-4.92%
Allegheny Power System, Inc. 2,000,000 60,750,000
- ---------------------------------------------------------------
American Electric Power Co. 2,600,000 106,925,000
- ---------------------------------------------------------------
Baltimore Gas & Electric Co. 800,000 21,400,000
- ---------------------------------------------------------------
Consolidated Edison Co. of New
York, Inc. 1,400,000 40,950,000
- ---------------------------------------------------------------
DQE, Inc. 500,000 14,500,000
- ---------------------------------------------------------------
Duke Power Co. 500,000 23,125,000
- ---------------------------------------------------------------
Edison International 1,737,100 34,524,863
- ---------------------------------------------------------------
Entergy Corp. 1,000,000 27,750,000
- ---------------------------------------------------------------
FPL Group, Inc. 500,000 23,000,000
- ---------------------------------------------------------------
Illinova Corp. 875,300 24,070,750
- ---------------------------------------------------------------
Texas Utilities Co. 600,000 24,450,000
- ---------------------------------------------------------------
Unicom Corp. 3,296,800 89,425,700
- ---------------------------------------------------------------
490,871,313
- ---------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.57%
Merrill Lynch & Co., Inc. 700,000 57,050,000
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-5.36%
Federal Home Loan Mortgage Corp. 500,000 55,062,500
- ---------------------------------------------------------------
Federal National Mortgage
Association 10,000,000 372,500,000
- ---------------------------------------------------------------
Student Loan Marketing Association 1,147,300 106,842,313
- ---------------------------------------------------------------
534,404,813
- ---------------------------------------------------------------
FOOD/PROCESSING-2.82%
Archer-Daniels-Midland Co. 5,000,000 110,000,000
- ---------------------------------------------------------------
Flowers Industries, Inc. 1,400,000 30,100,000
- ---------------------------------------------------------------
Interstate Bakeries Corp. 800,000 39,300,000
- ---------------------------------------------------------------
Nabisco Holdings Corp.-Class A 1,279,500 49,740,563
- ---------------------------------------------------------------
Ralcorp Holdings, Inc.(a) 1,062,600 22,447,425
- ---------------------------------------------------------------
Ralston-Ralston Purina Group 400,000 29,350,000
- ---------------------------------------------------------------
280,937,988
- ---------------------------------------------------------------
FUNERAL SERVICES-0.89%
Service Corp. International 2,800,000 78,400,000
- ---------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 300,000 10,200,000
- ---------------------------------------------------------------
88,600,000
- ---------------------------------------------------------------
GAS DISTRIBUTION-0.10%
KN Energy, Inc. 256,800 10,079,400
- ---------------------------------------------------------------
HOME BUILDING-0.21%
Clayton Homes, Inc. 1,548,300 20,902,050
- ---------------------------------------------------------------
HOTELS/MOTELS-0.09%
Choice Hotels International, Inc.(a) 500,000 8,812,500
- ---------------------------------------------------------------
</TABLE>
FS-90
<PAGE> 222
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (LIFE & HEALTH)-1.01%
Conseco Inc. 383,900 $ 24,473,625
- ---------------------------------------------------------------
Provident Companies, Inc. 1,000,000 48,375,000
- ---------------------------------------------------------------
Safeco Corp. 700,000 27,606,250
- ---------------------------------------------------------------
100,454,875
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-6.90%
Allstate Corp. 1,845,500 106,808,313
- ---------------------------------------------------------------
American International Group, Inc. 1,000,000 108,250,000
- ---------------------------------------------------------------
Chubb Corp. 353,300 18,989,875
- ---------------------------------------------------------------
CIGNA Corp. 700,000 95,637,500
- ---------------------------------------------------------------
CNA Financial Corp.(a) 400,000 42,800,000
- ---------------------------------------------------------------
Exel Limited 1,400,000 53,025,000
- ---------------------------------------------------------------
ITT Hartford Group, Inc. 1,200,000 81,000,000
- ---------------------------------------------------------------
MBIA, Inc. 500,000 50,625,000
- ---------------------------------------------------------------
Progressive Corp. 271,900 18,319,262
- ---------------------------------------------------------------
Transatlantic Holdings, Inc. 203,800 16,405,900
- ---------------------------------------------------------------
Travelers Group, Inc. 2,133,333 96,799,985
- ---------------------------------------------------------------
688,660,835
- ---------------------------------------------------------------
LEISURE & RECREATION-0.98%
Callaway Golf Co. 1,400,000 40,250,000
- ---------------------------------------------------------------
Carnival Corp.-Class A 1,740,200 57,426,600
- ---------------------------------------------------------------
97,676,600
- ---------------------------------------------------------------
MACHINERY (HEAVY)-0.16%
Case Corp. 300,000 16,350,000
- ---------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.39%
Pentair, Inc. 1,200,000 38,700,000
- ---------------------------------------------------------------
MEDICAL (DRUGS)-4.04%
American Home Products Corp. 1,000,000 58,625,000
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 2,200,000 239,250,000
- ---------------------------------------------------------------
ICN Pharmaceuticals, Inc. 1,431,435 28,091,912
- ---------------------------------------------------------------
R.P. Scherer Corp.(a) 500,000 25,125,000
- ---------------------------------------------------------------
Schering-Plough Corp. 800,000 51,800,000
- ---------------------------------------------------------------
402,891,912
- ---------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-4.28%
Baxter International, Inc. 7,517,800 308,229,800
- ---------------------------------------------------------------
Boston Scientific Corp.(a) 600,000 36,000,000
- ---------------------------------------------------------------
Hillenbrand Industries, Inc. 800,000 29,000,000
- ---------------------------------------------------------------
St. Jude Medical, Inc.(a) 800,000 34,100,000
- ---------------------------------------------------------------
Sybron International Corp.(a) 600,000 19,800,000
- ---------------------------------------------------------------
427,129,800
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-6.24%
Columbia/HCA Healthcare Corp. 8,500,000 346,375,000
- ---------------------------------------------------------------
Health Care and Retirement Corp.(a) 1,200,000 34,350,000
- ---------------------------------------------------------------
Manor Care, Inc. 500,000 13,500,000
- ---------------------------------------------------------------
MedPartners, Inc.(a) 7,500,000 157,500,000
- ---------------------------------------------------------------
OrNda HealthCorp(a) 1,800,000 52,650,000
- ---------------------------------------------------------------
Quorum Health Group, Inc.(a) 600,000 17,850,000
- ---------------------------------------------------------------
622,225,000
- ---------------------------------------------------------------
NATURAL GAS PIPELINE-1.31%
Columbia Gas System, Inc. 700,000 $ 44,537,500
- ---------------------------------------------------------------
El Paso Natural Gas Co. 1,714,100 86,562,050
- ---------------------------------------------------------------
131,099,550
- ---------------------------------------------------------------
OFFICE PRODUCTS-0.35%
Reynolds & Reynolds Co.-Class A 1,339,200 34,819,200
- ---------------------------------------------------------------
OIL & GAS-2.67%
Halliburton Co. 469,800 28,305,450
- ---------------------------------------------------------------
Mobil Corp. 300,000 36,675,000
- ---------------------------------------------------------------
NorAm Energy Corp. 1,000,000 15,375,000
- ---------------------------------------------------------------
Oryx Energy Co.(a) 4,000,000 99,000,000
- ---------------------------------------------------------------
Pennzoil Co. 700,000 39,550,000
- ---------------------------------------------------------------
Unocal Corp. 1,185,300 48,152,812
- ---------------------------------------------------------------
267,058,262
- ---------------------------------------------------------------
OIL & GAS
(REFINING/MARKETING)-0.48%
Tosco Corp. 602,907 47,705,016
- ---------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.55%
Baker Hughes, Inc. 1,800,000 62,100,000
- ---------------------------------------------------------------
BJ Services Co.(a) 721,500 36,796,500
- ---------------------------------------------------------------
Noble Drilling Corp.(a) 1,000,000 19,875,000
- ---------------------------------------------------------------
Tidewater, Inc. 800,000 36,200,000
- ---------------------------------------------------------------
154,971,500
- ---------------------------------------------------------------
PUBLISHING-0.48%
Gannett Company, Inc. 340,000 25,457,500
- ---------------------------------------------------------------
Knight-Ridder, Inc. 300,000 11,475,000
- ---------------------------------------------------------------
Scripps (E.W.) Co.-Class A 300,000 10,500,000
- ---------------------------------------------------------------
47,432,500
- ---------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.93%
American Stores Co. 900,000 36,787,500
- ---------------------------------------------------------------
Safeway, Inc.(a) 1,300,000 55,575,000
- ---------------------------------------------------------------
92,362,500
- ---------------------------------------------------------------
RETAIL (STORES)-0.05%
Meyer (Fred), Inc.(a) 154,300 5,477,650
- ---------------------------------------------------------------
SHOES & RELATED APPAREL-0.26%
Nike, Inc.-Class B 435,200 26,003,200
- ---------------------------------------------------------------
TELECOMMUNICATIONS-4.63%
Lucent Technologies, Inc. 1,022,400 47,286,000
- ---------------------------------------------------------------
MFS Communications Co., Inc.(a) 4,835,092 263,512,514
- ---------------------------------------------------------------
WorldCom, Inc.(a) 5,778,300 150,596,944
- ---------------------------------------------------------------
461,395,458
- ---------------------------------------------------------------
TELEPHONE-3.41%
Ameritech Corp. 3,194,600 193,672,625
- ---------------------------------------------------------------
BellSouth Corp. 2,000,000 80,750,000
- ---------------------------------------------------------------
Cincinnati Bell, Inc. 400,000 24,650,000
- ---------------------------------------------------------------
SBC Communications, Inc. 800,000 41,400,000
- ---------------------------------------------------------------
340,472,625
- ---------------------------------------------------------------
TOBACCO-4.31%
DIMON, Inc. 1,100,000 25,437,500
- ---------------------------------------------------------------
</TABLE>
FS-91
<PAGE> 223
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TOBACCO-(CONTINUED)
Philip Morris Companies, Inc. 2,600,000 $ 292,825,000
- ---------------------------------------------------------------
RJR Nabisco Holdings Corp. 3,283,800 111,649,200
- ---------------------------------------------------------------
429,911,700
- ---------------------------------------------------------------
Total Domestic Common Stocks 6,752,886,441
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-19.14%
ARGENTINA-0.38%
YPF Sociedad Anonima-ADR (Oil &
Gas-Exploration & Production) 1,500,000 37,875,000
- ---------------------------------------------------------------
AUSTRALIA-0.49%
Westpac Banking Corp. Ltd.
(Banking) 8,649,037 49,222,721
- ---------------------------------------------------------------
BERMUDA-0.02%
PartnerRe Ltd.
(Insurance-Multi-Line Property) 52,600 1,788,400
- ---------------------------------------------------------------
BRAZIL-0.15%
Telecomunicacoes Brasileiras S.A.
Telebras-ADR
(Telecommunications) 200,000 15,300,000
- ---------------------------------------------------------------
CANADA-2.86%
Canadian National Railway Co.
(Railroads) 1,600,000 60,800,000
- ---------------------------------------------------------------
Canadian Pacific, Ltd.
(Transportation) 6,200,000 164,300,000
- ---------------------------------------------------------------
CanWest Global Communications
Corp. (Advertising/Broadcasting) 1,800,000 18,450,000
- ---------------------------------------------------------------
Northern Telecom Ltd.
(Telecommunications) 400,000 24,750,000
- ---------------------------------------------------------------
Potash Corp. of Saskatchewan Inc.
(Chemicals) 200,000 17,000,000
- ---------------------------------------------------------------
285,300,000
- ---------------------------------------------------------------
DENMARK-0.58%
Danisco A.S. (Food/Processing) 460,000 27,955,456
- ---------------------------------------------------------------
Novo Nordisk A.S.-Class B
(Medical-Drugs) 160,500 30,242,921
- ---------------------------------------------------------------
58,198,377
- ---------------------------------------------------------------
FRANCE-0.98%
Rhone-Poulenc Rorer, Inc.-Class A
(Medical-Drugs) 517,900 17,657,610
- ---------------------------------------------------------------
Rhone-Poulenc Rorer, Inc.
(Medical-Drugs) 954,900 74,601,563
- ---------------------------------------------------------------
Roussel Uclaf (Medical-Drugs) 16,900 4,973,750
- ---------------------------------------------------------------
97,232,923
- ---------------------------------------------------------------
GERMANY-0.44%
VEBA A.G. (Electric Power) 760,000 43,956,330
- ---------------------------------------------------------------
HONG KONG-1.15%
Cheung Kong Holdings Ltd. (Real
Estate) 3,421,000 30,408,397
- ---------------------------------------------------------------
Citic Pacific Ltd. (Banking) 5,000,000 29,025,794
- ---------------------------------------------------------------
First Pacific Co. Ltd.
(Conglomerates) 7,850,000 10,200,076
- ---------------------------------------------------------------
Hang Seng Bank Ltd. (Banking) 1,200,000 14,584,007
- ---------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Real
Estate) 2,459,000 30,123,505
- ---------------------------------------------------------------
114,341,779
- ---------------------------------------------------------------
ITALY-1.60%
Edison S.p.A. (Electric Power) 3,000,000 18,911,667
- ---------------------------------------------------------------
Fila Holding S.p.A.-ADR
(Retail-Stores) 384,200 22,331,625
- ---------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A.
(Banking) 3,263,500 27,837,633
- ---------------------------------------------------------------
ITALY-(CONTINUED)
Telecom Italia Mobile S.p.A.
(Telecommunications) 14,500,000 36,751,813
- ---------------------------------------------------------------
Telecom Italia S.p.A.
(Telecommunications) 20,800,000 $ 54,022,413
- ---------------------------------------------------------------
159,855,151
- ---------------------------------------------------------------
JAPAN-0.38%
Fuji Photo Film (Leisure &
Recreation) 750,000 24,738,796
- ---------------------------------------------------------------
Honda Motor Co.
(Automobile-Manufacturers) 450,000 12,861,584
- ---------------------------------------------------------------
37,600,380
- ---------------------------------------------------------------
MALAYSIA-0.03%
Malayan Banking Berhad (Banking) 272,000 3,015,640
- ---------------------------------------------------------------
NETHERLANDS-1.02%
Royal Dutch Petroleum Co. (Oil &
Gas-Services) 200,000 34,150,000
- ---------------------------------------------------------------
VNU-Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit (Publishing) 3,000,000 62,728,062
- ---------------------------------------------------------------
Wolters Kluwer N.V. (Publishing) 40,000 5,317,116
- ---------------------------------------------------------------
102,195,178
- ---------------------------------------------------------------
NORWAY-0.16%
Storebrand A.S.A.
(Insurance-Multi-Line
Property)(a) 2,854,250 16,390,752
- ---------------------------------------------------------------
PHILIPPINES-0.26%
C & P Homes, Inc. (Home Building) 10,050,000 5,158,745
- ---------------------------------------------------------------
Filinvest Land Inc. (Real
Estate)(a) 19,833,000 6,183,673
- ---------------------------------------------------------------
Metro Pacific Corp.
(Conglomerates) 58,708,000 14,509,582
- ---------------------------------------------------------------
25,852,000
- ---------------------------------------------------------------
SPAIN-1.75%
Banco Popular Espanol S.A.
(Banking) 200,000 39,283,651
- ---------------------------------------------------------------
Empresa Nacional de Electricidad,
S.A. (Electric Power) 1,200,000 85,407,280
- ---------------------------------------------------------------
Iberdrola S.A. (Electric Power) 3,500,000 49,605,237
- ---------------------------------------------------------------
174,296,168
- ---------------------------------------------------------------
SWEDEN-1.21%
Hennes & Mauritz A.B.-Class B
(Retail-Stores) 300,000 41,525,535
- ---------------------------------------------------------------
Nordbanken A.B. (Banking) 262,250 7,940,678
- ---------------------------------------------------------------
Skandinaviska Enskilda
Banken-Class A (Banking) 4,000,000 41,056,320
- ---------------------------------------------------------------
Telefonaktiebolaget L.M.
Ericsson-ADR
(Telecommunications) 1,000,000 30,187,500
- ---------------------------------------------------------------
120,710,033
- ---------------------------------------------------------------
SWITZERLAND-1.84%
Novartis A.G. (Medical-Drugs)(a) 159,990 183,238,453
- ---------------------------------------------------------------
THAILAND-0.18%
Krung Thai Bank PLC (Banking) 5,918,100 11,422,677
- ---------------------------------------------------------------
Thai Farmers Bank PLC (Banking) 1,046,600 6,529,517
- ---------------------------------------------------------------
Thai Farmers Bank PLC-Wts.,
expiring 09/15/02 (Banking)(a) 137,500 130,015
- ---------------------------------------------------------------
18,082,209
- ---------------------------------------------------------------
UNITED KINGDOM-3.66%
Burton Group PLC (Retail-Stores) 1,800,000 4,810,690
- ---------------------------------------------------------------
</TABLE>
FS-92
<PAGE> 224
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Granada Group PLC (Leisure &
Recreation) 4,000,000 $ 59,139,970
- ---------------------------------------------------------------
Railtrack Group PLC (Railroads) 3,500,000 23,235,395
- ---------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Medical-Drugs) 3,000,000 204,000,000
- ---------------------------------------------------------------
Standard Chartered PLC
(Finance-Asset Management) 3,982,300 49,190,308
- ---------------------------------------------------------------
Unilever PLC (Consumer
Non-Durables) 1,000,000 24,267,603
- ---------------------------------------------------------------
364,643,966
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 1,909,095,460
- ---------------------------------------------------------------
PREFERRED STOCKS-0.38%
INSURANCE (LIFE & HEALTH)-0.12%
Conseco Inc.-$4.278 Conv. PRIDES 105,000 11,943,750
- ---------------------------------------------------------------
TELECOMMUNICATIONS-0.26%
MFS Communications Co., Inc.-$2.68
Conv. Pfd. 283,100 25,832,875
- ---------------------------------------------------------------
Total Preferred Stocks 37,776,625
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS-0.26%
COMPUTER SOFTWARE/SERVICES-0.26%
First Financial Management Corp.,
Conv. Deb., 5.00%, 12/15/99 $15,250,000 26,391,193
- ---------------------------------------------------------------
COMMERCIAL PAPER TRUST-1.50%
Citibank, N.A., 4.945%,
12/26/97(b) 150,000,000 150,000,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
MASTER NOTE AGREEMENTS-1.58%
Citicorp Securities, Inc.,
5.875%(c), 01/27/97 $24,000,000 $ 24,000,000
- ---------------------------------------------------------------
Goldman, Sachs & Co., 5.755%(d),
04/23/97 54,000,000 54,000,000
- ---------------------------------------------------------------
Morgan Stanley Group Inc.,
5.725%(c), 05/28/97 80,000,000 80,000,000
- ---------------------------------------------------------------
Total Master Note Agreements 158,000,000
- ---------------------------------------------------------------
U.S. TREASURY SECURITIES-4.48%
U.S. TREASURY BILLS-4.48%(e)
5.22%, 01/02/97 347,825,000 347,775,998
- ---------------------------------------------------------------
5.14%, 03/06/97 100,000,000 99,151,000
- ---------------------------------------------------------------
Total U.S. Treasury Securities 446,926,998
- ---------------------------------------------------------------
REPURCHASE AGREEMENTS-4.78%(f)
HSBC Securities, Inc.,
7.05%(g), 01/02/97 19,021,553 19,021,553
- ---------------------------------------------------------------
Merrill Lynch & Co. Inc.,
6.50%(h), 01/02/97 400,000,000 400,000,000
- ---------------------------------------------------------------
Merrill Lynch & Co. Inc.,
7.05%(i), 01/02/97 27,359,031 27,359,031
- ---------------------------------------------------------------
Morgan Stanley Group, Inc.,
7.05%(j), 01/02/97 30,000,000 30,000,000
- ---------------------------------------------------------------
Total Repurchase Agreements 476,380,584
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.81% 9,957,457,301
- ---------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.19% 18,537,009
- ---------------------------------------------------------------
NET ASSETS-100.00% $9,975,994,310
===============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Variable rate trust certificates representing an interest in a trust
(comprised of eligible debt obligations) entitling the Fund to receive
variable rate interest. The Fund has the right, upon seven calendar days'
notice to the trustee, to put its certificates to the trust at par value
plus accrued interest. Because variable rate trust certificates involve a
trust and a third party put feature, they involve complexities and potential
risks that may not be present where the debt obligation is owned directly.
Rate shown is the rate in effect on December 31, 1996.
(c) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 3 business days' notice to the issuer. Interest
rates on master notes are redetermined periodically. Rate shown is the rate
in effect on December 31, 1996.
(d) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 7 business days' prior written notice to the issuer.
Interest rates on master notes are redetermined periodically. Rate shown is
the rate in effect on December 31, 1996.
(e) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(f) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(g) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$300,117,500. Collateralized by U.S. Government obligations, 0% to 8.00% due
07/16/97 to 11/01/35 with an aggregate market value at December 31, 1996 of
$306,000,188.
(h) Repurchase agreement entered into 12/31/96 with a maturing value of
$400,144,444. Collateralized by U.S. Government obligations, 6.00% to 12.00%
due 03/01/01 to 11/01/26 with an aggregate market value at December 31, 1996
of $408,003,538.
(i) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$200,078,333. Collateralized by U.S. Government obligations, 0% to 15.50%
due 03/01/97 to 12/01/26 with an aggregate market value at December 31,
1996 of $204,003,804.
(j) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$300,117,500. Collateralized by U.S. Government obligations, 6.50% to
12.00% due 10/15/10 to 12/20/26 with an aggregate market value at December
31, 1996 of $307,371,109.
Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debentures
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
Wts. - Warrants
See Notes to Financial Statements.
FS-93
<PAGE> 225
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$8,588,978,881) $ 9,957,457,301
- ----------------------------------------------------------
Foreign currencies, at value (cost
$83,365,445) 82,577,413
- ----------------------------------------------------------
Receivables for:
Investments sold 34,148,878
- ----------------------------------------------------------
Fund shares sold 21,265,654
- ----------------------------------------------------------
Dividends and interest 19,239,351
- ----------------------------------------------------------
Investment for deferred compensation plan 57,673
- ----------------------------------------------------------
Other assets 166,862
- ----------------------------------------------------------
Total assets 10,114,913,132
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 44,248,364
- ----------------------------------------------------------
Fund shares reacquired 40,121,185
- ----------------------------------------------------------
Options written 36,831,463
- ----------------------------------------------------------
Deferred compensation plan 57,673
- ----------------------------------------------------------
Accrued advisory fees 5,076,114
- ----------------------------------------------------------
Accrued administrative service fees 18,619
- ----------------------------------------------------------
Accrued distribution fees 8,170,140
- ----------------------------------------------------------
Accrued transfer agent fees 2,510,426
- ----------------------------------------------------------
Accrued trustees' fees 17,930
- ----------------------------------------------------------
Accrued operating expenses 1,866,908
- ----------------------------------------------------------
Total liabilities 138,918,822
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $ 9,975,994,310
==========================================================
NET ASSETS:
Class A $ 5,100,060,952
==========================================================
Class B $ 4,875,933,358
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 174,979,851
==========================================================
Class B 168,596,396
==========================================================
Class A:
Net asset value and redemption price
per share $ 29.15
==========================================================
Offering price per share:
(Net asset value of $29.15
divided by 94.50%) $ 30.85
==========================================================
Class B:
Net asset value and offering price per
share $ 28.92
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $3,459,015 foreign
withholding tax) $ 140,639,640
- ----------------------------------------------------------
Interest 87,267,409
- ----------------------------------------------------------
Total investment income 227,907,049
- ----------------------------------------------------------
EXPENSES:
Advisory fees 51,821,484
- ----------------------------------------------------------
Custodian fees 1,348,989
- ----------------------------------------------------------
Distribution fees -- Class A 10,740,282
- ----------------------------------------------------------
Distribution fees -- Class B 39,533,247
- ----------------------------------------------------------
Administrative service fees 196,586
- ----------------------------------------------------------
Trustees' fees 58,939
- ----------------------------------------------------------
Transfer agent fees -- Class A 7,667,173
- ----------------------------------------------------------
Transfer agent fees -- Class B 10,273,753
- ----------------------------------------------------------
Other 4,429,849
- ----------------------------------------------------------
Total expenses 126,070,302
- ----------------------------------------------------------
Less: Fees waived by advisor (1,562,359)
- ----------------------------------------------------------
Expenses paid indirectly (136,415)
- ----------------------------------------------------------
Net expenses 124,371,528
- ----------------------------------------------------------
Net investment income 103,535,521
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTIONS
TRANSACTIONS:
Net realized gain (loss) from:
Investment securities 335,204,694
- ----------------------------------------------------------
Foreign currencies (1,465,209)
- ----------------------------------------------------------
Futures contracts 35,626,021
- ----------------------------------------------------------
Options contracts 9,794,340
- ----------------------------------------------------------
379,159,846
- ----------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 705,017,998
- ----------------------------------------------------------
Foreign currencies (1,035,558)
- ----------------------------------------------------------
Futures contracts (11,292,015)
- ----------------------------------------------------------
Options contracts (4,770,527)
- ----------------------------------------------------------
687,919,898
- ----------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and options
transactions 1,067,079,744
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $1,170,615,265
==========================================================
</TABLE>
See Notes to Financial Statements.
FS-94
<PAGE> 226
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 103,535,521 $ 16,293,031
- ------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and options transactions 379,159,846 412,157,661
- ------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies,
futures and options contracts 687,919,898 561,870,244
- ------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,170,615,265 990,320,936
- ------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (68,036,562) (10,460,381)
- ------------------------------------------------------------------------------------------------
Class B (33,169,539) --
- ------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (182,879,810) (183,638,497)
- ------------------------------------------------------------------------------------------------
Class B (175,428,877) (154,081,759)
- ------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 1,320,636,081 1,629,870,392
- ------------------------------------------------------------------------------------------------
Class B 1,674,774,506 1,958,628,734
- ------------------------------------------------------------------------------------------------
Net increase in net assets 3,706,511,064 4,230,639,425
- ------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 6,269,483,246 2,038,843,821
- ------------------------------------------------------------------------------------------------
End of period $9,975,994,310 $6,269,483,246
================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $8,530,223,852 $5,534,813,265
- ------------------------------------------------------------------------------------------------
Undistributed net investment income 6,940,026 6,075,815
- ------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign
currencies, futures and options transactions 76,188,601 53,872,233
- ------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and options contracts 1,362,641,831 674,721,933
- ------------------------------------------------------------------------------------------------
$9,975,994,310 $6,269,483,246
================================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Value Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund. The Fund's investment objective is to seek to achieve
long-term growth of capital by investing primarily in equity securities judged
by the Fund's investment advisor to be undervalued relative to the investment
advisor's appraisal of the current or projected earnings of the companies
issuing the securities, or relative to current market values of assets owned by
the companies issuing the securities or relative to the equity market generally.
Income is a secondary objective.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the mean between the closing bid and asked prices
on that day. Each security traded in the over-the-counter market (but not
FS-95
<PAGE> 227
including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between last bid and asked
prices based upon quotes furnished by independent sources. Securities for
which market quotations either are not readily available or are questionable
are valued at fair value as determined in good faith by or under the
supervision of the Trust's officers in a manner specifically authorized by
the Board of Trustees. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange which will not be reflected in
the computation of the Fund's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by
or under the supervision of the Board of Trustees.
B. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at the date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts -- A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a forward currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
D. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On December 31, 1996,
$1,465,209 was reclassified from undistributed net realized gains to
undistributed net investment income as a result of differing book/tax
treatment of foreign currency transactions. Net assets of the Fund were
unaffected as a result of this reclassification.
E. Stock Index Futures Contracts -- The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking to market"
on a daily basis to reflect the market value of the contract at the end of
each day's trading. Variation margin payments are made or received depending
upon whether unrealized gains or losses are incurred. When the contract is
closed, the Fund records a realized gain or loss equal to the difference
between the proceeds from (or cost of) the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and the change in the value of the contract may not correlate with changes in
the value of the Fund's portfolio being hedged.
F. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying security
at the time the option is written. When the Fund writes a covered call
option, an amount equal to the premium received by the Fund is recorded as an
asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the sale
of the underlying security and the proceeds of the sale are increased by the
premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the
FS-96
<PAGE> 228
Fund has given up the opportunity for capital appreciation above the
exercise price should the market price of the underlying security increase,
but has retained the risk of loss should the price of the underlying
security decline. During the option period, the Fund may be required at any
time to deliver the underlying security against payment of the exercise
price. This obligation is terminated upon the expiration of the option
period or at such earlier time at which the Fund effects a closing purchase
transaction by purchasing (at a price which may be higher than that received
when the call option was written) a call option identical to the one
originally written.
G. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
H. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $150 million. AIM is currently
voluntarily waiving a portion of its advisory fees payable by the Fund to AIM to
the extent necessary to reduce the fees paid by the Fund at net asset levels
higher than those currently incorporated in the present advisory fee schedule.
AIM will receive a fee calculated at 0.80% of the first $150 million of the
Fund's average daily net assets, plus 0.625% of the Fund's average daily net
assets in excess of $150 million to and including $2 billion, plus 0.60% of the
Fund's average daily net assets in excess of $2 billion. The waiver of fees is
entirely voluntary and the Board of Trustees would be advised of any decision by
AIM to discontinue the waiver. During the year ended December 31, 1996, AIM
voluntarily waived advisory fees in the amount of $1,562,359.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1996, AIM
was reimbursed $196,586 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the year ended December 31, 1996, AFS was paid
$9,776,850 for such services.
The Fund received reductions in transfer agency fees payable to AFS of
$126,199 from dividends received on balances in cash management accounts. In
addition, pricing service expenses in the amount of $10,216 were paid through
directed brokerage commissions paid by the Fund. The above arrangements resulted
in a reduction of the Fund's total expenses of $136,415 during the year ended
December 31, 1996.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the respective classes. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more assignees, its rights to all or a portion of
(a) compensation received by AIM Distributors from the Fund pursuant to the
Class B Plan (but not AIM Distributors' duties and obligations pursuant to the
Class B Plan) and (b) any contingent deferred sales charges payable to AIM
Distributors related to the Class B shares. During the year ended December 31,
1996, the Class A shares and the Class B shares paid AIM Distributors
$10,740,282 and $39,533,247, respectively, as compensation pursuant to the
Plans.
AIM Distributors received commissions of $7,792,991 from sales of the Class A
shares of the Fund during the year ended December 31, 1996. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1996,
AIM Distributors received $1,988,299 in contingent deferred sales charges
imposed on redemptions of Fund shares. Certain officers and trustees of the
Trust are officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1996, the Fund paid legal fees of $18,622
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
FS-97
<PAGE> 229
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $56,800,000. During the year ended December 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.08% of the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1996 was
$11,872,784,862 and $8,787,111,126, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $1,466,690,588
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (105,343,330)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $1,361,347,258
==========================================================
Cost of investments for tax purposes is $8,596,110,043.
</TABLE>
NOTE 6-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------- ----------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold:
Class A 83,369,308 $2,309,759,146 79,351,992 $2,054,533,413
- --------------------- ---------------------------- ----------------------------
Class B 73,576,913 2,011,544,498 75,466,438 1,966,370,940
- --------------------- ---------------------------- ----------------------------
Issued as
reinvestment of
dividends:
Class A 8,503,122 239,780,446 6,956,211 184,199,771
- --------------------- ---------------------------- ----------------------------
Class B 7,058,251 197,560,616 5,526,910 145,522,539
- --------------------- ---------------------------- ----------------------------
Reacquired:
Class A (44,030,263) (1,228,903,511) (23,428,920) (608,862,792)
- --------------------- ---------------------------- ----------------------------
Class B (19,368,345) (534,330,608) (5,847,788) (153,264,745)
- --------------------- ---------------------------- ----------------------------
109,108,986 $2,995,410,587 138,024,843 $3,588,499,126
============================ ============================
</TABLE>
NOTE 7-OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1996 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
--------------------------
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of period 4,000 $ 1,731,692
- ----------------------------------------------------------------------------------------
Written 244,171 78,737,578
- ----------------------------------------------------------------------------------------
Closed (42,715) (16,676,651)
- ----------------------------------------------------------------------------------------
Exercised (64,525) (7,877,711)
- ----------------------------------------------------------------------------------------
Expired (40,808) (23,997,281)
- ----------------------------------------------------------------------------------------
End of period 100,123 $ 31,917,627
========================================================================================
</TABLE>
FS-98
<PAGE> 230
Open call option contracts written at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
NUMBER DECEMBER 31, UNREALIZED
CONTRACT STRIKE OF PREMIUM 1996 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Boston Scientific Corp. Jan. 50 3,000 $ 1,040,965 $ 3,093,750 $(2,052,785)
Case Corp. Jul. 55 3,000 1,513,689 1,293,750 219,939
Clorox Co. Jan. 95 2,000 1,122,962 1,150,000 (27,038)
Comverse Technology, Inc. Jan. 40 2,000 901,970 225,000 676,970
Fila Holding S.p.a. - ADR Jan. 75 3,130 2,180,021 39,125 2,140,896
Informix Corp. Jan. 20 10,000 1,594,946 1,343,750 251,196
Lucent Technologies, Inc. Jan 40 6,000 2,015,932 3,900,000 (1,884,068)
Lucent Technologies, Inc. Jan. 45 3,995 1,498,075 848,938 649,137
MedPartners, Inc. Mar. 22.5 15,000 4,025,427 1,312,500 2,712,927
Merrill Lynch & Co., Inc. Jan. 75 3,000 1,303,816 2,100,000 (796,184)
Mobil Corp. Jan. 115 3,000 2,049,231 2,306,250 (257,019)
Nike, Inc. - Class B Jan. 60 4,000 1,091,963 750,000 341,963
Northern Telecom Ltd. Jan. 60 2,000 716,976 637,500 79,476
PepsiCo, Inc. Jan. 30 10,000 3,308,743 468,750 2,839,993
Travelers Group, Inc. Mar. 33.75 8,000 3,079,097 10,000,000 (6,920,903)
United Technologies Corp. Jan. 65 998 321,216 174,650 146,566
United Technologies Corp. Jan. 67.5 1,000 220,732 62,500 158,232
WorldCom, Inc. Jan. 22.5 20,000 3,931,866 7,125,000 (3,193,134)
- ---------------------------------------------------------------------------------------------------------------------------------
100,123 $31,917,627 $36,831,463 $(4,913,836)
=================================================================================================================================
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the ten-year period ended December 31, 1996 and for a Class
B share outstanding during each of the years in the three-year period ended
December 31, 1996 and the period October 18, 1993 (date sales commenced) through
December 31, 1993.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992(a) 1991
------------ ------------ ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of
period $ 26.81 $ 21.14 $ 20.82 $ 18.24 $ 17.55 $ 13.75
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Income from investment operations:
Net investment income 0.43(b) 0.14 0.16 0.04 0.12 0.13
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Net gains on securities (both
realized and unrealized) 3.42 7.21 0.52 3.34 2.68 5.73
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Total from investment
operations 3.85 7.35 0.68 3.38 2.80 5.86
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Less distributions:
Dividends from net investment
income (0.41) (0.09) (0.16) (0.03) (0.12) (0.14)
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Distributions from net realized
capital gains (1.10) (1.59) (0.20) (0.77) (1.99) (1.92)
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Total distributions (1.51) (1.68) (0.36) (0.80) (2.11) (2.06)
- ---------------------------------- ------------ ------------ ------------ --------- --------- ---------
Net asset value, end of period $ 29.15 $ 26.81 $ 21.14 $ 20.82 $ 18.24 $ 17.55
================================== ============ ============ ============ ========= ========= =========
Total return(c) 14.52% 34.85% 3.28% 18.71% 16.39% 43.45%
================================== ============ ============ ============ ========= ========= =========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $5,100,061 $ 3,408,952 $ 1,358,725 $765,305 $239,663 $152,149
================================== ============ ============ ============ ========= ========= =========
Ratio of expenses to average net
assets(d) 1.11%(e)(f) 1.12% 0.98% 1.09% 1.16% 1.22%
================================== ============ ============ ============ ========= ========= =========
Ratio of net investment income to
average net assets(g) 1.65%(e) 0.74% 0.92% 0.30% 0.75% 0.89%
================================== ============ ============ ============ ========= ========= =========
Portfolio turnover rate 126% 151% 127% 177% 170% 135%
================================== ============ ============ ============ ========= ========= =========
Average broker commission rate(h) $ 0.0436 N/A N/A N/A N/A N/A
================================== ============ ============ ============ ========= ========= =========
<CAPTION>
1990 1989 1988 1987
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of
period $ 14.53 $ 12.79 $ 11.47 $ 12.26
- ---------------------------------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.26 0.40 0.26 0.25
- ---------------------------------- -------- -------- -------- --------
Net gains on securities (both
realized and unrealized) 0.01 3.58 2.07 0.53
- ---------------------------------- -------- -------- -------- --------
Total from investment
operations 0.27 3.98 2.33 0.78
- ---------------------------------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.26) (0.43) (0.26) (0.39)
- ---------------------------------- -------- -------- -------- --------
Distributions from net realized
capital gains (0.79) (1.81) (0.75) (1.18)
- ---------------------------------- -------- -------- -------- --------
Total distributions (1.05) (2.24) (1.01) (1.57)
- ---------------------------------- -------- -------- -------- --------
Net asset value, end of period $ 13.75 $ 14.53 $ 12.79 $ 11.47
================================== ======== ======== ======== ========
Total return(c) 1.88% 31.54% 20.61% 5.96%
================================== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $86,565 $76,444 $60,076 $55,527
================================== ======== ======== ======== ========
Ratio of expenses to average net
assets(d) 1.21% 1.00% 1.00% 1.00%
================================== ======== ======== ======== ========
Ratio of net investment income to
average net assets(g) 1.87% 2.65% 1.98% 1.91%
================================== ======== ======== ======== ========
Portfolio turnover rate 131% 152% 124% 219%
================================== ======== ======== ======== ========
Average broker commission rate(h) N/A N/A N/A N/A
================================== ======== ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Calculated using average shares outstanding.
(c) Total returns do not deduct sales charges.
(d) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.13%, 1.13%, 1.23%, 1.09% and 1.08% for 1996, 1995 and 1990-88,
respectively.
(e) Ratios are based on average net assets of $4,296,112,779.
(f) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have been the same.
(g) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 1.63%, 0.73%, 1.85%, 2.56% and 1.90% for 1996, 1995 and
1990-88, respectively.
(h) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
FS-99
<PAGE> 231
NOTE 8-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
1996 1995 1994 1993
------------ ------------ --------- --------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 26.65 $ 21.13 $ 20.82 $ 21.80
- ------------------------------------------------------------ ------------ ------------ --------- --------
Income from investment operations:
Net investment income (loss) 0.20(a) (0.01) -- 0.02
- ------------------------------------------------------------ ------------ ------------ --------- --------
Net gains (losses) on securities (both realized and
unrealized) 3.38 7.12 0.51 (0.21)
- ------------------------------------------------------------ ------------ ------------ --------- --------
Total from investment operations 3.58 7.11 0.51 (0.19)
- ------------------------------------------------------------ ------------ ------------ --------- --------
Less distributions:
Dividends from net investment income (0.21) -- -- (0.02)
- ------------------------------------------------------------ ------------ ------------ --------- --------
Distributions from net realized capital gains (1.10) (1.59) (0.20) (0.77)
- ------------------------------------------------------------ ------------ ------------ --------- --------
Total distributions (1.31) (1.59) (0.20) (0.79)
- ------------------------------------------------------------ ------------ ------------ --------- --------
Net asset value, end of period $ 28.92 $ 26.65 $ 21.13 $ 20.82
============================================================ ============ ============ ========= ========
Total return(b) 13.57% 33.73% 2.46% (0.74)%
============================================================ ============ ============ ========= ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 4,875,933 $ 2,860,531 $ 680,119 $ 63,215
============================================================ ============ ============ ========= ========
Ratio of expenses to average net assets(c) 1.94%(d)(e) 1.94% 1.90% 1.85%(f)
============================================================ ============ ============ ========= ========
Ratio of net investment income (loss) to average net
assets(c) 0.82%(d) (0.08)% 0.00% (0.46)%(f)
============================================================ ============ ============ ========= ========
Portfolio turnover rate 126% 151% 127% 177%
============================================================ ============ ============ ========= ========
Average broker commission rate(g) $ 0.0436 N/A N/A N/A
============================================================ ============ ============ ========= ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns do not deduct contingent deferred sales charges and for
periods less than one year are not annualized.
(c) The ratios of expenses to average net assets prior to waiver of advisory
fees were 1.96% and 1.96% for 1996 and 1995, respectively. The ratio of net
investment income (loss) to average net assets prior to waiver of advisory
fees were 0.81% and (0.09)% for 1996 and 1995, respectively.
(d) Ratios are based on average net assets of $3,953,324,717.
(e) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have been the same.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
NOTE 9-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO plc. AIM Management is the parent company of the Fund's advisor. The
merger is expected to take place during the first quarter of 1997.
FS-100
<PAGE> 232
PART C
OTHER INFORMATION
Item 24. (a) Financial Statements:
Class A and B Shares of AIM Balanced Funds; AIM Global
Utilities Fund; AIM Growth Fund; AIM High Yield Fund; AIM
Income Fund; AIM Intermediate Government Fund; AIM Money Market
Fund; AIM Municipal Bond Fund; AIM Value Fund; and AIM Cash
Reserve Shares (formerly, Class C Shares) of AIM Money Market
Fund
In Part A: Financial Highlights
In Part B: (1) Reports of Independent Auditors
(2) Schedules of Investments as of December 31,
1996
(3) Statements of Assets and Liabilities as of
December 31, 1996
(4) Statements of Operations for the year ended
December 31, 1996
(5) Statements of Changes in Net Assets for the
years ended December 31, 1996 and 1995
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
(1) (a) - Agreement and Declaration of Trust of the Registrant was filed as an Exhibit to Post-Effective
Amendment No. 66 on September 15, 1993, and was filed electronically as an Exhibit to Post-Effective
Amendment No. 70 on November 17, 1995, and is hereby incorporated by reference.
(b) - First Amendment to Agreement and Declaration of Trust of the Registrant was filed as an Exhibit to
Post-Effective Amendment No. 66 on September 15, 1993, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 70 on November 17, 1995, and is hereby incorporated by reference.
(c) - Second Amendment to Agreement and Declaration of Trust of the Registrant (name change of AIM
Utilities Fund) was filed electronically as an Exhibit to Post-Effective Amendment No. 70 on November
17, 1995, and is hereby incorporated by reference.
(d) - Third Amendment to Agreement and Declaration of Trust of the Registrant (name change of AIM
Government Securities Fund) was filed electronically as an Exhibit to Post-Effective Amendment No. 70
on November 17, 1995, and is hereby incorporated by reference.
(e) - Fourth Amendment to Agreement and Declaration of Trust of the Registrant (name change of Class C
shares of AIM Money Market Fund) is filed herewith electronically.
(f) - Fifth Amendment to Agreement and Declaration of Trust of the Registrant (designation of
Class C shares of the Funds) is filed herewith
electronically.
(2) (a) - By-Laws of the Registrant were filed as an Exhibit to Post-Effective Amendment No. 66 on September
15, 1993, and were filed electronically as an Exhibit to Post-Effective Amendment No. 70 on November
17, 1995.
</TABLE>
C-1
<PAGE> 233
<TABLE>
<S> <C>
(b) - Amendment to By-Laws of the Registrant was filed as an Exhibit to Post-Effective Amendment No. 68 on
April 11, 1994, and was filed electronically as an Exhibit to Post-Effective Amendment No. 70 on
November 17, 1995.
(c) - Second Amendment to By-Laws of the Registrant was filed electronically as an Exhibit to Post -
Effective Amendment No. 70 on November 17,1995.
(d) - Amended and Restated By-Laws of the Registrant were filed electronically as an Exhibit to Post-
Effective Amendment No. 72 on April 28, 1997, and are hereby incorporated by reference.
(3) - Voting Trust Agreements - None.
(4) (a) - Specimen share certificates for the nine series of Class A Shares of Registrant (transfer agent
change) were filed as Exhibits to Post-Effective Amendment No. 69 on February 28, 1995.
(b) - Specimen share certificates for the nine series of Class B Shares of Registrant (transfer agent
change) were filed as Exhibits to Post-Effective Amendment No. 69 on February 28, 1995.
(c) - Specimen share certificate for the AIM Money Market Fund - Class C Shares of Registrant (transfer
agent change) was filed as an Exhibit to Post-Effective Amendment No. 69 on February 28, 1995.
(d) - Specimen share certificate for the AIM Global Utilities Fund - Class A Shares of Registrant (name
change) was filed electronically as an Exhibit to Post-Effective Amendment No. 70 on November 17,
1995.
(e) - Specimen share certificate for the AIM Global Utilities Fund - Class B Shares of Registrant (name
change) was filed electronically as an Exhibit to Post-Effective Amendment No. 70 on November
17,1995.
(f) - Specimen share certificate for the AIM Intermediate Government Fund - Class A Shares of Registrant
(name change) was filed electronically as an Exhibit to Post-Effective Amendment No. 71 on April 26,
1996.
(g) - Specimen share certificate for the AIM Intermediate Government Fund - Class B Shares of Registrant
(name change) was filed electronically as an Exhibit to Post-Effective Amendment No. 71 on April 26,
1996.
(5) (a) - (1) Master Investment Advisory Agreement, dated August 6, 1993, between the Registrant and A I M
Advisors, Inc. was filed as an Exhibit to Post-Effective Amendment No. 67 on October 15, 1993.
- (2) Master Investment Advisory Agreement, dated October 18, 1993, between the Registrant and A I M
Advisors, Inc. was filed as an Exhibit to Post-Effective Amendment No. 68 on February 28, 1995, and
was filed electronically as an Exhibit to Post-Effective Amendment No. 71 on April 26, 1996.
- (3) Amendment No. 1, dated as of September 28, 1994, to the Master Investment Advisory Agreement
between the Registrant and A I M Advisors, Inc., with respect to AIM Growth Fund was filed as an
Exhibit to Post-Effective Amendment No. 69 on February 28, 1995,
</TABLE>
C-2
<PAGE> 234
<TABLE>
<S> <C> <C> <C>
and was filed electronically as an Exhibit to Post-Effective Amendment No. 71 on April 26, 1996.
- (4) Amendment No. 2, dated as of November 14, 1994, to the Master Investment Advisory Agreement
between Registrant and A I M Advisors, Inc., with respect to AIM Value Fund was filed as an Exhibit
to Post-Effective Amendment No. 69 on February 28, 1995, and was filed electronically as an Exhibit
to Post-Effective Amendment No. 71 on April 26, 1996.
- (5) Master Investment Advisory Agreement, dated February 28, 1997, between the Registrant and A I M
Advisors, Inc. was filed electronically as an Exhibit to Post-Effective Amendment No. 72 on April 28,
1997, and is hereby incorporated by reference.
(b) - (1) Form of Sub-Advisory Agreement, dated August 6, 1993, among the Registrant, A I M Advisors, Inc.
and CIGNA Investments, Inc. was filed as an Exhibit to Post-Effective Amendment No. 66 on September
15, 1993.
- (2) Sub-Advisory Agreement, dated October 18, 1993, among the Registrant, A I M Advisors, Inc. and
CIGNA Investments, Inc. was filed as an Exhibit to Post-Effective Amendment No. 68 on April 11, 1994.
(6) (a) - (1) Master Distribution Agreement, dated August 6, 1993, between the Registrant (on behalf of its
Class A Shares and Class C Shares) and A I M Distributors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 67 on October 15, 1993.
- (2) Master Distribution Agreement, dated August 6, 1993, between the Registrant (on behalf of its
Class B Shares) and A I M Distributors, Inc. was filed as an Exhibit to Post-Effective Amendment No.
67 on October 15, 1993.
- (3) Master Distribution Agreement, dated October 18, 1993, between the Registrant (on behalf of its
Class A Shares and Class C Shares) and A I M Distributors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 68 on April 11, 1994, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 71 on April 26, 1997.
- (4) Master Distribution Agreement, dated October 18, 1993, between the Registrant (on behalf of its
Class B Shares) and A I M Distributors, Inc. was filed as an Exhibit to Post-Effective Amendment No.
68 on April 11, 1994.
- (5) Amended and Restated Master Distribution Agreement, dated May 2, 1995, between the Registrant (on
behalf of its Class B Shares) and A I M Distributors, Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 70 on November 17, 1995.
- (6) Master Distribution Agreement, dated February 28, 1997, between the Registrant (on behalf of its
Class A shares and its AIM Cash Reserve Shares) and A I M Distributors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment No. 72 on April 28, 1997.
- (7) Master Distribution Agreement, dated February 28, 1997, between the Registrant (on behalf of its
Class B shares) and A I M Distributors, Inc. was filed electronically as an Exhibit to Post-Effective
Amendment No. 72 on April 28, 1997, and is hereby incorporated by reference.
</TABLE>
C-3
<PAGE> 235
<TABLE>
<S> <C> <C> <C>
- (8) Form of Master Distribution Agreement between the Registrant (on behalf of
its Class A Shares, Class C Shares and AIM Cash Reserve Shares) and A I M Distributors, Inc. is filed
herewith electronically.
(b) - Form of Selected Dealer Agreement between A I M Distributors, Inc. and selected dealers is filed
herewith electronically.
(c) - Form of Bank Selling Group Agreement between A I M Distributors, Inc. and banks is filed herewith
electronically.
(7) (a) - (1) AIM Funds Retirement Plan for Eligible Directors/Trustees, effective as of March 8, 1994, as
restated September 18, 1995, was filed electronically as an Exhibit to Post-Effective Amendment No.
71 on April 26, 1996, and is hereby incorporated by reference.
- (2) AIM Funds Retirement Plan for Eligible Directors/Trustees was filed as an Exhibit to
Post-Effective Amendment No. 69 on February 28, 1995.
(b) - (1) Form of Deferred Compensation Plan for Eligible Directors/Trustees as approved on December 5,
1995, was filed electronically as an Exhibit to Post-Effective Amendment No. 71 on April 26, 1996,
and is hereby incorporated by reference.
- (2) Form of Deferred Compensation Plan for Eligible Directors/Trustees was filed as an Exhibit to
Post-Effective Amendment No. 69 on February 28, 1995.
(8) (a) - Custodian Contract, dated October 15, 1993, between the Registrant and State Street Bank and Trust
Company was filed as an Exhibit to Post-Effective Amendment No. 68 on April 11, 1994, and was filed
electronically as an Exhibit to Post-Effective Amendment No. 71 on April 26, 1996, and is hereby
incorporated by reference.
(b) - Amendment No. 1, dated as of September 19, 1995, to the Custodian Contract, dated October 15, 1993,
between the Registrant and State Street Bank and Trust Company was filed electronically as an Exhibit
to Post-Effective Amendment No. 71 on April 26, 1996, and is hereby incorporated by reference.
(c) - Subcustodian Agreement, dated September 9, 1994, among the Registrant, Texas Commerce Bank National
Association, State Street Bank and Trust Company and A I M Fund Services, Inc., was filed as an
Exhibit to Post-Effective Amendment No. 69 on February 28, 1995, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 71 on April 26, 1996, and is hereby incorporated by
reference.
(d) - Custody Agreement, dated October 19, 1995, between the Registrant, on behalf of AIM Municipal Bond
Fund, and The Bank of New York was filed electronically as an Exhibit to Post-Effective Amendment No.
70 on November 17, 1995, and is hereby incorporated by reference.
(9) (a) - (1) Form of Transfer Agency and Registrar Agreement, dated as of June 7, 1993, between AIM Funds
Group, a Massachusetts business trust, and The Shareholder Services Group, Inc. was filed as an
Exhibit to Post-Effective Amendment No. 65 on July 16, 1993.
- (2) Transfer Agency and Service Agreement, dated as of November 1, 1994, between the Registrant and
A I M Fund Services, Inc. was filed electronically as an Exhibit to Post-Effective Amendment No. 70
on November 17, 1995 and is hereby incorporated by reference.
</TABLE>
C-4
<PAGE> 236
<TABLE>
<S> <C> <C>
- (3) Form of Amendment No. 1 to the Transfer Agency and Service Agreement, dated as of November 1,
1994, between Registrant and A I M Fund Services, Inc. is filed herewith electroncially.
(b) - (1) Remote Access and Related Service Agreement, dated as of December 23, 1994, between the
Registrant and First Data Investor Services Group, Inc. (formerly, The Shareholder Services Group,
Inc.) was filed electronically as an Exhibit to Post-Effective Amendment No. 71 on April 26, 1996,
and is hereby incorporated by reference.
- (2) Amendment No. 1, effective October 4, 1995, to the Remote Access and Related Services Agreement,
dated as of December 23, 1994, between the Registrant and First Data Investor Services Group, Inc.
(formerly, The Shareholder Services Group, Inc.) was filed electronically as an Exhibit to
Post-Effective Amendment No. 71 on April 26, 1996, and is hereby incorporated by reference.
- (3) Addendum No. 2, effective October 12, 1995, to the Remote Access and Related Services Agreement,
dated as of December 23, 1994, between the Registrant and First Data Investor Services Group, Inc.
(formerly, The Shareholder Services Group, Inc.) was filed electronically as an Exhibit to
Post-Effective Amendment No. 71 on April 26, 1996, and is hereby incorporated by reference.
- (4) Amendment No. 3, effective February 1, 1997, to the Remote Access and Related
Services Agreement, dated December 23, 1994, between the Registrant and First Data Investor Services
Group, Inc. (formerly, The Shareholder Services Group, Inc.) is filed herewith electronically.
- (5) Shareholder Sub-Accounting Services Agreement, dated as of October 1, 1993, between the
Registrant and First Data Investor Services Group, Inc. (formerly, The Shareholder Services Group,
Inc.), Financial Data Services, Inc. and Merrill, Lynch, Pierce, Fenner & Smith Incorporated was
filed electronically as an Exhibit to Post-Effective Amendment No. 71 on April 26, 1996, and is
hereby incorporated by reference.
(c) - (1) Master Administrative Services Agreement, dated August 6, 1993, between the Registrant and A I M
Advisors, Inc. was filed as an Exhibit to Post-Effective Amendment No. 67 on October 15, 1993.
- (2) Master Administrative Services Agreement, dated October 18, 1993, between the Registrant and
A I M Advisors, Inc. was filed as an Exhibit to Post-Effective Amendment No. 68 on April 11, 1994,
and was filed electronically as an Exhibit to Post-Effective Amendment No. 71 on April 26, 1996.
- (3) Master Administrative Services Agreement, dated February 28, 1997, between the Registrant and
A I M Advisors, Inc. was filed electronically as an Exhibit to Post-Effective Amendment No. 72 on
April 28, 1997, and is hereby incorporated by reference.
- (4) Administrative Services Agreement, dated October 18, 1993, between A I M Advisors, Inc., on
behalf of the Registrant's portfolios, and A I M Fund Services, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 68 on April 11, 1994.
- (5) Amendment No. 1, dated as of May 11, 1994, to the Administrative Services Agreement, dated
October 18, 1993, between A I M Advisors, Inc., on behalf of the Registrant's portfolios, and
A I M Fund Services, Inc. was filed as an Exhibit to Post-Effective Amendment No. 69 on
February 28, 1995.
</TABLE>
C-5
<PAGE> 237
<TABLE>
<S> <C> <C> <C>
- (6) Amendment No. 2, dated as of July 1, 1994, to the Administrative Services Agreement, dated
October 18, 1993, between A I M Advisors, Inc., on behalf of the Registrant's portfolios, and
A I M Fund Services, Inc. was filed as an Exhibit to Post-Effective Amendment No. 69 on
February 28, 1995.
- (7) Amendment No. 3, dated as of September 16, 1994, to the Administrative Services Agreement, dated
October 18, 1993, between A I M Advisors, Inc., on behalf of the Registrant's portfolios, and
A I M Fund Services, Inc. was filed as an Exhibit to Post-Effective Amendment No. 69 on
February 28, 1995.
(10) - Opinion of Ballard Spahr Andrews & Ingersoll was filed in connection with the Registrant's Rule 24f-2
Notice on or about February 27, 1997.
(11) (a) - Consent of KPMG Peat Marwick LLP is filed herewith electronically.
(b) - Consent of Price Waterhouse LLP is filed herewith electronically.
(c) - Consent of Ballard Spahr Andrews & Ingersoll is filed herewith electronically.
(12) - Financial Statements - None.
(13) - Agreements Concerning Initial Capitalization - None.
(14) (a) - Form of Registrant's IRA Documents were filed as an Exhibit to Post-Effective Amendment No. 64 on
April 30, 1993, and is hereby incorporated by reference.
(b) - Form of Registrant's Simplified Employee Pension - Individual Retirement Accounts Contribution
Agreement was filed as an Exhibit to Post-Effective Amendment No. 64 on April 30, 1993, and is
hereby incorporated by reference.
(c) - Form of Registrant's 403(b) Plan was filed electronically as an Exhibit to Post-Effective Amendment
No. 72 on April 28, 1997, and is hereby incorporated by reference.
(15) (a) - (1) Master Distribution Plan for Registrant's Class A Shares and Class C Shares, and related forms,
were filed as an Exhibit to Post-Effective Amendment No. 68 on April 11, 1994.
- (2) Amended Master Distribution Plan for Registrant's Class A Shares and AIM Cash Reserve Shares
(formerly, Class C Shares), and related forms, were filed electronically as an Exhibit to
Post-Effective Amendment No. 71 on April 26, 1996.
- (3) Amended and Restated Master Distribution Plan for Registrant's Class A Shares and AIM Cash
Reserve Shares is filed herewith electronically.
- (4) Form of Second Amended and Restated Master Distribution Plan for Registrant's Class A Shares,
Class C Shares and AIM Cash Reserve Shares is filed herewith electronically.
- (5) Master Distribution Plan for Registrant's Class B Shares, and related forms, were filed as an
Exhibit to Post-Effective Amendment No. 68 on April 11, 1994.
- (6) Amended and Restated Master Distribution Plan for Registrant's Class B Shares, and related
forms, were filed electronically as an Exhibit to Post-Effective Amendment No. 70 on November 17,
1995.
</TABLE>
C-6
<PAGE> 238
<TABLE>
<S> <C>
- (7) Second Amended and Restated Master Distribution Plan for Registrant's Class B Shares is filed
herewith electronically.
(b) - Form of Shareholder Service Agreement to be used in connection with Registrant's Master Distribution
Plan is filed herewith electronically.
(c) - Form of Bank Shareholder Service Agreement to be used in connection with Registrant's Master
Distribution Plan is filed herewith electronically.
(d) - Form of Agency Pricing Agreement to be used in connection with Registrant's Master Distribution Plan
is filed herewith electronically.
(e) - Forms of Service Agreement for Bank Trust Department and for Brokers for Bank Trust Departments to be
used in connection with Registrant's Master Distribution Plan are filed herewith electronically.
(16) - Computation of Performance Quotations was filed electronically as an Exhibit to Post-Effective
Amendment No. 72 on April 28, 1997, and is hereby incorporated by reference.
(18) - Rule 18f-3 Amended and Restated Multiple Class Plan is filed herewith electronically.
(27) - Financial Data Schedule - None
</TABLE>
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each such
person indicate (1) if a company, the state or other sovereign power under the
laws of which it is organized, and (2) the percentage of voting securities
owned or other basis of control by the person, if any, immediately controlling
it.
None.
Item 26. Number of Holders of Securities
State in substantially the tabular form indicated, as of a specified
date within 90 days prior to the date of filing, the number of record holders
of each class of securities of the Registrant.
C-7
<PAGE> 239
<TABLE>
<CAPTION>
Number of Record Holder* as
Title of Series of July 15, 1997
--------------- ---------------------------------------
AIM Cash
Reserve Shares
(formerly)
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
AIM Balanced Fund 19,190 22,320 N/A
AIM Global Utilities Fund 9,964 5,995 N/A
AIM Growth Fund 13,897 23,603 N/A
AIM High Yield Fund 58,819 51,129 N/A
AIM Income Fund 12,343 6,179 N/A
AIM Intermediate Government Fund 7,132 3,988 N/A
AIM Money Market Fund 14,124 7,902 19,313
AIM Municipal Bond Fund 4,958 1,051 N/A
AIM Value Fund 305,749 382,464 N/A
</TABLE>
* Class C shares commenced operations on August 4, 1997.
Item 27. Indemnification
State the general effect of any contract, arrangements or statute
under which any director, officer, underwriter or affiliated person of the
Registrant is insured or indemnified in any manner against any liability which
may be incurred in such capacity, other than insurance provided by any
director, officer, affiliated person or underwriter for their own protection.
The Registrant's Agreement and Declaration of Trust (the "Agreement"),
dated May 5, 1993, as amended, provides, among other things (i) that
trustees shall not be liable for any act or omission or any conduct
whatsoever (except for liabilities to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty); (ii) for the
indemnification by the Registrant of the trustees and officers to the
fullest extent permitted by the Delaware Business Trust Act; and (iii)
that the shareholders and former shareholders of the Registrant are
held harmless by the Registrant (or applicable portfolio or class)
from personal liability arising from their status as such, and are
indemnified by the Registrant (or applicable portfolio or class)
against all loss and expense arising from such personal liability in
accordance with the Registrant's Bylaws and applicable law.
A I M Advisors, Inc., the Registrant and other investment companies
managed by A I M Advisors, Inc., their respective officers, trustees,
directors and employees (the "Insured Parties") are insured under an
Investment Advisory Professional and Directors and Officers Liability
Policy, issued by ICI Mutual Insurance Company, with a $15,000,000
limit of liability.
Item 28. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment advisor of the Registrant, and each
director, officer or partner of any such investment advisor, is or has been, at
any time during the past two fiscal years, engaged for his own account or in
the capacity of director, officer, employee, partner, or trustee.
The only employment of a substantial nature of the Advisor's directors
and officers is with the Advisor and its affiliated companies.
Reference is also made to the caption
C-8
<PAGE> 240
"Management--Investment Advisor" in the Prospectus which comprises Part A of
the Registration Statement, and to the caption "Management of the Trust" of the
Statement of Additional Information which comprises Part B of the Registration
Statement, and to Item 29(b) of this Part C.
<TABLE>
<CAPTION>
Item 29. Principal Underwriters
----------------------
<S> <C> <C>
(a) - A I M Distributors, Inc., the Registrant's principal underwriter, also acts as a principal
underwriter to the following investment companies:
AIM Advisor Funds, Inc.
AIM Equity Funds, Inc. (Retail Classes)
AIM International Funds, Inc.
AIM Investment Securities Funds (AIM Limited Maturity Treasury Shares)
AIM Summit Fund, Inc.
AIM Tax-Exempt Funds, Inc.
AIM Variable Insurance Funds, Inc.
(b)
</TABLE>
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ---------------- -------------------------- ---------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors Chairman & Trustee
Michael J. Cemo President & Director None
Gary T. Crum Director Senior Vice President
Robert H. Graham Senior Vice President & Director President & Trustee
James L. Salners Senior Vice President & Director None
William G. Littlepage Senior Vice President & Director None
John Caldwell Senior Vice President None
Gordon J. Sprague Senior Vice President None
Michael C. Vessels Senior Vice President None
Marilyn M. Miller First Vice President None
John J. Arthur Vice President & Treasurer Senior Vice President
& Treasurer
Mary K. Coleman Vice President None
Melville B. Cox Vice President & Chief Vice President
Compliance Officer
</TABLE>
- ----------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-9
<PAGE> 241
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- ---------------
<S> <C> <C>
William H. Kleh Vice President None
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
Carol F. Relihan Vice President Senior Vice President
& Secretary
Charles R. Dewey Vice President None
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
Kamala C. Sachidanandan Vice President None
Frank V. Serebrin Vice President None
B.J. Thompson Vice President None
Robert D. Van Sant, Jr. Vice President None
David E. Hessel Assistant Vice President, None
Assistant Treasurer
& Controller
Kathleen J. Pflueger Secretary Assistant Secretary
Luke P. Beausoleil Assistant Vice President None
Tisha B. Christopher Assistant Vice President None
Glenda A. Dayton Assistant Vice President None
Kathleen M. Douglas Assistant Vice President None
Terri N. Fiedler Assistant Vice President None
Mary E. Gentempo Assistant Vice President None
Jeffrey L. Horne Assistant Vice President None
Melissa E. Hudson Assistant Vice President None
Jodie L. Johnson Assistant Vice President None
Kim T. Lankford Assistant Vice President None
Wayne W. LaPlante Assistant Vice President None
</TABLE>
- ---------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-10
<PAGE> 242
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ---------------- -------------------------- ---------------
<S> <C> <C>
Ivy B. McLemore Assistant Vice President None
David B. O'Neil Assistant Vice President None
Terri L. Ransdell Assistant Vice President None
Patricia M. Shyman Assistant Vice President None
Christopher T. Simutis Assistant Vice President None
Gary K. Wendler Assistant Vice President None
Nicholas D. White Assistant Vice President None
Norman W. Woodson Assistant Vice President None
David L. Kite Assistant General Counsel Assistant Secretary
& Assistant Secretary
Nancy L. Martin Assistant General Counsel Assistant Secretary
& Assistant Secretary
Samuel D. Sirko Assistant General Counsel Assistant Secretary
& Assistant Secretary
Stephen I. Winer Assistant Secretary Assistant Secretary
</TABLE>
- ----------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
(c) - Not Applicable
Item 30. Location of Accounts and Records
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to
31a-3) promulgated thereunder, furnish the name and address of each person
maintaining physical possession of each such account, book or other document.
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173, maintains physical possession of each such accounts, books
or other documents of the Registrant at its principal executive
offices, except for those maintained by the Registrant's Custodians,
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 (except AIM Municipal Bond Fund) and Bank of New
York , 90 Washington Street, 11th Floor, New York, New York 10286 (for
AIM Municipal Bond Fund only), and the Registrant's Transfer Agent and
Dividend Paying Agent, A I M Fund Services, Inc., 11 Greenway Plaza,
Suite 100, Houston, Texas 77046-1173.
C-11
<PAGE> 243
Item 31. Management Services
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or Part B of this
Form (because the contract was not believed to be of interest to a purchaser of
securities of the Registrant) under which services are provided to the
Registrant, indicating the parties to the contract, the total dollars paid and
by whom, for the last three fiscal years.
None.
Item 32. Undertakings
The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the applicable Fund's latest annual report
to shareholders, upon request and without charge.
C-12
<PAGE> 244
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 25th day of
July, 1997.
REGISTRANT: AIM FUNDS GROUP
By: /s/ Robert H. Graham
-------------------------------
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Charles T. Bauer Chairman & Trustee July 25, 1997
--------------------------
(Charles T. Bauer)
/s/ Robert H. Graham Trustee & President July 25, 1997
------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ Bruce L. Crockett Trustee July 25, 1997
--------------------------
(Bruce L. Crockett)
/s/ Owen Daly II Trustee July 25, 1997
-----------------------------
(Owen Daly II)
/s/ Jack Fields Trustee July 25, 1997
-------------------------------
(Jack Fields)
/s/ Carl Frischling Trustee July 25, 1997
-------------------------------
(Carl Frischling)
/s/ John F.Kroeger Trustee July 25, 1997
----------------------------
(John F. Kroeger)
/s/ Lewis F. Pennock Trustee July 25, 1997
----------------------------
(Lewis F. Pennock)
/s/ Ian W. Robinson Trustee July 25, 1997
----------------------------
(Ian W. Robinson)
/s/ Louis S. Sklar Trustee July 25, 1997
-----------------------------
(Louis S. Sklar)
Senior Vice President &
/s/ John J. Arthur Treasurer (Principal Financial July 25, 1997
----------------------------- and Accounting Officer)
(John J. Arthur)
</TABLE>
<PAGE> 245
INDEX TO EXHIBITS
AIM FUNDS GROUP
<TABLE>
<CAPTION>
Exhibit Number
- --------------
<S> <C>
1(e) Fourth Amendment to Agreement and Declaration of Trust of the Registrant (name change of Class C Shares
of AIM Money Market Fund)
1(f) Fifth Amendment to Agreement and Declaration of Trust of the Registrant (designation of
Class C shares of the Funds)
6(a)(8) Form of Master Distribution Agreement between the Registrant (on behalf of its
Class A Shares, Class C Shares and AIM Cash Reserve Shares) and A I M Distributors, Inc.
6(b) Form of Selected Dealer Agreement between A I M Distributors, Inc. and selected dealers
6(c) Form of Bank Selling Group Agreement between A I M Distributors, Inc. and banks
9(a)(3) Form of Amendment No. 1 to the Transfer Agency and Service Agreement, dated as of November 1, 1994,
between Registrant and A I M Fund Services, Inc.
9(b)(4) Amendment No. 3, effective February 1, 1997, to the Remote Access and Related
Services Agreement, dated December 23, 1994, between the Registrant and First Data Investor Services
Group, Inc. (formerly, The Shareholder Services Group, Inc.)
11(a) Consent of KPMG Peat Marwick LLP
11(b) Consent of Price Waterhouse LLP
11(c) Consent of Ballard Spahr Andrews & Ingersoll
15(a)(3) Amended and Restated Master Distribution Plan for Registrant's Class A Shares and AIM Cash Reserve Shares
15(a)(4) Form of Second Amended and Restated Master Distribution Plan for Registrant's Class A Shares, Class C
Shares and AIM Cash Reserve Shares
15(a)(7) Second Amended and Restated Master Distribution Plan for Registrant's Class B Shares
15(b) Form of Shareholder Service Agreement to be used in connection with Registrant's Master Distribution Plan
15(c) Form of Bank Shareholder Service Agreement to be used in connection with Registrant's Master Distribution
Plan
15(d) Form of Agency Pricing Agreement to be used in connection with Registrant's Master Distribution Plan
15(e) Forms of Service Agreement for Bank Trust Department and for Brokers for Bank Trust Departments to be
used in connection with Registrant's Master Distribution Plan
18 Rule 18f-3 Amended and Restated Multiple Class Plan
</TABLE>
<PAGE> 1
EXHIBIT 1(e)
FOURTH AMENDMENT
TO
AGREEMENT AND DECLARATION OF TRUST
OF
AIM FUNDS GROUP
THIS FOURTH AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST OF AIM
FUNDS GROUP (the "Amendment") is entered into as of the 25th day of April,
1997, among Charles T. Bauer, Bruce L. Crockett, Owen Daly II, Jack Fields,
Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F. Pennock, Ian W.
Robinson, Louis S. Sklar, as trustees, and each person who became or becomes a
shareholder in accordance with the terms set forth in that certain Agreement
and Declaration of Trust of AIM Funds Group entered into as of May 5, 1993 (the
"Agreement").
WHEREAS, Section 9.7 of the Agreement authorizes the Trustees without
shareholder vote to amend or otherwise supplement the Agreement by making an
amendment; and
WHEREAS, at a meeting duly called and held in Houston, Texas on the
11th day of March, 1997, the Trustees resolved to amend, effective May 1, 1997,
the Agreement as hereinafter set forth.
NOW, THEREFORE, the Trustees hereby amend the Agreement as hereinafter
set forth:
1. Section 2.3 of the Agreement, as amended, is hereby further amended
to read as follows:
"Section 2.3. Establishment of Portfolios and Classes. The Trust shall
be divided into nine Portfolios, the AIM Balanced Fund, the AIM Global
Utilities Fund, the AIM Growth Fund, the AIM High Yield Fund, the AIM Income
Fund, the AIM Intermediate Government Fund, the AIM Money Market Fund, the AIM
Municipal Bond Fund, and the AIM Value Fund. With the exception of the AIM
Money Market Fund, all of the eight other Portfolios shall have two Classes,
the Class A Shares and the Class B Shares. The AIM Money Market Fund shall have
three Classes, the Class A Shares and the Class B Shares, and the AIM Cash
Reserve Shares. The above Portfolios and their respective Classes as set forth
in this Section 2.3 are collectively referred to as the "Portfolios". The
establishment and designation of any other Portfolio or Class thereof, or,
subject to Section 6.1 hereof, any change to the Portfolios, shall be effective
upon the adoption by a majority of the then Trustees of a resolution which sets
forth such establishment, designation or change."
2. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same Amendment.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of AIM
Funds Group, have executed this Fourth Amendment to Agreement and Declaration
of Trust of AIM Funds Group as of the 25th day of April, 1997.
/s/ CHARLES T. BAUER /s/ BRUCE L. CROCKETT
- --------------------------------- -------------------------------
Charles T. Bauer Bruce L. Crockett
Trustee Trustee
/s/ OWEN DALY II /s/ JACK FIELDS
- --------------------------------- -------------------------------
Owen Daly II Jack Fields
Trustee Trustee
/s/ CARL FRISCHLING /s/ ROBERT H. GRAHAM
- --------------------------------- -------------------------------
Carl Frischling Robert H. Graham
Trustee Trustee
/s/ JOHN F. KROEGER /s/ LEWIS F. PENNOCK
- --------------------------------- -------------------------------
John F. Kroeger Lewis F. Pennock
Trustee Trustee
/s/ IAN W. ROBINSON /s/ LOUIS S. SKLAR
- --------------------------------- -------------------------------
Ian W. Robinson Louis S. Sklar
Trustee Trustee
<PAGE> 1
EXHIBIT 1(f)
FIFTH AMENDMENT
TO
AGREEMENT AND DECLARATION OF TRUST
OF
AIM FUNDS GROUP
THIS FIFTH AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST OF AIM
FUNDS GROUP (the "Amendment") is entered into the 12th day of June, 1997, among
Charles T. Bauer, Bruce L. Crockett, Owen Daly II, Jack Fields, Carl
Frischling, Robert H. Graham, John F. Kroeger, Lewis F. Pennock, Ian W.
Robinson and Louis S. Sklar, as Trustees, and each person who became or becomes
a Shareholder in accordance with the terms set forth in that certain Agreement
and Declaration of Trust of AIM Funds Group entered into as of May 5, 1993, as
amended (the "Agreement").
WHEREAS, Section 9.7 of the Agreement authorizes the Trustees without
Shareholder vote to amend or otherwise supplement the Agreement by making an
amendment; and
WHEREAS, at a meeting duly called and held on the 12th day of June,
1997, the Trustees have resolved to amend the Agreement as hereinafter set
forth.
NOW, THEREFORE, the Trustees hereby amend the Agreement as herein set
forth below:
1. Capitalized terms not specifically defined in this Amendment shall
have the meanings ascribed to them in the Agreement.
2. Section 2.3, as amended, is hereby further amended to read in full
as follows:
"Section 2.3. Establishment of Portfolios and Classes. The Trust shall
be divided into nine Portfolios, the AIM Balanced Fund, the AIM Global
Utilities Fund, the AIM Growth Fund, the AIM High Yield Fund, the AIM Income
Fund, the AIM Intermediate Government Fund, the AIM Money Market Fund, the AIM
Municipal Bond Fund, and the AIM Value Fund. With the exception of the AIM
Money Market Fund, all of the eight other Portfolios shall have three Classes,
the Class A Shares, the Class B Shares, and the Class C Shares. The AIM Money
Market Fund shall have four Classes, the Class A Shares, the Class B Shares,
the Class C Shares, and the AIM Cash Reserve Shares. The above Portfolios and
their respective Classes as set forth in this Section 2.3 are collectively
referred to as the "Portfolios." The establishment and designation of any other
Portfolio or Class thereof, or, subject to Section 6.1 hereof, any change to
the Portfolios, shall be effective upon the adoption by a majority of the then
Trustees of a resolution which sets forth such establishment, designation or
change."
The foregoing shall not be construed to amend or replace Sections
2.3.1 and 2.3.2 of the Agreement.
<PAGE> 2
3. New Section 9.9 is hereby added to read in full as follows:
"Section 9.9. Shareholders' Right to Inspect Shareholder List. One or
more persons who together and for at least six months have been Shareholders of
at least five percent (5%) of the outstanding Shares of any Class may present
to any officer or resident agent of the Trust a written request for a list of
its Shareholders. Within twenty (20) days after such request is made, the Trust
shall prepare and have available on file at its principal office a list
verified under oath by one of its officers or its transfer agent or registrar
which sets forth the name and address of each Shareholder and the number of
Shares of each Class which the Shareholder holds. The rights provided for
herein shall not extend to any person who is a beneficial owner but not also a
record owner of Shares of the Trust."
4. With the exception of the amendments in the preceding paragraphs 2
and 3 of this Amendment, the Agreement shall in all other respects remain in
full force and effect.
5. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same Amendment.
<PAGE> 3
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this Fifth Amendment to Agreement and Declaration of Trust
of AIM Funds Group as of the day first above written.
/s/ CHARLES T. BAUER /s/ BRUCE L. CROCKETT
- --------------------------------- ---------------------------------
Charles T. Bauer, Trustee Bruce L. Crockett, Trustee
/s/ OWEN DALY II /s/ JACK FIELDS
- --------------------------------- ---------------------------------
Owen Daly II, Trustee Jack Fields, Trustee
/s/ CARL FRISCHLING /s/ ROBERT H. GRAHAM
- --------------------------------- ---------------------------------
Carl Frischling, Trustee Robert H. Graham, Trustee
/s/ JOHN F. KROEGER /s/ LEWIS F. PENNOCK
- --------------------------------- ---------------------------------
John F. Kroeger, Trustee Lewis F. Pennock, Trustee
/s/ IAN W. ROBINSON /s/ LOUIS S. SKLAR
- --------------------------------- ---------------------------------
Ian W. Robinson, Trustee Louis S. Sklar, Trustee
[THIS IS THE SIGNATURE PAGE FOR
THE FIFTH AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
OF AIM FUNDS GROUP]
<PAGE> 1
EXHIBIT 6(a)(8)
FORM OF
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
BETWEEN
AIM FUNDS GROUP
AND
A I M DISTRIBUTORS, INC.
(APPLICABLE TO CLASS A SHARES, CLASS C SHARES AND AIM CASH RESERVE SHARES)
THIS AGREEMENT made this ___ day of August, 1997, by and between AIM
FUNDS GROUP, a Delaware business trust (the "Company"), with respect to the
series of beneficial interest set forth on Appendix A to this Agreement, and
any applicable classes thereof, (the "Portfolios"), and A I M DISTRIBUTORS,
INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto agree as follows:
FIRST: The Company on behalf of the Portfolios hereby appoints the
Distributor as its exclusive agent for the sale of shares of the Portfolios to
the public directly and through investment dealers and financial institutions
in the United States and throughout the world.
SECOND: The Company shall not sell any shares of the Portfolios except
through the Distributor and under the terms and conditions set forth in
paragraph FOURTH below. Notwithstanding the provisions of the foregoing
sentence, however:
(A) the Company may issue shares of the Portfolios to any other
investment company or personal holding company, or to the shareholders thereof,
in exchange for all or a majority of the shares or assets of any such company;
and
(B) the Company may issue shares of the Portfolios at their net asset
value in connection with certain classes of transactions or to certain classes
of persons, in accordance with Rule 22d-1
<PAGE> 2
under the Investment Company Act of 1940, as amended (the "1940 Act"), provided
that any such class is specified in the then current prospectus of the
applicable Portfolio.
THIRD: The Distributor hereby accepts appointment as exclusive agent
for the sale of the shares of the Portfolios and agrees that it will use its
best efforts to sell such shares; provided, however, that:
(A) the Distributor may, and when requested by the Company on behalf
of a Portfolio shall, suspend its efforts to effectuate such sales at any time
when, in the opinion of the Distributor or of the Company, no sales should be
made because of market or other economic considerations or abnormal
circumstances of any kind; and
(B) the Company may withdraw the offering of the shares of a
Portfolio (i) at any time with the consent of the Distributor, or (ii) without
such consent when so required by the provisions of any statute or of any order,
rule or regulation of any governmental body having jurisdiction. It is
mutually understood and agreed that the Distributor does not undertake to sell
any specific amount of the shares of the Portfolios. The Company shall have
the right to specify minimum amounts for initial and subsequent orders for the
purchase of shares of any Portfolio.
FOURTH:
(A) The public offering price of shares of a Portfolio (the "offering
price") shall be the net asset value per share of the applicable Portfolio plus
a sales charge, if any. Net asset value per share shall be determined in
accordance with the provisions of the then current prospectus of the applicable
Portfolio. The sales charge shall be established by the Distributor, may
reflect scheduled variations in, or the elimination of, sales charges on sales
of a Portfolio's shares either generally to the public, or to any specified
class of investors or in connection with any specified class of transactions,
in accordance with Rule 22d-1 and as set forth in the then current prospectus
of the applicable Portfolio. The Distributor shall apply any scheduled
variation in, or elimination of, the selling commission uniformly to all
offerees in the class specified.
(B) The Company shall allow directly to investment dealers and other
financial institutions through whom shares of the Portfolios are sold such
portion of the sales charge as may be payable
-2-
<PAGE> 3
to them and specified by the Distributor, up to but not exceeding the amount of
the total sales charge. The difference between any commissions so payable and
the total sales charges included in the offering price shall be paid to the
Distributor.
(C) No provision of this Agreement shall be deemed to prohibit any
payments by a Portfolio to the Distributor or by a Portfolio or the Distributor
to investment dealers, financial institutions and 401(k) plan service providers
where such payments are made under a distribution plan adopted by the Company
on behalf of a Portfolio pursuant to Rule 12b-1 under the 1940 Act.
FIFTH: The Distributor shall act as agent of the Company on behalf of
the Portfolios in connection with the sale and repurchase of shares of the
Portfolios. Except with respect to such sales and repurchases, the Distributor
shall act as principal in all matters relating to the promotion of the sale of
shares of the Portfolios and shall enter into all of its own engagements,
agreements and contracts as principal on its own account. The Distributor
shall enter into agreements with investment dealers and financial institutions
selected by the Distributor, authorizing such investment dealers and financial
institutions to offer and sell shares of the Portfolios to the public upon the
terms and conditions set forth therein, which shall not be inconsistent with
the provisions of this Agreement. Each agreement shall provide that the
investment dealer and financial institution shall act as a principal, and not
as an agent, of the Company on behalf of the Portfolios.
SIXTH: The Portfolios shall bear:
(A) the expenses of qualification of shares of the Portfolios for
sale in connection with such public offerings in such states as shall be
selected by the Distributor, and of continuing the qualification therein until
the Distributor notifies the Company that it does not wish such qualification
continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH:
(A) The Distributor shall bear the expenses of printing from the
final proof and distributing the Portfolios' prospectuses and statements of
additional information (including supplements
-3-
<PAGE> 4
thereto) relating to public offerings made by the Distributor pursuant to this
Agreement (which shall not include those prospectuses and statements of
additional information, and supplements thereto, to be distributed to
shareholders of the Portfolios), and any other promotional or sales literature
used by the Distributor or furnished by the Distributor to dealers in
connection with such public offerings, and expenses of advertising in
connection with such public offerings.
(B) The Distributor may be reimbursed for all or a portion of such
expenses, or may receive reasonable compensation for distribution related
services, to the extent permitted by a distribution plan adopted by the Company
on behalf of a Portfolio pursuant to Rule 12b-1 under the 1940 Act.
EIGHTH: The Distributor will accept orders for the purchase of shares
of the Portfolios only to the extent of purchase orders actually received and
not in excess of such orders, and it will not avail itself of any opportunity
of making a profit by expediting or withholding orders. It is mutually
understood and agreed that the Company may reject purchase orders where, in the
judgment of the Company, such rejection is in the best interest of the Company.
NINTH: The Company, on behalf of the Portfolios, and the Distributor
shall each comply with all applicable provisions of the 1940 Act, the
Securities Act of 1933 and of all other federal and state laws, rules and
regulations governing the issuance and sale of shares of the Portfolios.
TENTH:
(A) In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Distributor, the Company on behalf of the Portfolios agrees to indemnify
the Distributor against any and all claims, demands, liabilities and expenses
which the Distributor may incur under the Securities Act of 1933, or common law
or otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of a
Portfolio, or any omission to state a material fact therein, the omission of
which makes any statement contained therein misleading, unless such statement
or omission was made in reliance upon, and in conformity with, information
furnished to the Company or a Portfolio in connection therewith by or on behalf
of the Distributor. The Distributor agrees to indemnify the Company and the
Portfolios against any and all claims, demands, liabilities and expenses which
the Company or a Portfolio may incur arising out of or based upon any act or
-4-
<PAGE> 5
deed of the Distributor or its sales representatives which has not been
authorized by the Company or a Portfolio in its prospectus or in this
Agreement.
(B) The Distributor agrees to indemnify the Company and the
Portfolios against any and all claims, demands, liabilities and expenses which
the Company or the Portfolios may incur under the Securities Act of 1933, or
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in any registration statement or
prospectus of a Portfolio, or any omission to state a material fact therein if
such statement or omission was made in reliance upon, and in conformity with,
information furnished to the Company or a Portfolio in connection therewith by
or on behalf of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the Portfolios' transfer
agent(s), or for any failure of any such transfer agent to perform its duties.
ELEVENTH: Nothing herein contained shall require the Company to take
any action contrary to any provision of its Agreement and Declaration of Trust,
or to any applicable statute or regulation.
TWELFTH: This Agreement shall become effective with respect to each
Portfolio as of the date hereof, shall continue in force and effect until
February 28, 1999, and shall continue in force and effect from year to year
thereafter, provided, that such continuance is specifically approved with
respect to such Portfolio at least annually (a)(i) by the Board of Trustees of
the Company or (ii) by the vote of a majority of the outstanding voting
securities (as defined in Section 2(a)(42) of the 1940 Act), and (b) by vote of
a majority of the Company's trustees who are not parties to this Agreement or
"interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of any
party to this Agreement cast in person at a meeting called for such purpose.
THIRTEENTH:
(A) This Agreement may be terminated with respect to any Portfolio at
any time, without the payment of any penalty, by vote of the Board of Trustees
of the Company or by vote of a majority of the outstanding voting securities of
the applicable Portfolio, or by the Distributor, on sixty (60) days' written
notice to the other party.
-5-
<PAGE> 6
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act.
FOURTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, it is agreed that the addresses of both the
Company and the Distributor shall be 11 Greenway Plaza, Suite 100, Houston,
Texas 77046.
FIFTEENTH: Copies of the Agreement and Declaration of Trust, as
amended, establishing the Company are on file with the Secretary of State of
the State of Delaware, and 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.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
AIM FUNDS GROUP
By:
--------------------------
Name: Robert H. Graham
Title: President
Attest:
- ---------------------------
Name:
Title:
A I M DISTRIBUTORS, INC.
By:
--------------------------
Name: Michael J. Cemo
Title: President
Attest:
- ---------------------------
Name:
Title:
-7-
<PAGE> 8
APPENDIX A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM FUNDS GROUP
CLASS A SHARES
- --------------
AIM Balanced Fund
AIM Global Utilities Fund
AIM Growth Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Value Fund
CLASS C SHARES
- --------------
AIM Balanced Fund
AIM Global Utilities Fund
AIM Growth Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Value Fund
AIM CASH RESERVE SHARES
- -----------------------
AIM Money Market Fund
-8-
<PAGE> 1
EXHIBIT 6(b)
[AIM LOGO APPEARS HERE]
A I M DISTRIBUTORS, INC.
SELECTED DEALER AGREEMENT
FOR INVESTMENT COMPANIES MANAGED
BY A I M ADVISORS, INC.
TO THE UNDERSIGNED SELECTED DEALER:
Gentlemen:
A I M Distributors, Inc., as the exclusive national distributor of shares of
the common stock (the "Shares") of the registered investment companies listed
on Schedule A attached hereto which may be amended from time to time by us (the
"Funds"), understands that you are a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"), or, if a foreign dealer, that
you agree to abide by all of the rules and regulations of the NASD for purposes
of this Agreement (which you confirm by your signature below). In consideration
of the mutual covenants stated below, you and we hereby agree as follows:
1 Sales of Shares through you will be at the public offering price of such
Shares (the net asset value of the Shares plus any sales charge applicable
to such Shares), as determined in accordance with the then effective
prospectus used in connection with the offer and sale of Shares
(the "Prospectus"), which public offering price may reflect scheduled
variations in, or the elimination of, the Sales Charge on sales of the
Funds' Shares either generally to the public or in connection with special
purchase plans, as described in the Prospectus. You agree that you will
apply any scheduled variation in, or elimination of, the Sales Charge
uniformly to all offerees in the class specified in the Prospectus.
2 You agree to purchase Shares solely through us and only for the purpose of
covering purchase orders already received from customers or for your own
bona fide investment. You agree not to purchase for any other securities
dealer unless you have an agreement with such other dealer or broker to
handle clearing arrangements and then only in the ordinary course of
business for such purpose and only if such other dealer has executed a
Selected Dealer Agreement with us. You also agree not to withhold any
customer order so as to profit therefrom.
3 The procedures relating to the handling of orders shall be subject to
instructions which we will forward from time to time to all selected
dealers with whom we have entered into a Selected Dealer Agreement. The
minimum initial order shall be specified in the Funds' then current
prospectuses. All purchase orders are subject to receipt of Shares by us
from the Funds concerned and to acceptance of such orders by us. We reserve
the right in our sole descretion to reject any order.
4 With respect to the Funds the Shares of which are indicated on the attached
Schedule as being sold with a Sales Charge (the "Load Funds"), you will be
allowed the concessions from the public offering price provided in the
Load Funds' prospectus. With respect to the Funds, the Shares of which are
indicated on the attached Schedule A as being sold with a contingent
deferred sales charge (the "CDSC Funds"), you will be paid a commission or
consession as disclosed in the CDSC Fund's then current prospectus. With
respect to the Funds whose Shares are indicated on the attached Schedule as
being sold without a Sales Charge or a contingent deferred sales charge
(the "No-Load Funds"), you may charge a reasonable administrative fee. For
the purpose of this Agreement the terms "Sales Charge" and "Dealer
Commission" apply only to the Load Funds and the CDSC Funds. All commissions
and concessions are subject to change without notice by us and will comply
with any changes in regulatory requirements. You agree that you will not
combine customer orders to reach breakpoints in commissions for any purpose
whatsoever unless authorized by the Prospectus or by us in writing.
5 You agree that your transactions in shares of the Funds will be limited to
(a) the purchase of Shares from us for resale to your customers at the
public offering price then in effect or for your own bona fide investment,
(b) exchanges of Shares between Funds, as permitted by the Funds' then
current registration statement (which includes the Prospectus) and in
accordance with procedures as they may be modified by us from time to time,
and (c) transactions involving the redemption of Shares by a Fund or the
repurchase of Shares by us as an accommodation to shareholders. Redemptions
by a Fund and repurchases by us will be effected in the manner and upon the
terms described in the Prospectus. We will, upon your request, assist you
in processing such orders for redemptions or repurchases. To facilitate
prompt payment following a redemption or repurchase of Shares, the owner's
signature shall appear as registered on the Funds' records and, as
described in the Prospectus, it may be required to be guaranteed by a
commercial bank, trust company or a member of a national securities
exchange.
7/97
<PAGE> 2
6 Sales and exchages of Shares may only be made in those states and
jurisdictions where the Shares are registered or qualified for sale to the
public. We agree to advise you currently of the identity of those states
and jurisdictions in which the Shares are registered or qualified for sale,
and you agree to indemnify us and/or the Funds for any claim, liability,
expense or loss in any way arising out of a sale of Shares in any state or
jurisdiction in which such Shares are not so registered or qualified.
7 We shall accept orders only on the basis of the then current offering
price. You agree to place orders in respect of Shares immediately upon the
receipt of orders from your customers for the same number of shares. Orders
which you receive from your customers shall be deemed to be placed with us
when received by us. Orders which you receive prior to the close of
business, as defined in the Prospectus, and placed with us within the time
frame set forth in the Prospectus shall be priced at the offering price
next computed after they are received by you. We will not accept from you
a conditional order on any basis. All orders shall be subject to
confirmation by us.
8 Your customer will be entitled to a reduction in the Sales Charge on
purchases made under a Letter of Intent or Right of Accumulation described
in the Prospectus. In such case, your Dealer's Concession will be based
upon such reduced Sales Charge; however, in the case of a Letter of Intent
signed by your customer, an adjustment to a higher Dealer's Concesssion
will thereafter be made to reflect actual purchases by your customer if he
should fail to fulfil his Letter of Intent. When placing wire trades, you
agree to advise us of any Letter of Intent signed by your customer or of
any Right of Accumulation available to him of which he has made you aware.
If you fail to so advise us, you will be liable to us for the return of
any commissions plus interest thereon.
9 You and we agree to abide by the Rules of Fair Practice of the NASD and all
other federal and state rules and regulations that are now or may become
applicable to transactions hereunder. Your expulsion from the NASD will
automatically terminate this Agreement without notice. Your suspension from
the NASD or a violation by you of applicable state and federal laws and
rules and regulations of authorized regulatory agencies will terminate this
Agreement effective upon notice received by you from us. You agree that it
is your responsibility to determine the suitability of any Shares as
investments for your customers, and that AIM Distributors has no
responsibility for such determination.
10 With respect to the Load Funds and the CDSC Funds, and unless otherwise
agreed, settlement shall be made at the offices of the Funds' transfer
agent within three (3) business days after our acceptance of the order. With
respect to the No-Load Funds, settlement will be made only upon receipt by
the Fund of payment in the form of federal funds. If payment is not so
received or made within ten (10) business days of our acceptance of the
order, we reserve the right to cancel the sale or, at our option, to sell
the Shares to the Funds at the then prevailing net asset value. In this
event, or in the event that you cancel the trade for any reason, you agree
to be responsible for any loss resulting to the Funds or to us from your
failure to make payments as aforesaid. You shall not be entitled to any
gains generated thereby.
11 If any Shares of any of the Load Funds sold to you under the terms of this
Agreement are redeemed by the Fund or repurchased for the account of the
Funds or are tendered to the Funds for redemption or repurchase within
seven (7) business days after the date of our confirmation to you of your
original purchase order therefore, you agree to pay forthwith to us the
full amount of the concession allowed to you on the original sale and we
agree to pay such amount to the Fund when received by us. We also agree to
pay to the Fund the amount of our share of the Sales Charge on the original
sale of such Shares.
12 Any order placed by you for the repurchase of Shares of a Fund is subject
to the timely receipt by the Fund's transfer agent of all required
documents in good order. If such documents are not received within a
reasonable time after the order is placed, the order is subject to
cancellation, in which case you agree to be responsible for any loss
resulting to the Fund or to us from such cancellation.
13 We reserve the right in our discretion without notice to you to suspend
sales or withdraw any offering of Shares entirely, to change the offering
prices as provided in the Prospecutus or, upon notice to you, to amend or
cancel this Agreement. You agree that any order to purchase Shares of the
Funds placed by you after notice of any amendment to this Agreement has
been sent to you shall constitute your agreement to any such amendment.
14 In every transaction, we will act as agent for the Fund and you will act as
principal for your own account. You have no authority whatsoever to act as
our agent or as agent for the Funds, any other Selected Dealer or the
Funds' transfer agent and nothing in this Agreement shall serve to appoint
you as an agent of any of the foregoing in connection with transactions
with your customers or otherwise.
15 No person is authorized to make any representations concerning the Funds or
their Shares except those contained in the Prospectus and any such
information as may be released by us as information supplemental to the
Prospectus. If you should make such unauthorized representaion, you agree
to indemnify the Funds and us from and against any and all claims,
liability, expense or loss in any way arising out of or in any way
connected with such representation.
7/97
<PAGE> 3
16 We will supply you with copies of the Prospectuses and Statements of
Additional Information of the Funds (including any amendments thereto) in
reasonable quantities upon request. You will provide all customers with a
Prospectus prior to or at the time such customer purchases Shares. You will
provide any customer who so requests a copy of the Statement of Additional
Information on file with the U.S. Securities and Exchange Commission.
17 You shall be solely responsible for the accuracy, timeliness and
completeness of any orders transmitted by you on behalf of your customers
by wire or telephone for purchases, exchanges or redemptions, and shall
indemnify us against any claims by your customers as a result of your
failure to properly transmit their instructions.
18 No advertising or sales literature, as such terms are defined by the NASD,
of any kind whatsoever will be used by you with respect to the Funds or us
unless first provided to you by us or unless you have obtained our prior
written approval.
19 All expenses incurred in connection with your activities under this
Agreement shall be borne by you.
20 This Agreement shall not be assignable by you. This Agreement shall be
constructed in accordance with the laws of the State of Texas.
21 Any notice to you shall be duly given if mailed or telegraphed to you at
your address as registered from time to time with the NASD.
22 This Agreement constitutes the entire agreement between the undersigned and
supersedes all prior oral or written agreements between the parties hereto.
A I M DISTRIBUTORS, INC.
Date: By: X /s/ MICHAEL J. CEMO
------------------ ---------------------------------------
The undersigned accepts your invitation to become a Selected Dealer and agrees
to abide by the foregoing terms and conditions. The undersigned acknowledges
receipt of prospectuses for use in connection with offers and sales of the
Funds.
Date: By: X
------------------ --------------------------------------
Signature
--------------------------------------
Print Name Title
--------------------------------------
Dealer's Name
--------------------------------------
Address
--------------------------------------
City State Zip
Please sign both copies and return one copy of each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
7/97
<PAGE> 4
[AIM LOGO APPEARS HERE]
A I M DISTRIBUTORS, INC.
SCHEDULE "A" TO
SELECTED DEALER AGREEMENT
<TABLE>
<CAPTION>
Shares Sold Shares Sold
Fund With Sales Charges* With CDSC**
- --------------------------------------------------------------------------------
<S> <C> <C>
AIM Advisor Cash Management Fund No No
AIM Advisor Flex Fund Yes Yes
AIM Advisor Income Fund Yes Yes
AIM Advisor International Value Fund Yes Yes
AIM Advisor Large Cap Value Fund Yes Yes
AIM Advisor MultiFlex Fund Yes Yes
AIM Advisor Real Estate Fund Yes Yes
AIM Aggressive Growth Fund Yes No
AIM Balanced Fund Yes Yes
AIM Blue Chip Fund Yes Yes
AIM Capital Development Fund Yes Yes
AIM Charter Fund Yes Yes
AIM Constellation Fund Yes Yes
AIM Global Aggressive Growth Fund Yes Yes
AIM Global Growth Fund Yes Yes
AIM Global Income Fund Yes Yes
AIM Global Utilities Fund Yes Yes
AIM Growth Fund Yes Yes
AIM High Yield Fund Yes Yes
AIM Income Fund Yes Yes
AIM Intermediate Government Fund Yes Yes
AIM International Equity Fund Yes Yes
AIM Limited Maturity Treasury Shares Yes No
AIM Money Market Fund Yes Yes
AIM Cash Reserve Shares No No
AIM Municipal Bond Fund Yes Yes
AIM Tax-Exempt Bond Fund of Connecticut Yes No
AIM Tax-Exempt Cash Fund No No
AIM Tax-Free Intermediate Shares Yes No
</TABLE>
7/97
<PAGE> 5
<TABLE>
Shares Sold Shares Sold
Fund With Sales Charges* With CDSC**
- --------------------------------------------------------------------------------
<S> <C> <C>
AIM Value Fund Yes Yes
AIM Weingarten Fund Yes Yes
</TABLE>
A I M Distributors may from time to time make payments of finders fees
or sponsor other incentive programs as described in the applicable fund
prospectus and statement of additional information, which are incorporated
herein by reference as they may be amended from time to time.
*Trades at $1 million and over breakpoint automatically subject to CDSC with
exception of AIM Advisor Cash Fund, AIM Cash Reserve Shares, AIM Limited
Maturity Treasury Shares, AIM Tax-Exempt Cash Fund and AIM Tax-Free
Intermediate Shares.
**For all Funds sold with CDSC (includes Class B and Class C shares) except for
AIM Constellation Fund, which offers only Class C shares.
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
7/97
<PAGE> 1
EXHIBIT 6(c)
[AIM LOGO APPEARS HERE]
A I M DISTRIBUTORS, INC.
BANK ACTING AS AGENT
FOR ITS CUSTOMERS
Agreement Relating to Shares
of AIM Family of Mutual Funds
(Confirmation and Prospectus to be sent by A I M Distributors,
Inc. to Customer)
A I M Distributors, Inc. is the exclusive national distributor of the shares of
the registered investment companies listed on Schedule A hereto which may be
amended from time to time by us (the "Funds"). As exclusive agent for the
Funds, we are offering to make available shares of common stock or of
beneficial interest, as the case may be, of the Funds (the "Shares") for
purchase by your customers on the following terms:
1 In all sales of Shares you shall act as agent for your customers, and in no
transaction shall you have any authority to act as agent for any Fund or
for us.
2 The customers in question are, for all purposes, your customers and not
customers of A I M Distributors, Inc. In receiving orders from your
customers who purchase Shares, A I M Distributors, Inc. is not soliciting
such customers and, therefore, has no responsibility for determining
whether Shares are suitable investments for such customers.
3 It is hereby understood that in all cases in which you place orders with us
for the purchase of Shares (a) you are acting as agent for the customer;
(b) the transactions are without recourse against you by the customer; (c)
as between you and the customer, the customer will have full beneficial
ownership of the securities; (d) each such transaction is initiated solely
upon the order of the customer; and (e) each such transaction is for the
account of the customer and not for your account.
4 Orders received from you will be accepted by us only at the public offering
price applicable to each order, as established by the then current
Prospectus of the appropriate Fund, subject to the discounts (defined
below) provided in such Prospectus. Following receipt from you of any order
to purchase Shares for the account of a customer, we shall confirm such
order to you in writing. We shall be responsible for sending your customer
a written confirmation of the order with a copy of the appropriate Fund's
current Prospectus. We shall send you a copy of such confirmation.
Additional instructions may be forwarded to you from time to time. All
orders are subject to acceptance or rejection by us in our sole discretion.
5 Members of the general public, including your customers, may purchase
Shares only at the public offering price determined in the manner described
in the current Prospectus of the appropriate Fund. With respect to the
Funds, the Shares of which are indicated on the attached Schedule A as
being sold with a sales charge (i.e. the "Load Funds"), you will be allowed
to retain a commission or concession from the public offering price
provided in such Load Funds' current Prospectus. With respect to the Funds,
the Shares of which are indicated on the attached Schedule A as being sold
with a contingent deferred sales charge (the "CDSC Funds"), you will be
paid a commission or concession as disclosed in the CDSC Fund's then
current prospectus. With respect to the Funds whose Shares are indicated on
the attached Schedule as being sold without a sales charge or a contingent
deferred sales charge, (i.e. the "No-Load Funds"), you will not be allowed
to retain any commission or concession. All commissions or concessions set
forth in any of the Load Funds' or CDSC Funds' Prospectus are subject to
change without notice by us and will comply with any changes in regulatory
requirements.
6 The tables of sales charges and discounts set forth in the current
Prospectus of each Fund are applicable to all purchases made at any one
time by any "purchaser", as defined in the current Prospectus. For this
purpose, a purchaser may aggregate concurrent purchases of securities of
any of the Funds.
7 Reduced sales charges may also be available as a result of quantity
discounts, rights of accumulation or letters of intent. Further information
as to such reduced sales charges, if any, is set forth in the appropriate
Fund Prospectus. In such case, your discount will be based upon such
reduced sales charge; however, in the case of a letter of intent signed by
your customer, an adjustment to a higher discount will thereafter be made
to reflect actual purchases by your customer if he should fail to fulfill
his letter of intent. You agree to advise us promptly as to the amounts of
any sales made by you to your customers qualifying for reduced sales
charges. If you fail to so advise us of any letter of intent signed by your
customer or of any right of accumulation available to him of which he has
made you aware, you will be liable to us for the return of any discount
plus interest thereon.
8 By accepting this Agreement you agree:
a. that you will purchase Shares only from us;
b. that you will purchase Shares from us only to cover purchase orders
already received from your customers; and
c. that you will not withhold placing with us orders received from your
customers so as to profit yourself as a result of such withholdings.
9 We will not accept from you a conditional order for Shares on any basis.
10 Payment for Shares ordered from us shall be in the form of a wire transfer
or a cashiers check mailed to us. Payment shall be made within three (3)
business days after our acceptance of the order placed on behalf of your
customer. Payment shall be equal to the public offering price less the
discount retained by you hereunder.
7/97
<PAGE> 2
11 If payment is not received within ten (10) business days of our acceptance
of the order, we reserve the right to cancel the sale or, at our option, to
sell Shares to the Fund at the then prevailing net asset value. In this
event you agree to be responsible for any loss resulting to the Fund from
the failure to make payment as aforesaid.
12 Shares sold hereunder shall be available in book-entry form on the books of
the Funds' Transfer Agent unless other instructions have been given.
13 No person is authorized to make any representations concerning Shares of
any Fund except those contained in the applicable current Prospectus and
printed information subsequently issued by the appropriate Fund or by us as
information supplemental to such Prospectus. You agree that you will not
make Shares available to your customers except under circumstances that
will result in compliance with the applicable Federal and State Securities
and Banking Laws and that you will not furnish to any person any
information contained in the then current Prospectus or cause any
advertisement to be published in any newspaper or posted in any public
place without our consent and the consent of the appropriate Fund.
14 Sales and exchanges of Shares may only be made in those states and
jurisdictions where Shares are registered or qualified for sale to the
public. We agree to advise you currently of the identity of those states
and jurisdictions in which the Shares are registered or qualified for
sales, and you agree to indemnify us and/or the Funds for any claim,
liability, expense or loss in any way arising out of a sale of Shares in
any state or jurisdiction not identified by us as a state or jurisdiction
in which such Shares are so registered or qualified. We agree to indemnify
you for any claim, liability, expense or loss in any way arising out of a
sale of shares in any state or jurisdiction identified by us as a state or
jurisdiction in which shares are so registered or qualified.
15 You shall be solely responsible for the accuracy, timeliness and
completeness of any orders transmitted by you on behalf of your customers
by wire or telephone for purchases, exchanges or redemptions, and shall
indemnify us against any claims by your customers as a result of your
failure to properly transmit their instructions.
16 All sales will be made subject to our receipt of Shares from the
appropriate Fund. We reserve the right, in our discretion, without notice,
to modify, suspend or withdraw entirely the offering of any Shares and,
upon notice, to change the sales charge or discount or to modify, cancel or
change the terms of this Agreement. You agree that any order to purchase
Shares of the Funds placed by you after any notice of amendment to this
Agreement has been sent to you shall constitute your agreement to any such
agreement.
17 The names of your customers shall remain your sole property and shall not
be used by us for any purpose except for servicing and information mailings
in the normal course of business to Fund Shareholders.
18 Your acceptance of this Agreement constitutes a representation that you are
a "Bank" as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, as amended, and are duly authorized to engage in the transactions to
be performed hereunder.
All communications to us should be sent to A I M Distributors, Inc., Eleven
Greenway Plaza, Suite 1919, Houston, Texas 77046. Any notice to you shall
be duly given if mailed or telegraphed to you at the address specified by
you below or to such other address as you shall have designated in writing
to us. This Agreement shall be construed in accordance with the laws of the
State of Texas.
A I M DISTRIBUTORS, INC.
Date: By: X /s/ MICHAEL J. CEMO
------------------ ---------------------------------------
The undersigned agrees to abide by the foregoing terms and conditions.
Date: By: X
------------------ --------------------------------------
Signature
--------------------------------------
Print Name Title
--------------------------------------
Dealer's Name
--------------------------------------
Address
--------------------------------------
City State Zip
Please sign both copies and return one copy of each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
7/97
<PAGE> 3
[AIM LOGO APPEARS HERE]
A I M DISTRIBUTORS, INC.
SCHEDULE "A" TO
BANK SELLING GROUP AGREEMENT
<TABLE>
<CAPTION>
Shares Sold Shares Sold
Fund With Sales Charges* With CDSC**
- --------------------------------------------------------------------------------
<S> <C> <C>
AIM Advisor Cash Management Fund No No
AIM Advisor Flex Fund Yes Yes
AIM Advisor Income Fund Yes Yes
AIM Advisor International Value Fund Yes Yes
AIM Advisor Large Cap Value Fund Yes Yes
AIM Advisor MultiFlex Fund Yes Yes
AIM Advisor Real Estate Fund Yes Yes
AIM Aggressive Growth Fund Yes No
AIM Balanced Fund Yes Yes
AIM Blue Chip Fund Yes Yes
AIM Capital Development Fund Yes Yes
AIM Charter Fund Yes Yes
AIM Constellation Fund Yes Yes
AIM Global Aggressive Growth Fund Yes Yes
AIM Global Growth Fund Yes Yes
AIM Global Income Fund Yes Yes
AIM Global Utilities Fund Yes Yes
AIM Growth Fund Yes Yes
AIM High Yield Fund Yes Yes
AIM Income Fund Yes Yes
AIM Intermediate Government Fund Yes Yes
AIM International Equity Fund Yes Yes
AIM Limited Maturity Treasury Shares Yes No
AIM Money Market Fund Yes Yes
AIM Cash Reserve Shares No No
AIM Municipal Bond Fund Yes Yes
AIM Tax-Exempt Bond Fund of Connecticut Yes No
AIM Tax-Exempt Cash Fund No No
AIM Tax-Free Intermediate Shares Yes No
</TABLE>
7/97
<PAGE> 4
<TABLE>
Shares Sold Shares Sold
Fund With Sales Charges* With CDSC**
- --------------------------------------------------------------------------------
<S> <C> <C>
AIM Value Fund Yes Yes
AIM Weingarten Fund Yes Yes
</TABLE>
A I M Distributors may from time to time make payments of finders fees
or sponsor other incentive programs as described in the applicable fund
prospectus and statement of additional information, which are incorporated
herein by reference as they may be amended from time to time.
*Trades at $1 million and over breakpoint automatically subject to CDSC with
exception of AIM Advisor Cash Management Fund, AIM Cash Reserve Shares, AIM
Limited Maturity Treasury Shares, AIM Tax-Exempt Cash Fund and AIM Tax-Free
Intermediate Shares.
**For all Funds sold with CDSC (includes Class B and Class C shares) except for
AIM Constellation Fund, which offers only Class C shares.
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
7/97
<PAGE> 1
EXHIBIT 9(a)(3)
FORM OF
AMENDMENT NO. 1
TRANSFER AGENCY AND SERVICE AGREEMENT
The Transfer Agency and Service Agreement (the "Agreement"), dated
November 1, 1994, by and between AIM Funds Group, a Delaware business trust,
and A I M Fund Services, Inc., a Delaware corporation, is hereby amended as
follows (terms used herein but not otherwise defined herein have the meaning
ascribed them in the Agreement):
1) Section 1. of the Fee Schedule to the Agreement is hereby deleted in
its entirety and replaced with the following:
" 1. For performance by the Transfer Agent pursuant to this
Agreement, the Fund agrees on behalf of each of the Portfolios
to pay the Transfer Agent an annualized fee for shareholder
accounts that are open during any monthly period as set forth
below, and an annualized fee of $.70 per shareholder account
that is closed during any monthly period. Both fees shall be
billed by the Transfer Agent monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all such accounts.
<TABLE>
<CAPTION>
Per Account Fee
Fund Type Annualized
--------- ----------
<S> <C>
Class A Annual/Semi-Annual Dividends $15.15
Class A Quarterly & Monthly Dividend 17.15
Class A Daily Accrual 19.65
Class B 19.65
Class C 19.65
AIM Cash Reserve Shares 19.65"
</TABLE>
All other terms and provisions of the Agreement not amended herein
shall remain in full force and effect.
Dated: August 4, 1997
AIM FUNDS GROUP
Attest: By:
------------------------------ -----------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M FUND SERVICES, INC.
Attest: By:
------------------------------ -----------------------------
Assistant Secretary John Caldwell
President
(SEAL)
<PAGE> 1
EXHIBIT 9(b)(4)
AMENDMENT NUMBER 3 TO THE REMOTE
ACCESS AND RELATED SERVICES AGREEMENT
THIS AMENDMENT, dated as of February 1, 1997 is made to the Remote
Access and Related Services Agreement dated December 23, 1994, as amended (the
"Agreement") between each registered investment company listed on the attached
Exhibit 1 hereof, (the "Fund") and The Shareholder Services Group, Inc., now
known as First Data Investor Services Group, Inc. ("FDISG").
WITNESSETH
WHEREAS, the Fund and FDISG desire to further amend the Agreement to
reflect certain changes thereto.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree that as of the date first referenced above, the
Agreement shall be amended as follows:
1. All references to "THE SHAREHOLDER SERVICES GROUP, INC." are hereby
deleted and replaced with "FIRST DATA INVESTOR SERVICES GROUP, INC." and all
references to "TSSG" are hereby deleted and replaced with "FDISG".
2. Delete the second sentence from Section 3(c) and replace with the
following:
"The Fund will pay to FDISG the amount so billed by Federal Funds Wire
within fifteen (15) business days after the Fund's receipt of the
invoice."
3. Section 4(b) of the Agreement is hereby deleted in its entirety and
replaced with the following new Section 4(b):
"FDISG agrees to provide to the Fund at its facilities located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046, 12 Greenway Plaza,
Houston, Texas 77046, 301 Congress Street, Suite 1700, Austin, Texas
78701 and 12503 East Euclid Drive, Suite 250, Englewood, CO 80111 or
at such other locations as may be mutually agreed upon in writing by
FDISG and the Fund (the "Fund Facility") remote access to the use of
information processing capabilities of the FDISG System as it may be
modified from time to time by FDISG."
4. Section 12 of the Agreement is hereby amended by adding the following
new Sections 12(c), through 12(i):
"(c) FDISG shall retain title to and ownership of the FDISG System,
including any and all data bases, computer programs, screen
formats, report formats, interactive design techniques,
derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents,
copyrights, trade secrets, and
<PAGE> 2
other related legal rights utilized in connection with the
services provided by FDISG to the Fund hereunder other than
shareholder account and transaction information which shall
remain the exclusive property of the Fund.
(d) FDISG hereby grants to the Fund and the Fund accepts a limited
license to the FDISG System for the sole and limited purpose
of having FDISG provide the services contemplated hereunder
and nothing contained in this Agreement shall be construed or
interpreted otherwise and subject to Section 15 such license
shall immediately terminate with the termination of this
Agreement.
(e) The transmission of account inquiry and transaction
information, including but not limited to maintenances,
exchanges, purchases and redemptions, shall be limited to
direct entry to the FDISG System by means of on-line mainframe
terminal entry or PC emulation of such mainframe terminal
entry and any other non-conforming method of transmission of
information to the FDISG System is strictly prohibited without
the prior written consent of FDISG.
(f) FDISG warrants that the FDISG System shall include, at no
additional cost to the Fund, design and performance
capabilities so that prior to, during, and after the calendar
year 2000, the FDISG System will not malfunction, produce
invalid or incorrect results, or abnormally cease to function
due to the year 2000 date change. In connection with the
foregoing, FDISG agrees to provide the Fund with periodic
quarterly updates with respect to FDISG compliance with this
provision.
(g) Other than CPU Authorization Passwords, FDISG represents and
warrants to the Fund the software products provided by FDISG
hereunder (the "Products") do not contain any "back door" or
concealed access devices, any block or protection feature
which prevents the Fund from making additional copies of such
Products as permitted by this Agreement or any "self-help"
code, "Unauthorized Code", "software locks" or any other
similar devices which, upon the occurrence of a certain date
or event, the passage of a certain amount of time, or taking
of any action (or failure to take action) by or on behalf of
FDISG, will cause such Products or any software or system with
such Products are used to be destroyed, erased, damaged, or
otherwise made inoperable. "Unauthorized Code" shall mean any
virus, Trojan horse, worm, or other software routines designed
to permit unauthorized access: to disable, or otherwise harm
software, hardware, or data; or to perform any other such
actions.
(h) Provided the Fund gives FDISG reasonable written notice,
reasonable assistance, including assistance from the Fund's
employees, agents, affiliates and to the extent possible
independent contractors (collectively, "FUND'S AGENTS"), and
sole authority to defend or settle the action, then FDISG
shall do the following ("INFRINGEMENT INDEMNIFICATION"): (a)
defend or settle, at its expense, any action brought against
the Fund or the Fund's Agents to the extent the action is
based on a claim that the Fund's use of the FDISG System
infringes a duly issued United
<PAGE> 3
States' patent or copyright or violates a third party's
proprietary trade secrets or other similar intellectual
property rights ("INFRINGEMENT"); and (b) pay damages and
costs finally awarded against the Fund or the Fund's Agents
directly attributable to such claim. FDISG shall have no
Infringement Indemnification obligation if the alleged
Infringement is based upon the Fund's use of the FDISG System
with equipment or software not furnished or approved by FDISG
or if such claim arises from FDISG's compliance with the Fund's
designs, or from the Fund's modifications of the Software.
The Infringement Indemnification states FDISG's entire
liability for Infringement and shall be the Fund's sole and
exclusive remedy for such claims.
(i) Within sixty (60) days after the execution of this Amendment,
FDISG and the Fund shall enter into an escrow agreement
relating to the source code for (i) the FDISG proprietary
software used in connection with the FDISG System (as defined
in Section 1 of the Agreement: (ii) the "Software" (as that
term is defined in Schedule G), including the Third Party
Software set forth in Sections 2.1.1 and 2.1.2 of Exhibit 1 of
Schedule G; and (iii) the "FDISG Software" as that term is
defined in Schedule H (collectively, the "Source Code")
substantially in the form attached as Exhibit 2 of this
Amendment Number 3 ("Exhibit 2"). Promptly after signing the
escrow agreement, FDISG shall forward the agreement to the
escrow agent with a copy of the Source Code to be deposited
into escrow. FDISG agrees to update the Source Code held by
the escrow agent on a quarterly basis. The Fund shall be
responsible and pay for all fees of the escrow agent. The
Source Code may be released to the Fund only if (i) FDISG
ceases to do business, makes an assignment for the benefit of
creditors, becomes insolvent (as revealed by its books and
records or otherwise), is generally unable to pay its debts as
such debts become due, or commences, or has commenced against
it a case under any chapter of state or federal bankruptcy
laws; and FDISG fails to cure any such event within sixty (60)
days after receiving notice from the Fund; and (ii) the Fund
has paid all amounts due to FDISG under this Agreement. Upon
receipt of the Source Code from the escrow agent, the Fund
shall a have license to use the Software solely as set forth
herein for the remaining current term of the Agreement subject
to Section 15, which use shall be expanded to include the
right to modify the software solely in connection with support,
maintenance and operation of the software and not for any
other purpose or person."
5. Sections 14(a) and (b) of the Agreement are hereby deleted from the
Agreement and replaced with the following new Sections 14(a) and (b):
(a) This Agreement which became effective as of December 23, 1994
is hereby extended effective February 1, 1997 and shall
continue through January 31, 2000 (the "Initial Term"). Upon
the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year
("Renewal Terms") each, unless the Fund or FDISG provides
written notice to the other of its intent not to
<PAGE> 4
renew. Such notice must be received not less than one-hundred
and eighty (180) days prior to the expiration of the Initial
Term or the then current Renewal Term.
(b) Notwithstanding the foregoing Section 14(a), in the event the
Fund provides notice of its intent to terminate as set forth in
Section 14(a), the Fund may extend the term of the Agreement
for up to an additional one-hundred and eighty (180) days (the
"Extension Period") by providing FDISG with written notice of
its intent to do so. Such notice must be received no later
than one-hundred and eighty (180) days prior to the expiration
of the Initial Term. During the Extension Period, the Fund may
terminate this Agreement at any time on thirty (30) days
written notice.
6. Section 15 is hereby amended by adding the following sentence to the
end of the paragraph:
"FDISG agrees to provide reasonable, supervised system access until
the Fund's conversion to another provider is complete".
7. Section 23(a) is hereby amended by deleting the information regarding
notices and inserting the following
To: The AIM Family of Funds
c/o A I M Fund Services, Inc.
Eleven Greenway Plaza, Suite 100
Houston, Texas 77046
Attention: John Caldwell, President
with copy to:
Fund Legal Counsel at same address
Attention: Carol F. Relihan, Senior Vice President &
General Counsel
To: First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, MA 02109
Attention: President
with copy to : General Counsel (same address)
8. Section 23 is hereby amended by adding the following new sub-section
(k):
"(k) Notwithstanding the indemnity provided by the Fund in Section
8(g), FDISG agrees to use commercially reasonable efforts to
maintain a Disaster Recovery Plan, at no cost to the Fund,
designed to minimize the impact of any unforeseen business
interruption or outage that renders the FDISG System or FDISG
Facility inoperable, a summary of which is attached hereto as
Schedule I."
<PAGE> 5
9. Schedule C is hereby deleted in its entirety and replaced with the
attached revised Schedule C.
10. Exhibit 1 and Exhibit 2 of Schedule D are hereby deleted in their
entirety.
11. Schedule F is hereby deleted in its entirety and replaced with the
attached revised Schedule F.
12. Addendum Number 2 to the Agreement is hereby deleted in its entirety
and the new revised Schedule D - Out of Pocket Expenses as referenced in
Section 3(b) is hereby added to the Agreement.
13. In addition to the foregoing, FDISG shall provide the Fund with a
software license to FDISG's proprietary IMPRESS Plus software and system in
accordance with the terms of and as more fully described in IMPRESS Plus
Software and Support Terms annexed hereto as Schedule G and incorporated
herein.
14. In addition to the foregoing, FDISG shall provide the Fund with a
software license to FDISG's proprietary Accounting Control Environment +
("ACE +") software in accordance with the terms of and as more fully described
in the ACE + Software and Support Terms annexed hereto as Schedule H and
incorporated herein.
The Agreement, as previously amended and as amended by this Amendment,
("Modified Agreement") constitutes the entire agreement between the parties
with respect to the subject matter hereof. The Modified Agreement supersedes all
prior and contemporaneous agreements between the parties in connection with the
subject matter hereof. No officer, employee, servant or other agent of either
party is authorized to make any representation, warranty, or other promises not
expressly contained herein with respect to the subject matter hereof.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their duly authorized officers, as of the day and year first
above written.
On behalf of the Funds and respective Portfolios and Classes set forth in
Exhibit 1 attached hereto as may be amended from time to time.
By: /s/ ROBERT H. GRAHAM
-------------------------------------
Title: President
----------------------------------
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/ GERALD G. KOKOS
-------------------------------------
Title: Executive Vice President
----------------------------------
<PAGE> 7
EXHIBIT 1
LIST OF FUNDS
<TABLE>
<S> <C>
AIM EQUITY FUNDS, INC.
Portfolios: Classes:
AIM Blue Chip Fund Class A and B Shares
AIM Capital Development Fund Class A and B Shares
AIM Charter Fund Class A and B Shares
AIM Weingarten Fund Class A and B Shares
AIM Aggressive Growth Fund Class A Shares
AIM Constellation Fund Class A Shares
AIM FUNDS GROUP
Portfolios: Classes:
AIM Balanced Fund Class A and Class B Shares
AIM Global Utilities Fund Class A and Class B Shares
AIM Growth Fund Class A and Class B Shares
AIM High Yield Fund Class A and Class B Shares
AIM Income Fund Class A and Class B Shares
AIM Intermediate Government Fund Class A and Class B Shares
AIM Municipal Bond Fund Class A and Class B Shares
AIM Value Fund Class A and Class B Shares
AIM Money Market Fund Class A, Class B, and
AIM Cash Reserve Shares
AIM INTERNATIONAL FUNDS, INC.
Portfolios: Classes:
AIM International Equity Fund Class A and Class B Shares
AIM Global Aggressive Growth Fund Class A and Class B Shares
AIM Global Growth Fund Class A and Class B Shares
AIM Global Income Fund Class A and Class B Shares
AIM INVESTMENT SECURITIES FUNDS
Portfolios: Classes:
Limited Maturity Treasury Portfolio AIM Limited Maturity Treasury Shares
AIM TAX-EXEMPT FUNDS, INC.
Portfolios: Classes:
AIM Tax-Exempt Cash Fund n/a
AIM Tax-Exempt Bond Fund of Connecticut n/a
Intermediate Portfolio AIM Tax-Free Intermediate Shares
</TABLE>
<PAGE> 8
EXHIBIT 2
PREFERRED REGISTRATION
TECHNOLOGY ESCROW AGREEMENT
Account Number __________
Recitals
This Preferred Registration Technology Escrow Agreement including any
Exhibits ("Agreement") is effective this ______ day of _____ 1997, by and among
Data Securities International, Inc. ("DSI"), a Delaware corporation, First Data
Investor Services Group, Inc. ("Depositor"), and each registered investment
company listed on the attached Schedule A hereof ("Preferred Registrant").
WHEREAS, Depositor has entered into a certain Remote Access and
Related Services Agreement dated December 23, 1994, as amended by Amendment
Number 3 dated as of February 1, 1997 (the "Remote Agreement") with the
Preferred Registrant which pursuant thereto certain proprietary software, as
described in Section 12(i) of the Remote Agreement, in object-code form and
other materials of Depositor have been licensed to Preferred Registrant (the
"Software");
WHEREAS, Depositor and Preferred Registrant desire the Agreement to be
supplementary to said contract pursuant to 11 United States Code Section
365(n);
WHEREAS, availability of or access to the source code and other
proprietary data related to the Software is critical to Preferred Registrant in
the conduct of its business;
WHEREAS, Depositor has deposited or will deposit with DSI such source
code and other proprietary data to provide for retention, administration and
controlled access for Preferred Registration under conditions specified herein;
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in consideration of the promises, mutual
covenants and conditions contained herein, the parties hereto agree as follows:
1. Deposit Account. Following the delivery of the executed Agreement, DSI
shall open a deposit account ("Deposit Account") for Depositor. The
opening of the Deposit Account means that DSI shall establish an account
ledger in the name of Depositor, assign a deposit account number
("Deposit Account Number"), calendar renewal notices to be sent to
Depositor as provided in Section 30, and request the initial deposit
("Initial Deposit") from Depositor. Depositor has an obligation to make
the Initial Deposit. In the event that Depositor has not made the
Initial Deposit within sixty (60) days of the execution of this
1
<PAGE> 9
Agreement, DSI shall request the initial Deposit from Depositor and
notify Preferred Registrant that such Initial Deposit has not been
received.
2. Preferred Registration Account. Following the execution and delivery of
the Agreement, DSI shall open a registration account ("Registration
Account") for Preferred Registrant. The opening of the Registration
Account means that DSI shall establish under the Deposit Account an
account ledger with a unique registration number ("Registration Number")
in the name of Preferred Registrant, calendar renewal notices to be sent
to Preferred Registrant as provided in Section 30, and request the
Initial Deposit from Depositor. DSI shall notify Preferred Registrant
upon receipt of Initial Deposit.
3. Term of Agreement. The Agreement will commence on the effective date
and continue through January 31, 2000, unless terminated earlier as
provided in the Agreement. The Agreement may be extended for one (1)
year terms.
4. Exhibit A, Notices and Communications. Notices and invoices to
Depositor, Preferred Registrant or DSI should be sent to the parties at
the addresses identified in the Exhibit A.
Documents, payment of fees, deposits of material, and any written
communication should be sent to the DSI offices as identified in the
Exhibit A.
Depositor and Preferred Registrant agree to each name their respective
designated contact ("Designated Contact") to receive notices from DSI
and to act on their behalf in the performance of their obligations as
set forth in the Agreement. Depositor and Preferred Registrant agree to
notify DSI immediately in the event of a change of their Designated
Contact in the manner stipulated in Exhibit A.
5. Exhibit B and Deposit Material. Depositor will submit proprietary data
and related material ("Deposit Material") to DSI for retention and
administration in the Deposit Account.
The Deposit Material will be submitted together with a completed
document called a "Description of Deposit Material", hereinafter
referred to as Exhibit B. Each Exhibit B should be signed by Depositor
prior to submission to DSI and will be signed by DSI upon completion of
the Deposit Material inspection.
Depositor represents and warrants that it lawfully possesses all Deposit
Material, can transfer Deposit Material to DSI and has the authority to
store Deposit Material in accordance with the terms of the Agreement.
6. Deposit Material Inspection. Upon receipt of an Exhibit B and Deposit
Material, DSI will be responsible only for reasonably matching the
labeling of the materials to the item descriptions listed on the Exhibit
B and validating the count of the materials to the quantity listed on
the Exhibit B. DSI will not be responsible for any other claims made by
2
<PAGE> 10
the Depositor on the Exhibit B. Acceptance will occur when DSI concludes
that the Deposit Material Inspection is complete. Upon acceptance DSI
will sign the Exhibit B and assign it the next Exhibit B number. DSI
shall issue a copy of the Exhibit B to Depositor and Preferred
Registrant within ten (10) days of acceptance.
7. Initial Deposit. The Initial Deposit will consist of all material
initially supplied by Depositor to DSI.
8. Deposit Changes. Depositor may desire or may be obligated to update the
Deposit Account with supplemental or replacement Deposit Material of
technology releases.
Supplemental Deposit ("Supplemental") is Deposit Material which is to be
added to the Deposit Account.
Replacement Deposit ("Replacement") is Deposit Material which will
replace existing Deposit Material as identified by any one or more
Exhibit B(s) in the Deposit Account. Replaced Deposit Material will be
destroyed or returned to Depositor.
9. Deposit. The existing deposit ("Deposit") means all Exhibit B(s) and
their associated Deposit Material currently in DSI's possession.
Destroyed or returned Deposit Material is not part of the Deposit;
however, DSI shall keep records of the destruction or return of Deposit
Material.
10. Replacement Option. Within ten (10) days of receipt of Replacement from
Depositor, DSI will send a letter to Preferred Registrant stating that
Depositor requests to replace existing Deposit Material, and DSI will
include a copy of the new Exhibit B(s) listing the new Deposit Material.
Preferred Registrant has twenty (20) days from the mailing of such
letter by DSI to instruct DSI to retain the existing Deposit Material
held by DSI, and if so instructed, DSI will change the Replacement to a
Supplemental. Conversion to Supplemental may cause an additional
storage unit fee as specified by DSI's Fee and Services Schedule.
If Preferred Registrant does not instruct DSI to retain the existing
Deposit Material, DSI shall permit such Deposit Material to be replaced
with the Replacement. Within ten (10) days of acceptance of the
Replacement by DSI, DSI shall issue a copy of the executed Exhibit B(s)
to Depositor and Preferred Registrant. DSI will either destroy or
return to Depositor all Deposit Material replaced by the Replacement.
11. Storage Unit. DSI will store the Deposit in defined units of space,
called storage units. The cost of the first storage unit will be
included in the annual Deposit Account fee.
12. Deposit Obligations of Confidentiality. DSI agrees to establish a locked
receptacle in which it shall place the Deposit and shall put the
receptacle under the administration of
3
<PAGE> 11
one or more of its officers, selected by DSI, whose identity shall be
available to Depositor at all times. DSI shall exercise a
professional level of care in carrying out the terms of the Agreement.
DSI acknowledges Depositor's assertion that the Deposit shall contain
proprietary data and that DSI has an obligation to preserve and
protect the confidentiality of the Deposit.
Except as provided for in the Agreement, DSI agrees that it shall not
divulge, disclose, make available to third parties, or make any use
whatsoever of the Deposit.
13. Audit Rights. DSI agrees to keep records of the activities undertaken
and materials prepared pursuant to the Agreement. DSI may issue to
Depositor and Preferred Registrant an annual report profiling the
Deposit Account. Such annual report will identify the Depositor,
Preferred Registrant, the current Designated Contacts, selected
special services, and the Exhibit B history, which includes Deposit
Material acceptance and destruction or return dates.
Upon reasonable notice, during normal business hours and during the
term of the Agreement, Depositor or Preferred Registrant will be
entitled to inspect the records of DSI pertaining to the Agreement,
and accompanied by an employee of DSI, inspect the physical status and
condition of the Deposit. The Deposit may not be changed during the
audit.
14. Renewal Period of Agreement. Upon payment of the initial fee or
renewal fee, the Agreement will be in full force and will have an
initial period of at least one (1) year unless otherwise specified.
The Agreement may be renewed for additional periods upon receipt by
DSI of the specified renewal fees prior to the last day of the period
("Expiration Date"). DSI may extend the period of the Agreement to
cover the processing of any outstanding instruction made during any
period of the Agreement.
Preferred Registrant has the right to pay renewal fees and other
related fees. In the event Preferred Registrant pays the renewal fees
and Depositor is of the opinion that any necessary condition for
renewal is not met, Depositor may so notify DSI and Preferred
Registrant in writing. The resulting dispute will be resolved
pursuant to the dispute resolution process defined in Section 25.
15. Expiration. If the Agreement is not renewed, or is otherwise
terminated, all duties and obligations of DSI to Depositor and
Preferred Registrant will terminate. If Depositor requests the return
of the Deposit, DSI shall return the Deposit to Depositor only after
any outstanding invoices and the Deposit return fee are paid. If the
fees are not received by the Expiration Date of the Agreement, DSI, at
its option, may destroy the Deposit.
16. Certification by Depositor. Depositor represents to Preferred
Registrant that:
4
<PAGE> 12
a. The Deposit delivered to DSI consists of the following: source
code deposited on computer magnetic media; all necessary and
available information, proprietary information, and technical
documentation which will enable a reasonably skilled
programmer of Preferred Registrant to create, maintain and/or
enhance the Software without the aid of Depositor or any other
person or reference to any other materials; maintenance tools
(test programs and program specifications); proprietary or
third party system utilities (compiler and assembler
descriptions); description of the system/program generation;
descriptions and locations of programs not owned by Depositor
but required for use and/or support; and names of key
developers for the technology on Depositor's staff.
b. The Deposit will be defined in the Exhibit B(s).
These representations shall be deemed to be made continuously
throughout the term of the Agreement.
17. Indemnification. Depositor and Preferred Registrant agree to defend
and indemnify DSI and hold DSI harmless from and against any and all
claims, actions and suits, whether in contract or in tort, and from
and against any and all liabilities, losses, damages, costs, charges,
penalties, counsel fees, and other expenses of any nature (including,
without limitation, settlement costs) incurred by DSI as a result of
performance of the Agreement except in the event of a judgment which
specifies that DSI acted with gross negligence or willful misconduct.
18. Filing for Release of Deposit by Preferred Registrant. Upon notice to
DSI by Preferred Registrant of the occurrence of a release condition
as defined in Section 21 and payment of the release request fee, DSI
shall notify Depositor by certified mail or commercial express mail
service with a copy of the notice from Preferred Registrant. If
Depositor provides contrary instruction within ten (1O) days of the
mailing of the notice to Depositor, DSI shall not deliver a copy of
the Deposit to Preferred Registrant.
19. Contrary Instruction. "Contrary Instruction" is the filing of an
instruction with DSI by Depositor stating that a Contrary Instruction
is in effect. Such Contrary Instruction means an officer of Depositor
warrants that a release condition has not occurred or has been cured.
DSI shall send a copy of the instruction by certified mail or
commercial express mail service to Preferred Registrant. DSI shall
notify both Depositor and Preferred Registrant that there is a dispute
to be resolved pursuant to Section 25. Upon receipt of Contrary
Instruction, DSI shall continue to store the Deposit pending Depositor
and Preferred Registrant joint instruction, resolution pursuant to
Section 25, order by a court of competent jurisdiction, or termination
by non-renewal of the Agreement.
20. Release of Deposit to Preferred Registrant. Pursuant to Section 18, if
DSI does not receive Contrary Instruction from Depositor, DSI is
authorized to release the Deposit, or if more than one Preferred
Registrant is registered to the Deposit, a copy of the Deposit,
5
<PAGE> 13
to the Preferred Registrant filing for release following receipt of
any fees due to DSI including Deposit copying and delivery fees.
21. Release Conditions of Deposit to Preferred Registrant.
Release conditions are:
a. Depositor ceases to do business, makes an assignment for the
benefit of creditors, becomes insolvent (as revealed by its
books and records or otherwise), is generally unable to pay
its debts as such debts become due, or commences, or has
commenced against it a case under any chapter of state or
federal bankruptcy laws; and Depositor fails to cure any such
event within 60 days after receiving notice from Preferred
Registrant; and
b. Preferred Registrant has paid all amounts due Depositor under
the Remote Agreement.
22. Grant of Use License. Subject to the terms and conditions of the
Agreement, Depositor hereby transfers and upon execution by DSI, DSI
hereby accepts a non-exclusive, nontransferable, royalty-free license
("Use License") for the unexpired term of the Remote Agreement subject
to Section 15 thereof which DSI will transfer to Preferred Registrant
upon controlled release of the Deposit as described in the Agreement.
The Use License will be solely for Preferred Registrant's internal
purposes in connection with support, maintenance, and operation of the
Software solely as set forth in the Remote Agreement and not for any
other purpose or person.
23. Use License Representation. Depositor represents and warrants to
Preferred Registrant and DSI that it has no knowledge of any
incumbrance or infringement of the Deposit, or that any claim has been
made that the Deposit infringes any patent, trade secret, copyright or
other proprietary right of any third party. Depositor warrants that it
has the full right, power, and ability to enter into and perform the
Agreement, to grant the foregoing Use License, and to permit the
Deposit to be placed with DSI.
24. Conditions Following Release. Following a release and subject to
payment to DSI of all outstanding fees, DSI shall transfer the Use
License to Preferred Registrant. Additionally Preferred Registrant
shall be required to maintain the confidentiality of the released
Deposit.
25. Disputes. In the event of a dispute, DSI shall so notify Depositor and
Preferred Registrant in writing. Upon agreement of the parties at the
time of a dispute, such dispute will be settled by arbitration in
accordance with the commercial rules of the American Arbitration
Association ("AAA"). Unless otherwise agreed to by Depositor and
Preferred Registrant, arbitration will take place in San Diego,
California, USA.
6
<PAGE> 14
26. Verification Rights. Depositor grants to Preferred Registrant the
option to verify the Deposit for accuracy, completeness and
sufficiency. Depositor agrees to permit DSI and at least one employee
of Preferred Registrant to be present at Depositor's facility to
verify, audit and inspect of the Deposit for the benefit of Preferred
Registrant. If DSI is present or is selected to perform the
verification, DSI will be paid according to DSI's then current
verification service hourly rates and any out of pocket expenses.
27. General. DSI may act in reliance upon any instruction, instrument, or
signature believed to be genuine and may assume that any employee
giving any written notice, request, advice or instruction in
connection with or relating to the Agreement has apparent authority
and has been duly authorized to do so. DSI may provide copies of the
Agreement or account history information to any employee of Depositor
or Preferred Registrant upon their request. For purposes of
termination or replacement, Deposit Material shall be returned only to
Depositor's Designated Contact, unless otherwise instructed by
Depositor's Designated Contact.
DSI is not responsible for failure to fulfill its obligations under the
Agreement due to causes beyond DSI's control.
The Agreement is to be governed by and construed in accordance with
the laws of the State of California.
The Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes all previous
communications, representations, understandings, and agreements,
either oral or written, between the parties. The Agreement may be
amended only in a writing signed by the parties.
If any provision of the Agreement is held by any court to be invalid
or unenforceable, that provision will be severed from the Agreement
and any remaining provisions will continue in full force.
28. Title to Media. Subject to the terms of the Agreement, title to the
media, upon which the proprietary data is written or stored, is and
shall be irrevocably vested in DSI. Notwithstanding the foregoing,
Depositor will retain ownership of the proprietary data contained on
the media including all copyright, trade secret, patent or other
intellectual property ownership rights subsisting in such proprietary
data.
29. Termination of Rights. The Use License as described above will
terminate in the event that the Agreement is terminated without the
Use License transferring to Preferred Registrant.
30. Fees. Fees are due upon receipt of signed contract, receipt of Deposit
Material, or when service is requested, whichever is earliest. If
invoiced fees are not paid within sixty (60) days of the date of the
invoice, DSI may terminate the Agreement. If the payment is not
7
<PAGE> 15
timely received by DSI, DSI shall have the right to accrue and collect
interest at the rate of one and one-half percent per month (18% per
annum) from the date of the invoice for all late payments.
Renewal fees will be due in full upon the receipt of invoice unless
otherwise specified by the invoice. In the event that renewal fees are
not received thirty (30) days prior to the Expiration Date, DSI shall
so notify Depositor and Preferred Registrant. If the renewal fees are
not received by the Expiration Date, DSI may terminate the Agreement
without further notice and without liability of DSI to Depositor or
Preferred Registrant.
DSI shall not be required to process any request for service unless
the payment for such request shall be made or provided for in a manner
satisfactory to DSI.
All service fees and renewal fees will be those specified in DSI's Fee
and Services Schedule in effect at the time of renewal or request for
service, except as otherwise agreed. For any increase in DSI's
standard fees, DSI shall notify Depositor and Preferred Registrant at
least ninety (90) days prior to the renewal of the Agreement. For any
service not listed on the Fee and Services Schedule, DSI shall provide
a quote prior to rendering such service.
Fees invoiced by DSI are the responsibility of the Preferred
Registrant and as such all invoices in accordance with this Agreement
are to be sent to the Preferred Registrant.
8
<PAGE> 16
On behalf of the Investment Companies
and respective Portfolios and Classes
set forth in Schedule A attached
hereto as may be amended from
time to time.
<TABLE>
<S> <C>
By: FIRST DATA INVESTOR SERVICES
--------------------------------- GROUP, INC.
Name:
------------------------------- By:
Title: ---------------------------------
------------------------------ Name:
-------------------------------
Title:
------------------------------
DATA SECURITIES
INTERNATIONAL, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
</TABLE>
<PAGE> 17
SCHEDULE A
LIST OF FUNDS
AIM EQUITY FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Blue Chip Fund Class A and B Shares
AIM Capital Development Fund Class A and B Shares
AIM Charter Fund Class A and B Shares
AIM Weingarten Fund Class A and B Shares
AIM Aggressive Growth Fund Class A Shares
AIM Constellation Fund Class A Shares
</TABLE>
AIM FUNDS GROUP
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Balanced Fund Class A and Class B Shares
AIM Global Utilities Fund Class A and Class B Shares
AIM Growth Fund Class A and Class B Shares
AIM High Yield Fund Class A and Class B Shares
AIM Income Fund Class A and Class B Shares
AIM Intermediate Government Fund Class A and Class B Shares
AIM Municipal Bond Fund Class A and Class B Shares
AIM Value Fund Class A and Class B Shares
AIM Money Market Fund Class A, Class B and AIM Cash Reserve Shares
</TABLE>
AIM INTERNATIONAL FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM International Equity Fund Class A and Class B Shares
AIM Global Aggressive Growth Fund Class A and Class B Shares
AIM Global Growth Fund Class A and Class B Shares
AIM Global Income Fund Class A and Class B Shares
</TABLE>
AIM INVESTMENT SECURITIES FUNDS
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
Limited Maturity Treasury Portfolio AIM Limited Maturity Treasury Shares
</TABLE>
AIM TAX-EXEMPT FUNDS, INC.
<TABLE>
<CAPTION>
Portfolios: Classes:
<S> <C>
AIM Tax-Exempt Cash Fund n/a
AIM Tax-Exempt Bond Fund of Connecticut n/a
Intermediate Portfolio AIM Tax-Free Intermediate Shares
</TABLE>
<PAGE> 18
EXHIBIT A
DESIGNATED CONTACT
Account Number: __________
<TABLE>
<S> <C>
NOTICES, DEPOSIT MATERIAL RETURNS AND INVOICES TO DEPOSITOR SHOULD BE ADDRESSED TO:
COMMUNICATION, INCLUDING DELINQUENCIES TO
DEPOSITOR SHOULD BE ADDRESSED TO: ------------------------------------------------
[Company Name/Address] ------------------------------------------------
- ----------------------------------------
------------------------------------------------
- ----------------------------------------
------------------------------------------------
- ----------------------------------------
Invoice Contact:
- ---------------------------------------- --------------------------------
Designated Contact:
---------------------
Telephone:
------------------------------
Facsimile:
------------------------------
State of Incorporation:
-----------------
NOTICES AND COMMUNICATION, INCLUDING INVOICES TO PREFERRED REGISTRANT SHOULD BE
DELINQUENCIES TO PREFERRED REGISTRANT ADDRESSED TO:
SHOULD BE ADDRESSED TO:
-----------------------------------------------
First Data Investor Services Group, Inc.
4400 Computer Drive -----------------------------------------------
Westborough, MA 01581
-----------------------------------------------
-----------------------------------------------
Designated Contact: Invoice Contact:
--------------------- -------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
Requests from Depositor or Preferred Registrant INVOICE INQUIRIES AND FEE REMITTANCES TO DSI
Contact should be given Contact or authorized SHOULD BE ADDRESSED TO:
employee Registrant.
DSI
CONTRACTS, DEPOSIT MATERIAL AND NOTICES TO DSI Attn: Accounts Receivable
SHOULD BE ADDRESSED TO:
DSI
Attn: Contract Administration
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
Date:
-----------------------------------
</TABLE>
<PAGE> 19
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIAL
Deposit Account Number:
--------------------------------------------------------
Depositor Company Name:
--------------------------------------------------------
DEPOSIT TYPE:
Initial Supplemental Replacement
- ------ ------ ------
If Replacement: Destroy Deposit Return Deposit
------ ------
ENVIRONMENT:
Host System CPU/OS:
------------------------------------------------------------
Version:
-----------------------------------------------------------------------
Backup:
------------------------------------------------------------------------
Source System CPU/OS:
----------------------------------------------------------
Version:
-----------------------------------------------------------------------
Compiler:
----------------------------------------------------------------------
Special Instructions:
----------------------------------------------------------
DEPOSIT MATERIAL:
Exhibit B Name: Version:
----------------- ------------------------------------
<TABLE>
<CAPTION>
Item Label Description Media Quantity
<S> <C> <C>
</TABLE>
<TABLE>
<S> <C>
For Depositor, I certify that the above For DSI, I received the above described
described Deposit Material was sent to DSI: Deposit Material subject to the terms on
the reverse side of this Exhibit:
By: By:
--------------------------------------- ---------------------------------------
Print Name: Print Name:
------------------------------- -------------------------------
Date: Date of Acceptance:
------------------------------------- -----------------------
ISE: EXHIBIT B#:
--------- ---------------
</TABLE>
<PAGE> 20
SCHEDULE C
FEE SCHEDULE
I. SHAREHOLDER ACCOUNT FEES. The Fund shall pay the following fees:
("Shareholder Account Fees"):
For the period beginning on the date of this Agreement, and continuing through
January 31, 2000, the Fund shall pay FDISG an annualized fee for shareholder
accounts open during any monthly period ("Open Account Fee") as follows:
<TABLE>
<CAPTION>
Account Volume Fee
<S> <C>
1-1.5 million $3.60/shareholder account
Exceeding 1.5 million $2.25/shareholder account
</TABLE>
The Fund also shall pay FDISG an annualized fee of $1.80 per shareholder
account that is closed during any monthly period ("Closed Account Fee") (The
Open Account Fees and Closed Account Fees hereafter collectively referred to as
"Shareholder Account Fees"). The Shareholder Account Fees shall be billed by
FDISG monthly in arrears on a prorated basis of 1/12 of the annualized fee for
all such accounts.
FDISG will provide a credit to the Shareholder Account Fees of one million
dollars in the years 1998 and 1999. The credit shall be applied as a reduction
of $83,333.33 on each monthly fee bill in 1998 and 1999.
In addition, on January 1 of the years 1998, 1999, and 2000 the Shareholder
Account fees may be increased by FDISG in an amount equal to the lesser of (i)
the cumulative percentage increase in the Consumer Price Index for all Urban
Consumers (CPI-U) U.S. City Average, All Items (unadjusted - (1982-84 + 100),
published by the U.S. Department of Labor, or (ii) seven percent (7%) of the
Shareholder Account Fees charged by FDISG to the Fund for the preceding twelve
(12) month period.
In return for the Shareholder Account Fees, FDISG agrees to provide the
following to the Fund:
o Remote Access to FDISG's FSR System
o License for 512 IMPRESS Plus software installations valued at 2.5
million dollars. Includes six weeks of technical and user training
(train-the-trainer).
o License for up to 10 copies of FDISG's ACE+ (Automate Control
Environment) software as further defined in Schedule H
o Dedicated Programming Support equivalent to I Systems Manager, 4
Programmers, and 2 Business Systems Analysts
o Implementation of a Separate FSR processing cycle by September 15,
1997, as more fully described in the attached Exhibit 3 of this
Schedule C.
o Implementation of the core TA system functionality identified in
Exhibit 1 of this Schedule C.
<PAGE> 21
o Implementation of IWT functionality as identified in Exhibit 2 of this
Schedule C
o Continued use of FDISG's Price/Rate Transmission (PRAT) application.
The PRAT Application will accept prices and dividend rates from the
Fund Accounting Department of the Fund electronically and post them to
the FDISG Pricing System. The PRAT application will run interconnected
via Local Area Network hardware and software.
II. DEDICATED PROGRAMMING SUPPORT
FDISG and the Fund will jointly determine the level of dedicated system
resources required to meet the Fund's enhancement priorities. FDISG agrees to
use reasonable efforts to make dedicated programming support available for all
projects required by the Fund. The amount of the resources required and the
projects to be worked on shall be determined jointly based upon joint periodic
review of project requirements; however, the Fund will decide the priorities
which will be assigned to each project and will determine what projects the
dedicated resources are to work on. All enhancements, improvements,
modifications or new features added to the FDISG System shall be, and shall
remain, the confidential, exclusive property of, and proprietary to, FDISG. The
parties agree to use best efforts to ensure that all enhancements to FDISG's
System, whether made by the Dedicated Team or otherwise, shall be made in a
manner that will not adversely effect the operational efficiency or
functionality of the FDISG System. Request for software changes may be
initiated by those representatives of the Fund identified in Exhibit 4 of this
Schedule C. The Fund will use its best efforts to notify FDISG in writing of
requests for software changes within 72 hours of an initial verbal request.
FDISG reserves the right to stop work on a request for which written
specifications have not been received.
a. SUPPORT PROVIDED TO THE FUND PERFORMED IN GROUPS OTHER
THAN THE DEDICATED PROGRAMMING TEAM
1. Coding to correct deficiencies in the system, unless such
deficiencies are included in item (II)(b)(9) below in which
event the Fund will be charged for such services. A system
deficiency is defined as a system process which does not
operate according to the design of the computer application or
system specifications. To correct system deficiencies, FDISG
will, at its own expense, expend whatever resources are
necessary to analyze the deficiency and apply an appropriate
remedy, in the form of corrected application code as
expeditiously as possible. An alternate process, in the form
of a functional work around, may be a suitable substitute for
the actual system fix, if the level of effort to develop the
system fix is deemed to be impractical or the elapsed time to
develop and apply the fix extends beyond the reasonable time
needed. For deficiencies identified by the Fund, the use of a
functional work around as an alternate process shall be
mutually agreed upon by the parties.
FDISG will evaluate all reported referrals, to validate
deficiency status or reclassify as a system enhancement, based
on the above definition.
2. Simple Maintenance determined to be core processing.
<PAGE> 22
3. FDISG generated (i.e., internal) requests to extend system
functionality and ensure industry competitiveness.
4. Enhancements required to comply with regulatory changes;
provided, however, FDISG will make such changes to the extent
that they are technically and commercially practical and are
within the scope of the software functions, capabilities and
database. FDISG agrees to use good faith in determining
whether such changes are technically and commercially
reasonable and agrees to negotiate with the Fund in good faith
to resolve any such issues.
b. EXAMPLES OF ACTIVITY TO BE PROVIDED TO THE FUND WHICH WILL
BE PERFORMED BY THE DEDICATED PROGRAMMING TEAM:
1. Customized form output (i.e., statements, confirmation
statements, commission statements).
2. Customized reports.
3. Addition of new features (enhancements) requested by the Fund.
4. Addition of existing features not used by the Fund.
5. Addition of new funds to the fund group.
6. Customized year-end processing.
7. Conversions from other systems to FSR subsequent to initial
funds being live.
8. Clean-up/Recovery project resulting from Fund error or causes
beyond the reasonable control of either party.
9. System "fixes" - coding to correct errors attributable to
code developed and currently maintained by the dedicated
teams.
10. Customization of existing functions specific to the Fund
11. Program documentation as requested by the Fund.
Software Exclusivity. The Fund may choose to have exclusive use of
enhancement software developed by its dedicated programming staff. Such
exclusivity would extend for a period of nine (9) months from the date
the enhancement is placed into the production libraries. Software
exclusivity would be waived if the Fund accepts either of the
following conditions:
a) If prior to implementation, FDISG or other FDISG clients agree
to share in the expense of the enhancements.
b) At any time during the 9 months following implementation,
FDISG or other FDISG clients agree to share the expense for
the enhancements.
Access and Capability. The Funds' dedicated programmers will have
access and capability to update any part of the System. However,
depending on the skill set of the programmers, as well as the scope of
the requested enhancement, it may be in the best interest of both the
Fund and FDISG to utilize non-dedicated programmers to address
<PAGE> 23
certain enhancements. In addition, because many programs are shared by
multiple clients, some enhancements may require approval from those
clients. These enhancements should be handled on an item by item
basis.
III. ADDITIONAL FEES
a. If the Fund chooses to use resources in addition to the
Dedicated Programming Team to accomplish work as outlined in
Section II.b, the following rates will apply:
<TABLE>
<CAPTION>
Annual Hourly
------ ------
<S> <C> <C>
Programmer $100,000 $135/hr
Business Systems Analyst $ 90,000 $100/hr
Acceptance Tester $ 85,000 $ 90/hr
</TABLE>
These rates apply to development and customization on all
software covered under this agreement (i.e. core TA system,
IMPRESS Plus, ACE+).
b. IMPRESS Plus Maintenance and Support Fees - The Fund will be
billed a monthly fee of $64,000 (fee based on $1500 per
workstation per year for 512 workstation license). Billing to
commence on the earlier of a) first production usage of
IMPRESS Plus software or b) August 1, 1997. Maintenance and
Support Fees include:
o All third party software maintenance charges from
software licensed in Exhibit 1 of Schedule G
o Full IMPRESS Plus applications support (bug fixes,
application assistance, etc.)
o Remote Dial-in IMPRESS Plus application support (if
needed)
o Subsequent interim and major releases for all
licensed IMPRESS Plus products
o 7x24 Help Desk Support for IMPRESS Plus applications
o Full support through First Data for third party
applications licensed in Exhibit 1 of Schedule G
o Participation in IMPRESS Plus User Group
c. IMPRESS Plus Installation Fees - Billable to the Fund at
$135/hr. (Estimate for 512 IMPRESS Plus workstations is 1100
hours). Installation includes:
o IMPRESS Plus application installation
o IMPRESS Plus third party software installation
o Network Design Assistance
o Hardware Configuration Assistance
o Workflow analysis
<PAGE> 24
o Project Management
o Post Installation Support
d. On each anniversary date of this Agreement, FDISG may adjust
the hourly and annual rates to reflect salary increases
and/or to maintain competitive rates in attracting qualified
personnel. Such annual increase will not exceed seven percent
(7%).
e. IMPRESS Plus Maintenance and Support and EMPRESS Plus
Installation Fees do not include the following:
o Hardware
o Network and Server Software not listed in Exhibit 1
of Schedule G
o Customization or application integration
o Support for IMPRESS Plus applications customized or
built by the Fund (see Section 3 of Exhibit 3 of
Schedule G)
o Installation, Integration and On-going Support of
hardware, network, and software components not
included in Schedule G
o Travel Expenses for install and support staff for
on-site visits (billed separately per Schedule D)
o Application Source Code
f. IMPRESS Plus Maintenance and Support and IMPRESS Plus
Installation Fees for Separate Test or Training System.
Maintenance and Support Fees - The Fund will be billed a
monthly fee of $2,666.66 (based on $1000 per workstation per
year with a minimum 32 workstation license). Billing to
commence on first production usage of IMPRESS Plus software in
the Training or Test environment. Maintenance and Support
includes items listed in Section III.b above.
Installation Fees - Billable to the Fund at $135/hr. (Estimate
for 32 IMPRESS Plus workstations is 200 hours). Installation
includes items listed in Section III.c above.
<PAGE> 25
g. Fees for IMPRESS Plus workstations in excess of 512:
<TABLE>
<CAPTION>
o Number of workstations ordered One-time License Fee
<S> <C>
32 $1300/workstation
64 $1000/workstation
128 waived
256 waived
</TABLE>
o Maintenance and Support - $1500 per workstation per
year; billable on first production usage of IMPRESS
Plus software; includes items listed in Section III.b
above
o Installation Fees - Billable to the Fund at $135/hr;
includes items listed in Section III.c above
The Fund agrees to pay a minimum of 18 months Maintenance and
Support for each workstation in excess of 512.
<PAGE> 26
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOI SYSTEMMATIC Specs
1 26610 DEFAULT/RECALCULATION PROBLEM Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
*Recalc does not include all
purchases applied to the LOI.*
Dealer comm credit not posted in
recalc.* No adjustment code to
adjust underwriter. * Trades
outside LOI period included in
recalc.* No ability to turn off
systematic recalc.
====================================================================================================================================
====================================================================================================================================
PRODUCE CHECKS ON NT2 ACCOUNTS Specs
2 19164 WITH DIRECT REDEMPTIONS Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Checks should be produced for
direct reds on NT2 accounts.
Transactions post to history, yet
no checks are produced. Update
DRDM0750 to allow.
====================================================================================================================================
====================================================================================================================================
3 25276 WIRE ORDER PROCESSING PROBLEM Specs
Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Wire order cancel/replacements
(OPR/OPC) do not update master
controls if not double Qc'd. If not
double Qc'd both trades appear
as new purchase orders.
====================================================================================================================================
====================================================================================================================================
Specs
4 24262 CERTIFICATE REPORT MISSING DATA Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
PFSR135D-R12 does not include
the work of several days in 1996.
Unable to reconcile certificate
issues without adhocs to identify
missing data.
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 27
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NSCC REPORT PNSC802D - Specs
INCORRECT COMMISSIONS ON Received
5 26768 SPLIT REPS
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
This report overestimates the
commission paid to split reps.
NSCC regulation requires
settlement by this report,
resulting in overpayments.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NSCC REJECT REPORT PNSCSPSD- Specs
R01 - MULTI PAGE REJECT RECEIVED
6 26769 DELETIONS AND TRUNCATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
NSCC rejects for a dealer that
run for more than one page are
dropping accounts, resulting in
inconsistancies from one page to
the next. Also truncation pro-
blems with Settlement Value,
Commission Amount and Fund Owes
Dealer amount.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ONLINE EDIT PREVENTING USE OF Specs
7 26772 CDSC EXEMPT OPTION 3. Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Exempt option 3 grosses up
CDSC on SWiPs, ensuring
consistent dollar amount
swips. For funds allowing
CDSC-free SWIPs, edit pre-
venting a shareholder
redeeming an amount
greater than 12% annually
from having a SWIP with a set
dollar amount.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 28
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOIMNT DELETING Specs
BROKER CLIENT Received
8 23849 NUMBER
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Systematic completion
of an LOI removes the
Broker Client Number
form the account in
error. Absence of the
BRCN causes problems
for the dealer.
Maintenance journals
are reviewed to
identify these accounts
and re-add the BRCN.
====================================================================================================================================
====================================================================================================================================
NET INDICATOR NOT Specs
CARRYING TO QC SCREEN Received
9 26155 AND NO MISMATCH WARNING
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
When entering a wire
order redemption as a
"net" amount trade, the
net indicator is not
carried forward in the
QC process, and does not
provide a mismatch
warning. The trade then
processes as "gross",
the default.
====================================================================================================================================
====================================================================================================================================
ASSIGNMENT OF CLOSED Specs
11 26770 ACCOUNTS ON QA RECORD Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
If a QA record is
manually created and
the master account is
not designated, FSR
assigns the first
account entered. If
this account is
closed, a consolidated
statement will not
print. Results in
additional phone calls
andduplicate statement
requests.
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 29
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REASSIGNMENT OF MASTER ACCOUNT Specs
12 26771 NUMBER Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
When a master account closes
AIM would like the master
account status to be reassigned
systematically to an open account
within the QA cluster. Currently
this is a time consuming manual
process.
====================================================================================================================================
====================================================================================================================================
Specs
13 26611 DIVIDEND CONTROL REPORT PROBLEMS Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
The Dividend and Capital Gain
reports do not match the
summary reports.
====================================================================================================================================
====================================================================================================================================
DUPLICATE STATEMENTS BY DBR NOT Specs
14 26612 AVAILABLE Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
AFS would like the ability to
request duplicate statements by
dealer, dealer/branch,
dealer/branch/rep. Current
functionality is by fund/account.
====================================================================================================================================
====================================================================================================================================
PAC'S NOT RUNNING ON CAPITAL Specs
16 26154 DEVELOPMENT ACCOUNTS Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Accounts opened via merger
subscription with converted PAC
information, when the PAC is
turned on, do not run. Deletion
and reestablishment of the PAC
data does not resolve the issue.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 30
Exhibit 1 of Schedule C
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRTY REFERRAL DESCRIPTION APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC'97
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUNDSERV REDEMPTION SHOWS
INCORRECT SHARE AMOUNT ON Specs
17 25763 HISTORY Received
- ------------------------------------------------------------------------------------------------------------------------------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Several examples of FundSERV
reds where the less than the
full amount of shares appear
redeemed in the line of
history, but the account is
left with a zero balance. The
correct amount is paid through
the NSCC. Control balancing
problems result.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
EXHIBIT 2 OF SCHEDULE C
IWT FUNCTIONALITY
<TABLE>
<CAPTION>
- ---------------------------- ----------------------------
NEW ACCOUNT FINANCIALS
- ---------------------------- ----------------------------
<S> <C>
CASHIERING REPORT
- ---------------------------- ----------------------------
ACCOUNT OPTIONS EXCEPTION WAIVER
- ---------------------------- ----------------------------
AUTO EXCHANGE ENHANCED QC
- ---------------------------- ----------------------------
BANK ADDRESS
- ---------------------------- ----------------------------
AIP FINANCIAL QC
- ---------------------------- ----------------------------
BANK WIRE IMBALANCE REPORT
- ---------------------------- ----------------------------
BENEFICIARY INTERNAL ASSET MOVE
- ---------------------------- ----------------------------
CHECKWRITING EXCHANGE
- ---------------------------- ----------------------------
DIVIDENDS/CAPGAIN TRANSFER
- ---------------------------- ----------------------------
SWP PURCHASES
- ---------------------------- ----------------------------
TELEPHONE RED REDEMPTIONS
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
ACCOUNT SEARCH
- ---------------------------- ----------------------------
ACCOUNT SETUP
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
DEALER
- ---------------------------- ----------------------------
DEALER OFFICE REP LIST
- ---------------------------- ----------------------------
DEALER ALPHA SEARCH
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
FINANCIAL INQUIRY
- ---------------------------- ----------------------------
- ---------------------------- ----------------------------
GROUP MASTER ADD
- ---------------------------- ----------------------------
LOI/ROA
- ---------------------------- ----------------------------
ACCOUNT LINK/UNLINK
- ---------------------------- ----------------------------
IWT ACCOUNT LIST
- ---------------------------- ----------------------------
PROCESSED ITEM LIST
- ---------------------------- ----------------------------
</TABLE>
<PAGE> 32
EXHIBIT 3 OF SCHEDULE C
AIM SEPARATE CYCLE OVERVIEW
This project removes AIM from all FSR regions, files, jobstreams, control
cards, etc. and establishes them with their own. It will allow AIM to have more
control over their processing and removes any unexpected complications caused
by dependency on the activities of other management companies.
VOLUME
o 1700+ Jobstreams (JCL, Procs, and Control Cards) to evaluate
o Approximately 70% of these will qualify for processing
(create new AIM and modify FSR)
o * Files to convert
o * GDGs
o * additional Tapes/Cartridges
o * additional DASD required
o * additional Tape Mounts
* These figures are currently being researched.
AFFECTED AREAS/DEPARTMENTS
o AIM Client Services - John Corey
o Atest - Kathy McNeil, Steve Carlson
o BOSS Application - Tom Farnsworth (B)
o Capacity Planning - Ron Larue
o Corporate Actions - Joe Viens
o DASD - John Dryer, Janet Rose (B)
o Database Administration (DBA) for On-line - Steve Powers (B)
o DCX - Linda Messore, Ann Stadtherr
o ESG - Connie Ciulla, Arthur Roy
o Express Delivery - Don Morgan
o FSR - Tom Woislow, Bill VonHandorf, Bill Quigley, Bob Reilly,
Ray Bennison
o NSCC - Carl Damelio
o Print Mail - Helene Grunes (B)
o Tape Operations - Don Chappell
o SCE - Ed Oelerich, Ellen Rhode
o Tax/CBA - Ed Boyle
o Transmissions - Frank Pitzi
Because of the large volume of work to be done and the number of departments
involved we are developing a "phased in" development and implementation
approach. This will cause the least impact to both our client and our own
internal departments. It will require tight project management and dedicated
point people both from AIM and our own departments. Each phase will migrate up
through test, acceptance and production.
<PAGE> 33
PHASE 1 - START-UP FILES
The foundation of this approach is to create six basic files with an AIM
high-level qualifier on a daily basis from the FSR system which can be used by
jobs which read them but not update them (see Phase 2). They would be deleted
at the beginning of the next day's cycle and recreated by the FSR cycle. These
files are:
P03AIM.PRIV.MASTER.DATE
P03AIM.PRIV.BATCH.DATE
P03AIM.PRIV.MASTER.FUND
P03AIM.PRIV.BATCH.FUND
P03AIM.PRIV.TRANS.ACCEPT1
P03AIM.PRIV.TRANS.DIVIDEND
The first four files would be copied from FSR files to AIM files in a new
temporary AIM job which would run daily.
The last two files, trans.accept1 and trans.dividend, currently exist with
different names in FSR. Job PFSR13DD (FSR/FED WIRE) now creates
P03FSR.TEMP.XMITOUT.ACCEPT1.AIM which contains all accept records for AIM. Job
PFSR13ED (FSR/FED WIRE) now creates P03FSR.TEMP.XMITOUT.DIV.AIM which contains
all dividend records for AIM. These files are input to AIM transmission jobs
(PFSRXCGD and PFSRXCLD) and the FSR/POST BACKUPS job (PFSR71HD).
We would rename P03FSR.PRIV.TRANS.ACCEPT1 and P03FSR.PRIV.TRANS.DIVIDEND to
P03AIM.PRIV.TRANS.ACCEPT1 and P03AIM.PRIV.TRANS.DIVIDEND in jobs PFSR13DD and
PFSR13ED. We would rename the transmission jobs to PAIMxxxx modify them
replacing FSR references with AIM, set up the appropriate schedule and move
them up the regions. We would place an override in PFSR71HD which would now
reference the PO3AIM file for backup. Once tested and QA'd by us and AIM we
would replace the FSR transmission jobs with the new AIM jobs.
RESULT OF PHASE 1
We now have three production jobs running in the AIM region and we have set up
the 6 basic AIM files which will be the basis for Phase 2.
<PAGE> 34
PHASE 2 - REPORTS, TRANSMISSIONS, AND AIM-ONLY JOBS
This phase involves converting jobs which do not update any of the master files.
They may read them and create temporary files but updating will wait for phase
3. Phase 2 jobstreams will include mainly report and transmission jobs as well
as any AIM-only jobs. We will be adding new schedule entries (CA-7) for AIM and
modifying existing FSR schedules where needed paying special attention to
triggers, requirements and dependencies. We will add new Express Delivery
entries for AIM reports and delete the AIM entries from the FSR system.
The actual migration of reports and transmission files from the FSR cycle to
the AIM cycle will be on a specific schedule. As we introduce reports to the
AIM cycle they will be available in SAR from both FSR and AIM cycles for a week
to allow AIM to review them. They will then be turned off in SAR for FSR. We
will provide AIM with a report schedule each week to aid this process.
Transmission files will be tested using record counts and selective file
compares. AIM-only jobs will also parallel for a week where feasible.
An example of a Phase 2 job is PFSR143D (FSR/AUTOEX). This job reads the batch
fund file, the batch date file and the trans.accept1 file to produce reports.
All these files are available in the AIM region.
Phase 2 work to be done described in a programmer's template includes (but is
not limited to):
Copy and rename the JCL jobs.
Modify procs and/or control cards if necessary for the test/acpt/prod
regions.
Verify that JCL, procs and control cards follow our current standards.
Create high-level overrides for FSR read-only files.
Change Express Delivery for AIM output and set up the FSR RID entry to
be deleted in n days.
Schedule the new AIM jobs with the same requirements and dependencies
as the FSR jobs but using the appropriate high level qualifier. This
requires tight control on the status of all jobs.
Change the schedules of any jobs which are dependent upon the FSR job
to be dependent upon the new AIM job. Note: this will not be the case
with all AIM jobs.
Move it up the regions testing at appropriate points.
Review the output (First Data and AIM).
After a week inhibit AIM output from FSR jobs from going to SAR. Only
AIM output from AIM jobs will be available in SAR.
The key to the success of this phase is an aggressive implementation schedule
and active participation by AIM representatives in checking and validating the
output.
RESULT OF PHASE 2
We now have report-only jobs (not associated with the actual updating of
files), most of the transmission jobs and all AIM-only jobs which are not
associated with updating files in AIM production. All converted reports and
files have been signed off by AIM. These AIM activities are also being
processed in FSR. We have gone as far as possible without updating files.
<PAGE> 35
PHASE 3 - ANCILLARY FILES AND SYSTEMS
This phase includes updating ancillary files and their associated jobstreams.
Examples of this type may include Bluesky, history, cert or check files, etc.
These files are not mainstream and tend to be localized in how they are
updated. In order to qualify for Phase 3 the Management Company must be the
high order sort key field.
There are two approaches we will use depending upon the main file's on-line
considerations. The first approach involves converting the main file once along
with all associated jobs and the other involves splitting out AIM from FSR at
the start of the cycle, updating it in AIM jobs and merging it back in FSR at
the end. Either approach will involve multiple jobs per master file.
For example, The Bluesky File is only used by 3 jobs: PFSRS07D which creates
the batch file, PFSR190D which updates the file and does an AIM-only extract,
and PFSR194D which does reports. In this case, we would split the FSR Bluesky
File into AIM-only and all other. The FSR Bluesky subsystem would then be
cloned for AIM and the result would be two separate Bluesky subsystems. Online
would access the appropriate Bluesky file.
Other subsystems may be too routed in our core to fully separate out and would
be better served breaking out AIM at the beginning of its cycle, updating in
AIM-only jobs and remerging it at the end of the cycle. Any special jobs used
for splitting out files or merging them after update will have to be backed out
in Phase 4.
All activities described in Phase 2 apply here as well.
RESULT OF PHASE 3
We have now isolated and converted any subsystems not bound to core processing.
Most AIM reports and transmissions are being produced in the AIM region. We are
updating some master files and have done everything possible surrounding the
core without touching it. We are ready for Phase 4.
<PAGE> 36
PHASE 4 - THE CORE
This phase deals with updates to our core master files, our functional
processes, converting large volume files (ShareA and its splits, history, lots,
global, etc.) and includes all jobstreams that have not yet been converted.
Additionally, it includes backing out any special split or merge jobs as well
as special overrides introduced in earlier phases. This will be the largest
phase. On-line will now access all AIM-only files.
Many of the activities done in the previous phases will be performed here as
well. Because so many programs interact with the core modules there is no easy
way to break this activity up. As always we will need our AIM partners to help
in the QA activities for this hefty stage.
It is possible to combine Phases 3 and 4 if it were felt to be desirable.
However, it is our intention to have all peripheral completed before attacking
the core so there will be no unnecessary distractions. Additionally, for
development contention reasons, we would like to turn these modules over as
expeditiously as possible.
All AIM-related activities, programs, control cards, overrides, splits, merges,
etc. will be removed from all FSR jobs.
RESULT OF PHASE 4
All AIM processing is now contained in its own region and runs under its own
schedule. On-line accesses AIM-only files. FSR no longer has any AIM
processing relationship with the exception of any files which are to be merged
from both regions for transmission or system reasons.
<PAGE> 37
EXHIBIT 4 of SCHEDULE C
AUTHORIZED PERSONS REQUESTING SYSTEM MODIFICATIONS
---------------------------------------------------
John Caldwell
President, A I M Fund Services, Inc.
---------------------------------------------------
Joseph Charpentier
Assistant Vice President, A I M Fund Services, Inc.
---------------------------------------------------
Tony D. Green
Senior Vice President, A I M Fund Services, Inc.
---------------------------------------------------
Jean Miller, Director of Applications
Information Technology Services
A I M Advisors, Inc.
<PAGE> 38
SCHEDULE D
OUT-OF-POCKET EXPENSES
The Fund shall reimburse FDISG monthly for applicable out-of-pocket expenses,
including, but not limited to the following items:
o Microfiche/microfilm production
o Magnetic media tapes and freight
o Telephone and telecommunication costs, including all lease,
maintenance and line costs
o NSCC transaction charges at $.15/per financial transaction,
$.10/per same day trade confirmations
o Shipping, Certified and Overnight mail and insurance
o Year-End form production and mailings
o Terminals, communication lines, printers and other equipment
and any expenses incurred in connection with such terminals
and lines
o Duplicating services, as pre-approved by the Fund
o Courier services
o Due Diligence Mailings
o Rendering fees as billed
o Overtime, as pre-approved by the Fund
o Temporary staff, as pre-approved by the Fund
o Travel and related expenses, as pre-approved by the Fund
o System training, as pre-approved by the Fund
o Record retention, retrieval and destruction costs, including,
but not limited to exit fees charged by third party record
keeping vendors
o Third party audit review
o All conversion costs: including System start up costs, but
excluding costs associated with conversions between FDISG
systems
o Such other miscellaneous expenses reasonably incurred by FDISG
in performing its duties and responsibilities under this
Agreement
<PAGE> 39
SCHEDULE F
PERFORMANCE STANDARDS
I STANDARDS FOR RESOLUTION OF SYSTEM DEFICIENCIES
"SYSTEM DEFICIENCY" - A system process which does not operate according to the
design of the computer application or system specifications, and is not a
result of any act or failure to act by the Fund.
1. FIRE CALL - A System Deficiency with at least one of the following
characteristics:
1. Potential or real financial exposure in excess of $100,000, or
2. Causes the Fund to be out of compliance with a major
regulatory requirement, or
3. Causes incorrect transaction processing and/or shareholder
confirmations with no reasonable manual workaround available
either at the Fund or in FDISG's systems
FDISG Response: Analysis and resolution within 36 hours or 2 nightly
processing cycles
2. CRITICAL DEFICIENCY - A System Deficiency with at least one of the
following characteristics:
o Potential or real financial exposure estimated from
$25,000-$100,000 or,
o Manual workaround requires substantial manual effort and
carries a high potential for error
FDISG Response: Impact Analysis within 3 business days of initial
notification; Determination of problem cause within 5 business days of
initial notification; Problem resolution within an average of 30
business days of initial notification
3. NON-CRITICAL DEFICIENCY - All other System Deficiencies
FDISG Response: Impact Analysis within 3 business days of initial
notification; Determination of problem cause within an average of 15
business days of initial notification; Problem resolution and target
dates to be determined on an item-by-item basis jointly by the Fund
and FDISG.
<PAGE> 40
II STANDARDS FOR ON-LINE SYSTEMS AVAILABILITY AND RESPONSE TIME
These standards shall apply on business days of the Funds.
o On-line systems availability between 7:00 a.m. and 7:00 p.m
Central Time ("CT") - 99% of hours available measured monthly.
o Average response time (7:00 a.m. to 7:00 p.m. CT) of 3 seconds
or less, measured end-to-end, in response to the system
employed by A I M Fund Services, Inc. as of September 1, 1994
- 99% measured monthly.
III STANDARDS FOR DELIVERY OF SYSTEM REPORTS
o CRITICAL REPORTS - The following report bundles in queue and
ready to begin transmission no later than 7:00 a.m. CT each
business day - a cumulative of two late bundles permitted per
month:
EFSR047H
EFSR601H
Changes to critical report bundles must be jointly approved by
an FDISG Client Service Officer and an authorized requestor of
the Fund as listed in Exhibit 4 of Schedule C.
o All other nightly report bundles in queue and ready to begin
transmission no later than 7:00 a.m. CT each business day -
95% measured monthly.
<PAGE> 41
IV STANDARDS FOR DELIVERY OF FILE TRANSMISSIONS
o CRITICAL FILES - The following jobs in queue and ready to
begin transmission no later than 4:30 CT each business day of
the Fund - a cumulative of two late files permitted per month:
<TABLE>
<CAPTION>
JOB NAME FREQUENCY APPLICATION
-------- --------- -----------
<S> <C> <C>
PFSRXCAD Daily Cap Stock File
PFSRXCYD Daily DISC Cap Stock File
PFSRXCTD Daily DISC ACH File
PFSRXCVD Daily DISC NSCC Green Sheets File
</TABLE>
o The following jobs in queue and ready to begin transmission no
later than 4:30 CT each business day of the Fund - 95%
measured monthly
<TABLE>
<CAPTION>
JOB NAME FREQUENCY APPLICATION
-------- --------- -----------
<S> <C> <C>
PFSRXCGD Daily Acceptance File
PFSRXCKD Daily Dealer File
PFSRXCHD Daily Order File
PFSRXCID Daily ShareA Master File
PFSRXCJD Daily Fund File
PFSRXCMD Daily Lot History File
PFSRXCND Daily Lot Maintenance File
PFSRXCLD Periodic. Dividend Activity
</TABLE>
The standards will not apply on business days with the
following activity: Processing of Year-end Dividend and
Capital Gain Activity, Annual Trustee Fee Payment; Year-end
File Initialization.
V STANDARDS FOR THE FUND
All inbound transmissions (i.e. SIAC, various third parties) and fund prices in
receipt by FDISG by 8:00 p.m. CT
VI RIGHT TO AUDIT
The Fund shall have the option, on an annual basis, to audit the reports used
to measure the standards listed in this Schedule F. Notice of an audit will be
given 14 days in advance, and the audit will not last more than one day.
<PAGE> 42
VII PENALTIES/INCENTIVES
FDISG agrees to achieve the performance levels specified in Schedule F,
Sections II, III, and IV, and semiannually (as of each June 30th and December
31st) to adjust the monthly Account Fee Invoice to reflect any
penalties/incentives as outlined below. Penalties for a given business day will
be applied only if the Standards of the Fund in Section V are achieved.
ON-LINE SYSTEMS AVAILABILITY - MONTHLY
For each one-tenth of 1% under 99%, the monthly Account Fees will be reduced by
the same percentage. The monthly maximum percentage penalty reduction will be
3% of the monthly bill. For each one-tenth of 1% in excess of 99% up to a
maximum of 1%, the monthly Account Fees will be increased by the same
percentage.
ON-LINE SYSTEMS AVAILABILITY - DAILY
If systems availability on any given business day is less than 80%, the monthly
account Fees will be reduced by the percentage of systems availability below
80% for that day times 1/30 of the monthly Account Fees.
REPORT AVAILABILITY - CRITICAL REPORTS
Monthly Account Fees will be reduced by $250.00 for each late instance greater
than the allowable error rate, up to a maximum of $500.00 per day. For each
month within the allowable error rate, monthly Account Fees shall be increased
by $1,000.
FILE TRANSMISSIONS - CRITICAL FILES
Monthly Account Fees will be reduced by $500.00 for each late instance greater
than the allowable error rate with a maximum penalty of $10,000 per month. For
each month within the allowable error rate, monthly Account Fees shall be
increased by $1,000.
The Performance Standards and related penalties set forth in this Schedule F
shall not apply in the event of any occurrence defined in Section 8(g) of the
Agreement.
<PAGE> 43
SCHEDULE G
IMPRESS PLUS SOFTWARE AND SUPPORT TERMS
ARTICLE 1 - SYSTEM, SUPPORT AND IMPLEMENTATION
1.1 Software and Support. FDISG shall provide or has previously provided
to the Fund and the Fund shall acquire from FDISG the right to use the computer
software programs set forth in Exhibit 1 of this Schedule G (the "Software"),
for the fees indicated in Schedule C of Amendment Number 3 to the Agreement.
Software includes related user manuals and reference guides (collectively,
"DOCUMENTATION"). One copy of the Documentation shall be provided to the Fund
at no additional cost. FDISG shall provide only the machine readable object
version of the Software and not source code. Additional terms and conditions
concerning the Software are set forth in Exhibits 1 of Schedule G ("EXHIBIT 1")
and Exhibit 1.1 of Schedule G ("EXHIBIT 1.1") (collectively, the "SOFTWARE
EXHIBITS"). Subject to the terms and conditions set forth in this Schedule G,
FDISG grants to the Fund and the Fund accepts from FDISG the non-exclusive,
non-transferable license to use the Software during the term of the Agreement
("LICENSE"). Some software components ("THIRD PARTY SOFTWARE") required to be
used with the Software were developed by a third party ("THIRD PARTY VENDOR").
Third Party Software is licensed to the Fund only pursuant to: (a) shrink
wrapped or other agreements between the Third Party Vendor and the Fund and (b)
the specifically indicated terms and conditions in this Schedule G. The
Software Exhibits shall indicate which Third Party Software the Fund is
required to obtain and license from FDISG and which Third Party Software the
Fund shall be solely responsible to obtain and license. As part of the
Software, FDISG shall provide the Fund with the interfaces set forth in Exhibit
1, between the Software and Third Party Software ("INTERFACES"). FDISG shall
provide the software support services ("SOFTWARE SUPPORT") so designated in
Exhibit 3 of Schedule G ("EXHIBIT 3"). Software Support shall include a
License to error corrections, minor enhancements and interim upgrades to the
Software which are made generally available to FDISG client's of the Software
under Software Support, but shall not include a License to substantial added
functionality, new interfaces, new architecture, new platforms or other major
software development efforts, as determined solely by FDISG.
1.2 Ownership. FDISG or its licensors shall retain tide to and ownership
of the Software, copies, derivative works, inventions, discoveries, patentable
or copyrightable matter, concepts, expertise, techniques, patents, copyrights,
trade secrets and other related legal rights ("PROPRIETARY INFORMATION"). FDISG
reserves all rights in the Proprietary Information not expressly granted to the
Fund in this Schedule G. Upon FDISG's reasonable request, the Fund shall inform
FDISG in writing of the quantity and location of any Software.
1.3 Equipment, System Implementation and Access. Fund is responsible for
acquiring, installing and maintaining the data processing and related equipment
("EQUIPMENT") set forth in Exhibit 2.1 of Schedule G with respect to production
equipment and Exhibit 2.2 of Schedule G with respect to Test/Training equipment
(collectively, ("EXHIBIT 2"). Additional terms and conditions concerning the
Equipment are set forth in Exhibit 2. The Equipment identified in Exhibit 2
represents the minimum equipment configuration required to properly operate the
Software. FDISG disclaims responsibility for the performance of the Software in
the event that the Fund utilizes equipment different than that which is set
forth in Exhibit 2. FDISG and the Fund shall (a) within a reasonable time after
the Effective Date, agree upon the tasks required to implement the Software,
Third Party Software and Equipment ("SYSTEM") and the party responsible and
time frames for each task ("SCOPE OF WORK"); (b) perform their respective
assigned tasks according to the Scope of Work; and (c) if not the party
assigned to a task, cooperate with the responsible party. To the extent the
Scope of Work is incomplete, FDISG shall follow its reasonable and customary
practices. Upon prior notice by FDISG to the Fund, the Fund shall give
reasonable access to the System to FDISG, FDISG's employees. affiliates,
representatives, agents, contractors, licensors and suppliers ("FDISG'S
AGENTS") who are providing services under the Agreement or auditing adherence
to the Agreement.
1.4 Use of Software. Fund may use the Software during the term of this
Agreement only on the Equipment and only to process the Fund's data for
internal business purposes (which shall not, for purposes of this Agreement,
include use by Fund to provide services to its customers on a service bureau
basis) and solely in connection with the Fund's use of the FDISG System and
only at the locations identified in the Agreement. If the Equipment is
inoperative due to malfunction, the license grant shall, upon written notice to
FDISG, be temporarily extended to authorize the Fund to use the Software on any
other equipment approved in writing by FDISG until the Equipment is returned to
operable condition. FDISG, in its reasonable discretion, may suspend any
Software Support while the Software is being used on such other Equipment. No
right is granted for use of the Software by any third party or by the Fund to
process for any third party, or for any other purpose whatsoever, except as
expressly provided in this paragraph. Except as otherwise specifically stated
herein, the Fund shall not modify, re-engineer, decompile or reverse engineer
the Software or otherwise attempt to obtain any source code without FDISG's
prior written consent.
<PAGE> 44
1.5 Software Installation and Acceptance. FDISG shall advise the Fund that
the Software as listed in Exhibit 1 is installed and functioning on the
Equipment ("Software Installation Date") so that implementation and training
activities can proceed. The Fund shall be deemed to have accepted the Software
sixty (60) days after Software Installation Date or sixty (60) days after the
Fund's first use of any Software component to process live production data
("SOFTWARE ACCEPTANCE DATE").
1.6 Copies of Software. The Fund may not copy the software except for
backup and archival purposes only, and the Fund shall include on all copies of
the Software all copyright and other proprietary notices or legends included on
the Software. The provisions of this Paragraph do not apply to Fund data files
in machine-readable form.
1.7 No-Export. The Software shall not be shipped or used by the Fund
outside the United States. The Fund shall comply with all applicable export and
re-export restrictions and regulations of the U.S. Department of Commerce or
other U.S. agency or authority. The Software shall not be transferred to a
prohibited country or otherwise in violation of any such restrictions or
regulations.
1.8 Termination. Terms and conditions of this Schedule G which require
their performance after the termination of the Agreement, including but not
limited to the License and Software use restrictions, limitations of liability,
indemnification, and confidentiality obligations, shall survive and be
enforceable despite the termination of the Agreement.
ARTICLE 2 - WARRANTIES AND REPRESENTATIONS
2.1 Software Warranties and Remedies. For the term of the Agreement, FDISG
warrants ("PERFORMANCE WARRANTY") that the Software shall perform on the
Equipment substantially in accordance with the Documentation and shall enable
the Funds to meet the requirements set forth in Section 240.17a-4 of the
Securities Exchange Act of 1934, except for Directly Obtained Third Party
Software as set forth in Section 2.2 below. The timely correction of errors
and deficiencies in the Software pursuant to Software Support shall be Fund's
sole and exclusive remedy for the Performance Warranty. FDISG warrants ("RIGHTS
WARRANTY") it has the right to license the Software in accordance with the
Agreement. Provided the Fund gives FDISG timely written notice, reasonable
assistance, including assistance from the Fund's employees, agents, independent
contractors and affiliates (collectively, "FUND'S AGENTS"), and sole authority
to defend or settle the action, then FDISG shall do the following
("INFRINGEMENT INDEMNIFICATION"): (a) defend or settle, at its expense, any
action brought against the Fund or the Fund's Agents to the extent the action is
based on a claim that the Software infringes a duly issued United States'
patent or copyright or violates a third party's proprietary trade secrets or
other similar intellectual property rights ("INFRINGEMENT"); and (b) pay
damages and costs finally awarded against the Fund or the Fund's Agents
directly attributable to such claim. FDISG shall have no Infringement
Indemnification obligation if the alleged Infringement is based upon the Fund's
use of the Software with equipment or software not furnished or approved by
FDISG or if such claim arises from FDISG's compliance with the Fund's designs,
or from the Fund's modifications of the Software. The Infringement
Indemnification states FDISG's entire liability for Infringement and shall be
the Fund's sole and exclusive remedy for the Rights Warranty.
2.2 Directly Obtained Third Party Software Warranties. All warranties for
the Directly Obtained Third Party Software identified Section 2.2 of Exhibit 1,
if any, are specifically set forth in the applicable agreements supplied by the
Third Party Vendors of such products.
2.3 Exclusion of Warranties. THE WARRANTIES SET FORTH IN PARAGRAPH 2.1
ABOVE AS TO THE SOFTWARE AND IN PARAGRAPH 2.2 ABOVE AS TO THIRD PARTY SOFTWARE
ARE IN LIEU OF ALL OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, ARISING
OUT OF OR RELATED TO THIS SCHEDULE G. FDISG SPECIFICALLY DISCLAIMS ALL OTHER
WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY,
NONINFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
2.4 Fund Responsibility. The System is an information system only,
designed to assist the Fund and the Fund's Agents in performing their
professional activities and is not intended to replace the professional skill
and judgment of the Fund's Agents. Fund shall be solely responsible for: (a)
acts or omissions of the Fund's Agents in entering data into the System,
including its accuracy and adequacy; (b) checking the correctness and accuracy
of the System output and data; and (c) any use of or reliance upon the System
output by the Fund's Agents. Except for the Infringement Indemnification and as
limited by applicable law, the Fund shall indemnify, defend and hold FDISG and
FDISG's Agents harmless from any losses, costs, damages, and liabilities,
including without limitation, reasonable attorneys' fees and court costs,
relating to any claim by any third party arising from or related to the Fund's
and the Fund's Agents' use of the System or System output.
ARTICLE 3 - MISCELLANEOUS
<PAGE> 45
3.1 Confidentiality Obligations. Each party shall keep confidential any
information relating to the other party's business which is clearly designated
or described in writing to be confidential ("CONFIDENTIAL INFORMATION"). Each
party shall keep and instruct its employees and agents to keep such information
confidential by using at least the same care and discretion as used with that
party's own confidential information. Information shall not be subject to such
confidentiality obligations if it is: (a) in the public domain, (b) known to a
party prior to the time of disclosure by the other party, (c) lawfully and
rightfully disclosed to a party by a third party on a non-confidential basis,
(d) developed by a party without reference to Confidential Information or (e)
required to be disclosed by law. If either party, its employees or agents
breaches or threatens to breach the obligations relating to use of the
Confidential Information, the other party may obtain injunctive relief, in
addition to its other remedies, inadequate monetary damages and irreparable
harm being acknowledged.
3.2 Confidential and Privileged Information. The Proprietary Information,
other FDISG software and related information, and the Agreement are
Confidential Information of FDISG and FDISG's Agents. Absent FDISG's written
permission, Fund shall not duplicate FDISG's Confidential Information. Fund
accepts full responsibility for complying with all laws, rules and regulations
concerning use and disclosure of privileged data regarding any information
placed or stored in the System or output from the System.
<PAGE> 46
EXHIBIT 1 OF SCHEDULE G
SOFTWARE
1. FDISG Software.
1.1 FDISG Software includes the following IMPRESS Plus products which are
further described in Exhibit 1.1 ("Specifications"):
IMPRESS Plus Workflow/Image Release 5.3
IMPRESS Plus Intelligent Workstations (IWT) Release 5.3 for FSR
IMPRESS Plus Customer Service System Release 5.3
1.2 Interfaces. Except as agreed in writing, FDISG shall not be required
to modify the Software or the Interfaces to accommodate changes made by the
Fund's vendor to its portion of the interface. If the Fund's vendor needs
information about the Software, then the vendor must first execute a
nondisclosure agreement in form and content reasonably acceptable to FDISG.
FDISG shall not be liable for any delay or degradation to the Software or
Equipment attributable to the Fund's use of Interfaces.
1.3 Customization. The listed products are licensed for IMPRESS Plus use
and customization only. Use of these tools to develop or customize non-IMPRESS
Plus applications is not permitted without the express written authorization of
FDISG.
2. Third Party Software.
2.1 FDISG Provided Third Party Software. The following Third Party
Software is licensed to the Fund directly by FDISG subject to the terms of the
Agreement:
2.1.1 BancTec Software. The following Third Party Software is licensed
directly to the Fund by FDISG subject to the mandatory BancTec ("BancTec")
terms and conditions set forth in Attachment 1 of this Exhibit 1 of Schedule G
("Attachment 1"), attached and incorporated by reference. To the extent that
the terms of Attachment 1 conflict with or differ from the other terms and
conditions in the Agreement, the terms of Attachment 1 shall prevail with
respect to the following BancTec Software ("BancTec Software"):
Informix Multi-User with 512 maximum users
XDP Storage Manager Multi-User with 512 maximum users
FloWare Multi-User with 512 maximum users
Application Designer Single-User with 512 maximum users
2.1.2 Pegasystems Software. The following Third Party Software is licensed
directly to the Fund by FDISG subject to the mandatory Pegasystems
("Pegasystems") terms and conditions set forth in Attachment 2 of this Exhibit
1 of Schedule G ("Attachment 2"), attached and incorporated by reference. To
the extent that the terms of Attachment 2 conflict with or differ from the
other terms and conditions in the Agreement, the terms of Attachment 2 shall
prevail with respect to the following Pegasystems Software ("Pegasystems
Software"):
Product Name Version Function
PegaSHARES RES 6.2 Workflow Engine
PegaENVIRONMENT ENV 4.2 Operating Shell
PegaPRISM Prism 5.1 Image Viewer
PegaStorage Manager Stor 2.1 Image Librarian
PegaREACH Real.0 Desktop Graphical Interface
2.2 Directly Obtained Third Party Software. The following Third Party,
Software is separately licensed by the Third Party Vendor directly to the Fund
subject to the respective terms and conditions of any "shrink-wrapped" or
<PAGE> 47
other agreements between the Third Party Vendor and the Fund. The Third Party
Software in the Required Column must be obtained by the Fund. The Third Party
Software in the Optional column is helpful but not required unless the
indicated features are being used. The Fund accepts the provisions of such
agreements, including the warranty provisions, if any, and agrees to comply
with the terms set forth in such agreements:
<TABLE>
<CAPTION>
Required: Optional:
<S> <C>
- - Microsoft DOS 6.2 or higher - ALCOM LanFax Redirector V2.15gl or greater
- - Microsoft Windows 95 or NT 4.0 (required if using fax)
- - Microsoft Office 95 or better - HiJaak PRO 2.0 or greater for Windows
- - Microsoft NT Server 3.5 (required if using fax)
- - Microsoft NTSQL Database 4.x and client - Word for Windows 6.Oc or greater (required if
Licenses using fax)
- - Microsoft TCP/IP Stack - Quarterdeck QEMM 7.X or greater (required if
- - Novell NetWare 3.11 or greater using fax)
- - SNA Server 3.0 or higher - CGS Computer Associates, Inc. Scanlib software
- - UNIX for selected Image Server platform (required for Ricoh scanners)
- - UNIX ESQL/C Compiler for selected - Powersoft PowerViewer (required for adhoc
UNIX platform reports)
- - MDI Gateway for DB2 by - 3270 Windows emulation package
MicroDecisionware Inc., A Sybase client (usually Rumba for Windows by WaUData)
- - Sybase Open Client NetLibrary for the
selected TCP/IP stack
</TABLE>
<PAGE> 48
ATTACHMENT 1 OF EXHIBIT 1 OF SCHEDULE G
TERMS AND CONDITIONS
BANCTEC
1. Each BancTec Software Package listed in Exhibit 1 of Schedule G
("Program") which is identified as "Multi-User Program" is licensed for
installation on a single network server computer which is supplied by BancTec,
FDISG, or a third party, and which is electronically linked with one or more
workstations having access to the Program. If Section 2.1.1 of Exhibit 1 of
Schedule G ("Exhibit 1") designates a maximum number of users authorized to
simultaneously access the Multi-User Program, no access will be permitted in
excess of such maximum number. In all other cases, Multi-User Program is
authorized to be accessed by all workstations which are configured to
communicate with that network server computer.
2. Each Program listed in Exhibit 1 identified as "Single-User Software"
is licensed for installation and use on a single computer.
3. Each Program listed in Exhibit 1 identified as an "Unlimited User
Program" is licensed for use by Client after ordering a copy of the Program.
Once ordered, the Fund may make unlimited copies of such Programs at no
additional charge.
4. Each Program listed in Exhibit 1 identified as a "Device Program" is
licensed for use solely to facilitate the operation of the corresponding
equipment device. If a Device Program is used for more than one device, the
license must be upgraded in accordance with Exhibit 1.
5. Each Program listed in Exhibit 1 identified as a "Development-User
Program" is licensed for installation and use on a single computer for
development and testing purposes. The license for Development-User Programs
also includes a license for production use on a single computer.
6. Each Program listed in Exhibit 1 identified as a "Production-User
Program" consists of necessary runtime modules and associated link libraries
for inclusion with custom software applications. Production-User Programs are
not licensed for use in the development of custom software applications and may
be either Multi-User or Single-User Programs.
7. Only a nontransferable, nonexclusive, perpetual license to use the
Programs and related BancTec documentation for its own internal use (including,
without limitation, providing processing services to third parties in a service
bureau or facilities management environment) is granted to the Fund.
8. BancTec or its vendors retain all title to the Programs, and all
copies thereof, and no title to the Programs, or any intellectual property in
the Programs, is being transferred; provided, however, nothing contained herein
shall give BancTec or its vendors any right, title or interest in the Software.
9. The Programs shall not be copied, except as specifically authorized
under an Exhibit to this Agreement and except for backup or archival purposes.
All such copies shall contain all copyright and other proprietary notices or
legends of BancTec or its vendors contained in the Programs delivered under
this Agreement.
10. The Programs shall not be modified, reverse assembled or decompiled by
the Fund. No attempt shall be made by the Fund to derive source code from the
Programs.
11. The Programs will not be shipped or used by FDISG or the Fund to
Africa or the Middle East. All applicable export and re-export restrictions and
regulations of the U.S. Department of Commerce or other U.S. agency or
<PAGE> 49
authority shall be complied with. The Programs shall not be transferred to a
prohibited country or otherwise in violation of any such restrictions or
regulations.
12. Each Program is copyrighted and contains proprietary and confidential
trade secret information of BancTec and its vendors. Each sublicensee of the
Programs shall protect the confidentiality of the Programs with at least the
same standard of care used to protect the Fund's own similar confidential
information.
13. BancTec and its vendors are each a direct and intended beneficiary of
the sublicenses granted for the Programs and may enforce such sublicenses
directly against sublicenses of the Programs.
14. Neither BancTec nor its vendors shall be liable to the Fund for any
general, special, direct, indirect, consequential, incidental, or other damages
arising out of the sublicense of the Programs.
15. The license granted to the Fund of the Programs may be terminated,
either immediately or after a notice period not exceeding thirty (30) days,
upon violation by the Fund of any of the terms or conditions of the Agreement,
including but not limited to Attachment 1.
16. Upon termination of the license grant to the Fund to use the Program
or the Agreement, the Fund shall return all copies of the Programs to FDISG.
<PAGE> 50
ATTACHMENT 2 OF EXHIBIT 1 OF SCHEDULE G
PEGASYSTEMS TERMS AND CONDITIONS
In addition to the terms of the Agreement, the following terms shall apply with
respect to the Pegasystems Software:
1. The Fund is prohibited from assigning, timesharing, renting, or
hypothecating any of the Pegasystems Software, without prior written approval
of Pegasystems.
2. The Fund is prohibited from passing or transferring any right, title,
or interest to the Pegasystems Software to any third party.
3. The Fund is prohibit from publicizing or disseminating any results of
any benchmark or other testing of the Pegasystems Software.
4. To the fullest extent permitted by applicable law, (i) Pegasystems
shall have no liability to the Fund for damages and claims, whether direct,
indirect, incidental, consequential, or punitive, and all attorneys' fees and
costs, arising from the Fund's use of the Pegasystems Software, and (ii) the
Fund shall have no rights to assert claims for damages against Pegasystems,
including claims against Pegasystems as a third party beneficiary of this
agreement.
5. Pegasystems, Inc. is a third party beneficiary of this agreement to
the extent permitted by applicable law.
<PAGE> 51
IMPRESSive Technology, IMPRESSive Results
EXHIBIT 1.1 OF SCHEDULE G
SPECIFICATIONS
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. PRODUCT OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . Page 1
II. PRODUCT BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . Page 3
III. TECHNICAL OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . Page 5
IV. HIGH LEVEL OVERVIEW OF IMPRESS Plus FUNCTIONALITY . . . . . . . Page 6
A. Workflow Management
B. Image Processing
C. Intelligent Workstation Processing
D. Customer Service System
</TABLE>
This item is the property of First Data Investor Services Group (First Data) of
Boston, Massachusetts, and contains confidential and trade secret information.
This item may not be transferred from the custody or control of First Data
except as authorized by, and then only by way of loan for limited purposes. It
must be returned to First Data upon request and, in all events, upon completion
of the purpose of the loan. Neither this item nor the information it contains
may be used or disclosed to persons not having a need for such use or
disclosure consistent with the purpose of the loan, without the prior written
consent of First Data.
Copyright First Data Investor Services Group
1994, 1995, 1996
ALL RIGHTS RESERVED
This media contains unpublished, confidential, and proprietary information of
First Data Investor Services Group. No disclosure or use of any portion of
these materials may be made without the express written consent of First Data
Investor Services Group.
<PAGE> 52
IMPRESSive Technology, IMPRESSive Results
I. PRODUCT OVERVIEW
IMPRESS Plus is First Data's workstation product. Designed to be a
cost-effective customer service and workflow management solution, it
takes an integrated approach to transfer agent service and processing
applications. IMPRESS Plus uses an open, three-tiered, client/server
architecture that provides both the flexibility and scalability to
address client's customization and growth needs.
IMPRESS Plus's valuable benefits include:
o Extensive management tools and employee empowerment via
intelligent workstation technologies.
o A lower cost of processing delivery through workflow routing
and document imaging.
o Efficient customer service through reduced research time,
automated inquiry tracking and correspondence tracking.
o State-of-the-art three-tiered client/server architecture
backed by relational databases and open systems.
o Client configurable screens, dialogue scripts, and workflow
rules for those components which use the Pegaysystems
technology.
o Automated correspondence generation.
IMPRESS Plus consists of these major components:
1.) A SOPHISTICATED MANAGEMENT WORKFLOW TOOL that contributes to
streamlining the flow of information on an enterprise-wide
basis. Automated workflow processes are systematically created
and the user's process is automatically documented at the same
time. Product users can continuously examine and redesign
their current processes, managing them interactively, focusing
on improving organizational productivity and quality.
2.) AN IMAGE PROCESSING SYSTEM that has the ability to scan
incoming documents, store them digitally and automatically
route them to the appropriate processing department thereby
eliminating paper from the workflow. This system also allows
for long term storage of documents and document retrieval.
Users can modify workflow and business rules on site.
3.) AN INTELLIGENT WORKSTATION APPLICATION (IWT) that improves
data entry speed and service quality by using graphical user
interface tools that seamlessly connect the user's desktop to
First Data's transfer agent processing systems, office
automation tools, correspondence/service tracking and
policy/procedure access systems.
4.) A CUSTOMER SERVICE SYSTEM that automates and enhances the
correspondence and customer servicing areas in mutual fund
operations. Customer Service staff can log all activity, such
as phone calls, letters, transactions, etc., while interacting
with customers. The system enables the service representative
to perform transactions over the phone, create "electronic
forms" consisting of instructions for other processors, and
dynamically sends work items to other staff electronically.
The Customer Service System is designed to enhance the quality
and efficiency of the service provided to customers through
the use of state-of-the-art client/server technology.
<PAGE> 53
IMPRESSive Technology, IMPRESSive Results
II. PRODUCT BENEFITS
o Allows clients to process transactiona and customer
correspondence quickly and efficiently.
o Allows clients to be at the leading edge of technology to
maintain competitiveness and to effectively deliver quality
service.
o IMPRESS Plus enables the organization to:
- enhance service responsiveness and quality
- streamline workflow and improve document control by
eliminating paper
- increase employee productivity and participation
- have access to real-time production statistics
- enhance organization cohesion and effectiveness
- reduce manual tasks
- increase accuracy by using intelligent rules-based
applications
- reduce processing costs
- Tie Customer Service Reps to sales
o The IMPRESS Plus workflow tools allow business/operational
workflows to be set up. Automated workflow processes are
created and the user's process is automatically documented at
the same time. Product users can continuously examine and
redesign their business processes and manage them
interactively, focusing on improving organizational
productivity and quality.
o IMPRESS Plus is a scaleable and flexible solution that allows
the user to choose an enterprise-wide or a departmental
solution. It allows the client to determine an implementation
strategy that meets their strategic plans and goals.
o The IMPRESS Plus product platform allows the user to build
upon and utilize future First Data services such as
information delivery of shareholder/investor data, sales and
marketing data and customer service processing.
o IMPRESS Plus is modular to support increasing volumes,
increasing numbers of users and future advances in component
technologies. This allows for functional as well as
enterprise-wide solution.
o The IMPRESS Plus product's UNIX and NT-based platform allows
for the flexibility and growth needed to market position and
grow in the '90s to meet the demands of the mutual fund
industry.
o IMPRESS Plus is developed to run in an open systems
environment, so that the application has the ability to
incorporate diverse hardware choices, such as servers,
scanners and printers.
Additional benefits that can be provided through customization of
certain products include:
o Ability for AIM Funds operations associates to customize
interfaces, rules, scripts, etc. based on predefined "levels"
of operators. Levels may range from entire organization right
down to the individual CSR.
o Creation of an Integrated Service Backbone within the AIM
organization designed to allow consistent processing of
service items, documents, correspondence, etc. regardless of
where they originated. (Internet, scan mail, fax, phone,
etc.)
o Optional ability to link VRU to the desktop via CTI and
related technologies for more efficiency and quality in
servicing.
<PAGE> 54
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
o Ability for AIM Funds operations associates to change workflow rules,
scripts, menus, screens, etc. associated with the front end servicing
applications as they see fit to effectively run their business efficiently
and with highest regard to quality.
o Ability for AIM Funds to introduce intelligent, 'point of contact'
scripting for service associates in the front end selling process.
Through the customized rules capability, AIM Funds can set up random
sales, campaigns, or promotions. In addition, IMPRESS Plus can be told
when to prompt CSR's that selected promotions apply to the customer at
hand based on data points in the customer's profile, recent activity, or
the like.
<PAGE> 55
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
III. TECHNICAL OVERVIEW
First Data's combined Customer Service, Workflow, Image and
Intelligent Workstation (IWT) technologies enable users to display the
digitized image of a shareholder form on the workstation along with
other service, data entry and office automation applications. This
allows a user to enter information directly from the image without
having to look away from the screen or handle paper. IMPRESS Plus
will have access to First Data's transfer agent processing system,
office automation tools, and correspondence tracking and
policy/procedure access systems. First Data has developed the
workflow and image capabilities of the system to meet the needs of the
financial industry.
The Customer Service and Intelligent Workstation applications improve
data entry speed and quality by using graphical user interface tools
and LAN/WAN topologies to seamlessly connect the users desktop to the
mainframe servers. These tools and technologies will significantly
off-load transactions and query processing from the mainframe by
putting these capabilities on the desktops and empowering the
end-user.
IMPRESS Plus is designed to run in an open systems environment. It has
the ability to incorporate various workstation platforms due to a
common set of access routines and open communication architecture.
IMPRESS Plus supports high-performance networking architectures
including Novell's SPX/IPX as well as the UNIX TCP/IP standard. SNA
connectivity is supported for LU6.2, 3270, and 5250 communications.
The application supports Microsoft Windows 3.11, Windows 95, and NT
client workstations, multiple UNIX server back-end platforms, and the
latest client/server database technologies offered by the INFORMIX and
Microsoft database systems.
IMPRESS Plus contains a state-of-the-art integration API (application
programming interface) that allows other applications, including
customer-specific applications, to be seamlessly integrated into
IMPRESS Plus.
The Customer Service and IWT applications have been designed with an
object-based architecture that allows one common application to
support First Data's multiple back-end transfer agent systems. They
are designed around First Data's newly defined and implemented
corporate data model. This model represents the future data source
for First Data's common transfer agent application. This object-based
architecture allows for a high level of client customization and
integration.
<PAGE> 56
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
IV. HIGH LEVEL OVERVIEW OF IMPRESS PLUS FUNCTIONALITY
WORKFLOW MANAGEMENT FUNCTIONALITY OVERVIEW
WORKFLOW DYNAMIC WORKFLOW DESIGN AND MONITORING
MANAGEMENT
IMPRESS Plus provides a set of client/server based tools that
allow designers and authorized system users to build workflow
rules to be implemented on the work floor. These rules can be
built and implemented, then changed as required by trained
administrators.
GENERIC WORKFLOW AVAILABLE FOR ALL TRANSACTIONS
IMPRESS Plus offers a generic wordflow that can be used for
any transaction type that is designated in an operation.
Liquidations, correspondence, new accounts, etc. are just some
examples of transactions that can be processed through this
generic workflow. Should the workflow need to be customized or
altered, it can be.
WORK FLOW MONITORING
IMPRESS Plus provides the following work flow monitoring
activities in a real time mode:
o Allow users with the proper security access to
monitor the status of workflow activities or entire
work flow maps
o Monitor work-in-process items via a graphical display
which produces bar graphs in a variety of
presentation formats
o Monitor multiple statistics simultaneously on a
graphical display.
PRIORITIZATION OF WORK
IMPRESS Plus allows the setting of a default priority of items
during workflow design, and, in addition, dynamically during
work in process. During work in process, an item's priority
is based on its transaction type, its default or subsequently
manually altered priority setting, as well as its age in the
activity queue.
<PAGE> 57
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
WORKFLOW MANUAL ROUTING OF ITEMS
MANAGEMENT
(CONTINUED) IMPRESS Plus allows items to be manually routed to
workflow map destinations, or, in some cases, to
specific end users by those users with authorization
to do so.
AUTOMATIC ROUTING OF WORK
IMPRESS Plus routes work items to the next
destination on a pre-defined set of workflow rules.
These rules can be overridden by the user when
necessary.
ITEM COPY ROUTING
IMPRESS Plus allows users to make "copies" of items
within the workflow and route them to other workflow
activities. This is commonly used when an individual
processing the work determines that an item must be
forwarded to another processing department or review
the steps because it is actually two or more
transactions.
ENHANCED QUALITY CONTROL
IMPRESS Plus allows for random or pre-determined QC,
statistical QC, or other more intelligent or
selective QC means.
ENHANCED QUALITY ASSURANCE
IMPRESS Plus allows for random or pre-determined QA,
statistical QA, or other more intelligent or
selective QA means.
<PAGE> 58
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
IMAGE FUNCTIONALITY OVERVIEW
IMAGE DOCUMENT SCAN, STORE, ROUTE, AND RETRIEVE
PROCESSING
IMPRESS Plus captures, through scanning, electronic
images OF documents, stores these electronic images
on magnetic disk, and subsequently allows for
retrieval of the electronic images. IMPRESS Plus
allows images to be accessed for image quality review
and provides for the rescanning of images determined
to be of unacceptable quality. Following the
completion of scanning and any image quality review,
items are automatically routed to subsequent
activities, based on a predefined set of workflow
rules.
ELECTRONIC DOCUMENT IMAGE PRESENTATION AND
MANIPULATION
IMPRESS Plus allows images to be viewed on image-
enabled workstations. Multi-page documents can be
scrolled through, and selected portions of an image
can be magnified.
IMAGE CROSS-REFERENCE TO PHYSICAL DOCUMENT LOCATION
TRACKING
AND RETRIEVAL IMPRESS Plus is designed so that the image database
stores the location of the physical document for each
document image. This location - known as a storage
box - is entered into the system while scanning
documents.
INDEXING OF IMAGES
IMPRESS Plus automatically assigns a unique indexing
number to each document that is created through
scanning. The unique indexing number consists of a
system-generated number that can subsequently be used
to cross-reference an item to a mainframe transfer
agent system. In addition, IMPRESS Plus allows for
the alternate indexing of documents by other user-
entered fields such as fund/account.
SOURCE KEY GENERATION AND DISPLAY
Each transaction type processed within IMPRESS Plus
receives a unique identifier that can be used to link
an item to the First Data transfer agent system.
This key may also be used for document retrieval.
IMAGE SCANNING, INDEXING, AND STORAGE OF DOCUMENTS
TRACKING PROCESSED PRIOR TO IMAGE WORKFLOW
AND RETRIEVAL
(CONTINUED) Through the IMPRESS Plus merge facility, users can
scan documents processed prior to the installation of
IMPRESS Plus. The merge facility allows you to
associate documents with existing, already scanned
and indexed documents, making them available for
future inquiry using IMPRESS Plus.
IMAGE ARCHIVAL AND SUBSEQUENT RETRIEVAL FROM OPTICAL
STORAGE
IMPRESS Plus provides storage and backup functions
for data objects, is designed to handle media
management, and communicates with the database
management system. IMPRESS Plus supports archival of
items to magnetic or selected WORM (Write Once
<PAGE> 59
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
Read Many) optical media. Archival from magnetic to
optical media criteria are set during installation
time.
PRINTING OF IMAGES
IMPRESS Plus allows you to print copies of document
images at LAN-based printers equipped with the
appropriate print server components.
REAL-TIME ADMINISTRATION TOOLS
IMPRESS Plus offers an administration function that
allows authorized users to add and maintain user
profiles, funds, transaction types, locations, and
other client site-specific data. This tool also
allows authorized users to change courier status,
determine the status of work that may have been
affected by an environmental mishap, and perform
other administrative tasks.
DOCUMENT/ACTIVITY HISTORY AND AUTOMATIC UPDATE
IMPRESS Plus automatically records and stores
document/activity history statistics on audit trail
logs during workflow activities, and produces
standard reports for such items as:
o Workflow activity type
o Date/time/user of each activity
o Beginning/ending date/time of each activity
o Last update user/date/time
ADMINISTRATIVE IMPRESS Plus allows much of this activity history to
FUNCTIONS be viewed on-line in various portions of the
(CONTINUED) application.
PRODUCTIVITY REPORTING AND QUALITY/TIMELINESS
REPORTING
IMPRESS Plus logs document/activity history
statistics to produce standard productivity reports
that can be run at the client's request.
ADHOC REPORTING
IMPRESS Plus provides a suite of standard reports
that can be customized. A client can also create
their own additional reports.
QUALITY CONTROL PROCESSING
IMPRESS Plus currently allows for processing
activities to be reviewed for quality by routing them
to a Quality Control queue. Authorized users can
then QC work items. Future IMPRESS Plus releases
will include various rule-based options for selective
quality control. IMPRESS Plus prevents users from
quality control checking their own work.
ACCESS SECURITY
IMPRESS Plus image processing provides security
access in the form of user logons and user profiles.
Users must have a user ID to access the system and
are further constrained by their user profile. The
client assigns user IDs for staff to access the
system and specifies the parameters of each user
profile. These profiles limit users to performing
<PAGE> 60
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
only those specific activities for which they have
been given permission (e.g. processing, scan, etc.).
It is recommended that the logon IDs match the user's
logon ID from the First Data transfer agent system.
VALUE-ADDED SHAREHOLDER ACCOUNTING SYSTEM ACCESS
FUNCTIONALITY
IMPRESS Plus allows workstation access to First
Data's transfer agent recordkeeping system. 3270
terminal emulation is accomplished through a
Windows-based software application. Keyboard mapping
is limited to the technical capabilities of the
emulation software and/or hardware.
DYNAMIC DATA EXCHANGE (DDE) FUNCTIONALITY
IMPRESS Plus will allow for Dynamic Data Exchange at
selected points in application modules when necessary
to transfer data between processes. An example would
be the passing of a source key stored on a transfer
agent system history line to the imaging inquiry
screen for a customer service operator.
ON-LINE HELP FOR USERS
IMPRESS Plus offers a comprehensive on-line help
system that follows Microsoft Windows help system
conventions. It is designed to serve both new users
learning how to use the system and more experienced
users who may occasionally need assistance or
additional information.
SYSTEM ADMINISTRATION PROCEDURES
IMPRESS Plus System Administration is made easier for
designated IMPRESS Plus technical support staff due
to the IMPRESS Plus Systems Administration and
Procedures manual and related documentation.
<PAGE> 61
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
INTELLIGENT WORKSTATION PROCESSING
(IWT) FUNCTIONALITY OVERVIEW
INTELLIGENT IWT is designed with a graphic interface ("GUI")
WORKSTATION which will provide an intelligent real-time interface
PROCESSING to the First Data transfer agent system for the
(IWT) following transaction activity:
NEW ACCOUNT SETUP
The IWT new account setup application is designed to
provide a MS/Windows graphic interface ("GUI") to
allow an intelligent real-time interface to the First
Data transfer agent system. New account setup
functionality includes:
o new account setup entry
o dealer/rep list
o TIN list for shareholder list
o systematic city and state population based on
entry of a 5 digit zip code
o dividend/cap gain addresses
o beneficiary addresses
o statement addresses
o ABA lookup and validation
o fund list
o wire and ACH bank addresses
Financial Transactions
The IWT financial transaction entry application is
designed to provide a MS/Windows graphic interface
("GUI") to allow an intelligent real-time interface
to the First Data transfer agent system. Financial
transaction entry functionality includes:
o telephone redemptions
o telephone exchange
o exchange processing
o transfer processing
o redemption processing
o subscription processing
Group
o linking and linking of accts by ROA, confirm,
L01, plan
<PAGE> 62
IMPRESSIVE TECHNOLOGY, IMPRESSIVE RESULTS
CUSTOMER SERVICE & ENHANCED INQUIRY SYSTEMS
FUNCTIONALITY OVERVIEW
CUSTOMER The Customer Service System is a client/server based,
SERVICE graphical user interface (GUI) system designed to
SYSTEM provide an intelligent real-time application to
enable clients to improve the quality of the service
provided to both shareholders and broker dealers.
This system provides functionality in the following
areas:
CONTACT TRACKING AND MANAGEMENT
A key feature of the Customer Service System will be
the ability to track and report on all interaction
with an end customer, be it a shareholder or
broker/dealer. Designed for ease of use by a
customer service representative, this system will
allow for the logging of telephone calls and
correspondence, the creation and updating of service
items, the processing and resolution of customer
issues to insure customer satisfaction at the end of
any contact. In addition, via reason codes and aging
information, management is empowered with the use of
statistical and trending reports regarding contact
made with their customer base .
CORRESPONDENCE GENERATION AND TRACKING
The Customer Service System is closely integrated to
word processing to allow for the automatic generation
of outgoing correspondence related to service items.
A service representative can choose from customized
pre-defined letters to generate high quality customer
correspondence.
TELEPHONE TRADING
Authorized customer service system users will be able
to perform transactions while on the telephone with
customers by invoking simplified graphical data entry
screens. In addition, customer service
representatives can create electronic forms
consisting of processing instructions for other
departments and dynamically send route these work
items via the workflow manager.
CUSTOMER ENHANCED INQUIRY
SERVICE
SYSTEM The Enhanced Inquiry windows provide enriched and
(Continued) user-friendly replacements for legacy transfer agent
inquiry screens. Examples of the inquiry functions
are search for customer information by name, account
number and social security number, account
information, financial transaction history, service
history, and correspondence history.
<PAGE> 63
EXHIBIT 2.1 OF SCHEDULE G
EQUIPMENT
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
IMPRESS IMAGE PRODUCTION HARDWARE AND SYSTEMS SOFTWARE
- ---------------------------------------------------------------------------------------------------------
PRODUCT Description QTY
<S> <C> <C> <C> <C>
486/66 DX, 200 MB HG, 16 MB RAM, Network Intface
Card, VGA Monitor, Windows 3.1, Novell LWP 5.0,
Print Servers Parallel Cable for printer 10
- ---------------------------------------------------------------------------------------------------------
HP IV+ / 5 Laser Printer with 6 MB Ram, Jet Direct for
Printers other printing can be installed 10
- ---------------------------------------------------------------------------------------------------------
P100 or greater, 540 MB HG, 16 MB RAM, Network
Interface Card, Cornerstone DP120 Mono, Image
Accel2 PCI, Adaptec 1542cp SCSI Card, SCSI Cable,
Scan Server Terminator. 5
- ---------------------------------------------------------------------------------------------------------
Ricoh IS-520 SCSI with Ink Jet Endorser. SCSI
Mid Speed Scanner Version 5
- ---------------------------------------------------------------------------------------------------------
Sun SPARCstation 5 Model 170, 17" Color Display,
48MB RAM, 2X2.1 GB Int disks, 4mm Tape, 3.5"
Floppy Drive, CD-ROM, Solaris 2.5.1, Solarais
Answerbooks, 1 @ X1053A, Solaris 2.5.1 SDK Kit,
Kodak Scan Server Solaris 2.5.1 Motif ToolKit, SUN Professional C 4.0 3
- ---------------------------------------------------------------------------------------------------------
High Speed Scanner Kodak 923D Scanners 3
- ---------------------------------------------------------------------------------------------------------
Sun ULTRAserver 6000, 12 250MHZ CPU's, 17" Color
Display, 1.2GB RAM, 2x9 GB Int disks, DG Clariion 42
Gb Raid 5 disk array, 4mm Tape, CD-ROM, Solaris
2.5.1. Answerbooks, 35/7OGb DLT Tape Changer, 1 @
1053A, 1 @ X1052A, 2 @ X1062, Fast
Image Server Ethernet/FDDI/ATM 1
- ---------------------------------------------------------------------------------------------------------
CYGNET 1802 with (3) Philips LD6100 Optical Drives,
Jukebox Optical SCSI Cable, RS-232 Null Modem Cable 1
- ---------------------------------------------------------------------------------------------------------
P100 or greater, 540 MB HG, 32 MB RAM, Network
Interface Adapter, 15" SVGA Monitor, Resolution of at
least 1024 x 768, Windows 3.1, Hiijack Pro for
Fax Controller PC Windows, Microsoft Word 6.X 1
- ---------------------------------------------------------------------------------------------------------
Tower Style P90 or greater, 2 GB HG, 32 MB RAM,
Network interface adapter, 14" VGA Monitor, (4)
Gamalink CP4/LSI Fax Cards (4) Lines per card,
FAX Server** QEMM 8.X, Allcom LANFAX 2.15gl/2.2gl 1
- ---------------------------------------------------------------------------------------------------------
Existing File Server with at least 500 MB of disk space
Novell File Servers available 2 or 3
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
**The fax server will require analog modem lines a max of 16 lines would
- ---------------------------------------------------------------------------------------------------------
be required for the hardware listed above.
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (SUN, Optical) (10 KVA) 1
- ---------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (SUN) (1.4 KVA) 3
- ---------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (FAX HW) (1 KVA) 2
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 64
EXHIBIT 2.1 OF SCHEDULE G
EQUIPMENT
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
28.8 K Modem, lines, and cables (SUN for remote
Remote Link suppor) 1
- ---------------------------------------------------------------------------------------------------------
Equipment to maintain a routed or switched network
environment with no more that 25-30 clients per
Network Hardware network segment.
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Pentium 90 or greater with 24-32MB ram. Display
should optimally support Image resolutions of
1600X1280 but other resolutions can be supported for
Workstations casual use. (1280X1024) 400
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Software required on all workstations
- ---------------------------------------------------------------------------------------------------------
Windows 95, Windows NT
- ---------------------------------------------------------------------------------------------------------
Microsoft Word 6.X or Greater
- ---------------------------------------------------------------------------------------------------------
Microsoft TCP/IP Stack
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 65
EXHIBIT 2.2 OF SCHEDULE G
EQUIPMENT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
IMPRESS Test/Training Hardware and Systems Software
- -------------------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION QTY
<S> <C> <C> <C> <C>
486/66 DX, 200 MB HG, 16 MB RAM, Network Intface
Card, VGA Monitor, Windows 3.1, Novell LWP 5.0,
Print Server Parallel Cable for printer 1
- -------------------------------------------------------------------------------------------------------
HP IV+/5 Laser Printer with 6 MB Ram, Jet Direct for
Printer other printing can be installed 1
- -------------------------------------------------------------------------------------------------------
P100 or greater, 540 MB HG, 16 MB RAM, Network
Interface Card, Cornerstone DP 120 Mono, Image
Accel2 PCI, Adaptec 1542cp SCSI Card, SCSI Cable
Scan Server Terminator 1
- -------------------------------------------------------------------------------------------------------
Ricoh IS-420 SCSI with Ink Jet Endorser, SCSI
Low Speed Scanner Version 1
- -------------------------------------------------------------------------------------------------------
Sun ULTRAserver 1, 250MHZ CPU, 17" Color Display,
128MB RAM, 2X2.1 GB Int disks, SUN 4GB External
Disk Pack, (2) 4mm Tape Drives, CD-ROM, Solaris
Image Server 2.5.1, Answerbooks, 1 @ 1053A, 1 @ X1052A. 1
- -------------------------------------------------------------------------------------------------------
Phillips LD6100 Optical Drive Differential, SCSI Cable
Standalone Optical SCSI Differential Terminator. 1
- -------------------------------------------------------------------------------------------------------
P100 or greater, 540 MB HG, 32 MB RAM, Network
Interface Adapter, 15" SVGA Monitor, Resolution of at
least 1024 X 768, Windows 3.1, Hijack Pro for
Fax Controller PC Windows, Microsoft Word 6.X 1
- -------------------------------------------------------------------------------------------------------
Tower Style P90 or greater, 1 GB HG, 32 MB RAM,
Network interface adapter, 14" VGA Monitor, (1)
Gamalink CP4/LSI Fax Cards (4) Lines per card,
FAX Server** QEMM 8.X, Allcom LANFAX 2.15gl/2.2gl 1
- -------------------------------------------------------------------------------------------------------
Existing File Server with at least 500 MB of disk space
Novell File Servers available 1
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
** THE FAX SERVER WILL REQUIRE ANALOG MODEM LINES A MAX OF 4 LINES WOULD BE
REQUIRED FOR THE HARDWARE LISTED ABOVE.
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (FAX) (1 KVA) 1
- -------------------------------------------------------------------------------------------------------
UPS OnLine UPS Equipment (SUN, Optical) (3 KVA) 1
- -------------------------------------------------------------------------------------------------------
28.8 K Modem, lines, and cables (SUN for remote
Remote Link suppor) 1
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Pentium 90 or greater with 24-32 MBram. Display
should optimally support image resolutions of
1600X1280 but other resolutions can be supported for
Workstations casual use. (128X1024) 10
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Software required on all workstations
- -------------------------------------------------------------------------------------------------------
Windows 95, Windows NT
- -------------------------------------------------------------------------------------------------------
Microsoft Word 6.X or Greater
- -------------------------------------------------------------------------------------------------------
Microsoft TCP/IP Stack
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 66
EXHIBIT 3 OF SCHEDULE G
MAINTENANCE AND SUPPORT TERMS
These terms are based on an IMPRESS User network environment of up to 512 Users
and the associated server(s), as described in Exhibits 1 and 2 of this Schedule
G.
1. Software Support.FDISG shall provide the following Software support
services ("Software Support"):
1.1. FDISG shall provide the Fund with full System Administration Guide(s)
for FDISG Software.
1.2. FDISG will have a Response Center (help desk) to provide 24 hours a
day, 7 days a week to designated client contacts.
1.3. FDISG shall use reasonable efforts to resolve all Software failures
through; (a) remote support to the Fund's information systems staff ("Fund's
Staff"); (b) coordination of Third Party Vendor support (on-site or remotely);
(c) coordination of other subcontractors' actions; or (d) direct on-site
support by FDISG personnel.
1.4. FDISG shall investigate errors in the Software reported by the Fund
which prevent substantial compliance with the then current Documentation and to
initiate the corrective action, if any, which FDISG considers reasonable and
appropriate, including but not limited to temporary fixes, patches and
corrective releases to FDISG's clients generally. Notwithstanding the
foregoing, if reported errors result from or arise out of. (i) malfunctions of
equipment other than the Equipment, (ii) improper Fund operator procedure or
misuse of the system by the Fund, (iii) modifications or changes made to the
system without FDISG's prior written approval, (iv) causes beyond the
reasonable control of either party, or (v) user developed features such as
those users may develop with form generators, ad hoc report writers and user
customized screens, then FDISG shall have no responsibility for investigating
the error or making the correction, except as the parties may otherwise agree
to in writing. The Fund shall pay FDISG's then current time and materials
charges plus reasonable travel and out-of-pocket expenses incurred in
investigating and attempting to correct any such errors.
1.5. FDISG shall from time to time provide bug fixes, error corrections,
maintenance, minor enhancements, upgrades and updates to the Software which are
generally made available by FDISG to its similar customers as part of Software
Support ("Updates"). The cost of the Updates is included in the fees and other
charges identified in Schedule C of the Agreement, if the updates are supplied
to the Fund using FDISG's standard update facility. FDISG installation
assistance for the new Updates may be required and, is billable to the Fund as
an Additional Service. During the term of the Agreement, FDISG will use
reasonable efforts to provide the Fund with not less than thirty (30) days
prior written notice of FDISG's intent issue a new update of Software. The
Fund shall implement an Update within ninety (90) days of receipt. Any support
by FDISG of any prior release of the Software after such ninety (90) day period
shall be at FDISG's sole discretion and as an Additional Service.
1.6. Software Support, the License, and the Software shall not include any
modification to the Software which contains any substantial added functionality
(including any significant new interface features), as determined solely by
FDISG or any new architecture or any significant modification of the Software
which contains any substantial added or different functionality, whether or not
such new functionality is coupled with any change in software architecture or
hardware platform ("New Products"). New Products shall be provided and
licensed to the Fund as an Additional Service.
1.7. FDISG may decline to support the Software if (i) the Software or
Equipment was added to or changed without FDISG's prior approval; (ii) the Fund
does not perform the Software Support; or (iii) FDISG determines that such
support would adversely affect the Scope of Work.
1.8 Software Support for the FDISG Software shall conform to the standards
set forth in Section I of Schedule F.
2. The Fund's Maintenance and Support Responsibilities. The Fund's facility
will have all of the required security, space, electrical power source,
communications lines, heating, ventilation and cooling, and other physical
<PAGE> 67
requirements reasonably necessary for the installation and proper operation of
the Equipment. The Fund's users will first direct all questions and problem to
the Fund's Staff for proper call tracking and problem resolution. The Fund's
Staff will coordinate all facility issues at the site and will serve as primary
contact for FDISG when planning installs, upgrades and other equipment changes.
The Fund's Staff shall:
2.1. Identify designated client contacts, one for Operations and one
technical systems administrator, to function as single points of contact for
discussion, review and resolution of problems with FDISG.
2.2. Perform initial problem determination and symptom documentation.
2.3. Be responsible for all system hardware and network hardware components
and shrink-wrap software from a maintenance, support and problem resolution
standpoint.
2.4. Provide (a) data back-up and recovery, (b) preventive maintenance,
and (c) perform server administration tasks as described in the Systems
Administration Guide(s) and Third Party Software documentation.
2.5. Maintain all network and trouble-log documentation required by FDISG
or by third-party vendors. FDISG shall be allowed to review such documentation
if necessary to resolve support issues.
2.6. Be available during normal business hours and reachable for support 24
hours a day, 7 days a week, as required. The Fund shall maintain the
appropriate staff level to adequately perform the maintenance support functions
specified. This staff should have experience in network administration,
troubleshooting, Microsoft Windows, workstation memory management, and UNIX and
NT systems administration.
2.7. Consult with FDISG before performing any work that may affect the
Software or performance of the System, including installation, upgrading, or
unplanned maintenance affecting Equipment
2.8. The fund is responsible for maintenance and support of customized code
unless contracted with FDISG.
3. Support of Customized Code. (Code changed by Fund or FDISG on a customized
basis)
3.1 Software Revisions. At times, FDISG will provide software updates to
components (third party or FDISG software) to either enhance the product or
address quality deficiencies. FDISG is responsible for notifying the Fund of
these updates, and what changes have been made. The Fund is responsible for
installing the updates and modifying any code which they have customized to
accommodate these enhancements. Assistance can be provided by FDISG at stated
billable rates.
3.2 Support of Modified Code. FDISG will provide application, technical
and workflow support for modified code only on a time and materials basis.
FDISG may request the replacement of the modified code with the original code
in order to assist in the determination of the problem source.
3.3 Mainframe Resource Utilization. If customized code requires greater
FDISG mainframe CICS, DASD, or CPU resources than the base FDISG delivered
IMPRESS Plus solution, FDISG reserves the right to charge the Fund for this
usage. If there is concern that excessive resource utilization could impair
the mainframe system, FDISG reserves the right to disallow this modified code
from executing on the mainframe. The Fund is advised to consult with FDISG in
order to determine if planned customization may negatively impact mainframe
resources.
4. Roles and Responsibilities.
4.1 FDISG shall not be responsible for the support of any Directly
Obtained Third Party Software or any other third party products. The Fund is
responsible for network connectivity, Operating Systems, gateways, and other
third party products. FDISG is not responsible for hardware not listed in
Exhibit 2 of Schedule G or software not listed in Sections 1, 2.1.1, or 2.1.2
of Exhibit 1 of Schedule G, unless specifically covered in a separate
agreement.
4.2 Additional support tasks may be provided on a time and material basis.
This may include workflow analysis, customization, network design, third party
product installation and additional training.
<PAGE> 68
SCHEDULE H
ACE + SOFTWARE AND SUPPORT TERMS
ARTICLE 1 - SYSTEM, SUPPORT AND IMPLEMENTATION
1.1 Software and Support. FDISG shall provide or has previously provided
to the Fund and the Fund shall acquire from FDISG the right to use the computer
software programs set forth in Exhibit 1 of this Schedule H (the "SOFTWARE"),
for the fees indicated in Schedule C of Amendment Number 3 to the Agreement.
Software includes related user manuals and reference guides (collectively,
"DOCUMENTATION"). One copy of the Documentation shall be provided to the Fund
at no additional cost. FDISG shall provide only the machine readable object
version of the Software and not source code. Additional terms and conditions
concerning the Software are set forth in Exhibit 1 of Schedule H ("Exhibit 1").
Subject to the terms and conditions set forth in this Schedule H, FDISG grants
to the Fund and the Fund accepts from FDISG the non-exclusive, non-transferable
license to use the Software during the term of the Agreement ("LICENSE"). Some
software components ("THIRD PARTY SOFTWARE") required to be used with the
Software were developed by a third party ("THIRD PARTY VENDOR"). Third Party
Software is licensed to the Fund only pursuant to shrink wrapped or other
agreements between the Third Party Vendor and the Fund directly. Exhibit 1
shall indicate the Third Party Software that the Fund is responsible to obtain
and license. FDISG shall provide the Fund with all error corrections, minor
enhancements and interim upgrades to the Software which are made generally
available to FDISG client's of the Software ("SOFTWARE SUPPORT"), but shall not
provide a License to any substantial added functionality, new interfaces, new
architecture, new platforms or other major software development efforts, as
determined solely by FDISG.
1.2 Ownership. FDISG or its licensor shall retain title to and ownership
of the Software, copies, derivative works, inventions, discoveries, patentable
or copyrightable matter, concepts, expertise, techniques, patents, copyrights,
trade secrets and other related legal rights ("PROPRIETARY INFORMATION").
FDISG reserves all rights in the Proprietary Information not expressly granted
to the Fund in this Schedule H. Upon FDISG's request, the Fund shall inform
FDISG in writing of the quantity and location of any Software.
1.3 Equipment, System Implementation and Access. Fund is responsible for
acquiring, installing and maintaining the data processing and related equipment
("EQUIPMENT") also set forth in Exhibit 1 of Schedule H. Additional terms and
conditions concerning the Equipment are also set forth in Exhibit 1. The
Equipment identified in Exhibit 1 represents the minimum equipment requirements
to run the Software. FDISG disclaims responsibility for the performance of the
Software in the event that the Fund utilizes equipment different than that
which is set forth in Exhibit 1. FDISG and the Fund shall (a) within a
reasonable time after the Effective Date, agree upon the tasks required to
implement the Software, Third Party Software and Equipment ("SYSTEM") and the
party responsible and time frames for each task ("SCOPE OF WORK"); (b) perform
their respective assigned tasks according to the Scope of Work; and (c) if not
the party assigned to a task, cooperate with the responsible party. To the
extent the Scope of Work is incomplete, FDISG shall follow its reasonable and
customary practices. Upon prior notice by FDISG to the Fund, the Fund shall
give reasonable access to the System to FDISG, FDISG's employees, affiliates,
representatives, agents, contractors, licensors and suppliers ("FDISG'S
AGENTS") who are providing services under the Agreement or auditing adherence
to the Agreement.
1.4 Use of Software. Fund may use the Software during the term of this
Agreement only on the Equipment and only to process the Fund's data for
internal business purposes (which shall not, for purposes of this Agreement,
include use by Fund to provide services to its customers on a service bureau
basis) in connection with the Fund's use of the FDISG System and only at the
locations identified in the Agreement. If the Equipment is inoperative due to
malfunction, the license grant shall, upon written notice to FDISG, be
temporarily extended to authorize the Fund to use the Software on any other
equipment approved in writing by FDISG until the Equipment is returned to
operable condition. FDISG, in its reasonable discretion, may suspend any
Software Support while the Software is being used on such other Equipment. No
right is granted for use of the Software by any third party or by the Fund to
process for any third party, or for any other purpose whatsoever, except as
expressly provided in this paragraph..
1.5 Software Installation and Acceptance. FDISG shall advise the Fund
that the Software as listed in Exhibit 1 is installed and functioning on the
Equipment ("Software Installation Date") so that implementation and training
activities can proceed. The Fund shall be deemed to have accepted the Software
thirty (30) days after Software Installation Date or thirty (30) days after the
Fund's first use of Software to process live production data ("SOFTWARE
ACCEPTANCE DATE").
1.6 Copies of Software. The Fund may not copy the software except for
backup and archival purposes only, and the Fund shall include on all copies of
the Software all copyright and other proprietary notices or legends included on
the Software. The provisions of this Paragraph do not apply to Fund data files
in machine-readable form.
<PAGE> 69
1.7 No-Export. The Software shall not be shipped or used by the fund
outside the United States. The Fund shall comply with all applicable export
and re-export restrictions and regulations of the U.S. Department of Commerce
or other U.S. agency or authority. The Software shall not be transferred to a
prohibited country or otherwise in violation of any such restrictions or
regulations.
1.8 Termination. Terms and conditions of this Schedule H which require
their performance after the termination of the Agreement, including but not
limited to the License and Software use restrictions, limitations of liability,
indemnification, and confidentiality obligations, shall survive and be
enforceable despite the termination of the Agreement.
ARTICLE 2 - WARRANTIES AND REPRESENTATIONS
2.1 Software. For the term of the Agreement, FDISG warrants ("Performance
Warranty") that the Software shall perform on the Equipment substantially in
accordance with the Documentation, except for Third Party Software as set forth
in Paragraph 2.2 below. The timely correction of errors and deficiencies in
the Software shall be Fund's sole and exclusive remedy for the Performance
Warranty. FDISG warrants ("Rights Warranty") it has the right to license the
Software in accordance with the Agreement. Provided the Fund gives FDISG
timely written notice, reasonable assistance, including assistance from the
Fund's employees, agents, independent contractors and affiliates (collectively,
"Fund's Agents"), and sole authority to defend or settle the action, then FDISG
shall do the following ("Infringement Indemnification"): (a) defend or settle,
at its expense, any action brought against the Fund or the Fund's Agents to the
extent the action is based on a claim that the Software infringes a duly issued
United States' patent or copyright or violates a third party's proprietary
trade secrets or other similar intellectual property rights ("Infringement");
and (b) pay damages and costs finally awarded against the Fund or the Fund's
Agents directly attributable to such claim. FDISG shall have no Infringement
Indemnification obligation if the alleged Infringement is based upon the Fund's
use of the Software with equipment or software not furnished or approved by
FDISG or if such claim arises from FDISG's compliance with the Fund's designs,
or from the Fund's modifications of the Software. The Infringement
Indemnification states FDISG's entire liability for Infringement and shall be
the Fund's sole and exclusive remedy for the Rights Warranty.
2.2 Third Party Warranties. All warranties for the Third Party Software,
if any, are specifically set forth in the Software Exhibits, Exhibit 1 or in
the applicable agreements supplied by the Third Party Vendors. Subject to the
terms of the Exhibit 1 and to the extent permitted by FDISG's suppliers, FDISG
conveys to Fund all Third Party Software warranties made by the Third Party
Vendors.
2.3 Exclusion of Warranties. THE WARRANTIES SET FORTH IN PARAGRAPH 2.1
ABOVE AS TO THE SOFTWARE AND IN PARAGRAPH 2.2 ABOVE AS TO THIRD PARTY SOFTWARE
ARE IN LIEU OF ALL OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, ARISING
OUT OF OR RELATED TO THIS SCHEDULE G. FDISG SPECIFICALLY DISCLAIMS ALL OTHER
WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY,
NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
2.4 Fund Responsibility. The System is an information system only,
designed to assist the Fund and the Fund's Agents in performing their
professional activities and is not intended to replace the professional skill
and judgment of the Fund's Agents. Fund shall be solely responsible for: (a)
acts or omissions of the Fund's Agents in entering data into the System,
including its accuracy and adequacy; (b) checking the correctness and accuracy
of the System output and data; and (c) any use of or reliance upon the System
output by the Fund's Agents. Except for the Infringement Indemnification and
as limited by applicable law, the Fund shall indemnify, defend and hold FDISG
and FDISG's Agents harmless from any losses, costs, damages, and liabilities,
including without limitation, reasonable attorneys' fees and court costs,
relating to any claim by any third party arising from or related to the Fund's
and the Fund's Agents' use of the System or System output.
ARTICLE 3 - MISCELLANEOUS
3.1 Confidentiality Obligations. Each party shall keep confidential any
information relating to the other party's business which is clearly designated
or described in writing to be confidential ("Confidential Information"). Each
party shall keep and instruct its employees and agents to keep such information
confidential by using at least the same care and discretion as used with that
party's own confidential information. Information shall not be subject to such
confidentiality obligations if it is: (a) in the public domain, (b) known to a
party, prior to the time of disclosure by the other party, (c) lawfully and
rightfully disclosed to a party by a third party on a non-confidential basis,
(d) developed by a party without reference to Confidential Information or (e)
required to be disclosed by law. If either party, its employees or agents
breaches or threatens to breach the obligations relating to use of the
Confidential
<PAGE> 70
Information, the other party may obtain injunctive relief, in addition to its
other remedies, inadequate monetary damages and irreparable harm being
acknowledged.
3.2 Confidential and Privileged Information. The Proprietary Information,
other FDISG software and related information, and the Agreement are
Confidential Information of FDISG and FDISG's Agents. Absent FDISG's written
permission, Fund shall not duplicate FDISG's Confidential Information. Fund
accepts full responsibility for complying with all laws, rules and regulations
concerning use and disclosure of privileged data regarding any information
placed or stored in the System or output from the System. Fund shall not
modify or reverse engineer the Software without FDISG's prior written consent.
<PAGE> 71
EXHIBIT 1 OF SCHEDULE H
SOFTWARE/HARDWARE
1. FDISG Software.
1.1 FDISG Software includes the following products:
ACE +
2. Third Party Software.
2.1 Directly Obtained Third-Party Software. The following Third Party
Software are separately licensed by the Third Party Vendor directly to the Fund
subject to the respective terms and conditions of "shrink-wrapped" or other
agreements between the Third Party Vendor and the Fund. The Third Party
Software in the Required Column must be obtained by the Fund. The Third Party
Software in the Optional column is helpful but not required unless the
indicated features are being used. The Fund accepts the provisions of such
agreements, including the warranty provisions, if any, and agrees to comply
with the terms set forth in such agreements:
<TABLE>
<CAPTION>
Required Optional
-------- --------
<S> <C>
Windows 3.1 Reachout PC Link (for external FDISG Support of ACE +)
DOS 3.3 or higher
</TABLE>
3. Hardware.
3.1 It is recommended that ACE + run on a PC Network (LAN) to fully use its
database features. The network should have at least 200 Mb of available disk
space. ACE + will also run on an individual local (hard) drive. PC
specifications are:
o 2 or more IBM PC Compatible 486/66 (486/33 minimum) Mhz (or
Pentium) with 16 Mb Ram (8 Mb minimum)
o 500 Mb Local (hard) drives (for backup only)
o External Fax/Modems (9600 baud or greater)(for PC faxing or
Reachout only)
o HP Laserjet 4 w/ Windows Drivers
3.2 PC/Mainframe Connection: ACE + data is based on mainframe ASCII files.
These files must be transmitted from the mainframe to LAN or PC. This can be
accomplished various ways. FDISG uses a mainframe to Gateway and BARR/SNA
transmission.
<PAGE> 72
SCHEDULE I
DISASTER RECOVERY SUMMARY
OVERVIEW
First Data's data center is a free standing building that is self sufficient
with back-up water supply, fuel storage, and diesel generator backup. The
building is protected with 24 hour on site guard protection as well as security
camera coverage throughout the property. Access is by picture ID only and all
doors are protected with card key access. Additionally, all systems are
protected by ACF2 Security. Security is audited on a regular basis.
Additionally, First Data maintains a reliable, tested disaster recovery system.
A tape backup system is set up on a daily rotation schedule with a full backup
of all data. The backup jobs run automatically every night and all tapes are
sent off-site on a daily basis to a physically secured facility. A business
resumption site has been established in our Providence facility. This Hot Site
is fully equipped with equipment, wiring and supplies in the case of a disaster
or business recovery.
A disaster is defined as any unforeseen business interruption or outage that
renders the data center or telecommunications network inoperable or
inaccessible for an undetermined amount of time suspending normal processing.
First Data's Disaster Recovery Plan provides us with the required procedures
and resource references to execute a full recovery of the data center and
associated critical processing.
This Plan addresses:
o Computer and communications equipment
o Programs, data and documentation
o Building and environmental concerns
o Fire detection and building evacuation
o Personnel, and
o Client Liaisons.
Due to contractual requirements, the data center must provide on-line
accessibility and processing availability within 24 hours of a declared
disaster. Total "downtime" is not to exceed 48 hours.
All outages that affect any client are considered priority one and all
available resources will be utilized to resolve outages, failures or slowdowns.
APPROACH
In a disaster situation, numerous issues and tasks must be addressed
immediately. To ensure all get equal attention, "teams" have been developed.
These teams are comprised of experienced First Data personnel responsible to
execute specific assigned functions critical to the overall recovery. Each team
will activate their procedures concurrently to affect a full system recovery at
the hot site. Some of the teams will act as support teams providing
<PAGE> 73
financial, administrative, and logistical coordination. The remaining recovery
teams will address more specific data and telecommunications issues.
o Support Teams
Financial/Administrative Support
Human Resources/Corporate Communications
Applications Team
Client Liaison Team
o Recovery Teams
Management Teams
Systems Software
Data Center Operations
Vendor
Telecommunications Team
Production Control
Facilities/Hardware
Each team will be headed by a team leader and a designated alternate. If, for
any reason, the team leader is unavailable, the alternate will assume
responsibility for the team notification and progress reporting to the team
management.
Dial backup capabilities, diverse routing of communications circuits and
triangulation present the best options for insuring continued system access in
the event of a communications failure. First Data can demonstrate each of these
capabilities at the client's request.
TESTING SUMMARY
First Data/FDT has contracted with Comdisco to provide hotsite disaster
recovery and backup services. First Data's overall goal is to establish network
connectivity for on-line and transmission capability, restore the application
and recover forward to a point in time and then re-process a batch cycle.
Using Comdisco's site at North Bergen, the First Data Technology (FDT)
operating system will be recovered while testing FDISG recoverability for all
network and application platforms.
The recovery will take place remotely with FDT, using the Business Recovery
Facilities (BRF) in Denver, and Westboro staff working out of the new BRF
in Tewksbury, MA. Comdisco will have staff at both BRFs, as well as North
Bergen, to assist whenever needed.
Tests are conducted annually. The test runs for 48 contiguous hours. Multiple
shifts will be required for FDT, FDISG, and Comdisco staff. Specific staff
requirements will be determined as the scope of the test becomes more clearly
defined.
The systems recovery portion of the test will take place at the Comdisco site in
New Jersey utilizing an IBM ES9000 with related peripherals. All the equipment
used in testing is
<PAGE> 74
compatible with the FDT hardware located in Denver. All tape mounts will be
handled by Comdisco staff in New Jersey, and the telecommunications testing
will be staffed by FDT with Comdisco assisting in New Jersey.
FDISG Test Objectives
o Test recoverability from both of Comdisco's new Business Recovery
Facilities
o Test transmission and network connectivity with clients
o Check and verify tape volumes stored offsite
o Benchmark the restore time for all (500) DASD volumes
o Ship all tapes from Denver to New Jersey
o Document (CDRS/FDISG) connectivity procedures
o Recover all applications to previous business cycle
<PAGE> 1
EXHIBIT 11(a)
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees and Shareholders
AIM Funds Group:
We consent to the use of our reports on the AIM Balanced Fund, AIM Global
Utilities Fund, AIM Growth Fund, AIM High Yield Fund, AIM Income Fund, AIM
Intermediate Government Fund, AIM Money Market Fund, AIM Municipal Bond Fund,
and the AIM Value Fund (series portfolios of AIM Funds Group) dated
February 7, 1997 included herein and the references to our firm under the
headings "Financial Highlights" in the Prospectus and "Audit Reports" in the
Statement of Additional Information.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
July 10, 1997
<PAGE> 1
EXHIBIT 11(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of Post-Effective Amendment No. 73 to the registration
statement of AIM Funds Group on Form N-1A (the "Registration Statement") of our
report dated February 16, 1993, relating to the selected per-share data and
ratios appearing in the December 31, 1992 Annual Report to Shareholders of AIM
Global Utilities Fund, AIM Growth Fund, AIM High Yield Fund, AIM Income Fund,
AIM Intermediate Government Fund, AIM Municipal Bond Fund, and AIM Value Fund
constituting parts of the AIM Funds Group (formerly AIM Funds (C)). We also
consent to the references to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Audit Reports" in the Statement of Additional
Information.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Houston, Texas
July 18, 1997
<PAGE> 1
EXHIBIT 11(c)
CONSENT OF COUNSEL
AIM FUNDS GROUP
We hereby consent to the use of our name and to the reference
to our firm under the caption "General Information - Legal Counsel" in the
Prospectus for AIM Funds Group (the "Fund") and under the caption Miscellaneous
Information - Legal Matters in the Statement of Additional Information for the
Fund, which is included in Post-Effective Amendment No. 73 to the Registration
Statement under the Securities Act of 1933 (No. 2-27334) and Amendment No. 73
to the Registration Statement under the Investment Company Act of 1940 (No.
811-1540) on Form N-1A of the Fund.
/s/ Ballard Spahr Andrews & Ingersoll
-------------------------------------
Philadelphia, Pennsylvania
July 10, 1997
<PAGE> 1
EXHIBIT 15(a)(3)
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM FUNDS GROUP
(CLASS A SHARES & AIM CASH RESERVE SHARES)
SECTION 1. AIM Funds Group, a Delaware business trust (the
"Fund"), on behalf of the series of shares of beneficial interest set forth in
Schedule A to this plan (the "Portfolios"), may act as a distributor of the
Class A Shares or AIM Cash Reserve Shares, of such Portfolios as described in
Schedule A to this plan (the "Shares") of which the Fund is the issuer,
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940
Act"), according to the terms of this Distribution Plan (the "Plan").
SECTION 2. The Fund may incur as a distributor of the Shares,
expenses at the rates set forth in Schedule A per annum of the average daily
net assets of the Fund attributable to the Shares, subject to any applicable
limitations imposed from time to time by applicable rules of the National
Association of Securities Dealers, Inc.
SECTION 3. Amounts set forth in Schedule A may be expended when
and if authorized in advance by the Fund's Board of Trustees. Such amounts may
be used to finance any activity which is primarily intended to result in the
sale of the Shares, including, but not limited to, expenses of organizing and
conducting sales seminars, advertising programs, finders fees, printing of
prospectuses and statements of additional information (and supplements thereto)
and reports for other than existing shareholders, preparation and distribution
of advertising material and sales literature, supplemental payments to dealers
and other institutions as asset-based sales charges. Amounts set forth in
Schedule A may also be used to finance payments of service fees under a
shareholder service arrangement to be established by A I M Distributors, Inc.
("Distributors") as the Fund's distributor in accordance with Section 4, and
the costs of administering the Plan. To the extent that amounts paid hereunder
are not used specifically to reimburse Distributors for any such expense, such
amounts may be treated as compensation for Distributors' distribution-related
services. All amounts expended pursuant to the Plan shall be paid to
Distributors and are the legal obligation of the Fund and not of Distributors.
That portion of the amounts paid under the Plan that is not paid or advanced by
Distributors to dealers or other institutions that provide personal continuing
shareholder service as a service fee pursuant to Section 4 shall be deemed an
asset-based sales charge. No provision of this Plan shall be interpreted to
prohibit any payments by the Fund during periods when the Fund has suspended or
otherwise limited sales.
SECTION 4.
(a) Amounts expended by the Fund under the Plan
shall be used in part for the implementation by Distributors
of shareholder service arrangements. The maximum service fee
paid to any service provider shall be twenty-five
one-hundredths of one percent (0.25%), or such lower rate for
the Portfolio as is specified on Schedule A, per annum of the
average daily net assets of the Fund attributable to the
Shares owned by the customers of such service provider.
<PAGE> 2
(b) Pursuant to this program, Distributors may
enter into agreements substantially in the form attached
hereto as Exhibit A ("Service Agreements") with such
broker-dealers ("Dealers") as may be selected from time to
time by Distributors for the provision of distribution-related
personal shareholder services in connection with the sale of
Shares to the Dealers' clients and customers ("Customers") to
Customers who may from time to time directly or beneficially
own Shares. The distribution-related personal continuing
shareholder services to be rendered by Dealers under the
Service Agreements may include, but shall not be limited to,
the following: (i) distributing sales literature; (ii)
answering routine Customer inquiries concerning the Fund and
the Shares; (iii) assisting Customers in changing dividend
options, account designations and addresses, and in enrolling
into any of several retirement plans offered in connection
with the purchase of Shares; (iv) assisting in the
establishment and maintenance of customer accounts and
records, and in the processing of purchase and redemption
transactions; (v) investing dividends and capital gains
distributions automatically in Shares; and (vi) providing such
other information and services as the Fund or the Customer may
reasonably request.
(c) Distributors may also enter into Bank
Shareholder Service Agreements substantially in the form
attached hereto as Exhibit B ("Bank Agreements") with selected
banks acting in an agency capacity for their customers
("Banks"). Banks acting in such capacity will provide some
or all of the shareholder services to their customers as set
forth in the Bank Agreements from time to time.
(d) Distributors may also enter into Agency
Pricing Agreements substantially in the form attached hereto
as Exhibit C ("Pricing Agreements") with selected retirement
plan service providers acting in an agency capacity for their
customers ("Retirement Plan Providers"). Retirement Plan
Providers acting in such capacity will provide some or all of
the shareholders services to their customers as set forth in
the Pricing Agreements from time to time.
(e) Distributors may also enter into Shareholder
Service Agreements substantially in the form attached hereto
as Exhibit D ("Bank Trust Department Agreements and Brokers
for Bank Trust Department Agreements") with selected bank
trust departments and brokers for bank trust departments.
Such bank trust departments and brokers for bank trust
departments will provide some or all of the shareholder
services to their customers as set forth in the Bank Trust
Department Agreements and Brokers for Bank Trust Department
Agreements.
SECTION 5. This Plan has been approved by a vote of at least a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Shares.
SECTION 6. This Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority of
both (a) the Board of Trustees of the Fund, and (b) those trustees of the Fund
who are not "interested persons" of the Fund (as defined in the 1940 Act) and
have no direct or indirect financial interest in the operation of this Plan or
any agreements
-2-
<PAGE> 3
related to it (the "Dis-interested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or such agreements.
SECTION 7. Unless sooner terminated pursuant to Section 9, this
Plan shall continue in effect until June 30, 1998 and thereafter shall continue
in effect so long as such continuance is specifically approved, at least
annually, in the manner provided for approval of this Plan in Section 6.
SECTION 8. Distributors shall provide to the Fund's Board of
Trustees and the Board of Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such expenditures
were made.
SECTION 9. This Plan may be terminated at any time by vote of a
majority of the Dis-interested Trustees, or by vote of a majority of the
outstanding voting securities of the Shares. If this Plan is terminated, the
obligation of the Fund to make payments pursuant to this Plan will also cease
and the Fund will not be required to make any payments beyond the termination
date even with respect to expenses incurred prior to the termination date.
SECTION 10. Any agreement related to this Plan shall be made in
writing, and shall provide:
(a) that such agreement may be terminated at any
time, without payment of any penalty, by vote of a majority of
the Dis-interested Trustees or by a vote of the outstanding
voting securities of the Fund attributable to the Shares, on
not more than sixty (60) days' written notice to any other
party to the agreement; and
(b) that such agreement shall terminate
automatically in the event of its assignment.
SECTION 11. This Plan may not be amended to increase materially
the amount of distribution expenses provided for in Section 2 hereof unless
such amendment is approved in the manner provided in Section 5 hereof, and no
material amendment to the Plan shall be made unless approved in the manner
provided for in Section 6 hereof.
AIM FUNDS GROUP
(on behalf of its Class A Shares
& AIM Cash Reserve Shares)
Attest: /s/ OFELIA M. MAYO By: /s/ CAROL F. RELIHAN
--------------------------- --------------------------
Assistant Secretary Senior Vice President
Effective as of August 31, 1993, as amended as of March 8, 1994, and as further
amended as of September 10, 1994.
Amended and restated for all Portfolios as of June 30, 1997.
- 3 -
<PAGE> 4
SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM FUNDS GROUP
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all
services rendered and all facilities furnished under the Distribution Plan for
each Portfolio (or Class thereof) designated below, a Distribution Fee*
determined by applying the annual rate set forth below as to each Portfolio (or
Class thereof) to the average daily net assets of the Portfolio (or Class
thereof) for the plan year, computed in a manner used for the determination of
the offering price of shares of the Portfolio.
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL RATE
--------- -----------
<S> <C>
AIM Balanced Fund (Class A Shares) 0.25%
AIM Global Utilities Fund (Class A Shares) 0.25%
AIM Growth Fund (Class A Shares) 0.25%
AIM High Yield Fund (Class A Shares) 0.25%
AIM Income Fund (Class A Shares) 0.25%
AIM Intermediate Government Fund (Class A Shares) 0.25%
AIM Money Market Fund (Class A Shares) 0.25%
AIM Municipal Bond Fund (Class A Shares) 0.25%
AIM Value Fund (Class A Shares) 0.25%
AIM Money Market Fund (AIM Cash Reserve Shares) 0.25%
</TABLE>
The Distributor will waive part of all of its Distribution Fee as to a
Portfolio (or Class thereof) to the extent that the ordinary business expenses
of the Portfolio exceed the expense limitation as to the Portfolio (if any) as
contained in the Master Investment Advisory Agreement between the Company and
A I M Advisors, Inc.
- ---------------
* The Distribution Fee is payable apart from the sales charge, if any, as
stated in the current prospectus for the applicable Portfolio (or Class
thereof).
- 4 -
<PAGE> 1
EXHIBIT 15(a)(4)
FORM OF
SECOND
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM FUNDS GROUP
(CLASS A SHARES, CLASS C SHARES AND AIM CASH RESERVE SHARES)
SECTION 1. AIM Funds Group, a Delaware business trust (the
"Fund"), on behalf of the series of shares of beneficial interest set forth in
Schedule A to this plan (the "Portfolios"), may act as a distributor of the
Class A Shares, Class C Shares or AIM Cash Reserve Shares, of such Portfolios
as described in Schedule A to this plan (the "Shares") of which the Fund is the
issuer, pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"), according to the terms of this Distribution Plan (the "Plan").
SECTION 2. The Fund may incur as a distributor of the Shares,
expenses at the rates set forth in Schedule A per annum of the average daily
net assets of the Fund attributable to the Shares, subject to any applicable
limitations imposed from time to time by applicable rules of the National
Association of Securities Dealers, Inc.
SECTION 3. Amounts set forth in Schedule A may be expended when
and if authorized in advance by the Fund's Board of Trustees. Such amounts may
be used to finance any activity which is primarily intended to result in the
sale of the Shares, including, but not limited to, expenses of organizing and
conducting sales seminars, advertising programs, finders fees, printing of
prospectuses and statements of additional information (and supplements thereto)
and reports for other than existing shareholders, preparation and distribution
of advertising material and sales literature, supplemental payments to dealers
and other institutions as asset-based sales charges. Amounts set forth in
Schedule A may also be used to finance payments of service fees under a
shareholder service arrangement to be established by A I M Distributors, Inc.
("Distributors") as the Fund's distributor in accordance with Section 4, and
the costs of administering the Plan. To the extent that amounts paid hereunder
are not used specifically to reimburse Distributors for any such expense, such
amounts may be treated as compensation for Distributors' distribution-related
services. All amounts expended pursuant to the Plan shall be paid to
Distributors and are the legal obligation of the Fund and not of Distributors.
That portion of the amounts paid under the Plan that is not paid or advanced by
Distributors to dealers or other institutions that provide personal continuing
shareholder service as a service fee pursuant to Section 4 shall be deemed an
asset-based sales charge. No provision of this Plan shall be interpreted to
prohibit any payments by the Fund during periods when the Fund has suspended
or otherwise limited sales.
SECTION 4.
(a) Amounts expended by the Fund under the Plan
shall be used in part for the implementation by Distributors
of shareholder service arrangements. The maximum service fee
paid to any service provider shall be twenty-five
one-hundredths of one percent (0.25%), or such lower rate for
the Portfolio as is specified on Schedule A, per annum of the
average daily net assets of the Fund attributable to the
Shares owned by the customers of such service provider.
<PAGE> 2
(b) Pursuant to this program, Distributors may
enter into agreements substantially in the form attached
hereto as Exhibit A ("Service Agreements") with such
broker-dealers ("Dealers") as may be selected from time to
time by Distributors for the provision of distribution-related
personal shareholder services in connection with the sale of
Shares to the Dealers' clients and customers ("Customers") to
Customers who may from time to time directly or beneficially
own Shares. The distribution-related personal continuing
shareholder services to be rendered by Dealers under the
Service Agreements may include, but shall not be limited to,
the following: (i) distributing sales literature; (ii)
answering routine Customer inquiries concerning the Fund and
the Shares; (iii) assisting Customers in changing dividend
options, account designations and addresses, and in enrolling
into any of several retirement plans offered in connection
with the purchase of Shares; (iv) assisting in the
establishment and maintenance of customer accounts and
records, and in the processing of purchase and redemption
transactions; (v) investing dividends and capital gains
distributions automatically in Shares; and (vi) providing such
other information and services as the Fund or the Customer may
reasonably request.
(c) Distributors may also enter into Bank
Shareholder Service Agreements substantially in the form
attached hereto as Exhibit B ("Bank Agreements") with selected
banks acting in an agency capacity for their customers
("Banks"). Banks acting in such capacity will provide some
or all of the shareholder services to their customers as set
forth in the Bank Agreements from time to time.
(d) Distributors may also enter into Agency
Pricing Agreements substantially in the form attached hereto
as Exhibit C ("Pricing Agreements") with selected retirement
plan service providers acting in an agency capacity for their
customers ("Retirement Plan Providers"). Retirement Plan
Providers acting in such capacity will provide some or all of
the shareholders services to their customers as set forth in
the Pricing Agreements from time to time.
(e) Distributors may also enter into Shareholder
Service Agreements substantially in the form attached hereto
as Exhibit D ("Bank Trust Department Agreements and Brokers
for Bank Trust Department Agreements") with selected bank
trust departments and brokers for bank trust departments.
Such bank trust departments and brokers for bank trust
departments will provide some or all of the shareholder
services to their customers as set forth in the Bank Trust
Department Agreements and Brokers for Bank Trust Department
Agreements.
SECTION 5. This Plan has been approved by a vote of at least a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Shares.
SECTION 6. This Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority of
both (a) the Board of Trustees of the Fund, and (b) those trustees of the Fund
who are not "interested persons" of the Fund (as defined in the 1940 Act) and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it (the "Dis-interested Trustees"), cast in person at
a meeting called for the purpose of voting on this Plan or such agreements.
-2-
<PAGE> 3
SECTION 7. Unless sooner terminated pursuant to Section 9, this
Plan shall continue in effect until June 30, 1998 and thereafter shall continue
in effect so long as such continuance is specifically approved, at least
annually, in the manner provided for approval of this Plan in Section 6.
SECTION 8. Distributors shall provide to the Fund's Board of
Trustees and the Board of Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such expenditures
were made.
SECTION 9. This Plan may be terminated at any time by vote of a
majority of the Dis-interested Trustees, or by vote of a majority of the
outstanding voting securities of the Shares. If this Plan is terminated, the
obligation of the Fund to make payments pursuant to this Plan will also cease
and the Fund will not be required to make any payments beyond the termination
date even with respect to expenses incurred prior to the termination date.
SECTION 10. Any agreement related to this Plan shall be made in
writing, and shall provide:
(a) that such agreement may be terminated at any
time, without payment of any penalty, by vote of a majority of
the Dis-interested Trustees or by a vote of the outstanding
voting securities of the Fund attributable to the Shares, on
not more than sixty (60) days' written notice to any other
party to the agreement; and
(b) that such agreement shall terminate
automatically in the event of its assignment.
SECTION 11. This Plan may not be amended to increase materially
the amount of distribution expenses provided for in Section 2 hereof unless
such amendment is approved in the manner provided in Section 5 hereof, and no
material amendment to the Plan shall be made unless approved in the manner
provided for in Section 6 hereof.
AIM FUNDS GROUP
(on behalf of its Class A Shares, Class C
Shares and AIM Cash Reserve Shares)
Attest: By:
------------------------- --------------------------------------
Assistant Secretary President
Effective as of August 31, 1993, as amended as of March 8, 1994, and as further
amended as of September 10, 1994.
Amended and restated for all Portfolios as of June 30, 1997, and ___________,
1997.
-3-
<PAGE> 4
SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM FUNDS GROUP
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all
services rendered and all facilities furnished under the Distribution Plan for
each Portfolio (or Class thereof) designated below, a Distribution Fee*
determined by applying the annual rate set forth below as to each Portfolio (or
Class thereof) to the average daily net assets of the Portfolio (or Class
thereof) for the plan year, computed in a manner used for the determination of
the offering price of shares of the Portfolio.
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL RATE
--------- -----------
<S> <C>
CLASS A SHARES
--------------
AIM Balanced Fund 0.25%
AIM Global Utilities Fund 0.25%
AIM Growth Fund 0.25%
AIM High Yield Fund 0.25%
AIM Income Fund 0.25%
AIM Intermediate Government Fund 0.25%
AIM Money Market Fund 0.25%
AIM Municipal Bond Fund 0.25%
AIM Value Fund 0.25%
CLASS C SHARES
--------------
AIM Balanced Fund 1.00%
AIM Global Utilities Fund 1.00%
AIM Growth Fund 1.00%
AIM High Yield Fund 1.00%
AIM Income Fund 1.00%
AIM Intermediate Government Fund 1.00%
AIM Money Market Fund 1.00%
AIM Municipal Bond Fund 1.00%
AIM Value Fund 1.00%
AIM CASH RESERVE SHARES
-----------------------
AIM Money Market Fund 0.25%
</TABLE>
The Distributor will waive part of all of its Distribution Fee as to a
Portfolio (or Class thereof) to the extent that the ordinary business expenses
of the Portfolio exceed the expense limitation as to the Portfolio (if any) as
contained in the Master Investment Advisory Agreement between the Company and
A I M Advisors, Inc.
- ----------------
* The Distribution Fee is payable apart from the sales charge, if any, as
stated in the current prospectus for the applicable Portfolio (or Class
thereof).
-4-
<PAGE> 1
EXHIBIT 15(a)(7)
SECOND
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM FUNDS GROUP
(CLASS B SHARES)
(SECURITIZATION FEATURE)
SECTION 1. AIM Funds Group (the "Fund"), on behalf of the series
of beneficial interest set forth in Schedule A to this plan (the "Portfolios"),
may pay for distribution of the Class B Shares of such Portfolios (the
"Shares") which the Fund issues from time to time, pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "1940 Act"), according to the terms of
this Distribution Plan (the "Plan").
SECTION 2. The Fund may incur expenses for and pay any
institution selected to act as the Fund's agent for distribution of the Shares
of any Portfolio from time to time (each, a "Distributor") at the rates set
forth on Schedule A hereto based on the average daily net assets of each class
of Shares subject to any applicable limitations imposed by the Conduct Rules of
the National Association of Securities Dealers, Inc. in effect from time to
time (the "Conduct Rules"). All such payments are the legal obligation of the
Fund and not of any Distributor or its designee.
SECTION 3.
(a) Amounts set forth in Section 2 may be used to
finance any activity which is primarily intended to result in
the sale of the Shares, including, but not limited to,
expenses of organizing and conducting sales seminars and
running advertising programs, payment of finders fees,
printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other
than existing shareholders, preparation and distribution of
advertising material and sales literature, payment of overhead
and supplemental payments to dealers and other institutions as
asset-based sales charges. Amounts set forth in Section 2
may also be used to finance payments of service fees under a
shareholder service arrangement, which may be established by
each Distributor in accordance with Section 4, the costs of
administering the Plan. To the extent that amounts paid
hereunder are not used specifically to reimburse the
Distributor for any such expense, such amounts may be treated
as compensation for the Distributor's distribution-related
services. No provision of this Plan shall be interpreted to
prohibit any payments by the Fund during periods when the Fund
has suspended or otherwise limited sales.
(b) Subject to the provisions of Sections 8 and 9
hereof, amounts payable pursuant to Section 2 in respect of
Shares of each Portfolio shall be paid by the Fund to the
Distributor in respect of such Shares or, if more than one
institution has acted or is acting as Distributor in respect
of such Shares, then amounts payable pursuant to Section 2 in
respect of such Shares shall be paid to each such Distributor
in proportion to the number of such Shares sold by or
attributable to such Distributor's distribution efforts in
respect of such Shares in accordance with
<PAGE> 2
allocation provisions of each Distributor's distribution
agreement (the "Distributor's 12b-1 Share") notwithstanding
that such Distributor's distribution agreement with the Fund
may have been terminated. That portion of the amounts paid
under the Plan that is not paid or advanced by the Distributor
to dealers or other institutions that provide personal
continuing shareholder service as a service fee pursuant to
Section 4 shall be deemed an asset-based sales charge.
(c) Any Distributor may assign, transfer or
pledge ("Transfer") to one or more designees (each an
"Assignee"), its rights to all or a designated portion of its
Distributor's 12b-1 Share from time to time (but not such
Distributor's duties and obligations pursuant hereto or
pursuant to any distribution agreement in effect from time to
time, if any, between such Distributor and the Fund), free and
clear of any offsets or claims the Fund may have against such
Distributor. Each such Assignee's ownership interest in a
Transfer of a specific designated portion of a Distributor's
12b-1 Share is hereafter referred to as an "Assignee's 12b-1
Portion." A Transfer pursuant to this Section 3(c) shall not
reduce or extinguish any claims of the Fund against the
Distributor.
(d) Each Distributor shall promptly notify the
Fund in writing of each such Transfer by providing the Fund
with the name and address of each such Assignee.
(e) A Distributor may direct the Fund to pay an
Assignee's 12b-1 Portion directly to such Assignee. In such
event, the Distributor shall provide the Fund with a monthly
calculation of the amount of (i) the Distributor's 12b-1
Share, and (ii) each Assignee's 12b-1 Portion, if any, for
such month (the "Monthly Calculation"). In such event, the
Fund shall, upon receipt of such notice and Monthly
Calculation from the Distributor, make all payments required
under such distribution agreement directly to the Assignee in
accordance with the information provided in such notice and
Monthly Calculation upon the same terms and conditions as if
such payments were to be paid to the Distributor.
(f) Alternatively, in connection with a Transfer,
a Distributor may direct the Fund to pay all of such
Distributor's 12b-1 Share from time to time to a depository or
collection agent designated by any Assignee, which depository
or collection agent may be delegated the duty of dividing such
Distributor's 12b-1 Share between the Assignee's 12b-1 Portion
and the balance of the Distributor's 12b-1 Share (such
balance, when distributed to the Distributor by the depository
or collection agent, the "Distributor's 12b-1 Portion"), in
which case only the Distributor's 12b-1 Portion may be subject
to offsets or claims the Fund may have against such
Distributor.
SECTION 4.
(a) Amounts expended by the Fund under the Plan
shall be used in part for the implementation by the
Distributor of shareholder service arrangements with respect
to the Shares. The maximum service fee payable to any
provider of such shareholder service shall be twenty-five
one-hundredths of one percent (0.25%) per annum of the average
daily net assets of the Shares attributable to the customers
of such service provider. All such payments are the legal
obligation of the Fund and not of any Distributor or its
designee.
- 2 -
<PAGE> 3
(b) Pursuant to this Plan, the Distributor may
enter into agreements substantially in the form attached
hereto as Exhibit A ("Service Agreements") with such
broker-dealers ("Dealers") as may be selected from time to
time by the Distributor for the provision of continuing
shareholder services in connection with Shares held by such
Dealers' clients and customers ("Customers") who may from time
to time directly or beneficially own Shares. The personal
continuing shareholder services to be rendered by Dealers
under the Service Agreements may include, but shall not be
limited to, some or all of the following: (i) distributing
sales literature; (ii) answering routine Customer inquiries
concerning the Fund and the Shares; (iii) assisting Customers
in changing dividend options, account designations and
addresses, and enrolling in any of several retirement plans
offered in connection with the purchase of Shares; (iv)
assisting in the establishment and maintenance of Customer
accounts and records, and in the processing of purchase and
redemption transactions; (v) investing dividends and capital
gains distributions automatically in Shares; (vi) performing
sub-accounting; (vii) providing periodic statements showing a
Customer's shareholder account balance and the integration of
such statements with those of other transactions and balances
in the Customer's account serviced by such institution; (viii)
forwarding applicable prospectuses, proxy statements, reports
and notices to Customers who hold Shares; and (ix) providing
such other information and administrative services as the Fund
or the Customer may reasonably request.
(c) The Distributor may also enter into Bank
Shareholder Service Agreements substantially in the form
attached hereto as Exhibit B ("Bank Agreements") with selected
banks and financial institutions acting in an agency capacity
for their customers ("Banks"). Banks acting in such capacity
will provide some or all of the shareholder services to their
customers as set forth in the Bank Agreements from time to
time.
(d) The Distributor may also enter into Agency
Pricing Agreements substantially in the form attached hereto
as Exhibit C ("Pricing Agreements") with selected retirement
plan service providers acting in an agency capacity for their
customers ("Retirement Plan Providers"). Retirement Plan
Providers acting in such capacity will provide some or all of
the shareholder services to their customers as set forth in
the Pricing Agreements from time to time.
(e) The Distributor may also enter into
Shareholder Service Agreements substantially in the form
attached hereto as Exhibit D ("Bank Trust Department
Agreements and Brokers for Bank Trust Department Agreements")
with selected bank trust departments and brokers for bank
trust departments. Such bank trust departments and brokers
for bank trust departments will provide some or all of the
shareholder services to their customers as set forth in the
Bank Trust Department Agreements and Brokers for Bank Trust
Department Agreements from time to time.
SECTION 5. This Plan shall not take effect until (i) it has
been approved, together with any related agreements, by votes of the majority
of both (a) the Board of Trustees of the Fund, and (b) those trustees of the
Fund who are not "interested persons" of the Fund (as defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it (the "Dis-interested Trustees"), cast in person
at a meeting called for the purpose of
- 3 -
<PAGE> 4
voting on this Plan or such agreements, and (ii) the execution by the Fund and
A I M Distributors, Inc. of a Master Distribution Agreement in respect of the
Shares.
SECTION 6. Unless sooner terminated pursuant to Section 8, this
Plan shall continue in effect until June 30, 1998 and thereafter shall continue
in effect so long as such continuance is specifically approved, at least
annually, in the manner provided for approval of this Plan in Section 5.
SECTION 7. Each Distributor shall provide to the Fund's Board of
Trustees and the Board of Trustees shall review, at least quarterly, a written
report of the amounts expended for distribution of the Shares and the purposes
for which such expenditures were made.
SECTION 8. This Plan may be terminated with respect to the
Shares of any Portfolio at any time by vote of a majority of the Dis-interested
Trustees, or by vote of a majority of outstanding Shares of such Portfolio.
Upon termination of this Plan with respect to any or all such classes, the
obligation of the Fund to make payments pursuant to this Plan with respect to
such classes shall terminate, and the Fund shall not be required to make
payments hereunder beyond such termination date with respect to expenses
incurred in connection with Shares sold prior to such termination date,
provided, in each case that each of the requirements of a Complete Termination
of this Plan in respect of such class, as defined below, are met. A
termination of this Plan with respect to any or all Shares of any or all
Portfolios shall not affect the obligation of the Fund to withhold and pay to
any Distributor contingent deferred sales charges to which such distributor is
entitled pursuant to any distribution agreement. For purposes of this Section
8 a "Complete Termination" of this Plan in respect of any Portfolio shall mean
a termination of this Plan in respect of such Portfolio, provided that: (i)
the Dis-interested Trustees of the Fund shall have acted in good faith and
shall have determined that such termination is in the best interest of the Fund
and the shareholders of such Portfolio; (ii) the Fund does not alter the terms
of the contingent deferred sales charges applicable to Shares outstanding at
the time of such termination; and (iii) unless the applicable Distributor at
the time of such termination was in material breach under the distribution
agreement in respect of such Portfolio, the Fund shall not, in respect of such
Portfolio, pay to any person or entity, other than such Distributor or its
designee, either the asset-based sales charge or the service fee (or any
similar fee) in respect of the Shares sold by such Distributor prior to such
termination.
SECTION 9. Any agreement related to this Plan shall be made in
writing, and shall provide:
(a) that such agreement may be terminated with
respect to the Shares of any or all Portfolios at any time,
without payment of any penalty, by vote of a majority of the
Dis-interested Trustees or by a vote of the majority of the
outstanding Shares of such Portfolio, on not more than sixty
(60) days' written notice to any other party to the agreement;
and
(b) that such agreement shall terminate
automatically in the event of its assignment; provided,
however, that, subject to the provisions of Section 8 hereof,
if such agreement is terminated for any reason, the obligation
of the Fund to make payments of (i) the Distributor's Share in
accordance with the directions of the Distributor pursuant to
Section 3(e) or (f) hereof if there exist Assignees for all or
any portion of such Distributor's 12b-1 Share, and (ii) the
remainder of such Distributor's 12b-1 Share to such
Distributor if there are no Assignees for such Distributor's
- 4 -
<PAGE> 5
Share, pursuant to such agreement and this Plan will continue
with respect to the Shares until such Shares are redeemed or
automatically converted into another class of shares of the
Fund.
SECTION 10. This Plan may not be amended to increase materially
the amount of distribution expenses provided for in Section 2 hereof unless
such amendment is approved by a vote of at least a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Shares, and no material
amendment to the Plan shall be made unless approved in the manner provided for
in Section 5 hereof.
AIM FUNDS GROUP
(on behalf of its Class B Shares)
Attest: /s/ OFELIA M. MAYO By: /s/ CAROL F. RELIHAN
---------------------------- ------------------------------
Assistant Secretary Senior Vice President
Effective as of August 31, 1993, as amended as of March 8, 1994, as further
amended as of September 10, 1994, and as amended and restated as of May 2,
1995.
Amended and restated for all Portfolios as of June 30, 1997.
- 5 -
<PAGE> 6
SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM FUNDS GROUP
(DISTRIBUTION FEE)
<TABLE>
<CAPTION>
MAXIMUM
ASSET-BASED SERVICE AGGREGATE
FUND SALES CHARGE FEE FEE
---- ------------ --- ---
<S> <C> <C> <C>
AIM Balanced Fund 0.75% 0.25% 1.00%
(Class B Shares)
AIM Global Utilities Fund 0.75% 0.25% 1.00%
(Class B Shares)
AIM Growth Fund 0.75% 0.25% 1.00%
(Class B Shares)
AIM High Yield Fund 0.75% 0.25% 1.00%
(Class B Shares)
AIM Income Fund 0.75% 0.25% 1.00%
(Class B Shares)
AIM Intermediate Government 0.75% 0.25% 1.00%
Fund (Class B Shares)
AIM Money Market Fund 0.75% 0.25% 1.00%
(Class B Shares)
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
(Class B Shares)
AIM Value Fund 0.75% 0.25% 1.00%
(Class B Shares)
</TABLE>
- 6 -
<PAGE> 1
EXHIBIT 15(b)
SHAREHOLDER SERVICE AGREEMENT
[LOGO APPEARS HERE] FOR SALE OF SHARES
A I M Distributors, Inc. OF THE AIM MUTUAL FUNDS
This Shareholder Service Agreement (the "Agreement") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act") by each
of the AIM-managed mutual funds (or designated classes of such funds) listed on
Schedule A to this Agreement (the "Funds"), under a Distribution Plan (the
"Plan") adopted pursuant to said Rule. This Agreement, being made between A I M
Distributors, Inc. ("Distributors"), solely as agent for the Funds, and the
undersigned authorized dealer, defines the services to be provided by the
authorized dealer for which it is to receive payments pursuant to the Plan
adopted by each of the Funds. The Plan and the Agreement have been approved by
a majority of the directors of each of the Funds, including a majority of the
directors who are not interested persons of such Funds, and who have no direct
or indirect financial interest in the operation of the Plan or related
agreements (the "Dis-interested Directors"), by votes cast in person at a
meeting called for the purpose of voting on the Plan. Such approval included a
determination that in the exercise of their reasonable business judgement and
in light of their fiduciary duties, there is a reasonable likelihood that the
Plan will benefit such Fund and its shareholders.
1 To the extent that you provide distribution-related continuing personal
shareholder services to customers who may, from time to time, directly or
beneficially own shares of the Funds, including but not limited to,
distributing sales literature, answering routine customer inquiries
regarding the Funds, assisting customers in changing dividend options,
account designations and addresses, and in enrolling into any of several
special investment plans offered in connection with the purchase of the
Fund's shares, assisting in the establishment and maintenance of customer
accounts and records and in the processing of purchase and redemption
transactions, investing dividends and capital gains distributions
automatically in shares and providing such other services as the Funds or
the customer may reasonably request, we, solely as agent for the Funds,
shall pay you a fee periodically or arrange for such fee to be paid to you.
2 The fee paid with respect to each Fund will be calculated at the end of each
payment period (as indicated in Schedule A) for each business day of the
Fund during such payment period at the annual rate set forth in Schedule A
as applied to the average net asset value of the shares of such Fund
purchased or acquired through exchange on or after the Plan Calculation
Date shown for such Fund on Schedule A. Fees calculated in this manner
shall be paid to you only if your firm is the dealer of record at the close
of business on the last business day of the applicable payment period, for
the account in which such shares are held (the "Subject Shares"). In cases
where Distributors has advanced payment to you of the first year's fee for
shares sold at net asset value and subject to contingent deferred sales
charge, no additional payments will be made to you during the first year
the Subject Shares are held.
3 The total of the fees calculated for all of the Funds listed on Schedule A
for any period with respect to which calculations are made shall be paid
to you within 45 days after the close of such period.
4 We reserve the right to withhold payment with respect to the Subject Shares
purchased by you and redeemed or repurchased by the Fund or by us as Agent
within seven (7) business days after the date of our confirmation of such
purchase. We reserve the right at any time to impose minimum fee payment
requirements before any periodic payments will be made to you hereunder.
5 This Agreement does not require any broker-dealer to provide transfer
agency and recordkeeping related services as nominee for its customers.
6 You shall furnish us and the Funds with such information as shall
reasonably be requested either by the directors of the Funds or by us with
respect to the fees paid to you pursuant to this Agreement.
7 We shall furnish the directors of the Funds, for their review on a
quarterly basis, a written report of the amounts expended under the Plan by
us and the purposes for which such expenditures were made.
8 Neither you nor any of your employees or agents are authorized to make any
representation concerning shares of the Funds except those contained in
the then current Prospectus for the Funds, and you shall have no authority
to act as agent for the Funds or for Distributors.
7/97
<PAGE> 2
9 We may enter into other similar Shareholder Service Agreements with any
other person without your consent.
10 This Agreement and Schedule A may be amended at any time without your
consent by Distributors mailing a copy of an amendment to you at the address
set forth below. Such amendment shall become effective on the date
specified in such amendment unless you elect to terminate this Agreement
within thirty (30) days of your receipt of such amendment.
11 This Agreement may be terminated with respect to any Fund at any time
without payment of any penalty by the vote of a majority of the directors
of such Fund who are Dis-interested Directors or by a vote of a majority of
the Fund's outstanding shares, on sixty (60) days' written notice. It will
be terminated by any act which terminates either the Selected Dealer
Agreement between your firm and us or the Fund's Distribution Plan, and in
any event, it shall terminate automatically in the event of its assignment
as that term is defined in the 1940 Act.
12 The provisions of the Distribution Agreement between any Fund and us,
insofar as they relate to the Plan, are incorporated herein by reference.
This Agreement shall become effective upon execution and delivery hereof
and shall continue in full force and effect as long as the continuance of
the Plan and this related Agreement are approved at least annually by a
vote of the directors, including a majority of the Dis-interested
Directors, cast in person at a meeting called for the purpose of voting
thereon. All communications to us should be sent to the address of
Distributors as shown at the bottom of this Agreement. Any notice to you
shall be duly given if mailed or telegraphed to you at the address
specified by you below.
13 You represent that you provide to your customers who own shares of the
Funds personal services as defined from time to time in applicable
regulations of the National Association of Securities Dealers, Inc., and
that you will continue to accept payments under this Agreement only so long
as you provide such services.
14 This Agreement shall be construed in accordance with the laws of the State
of Texas.
A I M DISTRIBUTORS, INC.
/S/ MICHAEL J. CEMO
Date:________________ By: X____________________________________________
The undersigned agrees to abide by the foregoing terms and conditions.
Date:________________ By: X____________________________________________
Signature
____________________________________________
Print Name Title
____________________________________________
Dealer's Name
____________________________________________
Address
____________________________________________
City State Zip
Please sign both copies and return one copy of
each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
7/97
<PAGE> 3
SCHEDULE "A"
[LOGO APPEARS HERE] SHAREHOLDER SERVICE AGREEMENT
A I M Distributors, Inc.
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ------------------------------------------------------------------------------------------
<S> <C> <C>
AIM Advisor Flex Fund A Shares 0.25 August 4, 1997
AIM Advisor Flex Fund C Shares 1.00** August 4, 1997
AIM Advisor Income Fund A Shares 0.25 August 4, 1997
AIM Advisor Income Fund C Shares 1.00** August 4, 1997
AIM Advisor International Value Fund A Shares 0.25 August 4, 1997
AIM Advisor International Value Fund C Shares 1.00** August 4, 1997
AIM Advisor Large Cap Value Fund A Shares 0.25 August 4, 1997
AIM Advisor Large Cap Value Fund C Shares 1.00** August 4, 1997
AIM Advisor MultiFlex Fund A Shares 0.25 August 4, 1997
AIM Advisor MultiFlex Fund C Shares 1.00** August 4, 1997
AIM Advisor Real Estate Fund A Shares 0.25 August 4, 1997
AIM Advisor Real Estate Fund C Shares 1.00** August 4, 1997
AIM Aggressive Growth Fund A Shares 0.25 July 1, 1992
AIM Balanced Fund A Shares 0.25 Ocotober 18, 1993
AIM Balanced Fund B Shares 0.25 October 18, 1993
AIM Balanced Fund C Shares 1.00** August 4, 1997
AIM Blue Chip Fund A Shares 0.25 June 3, 1996
AIM Blue Chip Fund B Shares 0.25 October 1, 1996
AIM Blue Chip Fund C Shares 1.00** August 4, 1997
AIM Capital Development Fund A Shares 0.25 July 17, 1996
AIM Capital Development Fund B Shares 0.25 October 1, 1996
AIM Capital Development Fund C Shares 1.00** August 4, 1997
AIM Charter Fund A Shares 0.25 November 18, 1986
AIM Charter Fund B Shares 0.25 June 15, 1995
AIM Charter Fund C Shares 1.00** August 4, 1997
AIM Constellation Fund A Shares 0.25 September 9, 1986
AIM Constellation Fund C Shares 1.00** August 4, 1997
AIM Global Aggressive Growth Fund A Shares 0.50 September 15, 1994
AIM Global Aggressive Growth Fund B Shares 0.25 September 15, 1994
AIM Global Aggressive Growth Fund C Shares 1.00** August 4, 1997
AIM Global Growth Fund A Shares 0.50 September 15, 1994
AIM Global Growth Fund B Shares 0.25 September 15, 1994
AIM Global Growth Fund C Shares 1.00** August 4, 1997
AIM Global Income Fund A Shares 0.50 September 15, 1994
</TABLE>
7/97
<PAGE> 4
SCHEDULE "A"
[LOGO APPEARS HERE] SHAREHOLDER SERVICE AGREEMENT
A I M Distributors, Inc.
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ---------------------------------------------------------------------------------------
<S> <C> <C>
AIM Global Income Fund B Shares 0.25 September 15, 1994
AIM Global Income Fund C Shares 1.00** August 4, 1997
AIM Global Utilities Fund A Shares 0.25 July 1, 1992
AIM Global Utilities Fund B Shares 0.25 September 1, 1993
AIM Global Utilities Fund C Shares 1.00** August 4, 1997
AIM Growth Fund A Shares 0.25 July 1, 1992
AIM Growth Fund B Shares 0.25 September 1, 1993
AIM Growth Fund C Shares 1.00** August 4, 1997
AIM High Yield Fund A Shares 0.25 July 1, 1992
AIM High Yield Fund B Shares 0.25 September 1, 1993
AIM High Yield Fund C Shares 1.00** August 4, 1997
AIM Income Fund A Shares 0.25 July 1, 1992
AIM Income Fund B Shares 0.25 September 1, 1993
AIM Income Fund C Shares 1.00** August 4, 1997
AIM Intermediate Government Fund A Shares 0.25 July 1, 1992
AIM Intermediate Government Fund B Shares 0.25 September 1, 1993
AIM Intermediate Government Fund C Shares 1.00** August 4, 1997
AIM International Equity Fund A Shares 0.25 May 21, 1992
AIM International Equity Fund B Shares 0.25 September 15, 1994
AIM International Equity Fund C Shares 1.00** August 4, 1997
AIM Limited Maturity Treasury Shares 0.15 December 2, 1987
AIM Money Market Fund A Shares 0.25 October 18, 1993
AIM Money Market Fund B Shares 0.25 October 18, 1993
AIM Money Market Fund C Shares 1.00** August 4, 1997
AIM Cash Reserve Shares 0.25 October 18, 1993
AIM Municipal Bond Fund A Shares 0.25 July 1, 1992
AIM Municipal Bond Fund B Shares 0.25 September 1, 1993
AIM Municipal Bond Fund C Shares 1.00** August 4, 1997
AIM Tax-Exempt Bond Fund of Connecticut A Shares 0.25 July 1, 1992
AIM Tax-Exempt Cash Fund A Shares 0.10 July 1, 1992
AIM Value Fund A Shares 0.25 July 1, 1992
AIM Value Fund B Shares 0.25 October 18, 1993
AIM Value Fund C Shares 1.00** August 4, 1997
</TABLE>
7/97
<PAGE> 5
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ---------------------------------------------------------------------------------------
<S> <C> <C>
AIM Weingarten Fund A Shares 0.25 September 9, 1986
AIM Weingarten Fund B Shares 0.25 June 15, 1995
AIM Weingarten Fund C Shares 1.00** August 4, 1997
</TABLE>
* Frequency of Payments: Quarterly, B and C share payments begin after an
initial 12 month holding period. Where the broker dealer or financial
institution waives the 1% up-front commission on Class C shares, payments
commence immediately.
** Of this amount, 0.25% is paid as a shareholder servicing fee and 0.75%
(0.35% for AIM Income Fund) is paid as an asset-based sales charge, as those
terms are defined under the rules of the National Association of Security
Dealers, Inc.
Minimum Payments: $50 (with respect to all funds in the aggregate.)
No payment pursuant to this Schedule is payable to a dealer, bank or other
service provider for the first year with respect to sales of $1 million or
more, at no load, in cases where A I M Distributors, Inc. has advanced the
service fee to the dealer, bank or other service provider.
7/97
<PAGE> 1
EXHIBIT 15(c)
[LOGO APPEARS HERE] BANK SHAREHOLDER
A I M Distributors, Inc. SERVICE AGREEMENT
We desire to enter into an Agreement with A I M Distributors, Inc. (the
"Company") acting as agent for the "AIM Funds", for servicing of our agency
clients who are shareholders of, and the administration of such shareholder
accounts in the shares of the AIM Funds (hereinafter referred to as the
"Shares"). Subject to the Company's acceptance of this Agreement, the terms and
conditions of this Agreement shall be as follows:
1 We shall provide continuing personal shareholder and administration
services for holders of the Shares who are also our clients. Such services
to our clients may include, without limitation, some or all of the
following: answering shareholder inquiries regarding the Shares and the AIM
Funds; performing subaccounting; establishing and maintaining shareholder
accounts and records; processing and bunching customer purchase and
redemption transactions; providing periodic statements showing a
shareholder's account balance and the integration of such statements with
those of other transactions and balances in the shareholder's other
accounts serviced by us; forwarding applicable AIM Funds prospectuses, proxy
statements, reports and notices to our clients who are holders of Shares;
and such other administrative services as you reasonably may request, to
the extent we are permitted by applicable statute, rule or regulations to
provide such services. We represent that we shall accept fees hereunder
only so long as we continue to provide personal shareholder services to our
clients.
2 Shares purchased by us as agents for our clients will be registered (choose
one) (in our name or in the name of our nominee) (in the names of our
clients). The client will be the beneficial owner of the Shares purchased
and held by us in accordance with the client's instructions and the client
may exercise all applicable rights of a holder of such Shares. We agree to
transmit to the AIM Funds' transfer agent in a timely manner, all purchase
orders and redemption requests of our clients and to forward to each
client any proxy statements, periodic shareholder reports and other
communications received from the Company by us on behalf of our clients.
The Company agrees to pay all out-of-pocket expenses actually incurred by
us in connection with the transfer by us of such proxy statements and
reports to our clients as required by applicable law or regulation. We
agree to transfer record ownership of a client's Shares to the client
promptly upon the request of a client. In addition, record ownership will
be promptly transferred to the client in the event that the person or
entity ceases to be our client.
3 Within five (5) business days of placing a purchase order we agree to send
(i) a cashiers check to the Company, or (ii) a wire transfer to the AIM
Funds' transfer agent, in an amount equal to the amount of all purchase
orders placed by us on behalf of our clients and accepted by the Company.
4 We agree to make available to the Company, upon the Company's request, such
information relating to our clients who are beneficial owners of Shares and
their transactions in such Shares as may be required by applicable laws and
regulations or as may be reasonably requested by the Company. The names of
our customers shall remain our sole property and shall not be used by the
Company for any other purpose except as needed for servicing and
information mailings in the normal course of business to holders of the
Shares.
5 We shall provide such facilities and personnel (which may be all or any
part of the facilities currently used in our business, or all or any
personnel employed by us) as may be necessary or beneficial in carrying out
the purposes of this Agreement.
6 Except as may be provided in a separate written agreement between the
Company and us, neither we nor any of our employees or agents are
authorized to assist in distribution of any of the AIM Funds' shares except
those contained in the then current Prospectus applicable to the Shares;
and we shall have no authority to act as agent for the Company or the AIM
Funds. Neither the AIM Funds, A I M Advisors, Inc. nor A I M Distributors,
Inc. will be a party, nor will they be represented as a party, to any
agreement that we may enter into with our clients.
7/97
<PAGE> 2
7 In consideration of the services and facilities described herein, we shall
receive from the Company on behalf of the AIM Funds an annual service fee,
payable at such intervals as may be set forth in Schedule A hereto, of a
percentage of the aggregate average net asset value of the Shares owned
beneficially by our clients during each payment period, as set forth in
Schedule A hereto. We understand that this Agreement and the payment of
such service fees has been authorized and approved by the Boards of
Directors/Trustees of the AIM Funds, and is subject to limitations imposed
by the National Association of Securities Dealers, Inc. In cases where the
Company has advanced payments to us of the first year's fee for shares sold
with a contingent deferred sales charge, no payments will be made to us
during the first year the subject Shares are held.
8 The AIM Funds reserve the right, at their discretion and without notice, to
suspend the sale of any Shares or withdraw the sale of Shares.
9 We understand that the Company reserves the right to amend this Agreement
or Schedule A hereto at any time without our consent by mailing a copy of
an amendment to us at the address set forth below. Such amendment shall
become effective on the date specified in such amendment unless we elect to
terminate this Agreement within thirty (30) days of our receipt of such
amendment.
10 This Agreement may be terminated at any time by the Company on not less
than 15 days' written notice to us at our principal place of business. We,
on 15 days' written notice addressed to the Company at its principal place
of business, may terminate this Agreement, said termination to become
effective on the date of mailing notice to us of such termination. The
Company's failure to terminate for any cause shall not constitute a waiver
of the Company's right to terminate at a later date for any such cause.
This Agreement shall terminate automatically in the event of its assigment,
the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the Investment Company Act of 1940, as amended.
11 All communications to the Company shall be sent to it at Eleven Greenway
Plaza, Suite 1919, Houston, Texas, 77046-1173. Any notice to us shall be
duly given if mailed or telegraphed to us at this address shown on this
Agreement.
12 This Agreement shall become effective as of the date when it is executed
and dated below by the Company. This Agreement and all rights and
obligations of the parties hereunder shall be governed by and construed
under the laws of the State of Texas.
A I M DISTRIBUTORS, INC.
/S/ MICHAEL J. CEMO
Date:________________ By: X____________________________________________
The undersigned agrees to abide by the foregoing terms and conditions.
Date:________________ By: X____________________________________________
Signature
____________________________________________
Print Name Title
____________________________________________
Dealer's Name
____________________________________________
Address
____________________________________________
City State Zip
Please sign both copies and return one copy of
each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
7/97
<PAGE> 3
SCHEDULE "A" TO BANK
[LOGO APPEARS HERE] SHAREHOLDER SERVICE AGREEMENT
A I M Distributors, Inc.
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ------------------------------------------------------------------------------------------
<S> <C> <C>
AIM Advisor Flex Fund A Shares 0.25 August 4, 1997
AIM Advisor Flex Fund C Shares 1.00** August 4, 1997
AIM Advisor Income Fund A Shares 0.25 August 4, 1997
AIM Advisor Income Fund C Shares 1.00** August 4, 1997
AIM Advisor International Value Fund A Shares 0.25 August 4, 1997
AIM Advisor International Value Fund C Shares 1.00** August 4, 1997
AIM Advisor Large Cap Value Fund A Shares 0.25 August 4, 1997
AIM Advisor Large Cap Value Fund C Shares 1.00** August 4, 1997
AIM Advisor MultiFlex Fund A Shares 0.25 August 4, 1997
AIM Advisor MultiFlex Fund C Shares 1.00** August 4, 1997
AIM Advisor Real Estate Fund A Shares 0.25 August 4, 1997
AIM Advisor Real Estate Fund C Shares 1.00** August 4, 1997
AIM Aggressive Growth Fund A Shares 0.25 July 1, 1992
AIM Balanced Fund A Shares 0.25 October 18, 1993
AIM Balanced Fund B Shares 0.25 October 18, 1993
AIM Balanced Fund C Shares 1.00** August 4, 1997
AIM Blue Chip Fund A Shares 0.25 June 3, 1996
AIM Blue Chip Fund B Shares 0.25 October 1, 1996
AIM Blue Chip Fund C Shares 1.00** August 4, 1997
AIM Capital Development Fund A Shares 0.25 June 17, 1996
AIM Capital Development Fund B Shares 0.25 October 1, 1996
AIM Capital Development Fund C Shares 1.00** August 4, 1997
AIM Charter Fund A Shares 0.25 November 18, 1986
AIM Charter Fund B Shares 0.25 June 15, 1995
AIM Charter Fund C Shares 1.00** August 4, 1997
AIM Constellation Fund A Shares 0.25 September 9, 1986
AIM Constellation Fund C Shares 1.00** August 4, 1997
AIM Global Aggressive Growth Fund A Shares 0.50 September 15, 1994
AIM Global Aggressive Growth Fund B Shares 0.25 September 15, 1994
AIM Global Aggressive Growth Fund C Shares 1.00** August 4, 1997
AIM Global Growth Fund A Shares 0.50 September 15, 1994
AIM Global Growth Fund B Shares 0.25 September 15, 1994
AIM Global Growth Fund C Shares 1.00** August 4, 1997
AIM Global Income Fund A Shares 0.50 September 15, 1994
</TABLE>
7/97
<PAGE> 4
SCHEDULE "A" TO BANK
[LOGO APPEARS HERE] SHAREHOLDER SERVICE AGREEMENT
A I M Distributors, Inc.
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ----------------------------------------------------------------------------------------
<S> <C> <C>
AIM Global Income Fund B Shares 0.25 September 15, 1994
AIM Global Income Fund C Shares 1.00** August 4, 1997
AIM Global Utilities Fund A Shares 0.25 July 1, 1992
AIM Global Utilities Fund B Shares 0.25 September 1, 1993
AIM Global Utilities Fund C Shares 1.00** August 4, 1997
AIM Growth Fund A Shares 0.25 July 1, 1992
AIM Growth Fund B Shares 0.25 September 1, 1993
AIM Growth Fund C Shares 1.00** August 4, 1997
AIM High Yield Fund A Shares 0.25 July 1, 1992
AIM High Yield Fund B Shares 0.25 September 1, 1993
AIM High Yield Fund C Shares 1.00** August 4, 1997
AIM Income Fund A Shares 0.25 July 1, 1992
AIM Income Fund B Shares 0.25 September 1, 1993
AIM Income Fund C Shares 1.00** August 4, 1997
AIM Intermediate Government Fund A Shares 0.25 July 1, 1992
AIM Intermediate Government Fund B Shares 0.25 September 1, 1993
AIM Intermediate Government Fund C Shares 1.00** August 4, 1997
AIM International Equity Fund A Shares 0.25 May 21, 1992
AIM International Equity Fund B Shares 0.25 September 15, 1994
AIM International Equity Fund C Shares 1.00** August 4, 1997
AIM Limited Maturity Treasury Shares 0.15 December 2, 1987
AIM Money Market Fund A Shares 0.25 October 18, 1993
AIM Money Market Fund B Shares 0.25 October 18, 1993
AIM Money Market Fund C Shares 1.00** August 4, 1997
AIM Cash Reserve Shares 0.25 October 18, 1993
AIM Municipal Bond Fund A Shares 0.25 July 1, 1992
AIM Municipal Bond Fund B Shares 0.25 September 1, 1993
AIM Municipal Bond Fund C Shares 1.00** August 4, 1997
AIM Tax-Exempt Bond Fund of Connecticut A Shares 0.25 July 1, 1992
AIM Tax-Exempt Cash Fund A Shares 0.10 July 1, 1992
AIM Value Fund A Shares 0.25 July 1, 1992
AIM Value Fund B Shares 0.25 October 18, 1993
AIM Value Fund C Shares 1.00** August 4, 1997
</TABLE>
7/97
<PAGE> 5
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
- ---------------------------------------------------------------------------------------
<S> <C> <C>
AIM Weingarten Fund A Shares 0.25 September 9, 1986
AIM Weingarten Fund B Shares 0.25 June 15, 1995
AIM Weingarten Fund C Shares 1.00** August 4, 1997
</TABLE>
* Frequency of Payments: Quarterly, B and C share payments begin after an
initial 12 month holding period. Where the broker dealer or financial
institution waives the 1% up-front commission on Class C shares, payments
commence immediately.
** Of this amount, 0.25% is paid as a shareholder servicing fee and 0.75%
(0.35% for AIM Income Fund) is paid as an asset-based sales charge, as those
terms are defined under the rules of the National Association of Security
Dealers, Inc.
Minimum Payments: $50 (with respect to all funds in the aggregate.)
No payment pursuant to this Schedule is payable to a dealer, bank or other
service provider for the first year with respect to sales of $1 million or
more, at no load, in cases where A I M Distributors, Inc. has advanced the
service fee to the dealer, bank or other service provider.
7/97
<PAGE> 1
EXHIBIT 15(d)
AGENCY PRICING AGREEMENT
(THE AIM FAMILY OF FUNDS--Registered Trademark--)
This Agreement is entered into as of the____ of ____________, 1997,
between _______________________(the "Plan Provider") and A I M Distributors,
Inc. (the "Distributor").
RECITAL
Plan Provider acts as a trustee and/or servicing agent for defined
contribution plans and/or deferred compensation plans (the "Plans") and invests
and reinvests such Plans' assets as specified by an investment advisor, sponsor
or administrative committee of the Plan (a "Plan Representative") generally
upon the direction of Plan beneficiaries (the "Participants").
Plan Provider and Distributor desire to facilitate the purchase and
redemption of shares (the "Shares") of the funds listed on Exhibit A hereto
(the "Fund" or "Funds"), registered investment companies distributed by
Distributor, on behalf of the Plans, through one or more accounts (not to
exceed one per Plan) in each Fund (individually an "Account" and collectively
the "Accounts"), subject to the terms and conditions of this Agreement.
Distributor shall, on behalf of the Funds, pay to Plan Provider a fee in
accordance with Exhibit A hereto.
AGREEMENT
1. SERVICES
Plan Provider shall provide shareholder and administration services
for the Plans and/or their Participants, including, without
limitation: answering questions about the Funds; assisting in changing
dividend options, account designations and addresses; establishing and
maintaining shareholder accounts and records; and assisting in
processing purchase and redemption transactions (the "Services").
Plan Provider shall comply with all applicable laws, rules and
regulations, including requirements regarding prospectus delivery and
maintenance and preservation of records. To the extent allowed by
law, Plan Provider shall provide Distributor with copies of all
records that Distributor may reasonably request. Distributor or its
affiliate will recognize each Plan as an unallocated account in each
Fund, and will not maintain separate accounts in each Fund for each
Participant. Except to the extent provided in Section 3, all Services
performed by Plan Provider shall be as an independent contractor and
not as an employee or agent of Distributor or any of the Funds. Plan
Provider and Plan Representatives, and not Distributor, shall take all
necessary action so that the transactions contemplated by this
Agreement shall not be "Prohibited Transactions" under section 406 of
the Employee Retirement Income Security Act of 1974, or section 4975
of the Internal Revenue Code.
2. PRICING INFORMATION
Each Fund or its designee will furnish Plan Provider on each business
day that the New York Stock Exchange is open for business ("Business
Day"), with (i) net asset value information as of the close of trading
(currently 4:00 p.m. Eastern Time) on the New York Stock Exchange or
as at such later times at which a Fund's net asset value is calculated
as specified in such Fund's prospectus ("Close of Trading"), (ii)
dividend and capital gains
<PAGE> 2
information as it becomes available, and (iii) in the case of income
Funds, the daily accrual or interest rate factor (mil rate). The Funds
shall use their best efforts to provide such information to Plan
Provider by 6:00 p.m. Central Time on the same Business Day.
Distributor or its affiliate will provide Plan Provider (a) daily
confirmations of Account activity within five Business Days after each
day on which a purchase or redemption of Shares is effected for the
particular Account, (b) if requested by Plan Provider, quarterly
statements detailing activity in each Account within fifteen Business
Days after the end of each quarter, and (c) such other reports as may
be reasonably requested by Plan Provider.
3. ORDERS AND SETTLEMENT
If Plan Provider receives instructions in proper form from
Participants or Plan Representatives before the Close of Trading on a
Business Day, Plan Provider will process such instructions that same
evening. On the next Business Day, Plan Provider will transmit orders
for net purchases or redemptions of Shares to Distributor or its
designee by 9:00 a.m. Central Time and wire payment for net purchases
by 2:00 p.m. Central Time. Distributor or its affiliate will wire
payment for net redemptions on the Business Day following the day the
order is executed for the Accounts. In doing so, Plan Provider will
be considered the Funds' agent, and Shares will be purchased and
redeemed as of the Business Day on which Plan Provider receives the
instructions. Plan Provider will record time and date of receipt of
instructions and will, upon request, provide such instructions and
other records relating to the Services to Distributor's auditors. If
Plan Provider receives instructions in proper form after the Close of
Trading on a Business Day, Plan Provider will treat the instructions
as if received on the next Business Day.
4. REPRESENTATIONS WITH RESPECT TO THE DISTRIBUTOR AND THE FUNDS
Plan Provider and its agents shall limit representations concerning a
Fund or Shares to those contained in the then current prospectus of
such Fund, in current sales literature furnished by Distributor to
Plan Provider, in publicly available databases, such as those
databases created by Standard & Poor's and Morningstar, and in current
sales literature created by Plan Provider and submitted to and
approved in writing by Distributor prior to its use.
5. USE OF NAMES
Plan Provider and its affiliates will not, without the prior written
approval of Distributor, make public references to A I M Management
Group Inc. or any of its subsidiaries, or to the Funds. For purposes
of this provision, the public does not include Plan Providers'
representatives who are actively engaged in promoting the Funds. Any
brochure or other communication to the public that mentions the Funds
shall be submitted to Distributor for written approval prior to use.
Plan Provider shall provide copies of its regulatory filings that
include any reference to A I M Management Group Inc. or its
subsidiaries or the Funds to Distributor. If Plan Provider or its
affiliates should make unauthorized references or representations,
Plan Provider agrees to indemnify and hold harmless the Funds, A I M
Management Group Inc. and its subsidiaries from any claims, losses,
expenses or liability arising in any way out of or connected in any
way with such references or representations.
-2-
<PAGE> 3
6. TERMINATION
(a) This Agreement may be terminated with respect to any Fund at
any time without any penalty by the vote of a majority of the
directors of such Fund who are "disinterested directors", as
that term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), or by a vote of a majority of the
Fund's outstanding shares, on sixty (60) days' written notice.
It will be terminated by any act which terminates either the
Fund's Distribution Plan, or any related agreement thereunder,
and in any event, it shall terminate automatically in the
event of its assignment as that term is defined in the 1940
Act.
(b) Either party may terminate this Agreement upon ninety (90)
days' prior written notice to the other party at the address
specified below.
7. INDEMNIFICATION
(a) Plan Provider agrees to indemnify and hold harmless the
Distributor, its affiliates, the Funds, the Funds' investment
advisors, and each of their directors, officers, employees,
agents and each person, if any, who controls them within the
meaning of the Securities Act of 1933, as amended (the
"Securities Act"), (the "Distributor Indemnitees") against any
losses, claims, damages, liabilities or expenses to which a
Distributor Indemnitee may become subject insofar as those
losses, claims, damages, liabilities or expenses or actions in
respect thereof, arise out of or are based upon (i) Plan
Provider's negligence or willful misconduct in performing the
Services, (ii) any breach by Plan Provider of any material
provision of this Agreement, or (iii) any breach by Plan
Provider of a representation, warranty or covenant made in
this Agreement; and Plan Provider will reimburse the
Distributor Indemnitee for any legal or other expenses
reasonably incurred, as incurred, by them in connection with
investigating or defending such loss, claim or action. This
indemnity agreement will be in addition to any liability which
Plan Provider may otherwise have.
(b) Distributor agrees to indemnify and hold harmless Plan
Provider and its affiliates, and each of its directors,
officers, employees, agents and each person, if any, who
controls Plan Provider within the meaning of the Securities
Act (the "Plan Provider Indemnitees") against any losses,
claims, damages, liabilities or expenses to which a Plan
Provider Indemnitee may become subject insofar as such losses,
claims, damages, liabilities or expenses (or actions in
respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact
contained in the Registration Statement or Prospectus of a
Fund, or the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to
make statements therein not misleading, (ii) any breach by
Distributor of any material provision of this Agreement, (iii)
Distributor's negligence or willful misconduct in carrying out
its duties and responsibilities under this Agreement, or (iv)
any breach by Distributor of a representation, warranty or
covenant made in this Agreement; and Distributor will
reimburse the Plan Provider Indemnitees for any legal or other
expenses reasonably incurred, as incurred, by them, in
connection with investigating or defending any such loss,
claim or action. This indemnity agreement will be in addition
to any liability which Distributor may otherwise have.
-3-
<PAGE> 4
(c) If any third party threatens to commence or commences any
action for which one party (the "Indemnifying Party") may be
required to indemnify another person hereunder (the
"Indemnified Party"), the Indemnified Party shall promptly
give notice thereof to the Indemnifying Party. The
Indemnifying Party shall be entitled, at its own expense and
without limiting its obligations to indemnify the Indemnified
Party, to assume control of the defense of such action with
counsel selected by the Indemnifying Party which counsel shall
be reasonably satisfactory to the Indemnified Party. If the
Indemnifying Party assumes the control of the defense, the
Indemnified Party may participate in the defense of such claim
at its own expense. Without the prior written consent of the
Indemnified Party, which consent shall not be withheld
unreasonably, the Indemnifying Party may not settle or
compromise the liability of the Indemnified Party in such
action or consent to or permit the entry of any judgment in
respect thereof unless in connection with such settlement,
compromise or consent each Indemnified Party receives from
such claimant an unconditional release from all liability in
respect of such claim.
8. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Texas applicable to agreements fully
executed and to be performed therein.
9. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each party represents that it is free to enter into this Agreement and
that by doing so it will not breach or otherwise impair any other
agreement or understanding with any other person, corporation or other
entity. Each party represents that it has full power and authority
under applicable law, and has taken all action necessary to enter into
and perform this Agreement and the person executing this Agreement on
its behalf is duly authorized and empowered to execute and deliver
this Agreement. Additionally, each party represents that this
Agreement, when executed and delivered, shall constitute its valid,
legal and binding obligation, enforceable in accordance with its
terms.
Plan Provider further represents, warrants, and covenants that:
(a) it is registered as a transfer agent pursuant to Section 17A
of the Securities Exchange Act of 1934, as amended (the "1934
Act"), or is not required to be registered as such;
(b) the arrangements provided for in this Agreement will be
disclosed to the Plan Representatives; and
(c) it is registered as a broker-dealer under the 1934 Act or any
applicable state securities laws, or, including as a result of
entering into and performing the services set forth in this
Agreement, is not required to be registered as such.
Distributor further represents, warrants and covenants, that:
(a) it is registered as a broker-dealer under the 1934 Act and any
applicable state securities laws; and
-4-
<PAGE> 5
(b) the Funds' advisors are registered as investment advisors
under the Investment Advisers Act of 1940, the Funds are
registered as investment companies under the 1940 Act and Fund
Shares are registered under the Securities Act.
10. MODIFICATION
This Agreement and Exhibit A may be amended at any time by Distributor
without Plan Provider's consent by Distributor mailing a copy of an
amendment to Plan Provider at the address set forth below. Such
amendment shall become effective thirty (30) days from the date of
mailing unless this Agreement is terminated by the Plan Provider
within such thirty (30) days.
11. ASSIGNMENT
This Agreement shall not be assigned by a party hereto, without the
prior written consent of the other parties hereto, except that a party
may assign this Agreement to an affiliate having the same ultimate
ownership as the assigning party without such consent.
12. SURVIVAL
The provisions of Sections 1, 5 and 7 shall survive termination of
this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by
their duly authorized officers as of the date first above written.
______________________________________
(PLAN PROVIDER)
By:___________________________________
Print Name:___________________________
Title:________________________________
Address: _____________________________
______________________________________
______________________________________
A I M DISTRIBUTORS, INC.
(DISTRIBUTOR)
By:___________________________________
Print Name:___________________________
Title:________________________________
11 Greenway Plaza
Suite 1919
Houston, Texas 77210
-5-
<PAGE> 6
EXHIBIT A
For the term of this Agreement, Distributor, or its affiliates, shall
pay Plan Provider the following amounts for each of the following Funds with
respect to the average daily net asset value of the Class A and Class C Shares
of the Plans' balances for the prior quarter:
<TABLE>
<CAPTION>
FUND ANNUAL FEE
- ---------- ----------
<S> <C>
AIM Equity Funds, Inc.
- ----------------------
AIM Aggressive Growth Fund* .25%
AIM Blue Chip Fund .25%
AIM Capital Development Fund .25%
AIM Charter Fund .25%
AIM Constellation Fund .25%
AIM Weingarten Fund .25%
AIM Funds Group
- ---------------
AIM Balanced Fund .25%
AIM Global Utilities Fund .25%
AIM Growth Fund .25%
AIM High Yield Fund .25%
AIM Income Fund .25%
AIM Intermediate Government Fund .25%
AIM Municipal Bond Fund .25%
AIM Value Fund .25%
AIM International Funds, Inc.
- -----------------------------
AIM Global Aggressive Growth Fund .25%
AIM Global Growth Fund .25%
AIM Global Income Fund .25%
AIM International Equity Fund .25%
AIM Investment Securities Funds
- -------------------------------
Limited Maturity Treasury Portfolio (AIM
Limited Maturity Treasury Shares) .15%
</TABLE>
Distributor or its affiliates shall calculate the amount of quarterly
payment and shall deliver to Plan Provider a quarterly statement showing the
calculation of the quarterly amounts payable to Plan Provider. Distributor
reserves the right at any time to impose minimum fee payment requirements
before any quarterly payments will be made to Plan Provider. Payment to Plan
Provider shall occur within 30 days following the end of each quarter. All
parties agree that the payments referred to herein are for record keeping and
administrative services only and are not for legal, investment advisory or
distribution services.
Minimum Payments: $50 (with respect to all Funds in the aggregate.)
* AIM Aggressive Growth Fund is currently closed to new investors.
<PAGE> 1
EXHIBIT 15(e)
A I M DISTRIBUTORS, INC.
[LOGO APPEARS HERE] SHAREHOLDER SERVICE AGREEMENT
A I M Distributors, Inc.
(BANK TRUST DEPARTMENTS)
____________________, 19_____
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with A I M Distributors, Inc. ("AIM
Distributors") as agent on behalf of the funds listed on Schedule A hereto (the
"Funds"), for the servicing of our clients who are shareholders of, and the
administration of accounts in, the Funds. We understand that this Shareholder
Service Agreement (the "Agreement") has been adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act") by each of the Funds,
under a Distribution Plan (the "Plan") adopted pursuant to said Rule, and is
subject to applicable rules of the National Association of Securities Dealers,
Inc. ("NASD"). This Agreement defines the services to be provided by us for
which we are to receive payments pursuant to the Plan. The Plan and the
Agreement have been approved by a majority of the directors or trustees of the
applicable Fund, including a majority of directors or trustees who are not
interested persons of the applicable Fund, and who have no direct or indirect
financial interest in the operation of the Plan or related agreements, by votes
cast in person at a meeting called for the purpose of voting on the Plan. Such
approval included a determination by the directors or trustees of the
applicable Fund, in the exercise of their reasonable business judgement and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Plan will benefit the Fund and the holders of its Shares. The terms and
conditions of this Agreement shall be as follows:
1. To the extent that we provide continuing personal shareholder services
and administrative support services to our customers who may from time
to time own shares of the Funds of record or beneficially, including but
not limited to, forwarding sales literature, answering routine customer
inquiries regarding the Funds, assisting customers in changing dividend
options, account designations and addresses, and in enrolling into any
of several special investment plans offered in connection with the
purchase of the Funds' shares, assisting in the establishment and
maintenance of customer accounts and records and in the processing of
purchase and redemption transactions, investing dividends and capital
gains distributions automatically in shares of the Funds and providing
such other services as AIM Distributors or the customer may reasonably
request, you shall pay us a fee periodically. We represent that we
shall accept fees hereunder only so long as we continue to provide such
personal shareholder services.
2. We agree to transmit to AIM Distributors in a timely manner, all
purchase orders and redemption requests of our clients and to forward to
each client all proxy statements, periodic shareholder reports and other
communications received from AIM Distributors by us relating to shares
of the Funds owned by our clients. AIM Distributors, on behalf of the
Funds, agrees
<PAGE> 2
Shareholder Service Agreement Page 2
(Bank Trust Departments)
to pay all out-of-pocket expenses actually incurred by us in connection
with the transfer by us of such proxy statements and reports to our
clients as required under applicable laws or regulations.
3. We agree to make available upon AIM Distributors's request, such
information relating to our clients who are beneficial owners of Fund
shares and their transactions in such shares as may be required by
applicable laws and regulations or as may be reasonably requested by AIM
Distributors.
4. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record
ownership will be promptly transferred to the client in the event that
the person or entity ceases to be our client.
5. Neither we nor any of our employees or agents are authorized to make any
representation to our clients concerning the Funds except those
contained in the then current prospectuses applicable to the Funds,
copies of which will be supplied to us by AIM Distributors; and we shall
have no authority to act as agent for any Fund or AIM Distributors.
Neither a Fund, nor A I M Advisors, Inc. ("AIM") will be a party, nor
will they be represented as a party, to any agreement that we may enter
into with our clients and neither a Fund nor AIM shall participate,
directly or indirectly, in any compensation that we may receive from our
clients in connection with our acting on their behalf with respect to
this Agreement.
6. In consideration of the services and facilities described herein, we
shall receive a maximum annual service fee and asset-based sales charge,
payable monthly, as set forth on Schedule A hereto. We understand that
this Agreement and the payment of such service fees and asset-based
sales charge has been authorized and approved by the Board of Directors
or Trustees of the applicable Fund, and that the payment of fees
thereunder is subject to limitations imposed by the rules of the NASD.
7. AIM Distributors reserves the right, in its discretion and without
notice, to suspend the sale of any Fund or withdraw the sale of shares
of a Fund, or upon notice to us, to amend this Agreement. We agree that
any order to purchase shares of the Funds placed by us after notice of
any amendment to this Agreement has been sent to us shall constitute our
agreement to any such amendment.
8. All communications to AIM Distributors shall be duly given if mailed to
A I M Distributors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173. Any notice to us shall be duly given if mailed to us at the
address specified by us in this Agreement or to such other address as we
shall have designated in writing to AIM Distributors.
9. This Agreement may be terminated at any time by AIM Distributors on not
less than 60 days' written notice to us at our principal place of
business. We, on 60 days' written notice addressed to AIM Distributors
at its principal place of business, may terminate this Agreement. AIM
Distributors may also terminate this Agreement for cause on violation by
us of any of the provisions of this Agreement, said termination to
become effective on the date of mailing notice to us of such
termination. AIM Distributors's failure to terminate for any cause
shall not
<PAGE> 3
Shareholder Service Agreement Page 3
(Bank Trust Departments)
constitute a waiver of AIM Distributors's right to terminate at a later
date for any such cause. This Agreement may be terminated with respect
to any Fund at any time by the vote of a majority of the directors or
trustees of such Fund who are disinterested directors or by a vote of a
majority of the Fund's outstanding shares, on not less than 60 days'
written notice to us at our principal place of business. This Agreement
will be terminated by any act which terminates a Fund's Distribution
Agreement with AIM Distributors, the Agreement for Purchase of Shares of
The AIM Family of Funds--Registered Trademark-- between us and AIM
Distributors or a Fund's Distribution Plan, and in any event, it shall
terminate automatically in the event of its assignment by us, the term
"assignment" for this purpose having the meaning defined in Section
2(a)(4) of the 1940 Act.
10. We represent that our activities on behalf of our clients and pursuant
to this Agreement either (i) are not such as to require our registration
as a broker-dealer in the state(s) in which we engage in such
activities, or (ii) we are registered as a broker-dealer in the state(s)
in which we engage in such activities. We represent that we are
registered as a broker-dealer with the NASD if required under applicable
law.
11. This Agreement and the Agreement for Purchase of Shares of The AIM
Family of Funds--Registered Trademark-- through Bank Trust Departments
constitute the entire agreement between us and AIM Distributors and
supersede all prior oral or written agreements between the parties
hereto. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which shall constitute the same
instrument.
12. This Agreement and all rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of Texas.
13. This Agreement shall become effective as of the date when it is executed
and dated by AIM Distributors.
<PAGE> 4
Shareholder Service Agreement Page 4
(Bank Trust Departments)
The undersigned agrees to abide by the foregoing terms and conditions.
-------------------------------------
(Firm Name)
-------------------------------------
(Address)
-------------------------------------
City/State/Zip/County
By:
------------------------------
Name:
--------------------------------
Title:
------------------------------
Dated:
-------------------------------
ACCEPTED:
A I M DISTRIBUTORS, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Dated:
----------------------------------
Please sign both copies and return to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
<PAGE> 5
Shareholder Service Agreement Page 5
(Bank Trust Departments)
SCHEDULE A
<TABLE>
<CAPTION>
Funds Fees
----- ----
<S> <C>
AIM Equity Funds, Inc.
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund (Retail Class)
AIM Constellation Fund (Retail Class)
AIM Weingarten Fund (Retail Class)
* AIM Aggressive Growth Fund
AIM Funds Group
AIM Balanced Fund
AIM Global Utilities Fund
AIM Growth Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Value Fund
AIM International Funds, Inc.
AIM International Equity Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Global Income Fund
AIM Investment Securities Funds
Limited Maturity Treasury Portfolio
AIM Tax-Exempt Funds, Inc.
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
Intermediate Portfolio
</TABLE>
__________________________________
*Shares of AIM Aggressive Growth Fund may only be sold to current
shareholders who maintain open accounts in AIM Aggressive Growth Fund.
<PAGE> 6
A I M DISTRIBUTORS, INC.
SHAREHOLDER SERVICE AGREEMENT
[LOGO APPEARS HERE]
A I M Distributors, Inc. (BROKERS FOR BANK TRUST DEPARTMENTS)
____________________, 19_____
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with A I M Distributors, Inc. ("AIM
Distributors") as agent on behalf of the funds listed on Schedule A hereto (the
"Funds"), for the servicing of our clients who are shareholders of, and the
administration of accounts in, the Funds. We understand that this Shareholder
Service Agreement (the "Agreement") has been adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act") by each of the Funds,
under a Distribution Plan (the "Plan") adopted pursuant to said Rule, and is
subject to applicable rules of the National Association of Securities Dealers,
Inc. ("NASD"). This Agreement defines the services to be provided by us for
which we are to receive payments pursuant to the Plan. The Plan and the
Agreement have been approved by a majority of the directors or trustees of the
applicable Fund, including a majority of directors or trustees who are not
interested persons of the applicable Fund, and who have no direct or indirect
financial interest in the operation of the Plan or related agreements, by votes
cast in person at a meeting called for the purpose of voting on the Plan. Such
approval included a determination by the directors or trustees of the
applicable Fund, in the exercise of their reasonable business judgement and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Plan will benefit the Fund and the holders of its Shares. The terms and
conditions of this Agreement shall be as follows:
1. To the extent that we provide continuing personal shareholder services
and administrative support services to our customers who may from time
to time own shares of the Funds of record or beneficially, including but
not limited to, forwarding sales literature, answering routine customer
inquiries regarding the Funds, assisting customers in changing dividend
options, account designations and addresses, and in enrolling into any
of several special investment plans offered in connection with the
purchase of the Funds' shares, assisting in the establishment and
maintenance of customer accounts and records and in the processing of
purchase and redemption transactions, investing dividends and capital
gains distributions automatically in shares of the Funds and providing
such other services as AIM Distributors or the customer may reasonably
request, you shall pay us a fee periodically. We represent that we
shall accept fees hereunder only so long as we continue to provide such
personal shareholder services.
2. We agree to transmit to AIM Distributors in a timely manner, all
purchase orders and redemption requests of our clients and to forward to
each client all proxy statements, periodic shareholder reports and other
communications received from AIM Distributors by us relating to shares
of the Funds owned by our clients. AIM Distributors, on behalf of the
Funds, agrees
<PAGE> 7
Shareholder Service Agreement Page 2
(Brokers for Bank Trust Departments)
to pay all out-of-pocket expenses actually incurred by us in connection
with the transfer by us of such proxy statements and reports to our
clients as required under applicable laws or regulations.
3. We agree to transfer to AIM Distributors in a timely manner as set forth
in the applicable prospectus, federal funds in an amount equal to the
amount of all purchase orders placed by us and accepted by AIM
Distributors. In the event that AIM Distributors fails to receive such
federal funds on such date (other than through the fault of AIM
Distributors), we shall indemnify the applicable Fund and AIM
Distributors against any expense (including overdraft charges) incurred
by the applicable Fund and/or AIM Distributors as a result of the
failure to receive such federal funds.
4. We agree to make available upon AIM Distributors's request, such
information relating to our clients who are beneficial owners of Fund
shares and their transactions in such shares as may be required by
applicable laws and regulations or as may be reasonably requested by AIM
Distributors.
5. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record
ownership will be promptly transferred to the client in the event that
the person or entity ceases to be our client.
6. Neither we nor any of our employees or agents are authorized to make any
representation to our clients concerning the Funds except those
contained in the then current prospectuses applicable to the Funds,
copies of which will be supplied to us by AIM Distributors; and we shall
have no authority to act as agent for any Fund or AIM Distributors.
Neither a Fund, nor A I M Advisors, Inc. ("AIM") will be a party, nor
will they be represented as a party, to any agreement that we may enter
into with our clients and neither a Fund nor AIM shall participate,
directly or indirectly, in any compensation that we may receive from our
clients in connection with our acting on their behalf with respect to
this Agreement.
7. In consideration of the services and facilities described herein, we
shall receive a maximum annual service fee and asset-based sales charge,
payable monthly, as set forth on Schedule A hereto. We understand that
this Agreement and the payment of such service fees and asset-based
sales charge has been authorized and approved by the Board of Directors
or Trustees of the applicable Fund, and that the payment of fees
thereunder is subject to limitations imposed by the rules of the NASD.
8. AIM Distributors reserves the right, in its discretion and without
notice, to suspend the sale of any Fund or withdraw the sale of shares
of a Fund, or upon notice to us, to amend this Agreement. We agree that
any order to purchase shares of the Funds placed by us after notice of
any amendment to this Agreement has been sent to us shall constitute our
agreement to any such amendment.
9. All communications to AIM Distributors shall be duly given if mailed to
<PAGE> 8
Shareholder Service Agreement Page 3
(Brokers for Bank Trust Departments)
A I M Distributors, Inc., 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173. Any notice to us shall be duly given if mailed to us at the
address specified by us in this Agreement or to such other address as we
shall have designated in writing to AIM Distributors.
10. This Agreement may be terminated at any time by AIM Distributors on not
less than 60 days' written notice to us at our principal place of
business. We, on 60 days' written notice addressed to AIM Distributors
at its principal place of business, may terminate this Agreement. AIM
Distributors may also terminate this Agreement for cause on violation
by us of any of the provisions of this Agreement, said termination to
become effective on the date of mailing notice to us of such
termination. AIM Distributors's failure to terminate for any cause
shall not constitute a waiver of AIM Distributors's right to terminate
at a later date for any such cause. This Agreement may be terminated
with respect to any Fund at any time by the vote of a majority of the
directors or trustees of such Fund who are disinterested directors or by
a vote of a majority of the Fund's outstanding shares, on not less than
60 days' written notice to us at our principal place of business. This
Agreement will be terminated by any act which terminates a Fund's
Distribution Agreement with AIM Distributors, the Selected Dealer
Agreement between us and AIM Distributors or a Fund's Distribution Plan,
and in any event, shall terminate automatically in the event of its
assignment by us, the term "assignment" for this purpose having the
meaning defined in Section 2(a)(4) of the 1940 Act.
11. We represent that our activities on behalf of our clients and pursuant
to this Agreement either (i) are not such as to require our registration
as a broker-dealer in the state(s) in which we engage in such
activities, or (ii) we are registered as a broker-dealer in the state(s)
in which we engage in such activities. We represent that we are
registered as a broker-dealer with the NASD if required under applicable
law.
12. This Agreement and all rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of Texas.
This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which shall constitute the same
instrument. This Agreement shall not relieve us or AIM Distributors
from any obligations either may have under any other agreements between
us.
13. This Agreement shall become effective as of the date when it is executed
and dated by AIM Distributors.
<PAGE> 9
Shareholder Service Agreement Page 4
(Brokers for Bank Trust Departments)
The undersigned agrees to abide by the foregoing terms and conditions.
-------------------------------------------------
(Firm Name)
-------------------------------------------------
(Address)
-------------------------------------------------
City/State/Zip/County
By:
------------------------------------------
Name:
--------------------------------------------
Title:
------------------------------------------
Dated:
-------------------------------------------
ACCEPTED:
A I M DISTRIBUTORS, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Dated:
-----------------------------
Please sign both copies and return to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
<PAGE> 10
Shareholder Service Agreement Page 5
(Brokers for Bank Trust Departments)
SCHEDULE A
<TABLE>
<CAPTION>
Funds Fees
----- ----
<S> <C>
AIM Equity Funds, Inc.
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund (Retail Class)
AIM Constellation Fund (Retail Class)
AIM Weingarten Fund (Retail Class)
* AIM Aggressive Growth Fund
AIM Funds Group
AIM Balanced Fund
AIM Global Utilities Fund
AIM Growth Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Value Fund
AIM International Funds, Inc.
AIM International Equity Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Global Income Fund
AIM Investment Securities Funds
Limited Maturity Treasury Portfolio
AIM Tax-Exempt Funds, Inc.
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
Intermediate Portfolio
</TABLE>
__________________________________
*Shares of AIM Aggressive Growth Fund may only be sold to current
shareholders who maintain open accounts in AIM Aggressive Growth Fund.
<PAGE> 1
EXHIBIT 18
AMENDED AND RESTATED MULTIPLE CLASS PLAN
OF
THE AIM FAMILY OF FUNDS
1. This Amended and Restated Multiple Class Plan (the "Plan") adopted in
accordance with Rule 18f-3 under the Act shall govern the terms and
conditions under which the Funds may issue separate Classes of Shares
representing interests in one or more Portfolios of each Fund.
2. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
a. Act - Investment Company Act of 1940, as amended.
b. CDSC - contingent deferred sales charge.
c. CDSC Period - the period of years following acquisition of
Shares during which such Shares may be assessed a CDSC upon
redemption.
d. Class - a class of Shares of a Fund representing an interest
in a Portfolio.
e. Class A Shares - shall mean those Shares designated as Class A
Shares in the Fund's organizing documents, as well as those
Shares deemed to be Class A Shares for purposes of this Plan.
f. Class B Shares - shall mean those Shares designated as Class B
Shares in the Fund's organizing documents.
g. Class C Shares - shall mean those Shares designated as Class C
Shares in the Fund's organizing documents, as well as those
Shares deemed to be Class C Shares for purposes of this Plan.
h. Directors - the directors or trustees of a Fund.
i. Distribution Expenses - expenses incurred in activities which
are primarily intended to result in the distribution and sale
of Shares as defined in a Plan of Distribution and/or
agreements relating thereto.
j. Distribution Fee - a fee paid by a Fund to the Distributor to
compensate the Distributor for Distribution Expenses.
k. Distributor - A I M Distributors, Inc. or Fund Management
Company, as applicable.
l. Fund - those investment companies advised by A I M Advisors,
Inc. which have adopted this Plan.
1
<PAGE> 2
m. Institutional Shares - shall mean Shares of a Fund
representing an interest in a Portfolio offered for sale to
institutional customers as may be approved by the Directors
from time to time and as set forth in the Fund's prospectus.
n. Plan of Distribution - Any plan adopted under Rule 12b-1 under
the Act with respect to payment of a Distribution Fee.
o. Portfolio - a series of the Shares of a Fund constituting a
separate investment portfolio of the Fund.
p. Service Fee - a fee paid to financial intermediaries for the
ongoing provision of personal services to Fund shareholders
and/or the maintenance of shareholder accounts.
q. Share - a share of common stock of or beneficial interest in
a Fund, as applicable.
3. Allocation of Income and Expenses.
a. Distribution and Service Fees - Each Class shall bear
directly any and all Distribution Fees and/or Service Fees
payable by such Class pursuant to a Plan of Distribution
adopted by the Fund with respect to such Class.
b. Transfer Agency and Shareholder Recordkeeping Fees - Each
Class shall bear directly the transfer agency fees and
expenses and other shareholder recordkeeping fees and
expenses specifically attributable to that Class.
c. Allocation of Other Expenses - Each Class shall bear
proportionately all other expenses incurred by a Fund based
on the relative net assets attributable to each such Class.
d. Allocation of Income, Gains and Losses - Except to the extent
provided in the following sentence, each Portfolio will
allocate income and realized and unrealized capital gains and
losses to a Class based on the relative net assets of each
Class. Notwithstanding the foregoing, each Portfolio that
declares dividends on a daily basis will allocate income on
the basis of settled shares.
e. Waiver and Reimbursement of Expenses - A Portfolio's adviser,
underwriter or any other provider of services to the
Portfolio may waive or reimburse the expenses of a particular
Class or Classes.
4. Distribution and Servicing Arrangements. The distribution and
servicing arrangements identified below will apply for the following
Classes offered by a Fund with respect to a Portfolio. The provisions
of the Fund's prospectus describing the distribution and servicing
arrangements in detail are incorporated herein by this reference.
a. Class A Shares. Class A Shares shall be offered at net asset
value plus a front-end sales charge as approved from time to
time by the Directors and set forth in the Fund's prospectus,
may be reduced or eliminated for certain money market fund
2
<PAGE> 3
shares, for larger purchases, under a combined
purchase privilege, under a right of accumulation,
under a letter of intent or for certain categories of
purchasers as permitted by Rule 22(d) of the Act and as set
forth in the Fund's prospectus. Class A Shares that are not
subject to a front-end sales charge as a result of the
foregoing shall be subject to a CDSC for the CDSC Period set
forth in Section 5(a) of this Plan if so provided in the
Fund's prospectus. The offering price of Shares subject to a
front-end sales charge shall be computed in accordance with
Rule 22c-1 and Section 22(d) of the Act and the rules and
regulations thereunder. Class A Shares shall be subject to
ongoing Service Fees and/or Distribution Fees approved from
time to time by the Directors and set forth in the Fund's
prospectus. Although AIM Cash Reserve Shares, AIM Limited
Maturity Treasury Shares, AIM Tax-Free Intermediate Shares
and shares of AIM Tax-Exempt Bond Fund of Connecticut and AIM
Tax Exempt Cash Fund are not designated as "Class A", they
are substantially similar to Class A Shares as defined herein
and shall be deemed to be Class A Shares for the purposes of
this Plan.
b. Class B Shares. Class B Shares shall be (i) offered at net
asset value, (ii) subject to a CDSC for the CDSC Period set
forth in Section 5(b), (iii) subject to ongoing Service Fees
and Distribution Fees approved from time to time by the
Directors and set forth in the Fund's prospectus, and (iv)
converted to Class A Shares eight years from the end of the
calendar month in which the shareholder's order to purchase
was accepted as set forth in the Fund's prospectus.
c. Class C Shares. Class C Shares shall be (i) offered at net
asset value, (ii) subject to a CDSC for the CDSC Period set
forth in Section 5(c), and (iii) subject to ongoing Service
Fees and Distribution Fees approved from time to time by the
Directors and set forth in the Fund's prospectus.
d. Institutional Shares. Institutional Shares shall be (i)
offered at net asset value, (ii) offered only to certain
categories of institutional customers as approved from time
to time by the Directors and as set forth in the Fund's
prospectus and (iii) may be subject to ongoing Service Fees
and/or Distribution Fees as approved from time to time by the
Directors and set forth in the Fund's prospectus.
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares that
do not incur a front-end sales charge and of Class B Shares and Class
C Shares as follows:
a. Class A Shares. The CDSC Period for Class A Shares shall be 18
months. The CDSC Rate shall be as set forth in the Fund's
prospectus, the relevant portions of which are incorporated
herein by this reference. No CDSC shall be imposed on Class A
Shares unless so provided in a Fund's prospectus.
b. Class B Shares. The CDSC Period for the Class B Shares shall
be six years. The CDSC Rate for the Class B Shares shall be
as set forth in the Fund's prospectus, the relevant portions
of which are incorporated herein by this reference.
3
<PAGE> 4
c. Class C Shares. The CDSC Period for the Class C Shares shall
be one year. The CDSC Rate for the Class C Shares shall be as
set forth in the Fund's prospectus, the relevant portions of
which are incorporated herein by reference.
d. Method of Calculation. The CDSC shall be assessed on an
amount equal to the lesser of the then current market value
or the cost of the Shares being redeemed. No sales charge
shall be imposed on increases in the net asset value of the
Shares being redeemed above the initial purchase price. No
CDSC shall be assessed on Shares derived from reinvestment of
dividends or capital gains distributions. The order in which
Shares are to be redeemed when not all of such Shares would
be subject to a CDSC shall be determined by the Distributor
in accordance with the provisions of Rule 6c-10 under the Act.
e. Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares and disclosed in
the Fund's prospectus or statement of additional information
and, for the Class A Shares, as allowed under Rule 6c-10 under
the Act.
6. Exchange Privileges. Exchanges of Shares shall be permitted between
Funds as follows:
a. Class A Shares may be exchanged for Class A Shares of another
Portfolio, subject to certain limitations set forth in the
Fund's prospectus as it may be amended from time to time,
relevant portions of which are incorporated herein by this
reference.
b. Class B Shares may be exchanged for Class B Shares of another
Portfolio at their relative net asset value.
c. Class C Shares may be exchanged for Class C Shares of any
other Portfolio at their relative net asset value.
d. Depending upon the Portfolio from which and into which an
exchange is being made and when the shares were purchased,
shares being acquired in an exchange may be acquired at their
offering price, at their net asset value or by paying the
difference in sales charges, as disclosed in the Fund's
prospectus and statement of additional information.
e. CDSC Computation. The CDSC payable upon redemption of Class A
Shares, Class B Shares and Class C Shares subject to a CDSC
shall be computed in the manner described in the Fund's
prospectus.
7. Service and Distribution Fees. The Service Fee and Distribution Fee
applicable to any Class shall be those set forth in the Fund's
prospectus, relevant portions of which are incorporated herein by this
reference. All other terms and conditions with respect to Service Fees
and Distribution Fees shall be governed by the Plan of Distribution
adopted by the Fund with respect to such fees and Rule 12b-1 of the
Act.
4
<PAGE> 5
8. Conversion of Class B Shares.
a. Shares Received upon Reinvestment of Dividends and
Distributions - Shares purchased through the reinvestment of
dividends and distributions paid on Shares subject to
conversion shall be treated as if held in a separate
sub-account. Each time any Shares in a Shareholder's account
(other than Shares held in the sub-account) convert to Class A
Shares, a proportionate number of Shares held in the
sub-account shall also convert to Class A Shares.
b. Conversions on Basis of Relative Net Asset Value - All
conversions shall be effected on the basis of the relative
net asset values of the two Classes without the imposition of
any sales load or other charge.
c. Amendments to Plan of Distribution for Class A Shares - If
any amendment is proposed to the Plan of Distribution under
which Service Fees and Distribution Fees are paid with
respect to Class A Shares of a Fund that would increase
materially the amount to be borne by those Class A Shares,
then no Class B Shares shall convert into Class A Shares of
that Fund until the holders of Class B Shares of that Fund
have also approved the proposed amendment. If the holders of
such Class B Shares do not approve the proposed amendment, the
Directors of the Fund and the Distributor shall take such
action as is necessary to ensure that the Class voting
against the amendment shall convert into another Class
identical in all material respects to Class A Shares of the
Fund as constituted prior to the amendment.
9. This Plan shall not take effect until a majority of the Directors of a
Fund, including a majority of the Directors who are not interested
persons of the Fund, shall find that the Plan, as proposed and
including the expense allocations, is in the best interests of each
Class individually and the Fund as a whole.
10. This Plan may not be amended to materially change the provisions of
this Plan unless such amendment is approved in the manner specified in
Section 9 above.
5
