<PAGE> 1
As filed with the Securities and Exchange Commission on September 18, 1998.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-effective Amendment No. ____ Post-effective Amendment No. ____
(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)
Registrant's Telephone Number: (713)626-1919
Name and Address of Agent for Service: Copy to:
CAROL F. RELIHAN, ESQUIRE THOMAS H. DUNCAN, ESQUIRE
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP
11 Greenway Plaza 1225 17th Street
Suite 100 Suite 2300
Houston, TX 77046 Denver, CO 80202
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective under the Securities Act of
1933.
It is proposed that this filing will become effective on October 19,
1998 pursuant to Rule 488.
The title of the securities being registered is AIM Cash Reserve Shares
and Class B Shares of AIM Money Market Fund. No filing fee is due in reliance on
Section 24(f) of the Securities Act of 1933.
<PAGE> 2
AIM FUNDS GROUP
Cross Reference Sheet
Pursuant to Rule 481(a) under the Securities Act of 1933
<TABLE>
<CAPTION>
LOCATION IN COMBINED PROXY
FORM N-14 ITEM NO. STATEMENT AND PROSPECTUS
------------------ ------------------------
<S> <C> <C>
PART A
Item 1. Beginning of Registration Statement and Cover Page of Registration
Outside Front Cover Page of Prospectus Statement; Front Cover Page
of Prospectus
Item 2. Beginning and Outside Back Cover Page of Table of Contents
Prospectus
Item 3. Fee Table, Synopsis and Risk Factors Synopsis; Risk Factors
Item 4. Information About the Transaction Reasons for the Transaction;
Synopsis; Additional
Information About the
Agreement; Rights of
Shareholders; Capitalization
Item 5. Information About the Registrant Front Cover Page of
Prospectus; Synopsis; Risk
Factors; Incorporation of
Documents by Reference in
the Prospectus; Comparison of
Investment Objectives, Policies
and Restrictions; Financial
Information; Additional
Information About Money
Market and Dollar Fund;
Information Filed with the
Securities and Exchange
Commission
Item 6. Information About the Company Being Front Cover Page of
Acquired Prospectus; Incorporation of
Documents by Reference in
the Prospectus; Comparison of
Investment Objectives, Policies
and Restrictions; Financial
Information; Additional
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Information About Money
Market and Dollar Fund;
Information Filed with the
Securities and Exchange
Commission
Item 7. Voting Information Prospectus Cover Page; Notice
of Special Meeting of
Shareholders; Introduction;
Ownership of Money Market
and Dollar Fund Shares
Item 8. Interest of Certain Persons and Experts Not Applicable
Item 9. Additional Information Required for Not Applicable
Reoffering by Persons Deemed to be
Underwriters
----------------------------------------
PART B
Item 10. Cover Page Cover Page of Statement of
Additional Information
Item 11. Table of Contents Not Applicable
Item 12. Additional Information about the Registrant Additional Information About
AFG and Money Market;
Incorporation of Documents
by Reference in the Statement
of Additional Information
Item 13. Additional Information about the Company Not Applicable
Being Acquired
Item 14. Financial Statements Financial Information;
Incorporation of Documents
by Reference in the Statement
of Additional Information;
Incorporation of Documents
by Reference in Part C
</TABLE>
PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of this document.
<PAGE> 4
AIM DOLLAR FUND
A PORTFOLIO OF
AIM INVESTMENT PORTFOLIOS
FIFTY CALIFORNIA STREET, 27TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111
October __, 1998
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your
approval of a proposed combination of AIM Dollar Fund ("Dollar Fund"), an
investment portfolio of AIM Investment Portfolios, with AIM Money Market Fund
("Money Market"), an investment portfolio of AIM Funds Group.
Dollar Fund and Money Market are both money market funds which
provide cash management alternatives to shareholders of The AIM Family of
Funds(R). AIM Advisors, Inc. serves as the investment adviser to both funds. As
discussed in the accompanying document, combining the two funds will simplify
the arrangements under which shareholders of The AIM Family of Funds can
exchange their shares with those of AIM money market funds. In addition,
operating Dollar Fund and Money Market as separate funds duplicates investment
objectives, whereas combining the two funds should offer Dollar Fund
shareholders an investment in a larger fund with a potentially broader range of
investment choices, the potential for more stable cash flows, potential for
lower costs through economies of scale. The accompanying document describes the
proposed transaction and compares the investment policies and operating expenses
of the funds for your evaluation.
Shareholders are being asked to approve an Agreement and Plan of
Reorganization between AIM Investment Portfolios acting on behalf of Dollar Fund
and AIM Funds Group acting on behalf of Money Market. After careful
consideration, the Board of Trustees of AIM Investment Portfolios has
unanimously approved this proposal and recommends that you read the enclosed
materials carefully and then vote FOR the proposal.
Your vote is important. Please take a moment now to sign and return
your proxy cards in the enclosed postage paid return envelope. If we do not hear
from you after a reasonable amount of time you may receive a telephone call from
our proxy solicitor, Shareholder Communications Corporation, reminding you to
vote your shares.
Thank you for your cooperation and continued support.
Sincerely,
Robert Graham
Chairman
<PAGE> 5
AIM DOLLAR FUND
A PORTFOLIO OF
AIM INVESTMENT PORTFOLIOS
FIFTY CALIFORNIA STREET, 27th FLOOR
SAN FRANCISCO, CALIFORNIA 94111
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 11, 1998
TO THE SHAREHOLDERS OF AIM DOLLAR FUND:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of AIM
Dollar Fund ("Dollar Fund"), an investment portfolio of AIM Investment
Portfolios ("AIP"), will be held at 11 Greenway Plaza, Suite 100, Houston, TX
77046 on December 11 , 1998, at _____ p.m., local time, for the following
purposes:
1. To approve an Agreement and Plan of Reorganization (the
"Agreement") between AIP, acting on behalf of Dollar Fund, and AIM
Funds Group ("AFG"), acting on behalf of AIM Money Market Fund
("Money Market"), and the consummation of the transactions
contemplated therein. The Agreement provides for the combination
of Dollar Fund and Money Market (the "Reorganization"). Pursuant
to the Agreement, all of the assets of Dollar Fund will be
transferred to Money Market, Money Market will assume all of the
liabilities of Dollar Fund, and AFG will issue directly (i) to
Dollar Fund's Class A and Advisor Class shareholders, AIM Cash
Reserve Shares of Money Market, and (ii) to Dollar Fund's Class B
shareholders, Class B Shares of Money Market, having an aggregate
net asset value equal to the net value of the Dollar Fund assets
transferred to Money Market. It is expected that the value of each
Dollar Fund shareholder's account with Money Market immediately
after the Reorganization will be the same as the value of such
shareholder's account with Dollar Fund immediately prior to the
Reorganization. The Reorganization has been structured as a
tax-free transaction. No initial sales charge will be imposed in
connection with the Reorganization.
2. To transact any other business, not currently contemplated, that
may properly come before the Special Meeting, in the discretion of
the proxies or their substitutes.
Shareholders of record as of the close of business on October 13,
1998, are entitled to notice of, and to vote at, the Special Meeting or any
adjournment thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY WHICH IS BEING SOLICITED BY THE MANAGEMENT OF
AIP. THIS IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE SPECIAL
MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE
SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN NOTICE
OF REVOCATION TO AIP AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY VOTING IN
PERSON AT THE SPECIAL MEETING.
HELGE K. LEE
VICE PRESIDENT AND SECRETARY
October __, 1998
<PAGE> 6
AIM INVESTMENT PORTFOLIOS
AIM DOLLAR FUND
c/o AIM FUNDS
P.O. BOX 7345
SAN FRANCISCO, CA 94120-7345
TOLL FREE: (800) 347-4246
AIM FUNDS GROUP
AIM MONEY MARKET FUND
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 347-4246
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated: October __, 1998
This document is being furnished in connection with the Special
Meeting of Shareholders of AIM Dollar Fund ("Dollar Fund"), an investment
portfolio of AIM Investment Portfolios ("AIP") to be held on December 11, 1998
(the "Special Meeting"). At the Special Meeting, the shareholders of Dollar Fund
are being asked to consider and approve the Agreement and Plan of Reorganization
(the "Agreement") between AIP, acting on behalf of Dollar Fund, and AIM Funds
Group ("AFG") acting on behalf of AIM Money Market Fund ("Money Market"), and
the consummation of the transactions contemplated therein (the
"Reorganization"). THE BOARD OF TRUSTEES OF AIP HAS UNANIMOUSLY APPROVED THE
AGREEMENT AND REORGANIZATION AS BEING IN THE BEST INTEREST OF DOLLAR FUND
SHAREHOLDERS.
Pursuant to the Agreement, all of the assets of Dollar Fund will be
transferred to Money Market, Money Market will assume all of the liabilities of
Dollar Fund, and AFG will issue directly (i) to Dollar Fund's Class A and
Advisor Class shareholders, AIM Cash Reserve Shares of Money Market ("Money
Market Cash Reserve Shares"), and (ii) to Dollar Fund's Class B shareholders,
Money Market Class B Shares, having an aggregate net asset value equal to the
net value of the Dollar Fund assets transferred to Money Market. It is expected
that the value of each shareholder's account with Money Market immediately after
the Reorganization will be the same as the value of such shareholder's account
with Dollar Fund immediately prior to the Reorganization. The Reorganization has
been structured as a tax-free transaction. No initial sales charge will be
imposed in connection with the Reorganization.
Money Market is a series portfolio of AFG, an open-end, series
management investment company. The investment objective of Money Market is to
provide as high a level of current income as is consistent with the preservation
of capital and liquidity. Dollar Fund's investment objective of seeking maximum
current income consistent with liquidity and conservation of
<PAGE> 7
]
capital is similar to that of Money Market. Both are money market funds that
invest in accordance with Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "1940 Act"), which generally restricts each fund's investments to
high quality short-term liquid securities that are determined to present minimal
credit risk, and sets specific limits on the fund's dollar-weighted average
portfolio maturity. Money Market and Dollar Fund are designed as cash management
alternatives for shareholders. See "Comparison of Investment Objectives,
Policies and Restrictions."
This Combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus") sets forth the information that a shareholder of Dollar
Fund should know before voting on the Agreement. It should be read and retained
for future reference.
The current Prospectus of Dollar Fund, dated September 8, 1998 (the
"Dollar Fund Prospectus"), together with the related Statement of Additional
Information also dated September 8, 1998, are on file with the Securities and
Exchange Commission (the "SEC") and are incorporate by reference herein. The
Prospectus of Money Market dated May 1, 1998 (the "Money Market Prospectus"),
and the related Statement of Additional Information also dated May 1, 1998, have
been filed with the SEC and are incorporated by reference herein. A copy of the
Money Market Prospectus is attached as Appendix II to this Proxy
Statement/Prospectus. Such documents are available without charge by writing to
A I M Distributors, Inc., P.O. Box 4739, Houston, Texas 77210-4739 or by calling
(800)347-4246. The SEC maintains a Web site at http://www.sec.gov that contains
the prospectuses and statements of additional information described above,
material incorporated by reference, and other information about AIP and AFG.
Additional information about Dollar Fund and Money Market may also be obtained
on the Web at http://www.aimfunds.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION..........................................................................................1
REASONS FOR THE REORGANIZATION........................................................................2
Background and Reasons for the Reorganization.....................................................2
Board Considerations..............................................................................2
SYNOPSIS..............................................................................................5
Reorganization....................................................................................5
Comparison of Money Market and Dollar Fund........................................................6
RISK FACTORS..........................................................................................8
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS........................................9
Investment Objectives.............................................................................9
Investment Policies...............................................................................9
Investment Restrictions..........................................................................11
FINANCIAL INFORMATION................................................................................11
ADDITIONAL INFORMATION ABOUT THE AGREEMENT...........................................................15
Terms of the Reorganization......................................................................15
The Reorganization...............................................................................16
Other Terms .....................................................................................16
Federal Tax Consequences.........................................................................17
Accounting Treatment.............................................................................18
RIGHTS OF SHAREHOLDERS...............................................................................19
Liability of Shareholders........................................................................19
Election of Trustees; Annual Shareholder Meetings................................................19
Terms of Trustees................................................................................19
Removal of Trustees..............................................................................20
Special Meetings of Shareholders.................................................................20
Liability of Trustees and Officers...............................................................20
Termination .....................................................................................21
Voting Rights of Shareholders....................................................................21
Dissenters' Rights...............................................................................22
Amendments to Organization Documents.............................................................22
</TABLE>
i
<PAGE> 9
<TABLE>
<S> <C>
OWNERSHIP OF MONEY MARKET AND DOLLAR FUND SHARES.....................................................23
Significant Holders..............................................................................23
Ownership of Officers and Trustees...............................................................23
CAPITALIZATION.......................................................................................24
LEGAL MATTERS........................................................................................24
INFORMATION FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION...............................................................25
ADDITIONAL INFORMATION ABOUT MONEY MARKET AND
DOLLAR FUND......................................................................................25
</TABLE>
ii
<PAGE> 10
<TABLE>
<S> <C>
APPENDIX I ................................................................Agreement and Plan of Reorganization
APPENDIX II.................................................................Prospectus of AIM Money Market Fund
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the
AIM logo), AIM and Design, AIM, AIM Link, AIM Institutional Funds, aimfunds.com,
Invest With Discipline, La Familia AIM de Fondos and La Familia AIM de Fondos
and Design are registered service marks, and AIM Bank Connection is a service
mark, of A I M Management Group Inc.
iii
<PAGE> 11
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by AIP's Board of Trustees from the shareholders of
Dollar Fund for use at the Special Meeting of Shareholders to be held at 11
Greenway Plaza, Suite 100, Houston, TX 77046 on December 11, 1998, at _____
p.m., local time (such meetings and any adjournments thereof are referred to as
the "Special Meeting").
AIP has engaged the services of Shareholder Communications Corporation
("SCC") to assist it in the solicitation of proxies for the Special Meeting. AIP
expects to solicit proxies principally by mail, but AIP or SCC may also solicit
proxies by telephone, facsimile, telegraph or personal interview. AIP's officers
will not receive any additional or special compensation for any such
solicitation. Money Market will bear its costs and expenses incurred in
connection with the Reorganization, which are expected to be minimal. A I M
Advisors, Inc. ("AIM Advisors") the investment adviser to Money Market and
Dollar Fund, has agreed to reimburse Dollar Fund for any expenses it incurs in
connection with the Reorganization, including the cost of printing and mailing
this Proxy Statement/Prospectus, and the cost of shareholder solicitation (which
is anticipated to be approximately $16,000).
All properly executed and unrevoked proxies received in time for the
Special Meeting will be voted in accordance with the instructions contained
therein; if no instructions are given, shares represented by proxies will be
voted FOR the proposal to approve the Agreement and in accordance with
management's recommendation on other matters. The presence in person or by proxy
of one-third of the outstanding shares of beneficial interest of Dollar Fund at
the Special Meeting will constitute a quorum ("Quorum"). Approval of the
Agreement requires the affirmative vote of a majority of the shares cast.
Abstentions and broker non-votes will be counted as shares present at the
Special Meeting for quorum purposes but will not be considered votes cast at the
Special Meeting. Broker non-votes arise from a proxy returned by a broker
holding shares for a customer which indicates that the broker has not been
authorized by the customer to vote on a proposal. Any person giving a proxy has
the power to revoke it at any time prior to its exercise by executing a
superseding proxy or by submitting a notice of revocation to the Secretary of
AIP. In addition, although mere attendance at the Special Meeting will not
revoke a proxy, a shareholder present at the Special Meeting may withdraw his
proxy and vote in person. Shareholders may also transact any other business not
currently contemplated that may properly come before the Special Meeting in the
discretion of the proxies or their substitutes.
Shareholders of record as of the close of business on October 13, 1998
(the "Record Date"), are entitled to vote at the Special Meeting. On the Record
Date, there were outstanding __________ shares of Dollar Fund. Each share is
entitled to one vote for each full share held, and a fractional vote for a
fractional share held.
<PAGE> 12
AIP intends to mail this Proxy Statement/Prospectus and the accompanying
proxy on or about October __, 1998.
2
<PAGE> 13
REASONS FOR THE REORGANIZATION
BACKGROUND AND REASONS FOR THE REORGANIZATION
AIP was organized as a Maryland corporation in 1981, and was reorganized
into a Delaware business trust on September 8, 1998. Prior to May 29, 1998, AIP
operated under the name G.T. Investment Portfolios, Inc. Chancellor LGT Asset
Management, Inc., an indirect subsidiary of Liechtenstein Global Trust AG
("LGT"), initially provided investment advisory services to G.T. Investment
Portfolios, Inc.
On May 29, 1998, LGT consummated a purchase agreement with AMVESCAP PLC
pursuant to which AMVESCAP PLC acquired LGT's Asset Management Division,
including Chancellor LGT Asset Management, Inc., which then changed its name to
INVESCO (NY), Inc. In connection with that transaction, the Board of Directors
of AIP's predecessor determined that it would be advisable to engage AIM
Advisors to provide investment advisory and other services to G.T. Investment
Portfolios, Inc. and for INVESCO (NY), Inc. to serve as sub-adviser with
day-to-day portfolio management responsibility. AIM Advisors and its affiliates
are indirect subsidiaries of AMVESCAP PLC that provide investment advisory,
marketing, administration, fund accounting and distribution services to The AIM
Family of Funds. The shareholders of G.T. Investment Portfolios, Inc. approved
the changes, which took effect on May 29, 1998. G.T. Investment Portfolios, Inc.
changed its name to AIM Investment Portfolios, Inc. at that same time. AIM
Advisors now serves as investment adviser to Dollar Fund and INVESCO (NY), Inc.
serves as sub-adviser to Dollar Fund.
AIM Advisors evaluated Dollar Fund and Money Market and has recommended
that Dollar Fund be reorganized into Money Market. Both funds serve as cash
management alternatives for shareholders of The AIM Family of Funds(R). As
described in more detail below, operating Dollar Fund and Money Market as
separate funds duplicates investment objectives. Combining the two funds will
simplify the arrangements under which shareholders of The AIM Family of Funds
can exchange their shares with those of AIM money market funds. The
Reorganization also should provide Dollar Fund shareholders an investment in a
larger fund with a potentially broader range of investment choices, the
potential for more stable cash flows, and the potential for lower costs though
economies of scale.
BOARD CONSIDERATIONS
The Board of Directors of AIP's predecessor determined that the proposed
reorganization of Dollar Fund is in the best interests of the shareholders of
Dollar Fund, and recommended approval of the Agreement by the shareholders at
the Special Meeting. A summary of the information that was presented to, and
considered by, the Board of Directors in making their determination is provided
below.
At a meeting of the Board of Directors held on August 11 and 12, 1998,
AIM Advisors proposed that the Board of Directors approve the proposed
reorganization of Dollar Fund. The Directors received from AIM Advisors written
materials that described the structure and tax
3
<PAGE> 14
consequences of the proposed reorganization and contained information concerning
Dollar Fund and Money Market, including comparative historical total return and
fee and expense information and a comparison of the investment objectives of the
two funds.
In considering the proposed reorganization, the Board of Directors
noted that Dollar Fund and Money Market are both operated to provide cash
management alternatives to shareholders of The AIM Family of Funds. The two
funds have similar investment objectives, and both operate in compliance with
the requirements of Rule 2a-7 under the 1940 Act. A merger of Dollar Fund into
Money Market would result in a fund with approximately $1.4 billion in total
assets; Dollar Fund had assets of approximately $400 million at June 30, 1998.
The Board of Directors believes that Dollar Fund shareholders should benefit
from the broader range of investments usually available to the larger fund as
Money Market has repurchase agreements and master note arrangements in place
with a greater number of counterparties. The larger combined fund should have
more stable cash flows which could allow the portfolio to assume longer average
maturities when deemed advisable by AIM Advisors.
AIM Advisors also provided comparable performance information for the two
funds and the expense ratios of the two funds, the latter of which is shown
below.
<TABLE>
<CAPTION>
COMPARATIVE FEES FOR THE YEAR ENDING DECEMBER 31, 1997
AIM Money Market Fund AIM Dollar Fund
------------------------- -----------------------------------------
Cash Advisor
Reserve Class B Class A Class B Class
Shares Shares Shares Shares Shares
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Management Fees 0.55%(1) 0.55%(1) 0.50% 0.50% 0.50%
12b-1 Fees 0.25% 1.00% 0.25% 1.00% 0.00%
Other 0.25% 0.25% 0.53% 0.53% 0.53%
-------- -------- -------- -------- --------
Total Fund Operating
Expenses 1.05% 1.80% 1.28% 2.03% 1.03%
======== ======== ======== ======== ========
Total Expense Ratio -
(Net of Waivers for
Dollar Fund) 1.05% 1.80% 0.98% 1.73% 0.98%
======== ======== ======== ======== ========
</TABLE>
(1) These fees are applicable for the first $1 billion of Money Market
assets; for any amount over $1 billion, the fee is 0.50%
Currently, each class of shares of Dollar Fund enjoys a slightly lower
expense ratio than the corresponding class of Money Market, primarily due to
fee waivers and expense reimbursements by the investment adviser. The voluntary
fee waivers and expense reimbursements are due to expire on May 31, 2000.
Without those limitations, the expense ratios for Dollar Fund Class A and Class
B shares would be higher than that of the corresponding class of Money Market:
1.28% for Dollar Fund Class A shares vs 1.05% for Money Market Cash Reserve
Shares and 2.03% for Dollar Fund Class B
4
<PAGE> 15
shares vs. 1.80% for Money Market Class B Shares. The Dollar Fund Advisor
Class expense ratio would be slightly lower than the corresponding class of
Money Market: 1.03% for Dollar Fund Advisor Class shares vs. 1.05% for Money
Market Cash Reserve Shares. The pro forma estimated expense ratios of the
combined funds is 1.00% for Money Market Cash Reserve Shares and 1.75% for Money
Market Class B Shares. Eliminating duplicate services and creating economies of
scale may further narrow or eliminate the differences in operating expense
ratios.
The Board of Directors noted that Money Market does not have a class of
shares comparable to the Dollar Fund Advisor Class and that Dollar Fund Advisor
Class shareholders will receive the class of Money Market shares, AIM Cash
Reserve Shares, having the lowest expense ratio. However, as noted above,
elimination of duplicate services and creation of economies of scale may, to
some extent, lessen the difference between the Money Market Cash Reserve Shares
expense ratio and the lower expense ratio for the Dollar Fund Advisor Class
shares that would exist even after termination of voluntary fee waivers and
reimbursements. Eligible institutional Advisor Class shareholders will also have
the option of exchanging into other institutional money market funds managed by
AIM Advisors with lower expense ratios than Cash Reserve.
In addition, the Board of Directors noted that the shareholders of Dollar
Fund would not be subject to any additional risks as shareholders of Money
Market because the two funds have similar investment objectives. Moreover, AIM
Advisors serves as investment adviser for both funds, with its affiliate,
INVESCO (NY), Inc., serving as sub-adviser to Dollar Fund. The Board of
Directors further noted, that the value of each shareholder's account with Money
Market immediately after the Reorganization will be the same as the value of
that shareholder's account with Dollar Fund immediately prior to the
Reorganization; that no initial sales or other charges would be imposed on any
of the shares of Money Market acquired by the shareholders of Dollar Fund in
connection with the Reorganization and that AIM Advisors has agreed to pay all
expenses incurred by Dollar Fund in connection with the Reorganization,
including the costs of printing and mailing this Proxy Statement/Prospectus and
the costs of shareholder solicitations. Finally, the Board of Directors reviewed
the principal terms of the Agreement. The Board of Directors noted that Dollar
Fund would be provided with an opinion of counsel that the reorganization would
be tax-free as to Dollar Fund and its shareholders.
AIM Advisors also noted its research has found that no other family of
mutual funds operates duplicate taxable general money market funds like Dollar
Fund and Money Market. AIM Advisors indicated that maintaining duplicate money
market funds would be likely to create confusion on the part of purchasers and
broker-dealers, making marketing and shareholder servicing of each of the funds
more difficult. The exchange program currently available to shareholders would
be particularly complicated by the choice of two taxable money market funds with
essentially duplicate characteristics.
At a subsequent meeting of the Board of Directors held on August 31,
1998, based upon their evaluation of the information presented to them, the
Board of Directors determined that the proposed reorganization will not dilute
the interests of, among other things, Dollar Fund's shareholders and is in the
best interest of Dollar Fund's shareholders in view of the broader range of
investments available to the larger fund and the more stable cash flows and
possible economies of scale from the larger fund size. Therefore, the Board of
Directors recommends the approval of the Agreement by the shareholders at a
Special Meeting.
5
<PAGE> 16
SYNOPSIS
REORGANIZATION
The Reorganization will result in the combination of Dollar Fund and
Money Market. Dollar Fund is a portfolio of AIP, a Delaware business trust.
Money Market is a portfolio of AFG, also a Delaware business trust. If
shareholders of Dollar Fund approve the Agreement and other closing conditions
are satisfied, all of the assets of Dollar Fund will be transferred to Money
Market, Money Market will assume all of the liabilities of Dollar Fund, and AFG
will issue (i) directly to Dollar Fund's Class A and Advisor Class shareholders,
Money Market Cash Reserve Shares, and (ii) directly to Dollar Fund's Class B
shareholders, Money Market Class B Shares, having an aggregate net asset value
equal to the net value of the Dollar Fund assets transferred to Money Market.
Shareholders will not pay any initial sales charge in connection with the
Reorganization. It is expected that the value of each shareholder's account with
Money Market immediately after the Reorganization will be the same as the value
of such shareholder's account with Dollar Fund immediately prior to the
Reorganization. A copy of the Agreement is attached as Appendix l to this Proxy
Statement/ Prospectus. See "Additional Information About the Agreement" below.
Dollar Fund is to receive an opinion of Ballard Spahr Andrews &
Ingersoll, LLP to the effect that the Reorganization will constitute a tax-free
reorganization for Federal income tax purposes. Thus, shareholders will not have
to pay Federal income taxes as a result of the Reorganization. See "Additional
Information About the Agreement - Federal Tax Consequences" below.
Money Market is a diversified investment portfolio of AFG, an open-end
series management investment company registered under the 1940 Act. The
principal offices of AFG are located at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046 (telephone: (800) 347-4246).
COMPARISON OF MONEY MARKET AND DOLLAR FUND
Investment Objective and Policies
The investment objectives of Money Market and Dollar Fund are very
similar, and the types of securities the two funds purchase to achieve their
objectives are very similar also. The investment objective of Money Market is to
provide as high a level of current income as is consistent with the preservation
of capital and liquidity. The investment objective of Dollar Fund is to seek
maximum current income consistent with liquidity and conservation of capital.
Both Money Market and Dollar Fund comply with the requirements of Rule 2a-7
under the 1940 Act, which generally restrict each fund's investments to high
quality short-term liquid securities that are determined to present minimal
credit risk, and set specific limits on the fund's dollar-weighted average
portfolio maturity. Both are designed as cash management alternatives for
6
<PAGE> 17
shareholders and seek to maintain a stable $1.00 net asset value. See
"Comparison of Investment Objectives, Policies and Restrictions" below.
Investment Advisory Services
AIM Advisors serves as investment adviser to Dollar Fund, and INVESCO
(NY), Inc. serves as Dollar Fund's sub-adviser. AIM Advisors also serves as
investment adviser to Money Market. INVESCO (NY), Inc. does not act as
sub-adviser for Money Market, however, and the Reorganization will end INVESCO
(NY), Inc.'s role in management of the Dollar Fund assets transferred to Money
Market.
Performance
Set forth below are average annual total returns for the periods
indicated for each of Money Market and Dollar Fund. Average annual total return
figures do not take into account sales charges applicable to redemptions of
Class B shares of Money Market or Dollar Fund.
<TABLE>
<CAPTION>
Money Market Dollar Fund
--------------------- ---------------------------------
Cash Advisor
Reserve Class B Class A Class B Class
Shares Shares Shares Shares Shares
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
1 Year Ended December 31, 1997 4.66% 3.84% 4.62% 3.84% 4.61%
3 Years Ended December 31, 1997 4.70% 3.92% 4.73% 3.95% N/A
</TABLE>
7
<PAGE> 18
Expenses
Set forth below is a comparison of annual operating expenses as a
percentage of net assets ("Expense Ratio") for the Cash Reserve and Class B
shares of Money Market and for the Class A, Class B and Advisor Class shares of
Dollar Fund for the fiscal year ended December 31, 1997. Expense Ratios are
shown net of any voluntary fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
Money Market
Money Market Dollar Fund Pro Forma Estimated
--------------------- ------------------------------------ --------------------
Cash Cash
Reserve Class B Class A Class B Advisor Reserve Class B
Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION EXPENSES
Deferred Sales Load (as a
percentage of original
purchase price or
redemption proceeds, as
applicable) ............. none 5.0% none 5.0% none none 5.0%
ANNUAL OPERATING
EXPENSES (AS A % OF NET
ASSETS) (AFTER FEE
WAIVERS OR EXPENSE
REIMBURSEMENTS, IF ANY)
Management fees ......... 0.55%(1) 0.55%(1) 0.50% 0.50% 0.50% 0.55%(1) 0.55%(1)
Rule 12b-1 distribution
plan payments ........... 0.25% 1.00% 0.25% 1.00% 0.00% 0.25% 1.00%
All other expenses ...... 0.25% 0.25% 0.53% 0.53% 0.53% 0.20% 0.20%
------- ------- ------- ------- ------- ------- -------
Total fund operating
expenses ................ 1.05% 1.80% 1.28% 2.03% 1.03% 1.00% 1.75%
======= ======= ======= ======= ======= ======= =======
Expense Ratio (net of
waivers)(2) ............. 1.05% 1.80% 1.00% 1.75% 1.00% 1.00% 1.75%
======= ======= ======= ======= ======= ======= =======
</TABLE>
(1) These fees are applicable for the first $1 billion of Money Market
assets; for any amount over $1 billion, the fee is 0.50%.
(2) AIM Advisors has undertaken to limit the expenses of Dollar Fund
(exclusive of brokerage commissions, taxes, interest and extraordinary
expenses) to the annual rate of 1.00% of the average daily net assets of
the Dollar Fund Class A shares and Advisor Class shares and 1.75% of the
average daily net assets of the Dollar Fund Class B shares.
Sales Charges
No sales charges are applicable to the Reorganization.
Money Market Cash Reserve Shares, which will be issued to Dollar Fund
Class A and Advisor Class shareholders pursuant to the Agreement, are sold at
net asset value without an initial sales charge or a contingent deferred sales
charge. Money Market Class B 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. Money Market Cash Reserve Shares pay a fee in the amount
of 0.25% of average daily net assets of Money Market Cash Reserve Shares to A I
M Distributors, Inc. ("AIM Distributors") for distribution services. Class B
shares of Money Market (which are only available through an exchange of Class B
shares of other funds in The AIM Family of Funds) pay AIM Distributors fees at
an annual rate of 1.00% of the average daily net assets attributable to the
Class B shares for distribution services. For more information, see the
Investors Guide to The AIM Family of Funds in the Money Market Prospectus
attached as Appendix II to this Proxy Statement/Prospectus.
8
<PAGE> 19
The Class A shares of Dollar Fund are sold at net asset value, without
imposition of an initial sales charge or a contingent deferred sales charge.
Advisor Class shares of Dollar Fund are similarly sold at net asset value,
without the imposition of an initial sales charge or a contingent deferred sales
charge, but are available for purchase only by qualified purchasers. Dollar Fund
Class B shares are available only through an exchange of Class B shares of
another fund in The AIM Family of Funds and 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.
Like the Money Market Cash Reserve shares, Class A shares of Dollar Fund
pay a fee in the amount of 0.25% of average daily net assets of the Class A
shares to AIM Distributors for distribution services. Dollar Fund Advisor Class
shares are not subject to such distribution fees. Dollar Fund Class B shares pay
distribution expenses at an annual rate of 1.00% of the average daily net assets
attributable to the Class B shares to AIM Distributors. AIM Distributors is
currently waiving 0.25% of the distribution fees payable by the Class A and
Class B shares of Dollar Fund.
Distribution; Purchase, Exchange and Redemption
Shares of Money Market and Dollar Fund are both distributed by AIM
Distributors. Purchase and redemption procedures are the same for Money Market
and Dollar Fund except that Class B shares of Dollar Fund may only be acquired
through an exchange. Shares of Money Market and Dollar Fund may be exchanged
for shares of other funds of The AIM Family of Funds of the same class.
RISK FACTORS
Dollar Fund and Money Market have similar investment objectives and
policies, and the types of securities the two funds purchase to achieve their
objectives are also similar. Both funds are operated in compliance with the
requirements of Rule 2a-7 under the 1940 Act, and AIM Advisors provides
investment advisory services to both funds. Accordingly, the risks associated
with an investment in Money Market would be the same as the risks associated
with an investment in Dollar Fund. For a discussion of the risks associated with
an investment in Money Market, see the Money Market prospectus attached as
Appendix II to this Proxy Statement/Prospectus.
9
<PAGE> 20
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES
Money Market
The investment objective of Money Market is to provide as high a level of
current income as is consistent with the preservation of capital and liquidity.
Dollar Fund
Dollar Fund's investment objective is to seek maximum current income
consistent with liquidity and conservation of capital.
INVESTMENT POLICIES
Money Market
Money Market invests 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 are
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 the AFG Prospectus
attached hereto.
Money Market may invest in other types of Money Market Instruments not
prohibited by its investment restrictions, if approved by its board of trustees.
Money Market 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.
Money Market 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 nationally recognized statistical rating organizations
("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 Advisors (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.
Money Market must also comply with Rule 2a-7 under the 1940 Act, which
governs the operations of money market funds and may be more restrictive than
Money Market's investment policies and restrictions. If any of Money Market's
policies and restrictions are more restrictive than Rule 2a-7, such policies and
restrictions will be followed.
Money Market will normally hold portfolio securities to maturity but may
dispose of such securities prior to maturity if AIM Advisors 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.
10
<PAGE> 21
Dollar Fund
Dollar Fund seeks to achieve its investment objective by investing in
high quality, U.S. dollar-denominated money market instruments, i.e., debt
obligations with remaining maturities of 13 months or less. Permitted
investments, include obligations issued or guaranteed by the U.S. and foreign
governments, their agencies and instrumentalities, obligations of U.S. and non-
U.S. banks, interest bearing deposits in U.S. commercial and savings banks,
commercial paper and other short-term debt obligations of U.S. and foreign
companies, and repurchase agreements secured by any of the foregoing.
Dollar Fund seeks to maintain a net asset value of $1.00 per share. To do
so, Dollar Fund uses the amortized cost method of valuing its securities
pursuant to Rule 2a-7 under the 1940 Act, certain requirements of which are
summarized below.
In accordance with Rule 2a-7, Dollar Fund (i) maintains a dollar-weighted
average portfolio maturity of 90 days or less and (ii) purchases only
instruments having remaining maturities of 13 months or less.
Dollar Fund invests only in high quality, U.S. dollar-denominated money
market instruments determined by AIM Advisors and its sub-adviser to present
minimal credit risks in accordance with procedures established by AIP's board of
trustees. To be considered high quality, a security must be rated in accordance
with applicable rules in one of the two highest rating categories for short-term
securities by at least two NRSROs (or one, if only one such NRSRO has rated the
security) or, if the issuer has no applicable short-term rating, determined by
AIM Advisors or its sub-adviser to be of equivalent credit quality.
Dollar Fund will limit its purchases of municipal securities to those
which are "First Tier" securities as defined in Rule 2a-7 under the 1940 Act.
INVESTMENT RESTRICTIONS
Money Market and Dollar Fund
There are some differences in the investment restrictions applicable to
Money Market and Dollar Fund. However, Money Market and Dollar Fund both are
money market funds whose investment practices are circumscribed by the more
restrictive requirements of Rule 2a-7 under the 1940 Act. Thus the differences
in the investment restrictions of Money Market and Dollar Fund are not material
to the funds' actual operations.
11
<PAGE> 22
FINANCIAL HIGHLIGHTS
Money Market
Shown below are the financial highlights for a Money Market Cash Reserve
Share and a Money Market Class B Share outstanding during the six months ended
June 30, 1998, each of the years in the four-year period ended December 31, 1997
and the period October 16, 1993 (date operations commenced) through December 31,
1993. This information (other than the information for the six months ended June
30, 1998) has been audited by AFG's independent accountants. The "Report of
Independent Accountants" and financial statements included in Money Market's
annual report to shareholders for the fiscal year ended December 31, 1997, are
hereby incorporated by reference into this Proxy Statement/Prospectus. Money
Market's annual report to shareholders, which contains additional unaudited
performance information, is available without charge upon request made to AFG at
the address or telephone number appearing on the cover page of this Proxy
Statement/Prospectus.
12
<PAGE> 23
MONEY MARKET CASH RESERVE SHARES
<TABLE>
<CAPTION>
Year Ended December 31
June 30, ---------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
(unaudited)
-----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value beginning
of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from operations:
Net investment income ..... 0.0231 0.0456 0.0433 0.0493 0.0337 0.0048
Less distributions:
Dividends from net
investment income.......... (0.0231) (0.0456) (0.0433) (0.0493) (0.0337) (0.0048)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of
period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== =========== ===========
Total return(a) ............... 4.72% 4.66% 4.41% 5.04% 3.42% 2.27%(e)
Ratios/Supplemental Data:
Net assets, end of year
(000's omitted)............ $ 488,969 $ 344,117 $ 315,470 $ 293,450 $ 359,952 $ 241,778
Ratio of expenses to
average net assets......... 1.02%(b) 1.05% 1.08% 1.04% 0.99%(e) 1.00%(c)(e)
Ratio of net investment
income to average net
assets .................... 4.62%(b) 4.55% 4.32% 4.92% 3.49%(e) 2.27%(c)(e)
</TABLE>
13
<PAGE> 24
MONEY MARKET CLASS B SHARES
<TABLE>
<CAPTION>
Year Ended December 31
June 30, ---------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
(unaudited)
-----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value beginning
of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from operations:
Net investment income...... 0.0189 0.0378 0.0360 0.0419 0.0259 0.0032
Less distributions:
Dividends from net
investment income.......... (0.0189) (0.0378) (0.0360) (0.0419) (0.0259) (0.0032)
----------- --------- --------- --------- --------- ---------
Net asset value, end
of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ========= ========= ========= ========= =========
Total return(a) ............. 3.85% 3.84% 3.66% 4.27% 2.62% 1.51%(e)
Ratios/Supplemental Data:
Net assets, end of year
(000's omitted)............ $ 155,216 $ 116,058 $ 91,148 $ 69,857 $ 33,999 $ 1,289
Ratio of expenses to
average net assets....... 1.77%(b) 1.80% 1.81% 1.78% 1.78%(d) 1.75%(c)(d)
Ratio of net investment
income to average net
assets................... 3.87%(b) 3.80% 3.60% 4.14% 3.14%(d) 1.54%(c)(d)
</TABLE>
- ---------------
(a) Does not deduct sales charges where applicable and are annualized for
periods less than one year.
(b) Ratios are annualized and based on average net assets as follows: Class B
shares - $122,331,933 and AIM Cash Reserve Shares - $363,132,327.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average daily net assets prior to fee waivers
and/or expense reimbursements were 1.87% and 3.05%, respectively, for
1994 and 1.95% (annualized) and 1.34% (annualized), respectively, for
1993.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average daily net assets prior to fee waivers
and/or expense reimbursements were 1.08% and 3.40%, respectively, for
1994 and 1.20% (annualized) and 2.07% (annualized), respectively, for
1993.
14
<PAGE> 25
Dollar Fund
Shown below are financial highlights for Class A shares, Class B shares
and Advisor Class shares outstanding during the six months ended June 30, 1998,
and each of the years and periods described below. This information (other than
the information for the six months ended June 30, 1998) has been audited by
AIP's independent accountants. The "Report to Independent Accountants" and
financial statements included in Dollar Fund's annual report to shareholders for
the fiscal year ended December 31, 1997, are hereby incorporated by reference
into this Proxy Statement/Prospectus. Dollar Fund's annual report to
shareholders, which contains additional unaudited performance information, is
available without charge upon request made to AIP at the address or telephone
number appearing on the cover page on this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
DOLLAR FUND CLASS A+
Year Ended December 31,
June 30, ---------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
----------- --------- --------- --------- --------- ---------
(unaudited)
-----------
<S> <C> <C> <C> <C> <C> <C>
Net investment income ................ $ 0.023 $ 0.045 $ 0.044 $ 0.050 $ 0.032 $ 0.022
Distributions from net
investment income .................... (0.023) (0.045) (0.044) (0.050) (0.032) (0.022)
----------- --------- --------- --------- --------- ---------
Net asset value (unchanged
during the period) ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ========= ========= ========= ========= =========
Total investment return(b) ........... 2.30% 4.62% 4.50% 5.08% 3.30% 2.20%
Ratios and supplemental data:
Net assets, end of period
(in 000's) ........................... $ 291,301 $ 186,611 $ 392,623 $ 183,761 $ 320,858 $ 87,822
Ratio of net investment income
to average net assets:
With expense reductions,
waivers, and
reimbursement(a) ................... 4.61% 4.50% 4.39% 4.94% 3.40% 2.17%
Without expense reductions,
waivers, and
reimbursement(a) ................... 4.36% 4.20% 4.08% 4.66% 3.15% 1.46%
Ratio of expenses to average
net assets:
With expense reductions,
waivers, and
reimbursement(a) ................... 0.93% 0.98% 0.99% 0.97% 0.92% 1.00%
Without expense reductions,
waivers, and
reimbursements(a) .................. 1.18% 1.28% 1.30% 1.25% 1.17% 1.72%
</TABLE>
- --------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
15
<PAGE> 26
<TABLE>
<CAPTION>
DOLLAR FUND CLASS B++
Year ended December 31, April 1, 1993
------------------------------------------------------ to
June 30, December 31,
1998 1997 1996 1995 1994 1993
----------- --------- --------- --------- --------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net investment income ............. $ 0.019 $ 0.038 $ 0.037 $ 0.040 $ 0.025 $ 0.010
Distributions from net
investment income ................. (0.019) (0.038) (0.037) (0.040) (0.025) (0.010)
----------- --------- --------- --------- --------- ---------
Net asset value (unchanged
during the period) ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ========= ========= ========= ========= =========
Total investment return(b) ........ 1.99% 3.84% 3.73% 4.29% 2.53% 1.40%
Ratios and supplemental data:
Net assets, end of period
(in 000's) ........................ $ 101,102 $ 83,498 $ 128,308 $ 99,151 $ 109,936 $ 3,478
Ratio of net investment income to
average net assets:
With expense reductions,
waivers, and
reimbursement(a) ............... 3.86% 3.75% 3.64% 4.19% 2.65% 1.42%
Without expense reductions,
waivers, and
reimbursement(a) ............... 3.61% 3.45% 3.33% 3.91% 2.40% 0.86%
Ratio of expenses to average
net assets:
With expense reductions,
waivers, and
reimbursement(a) ............... 1.68% 1.73% 1.74% 1.72% 1.67% 1.75%
Without expense reductions,
waivers, and
reimbursements(a) .............. 1.93% 2.03% 2.05% 2.00% 1.92% 2.31%
</TABLE>
- --------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
16
<PAGE> 27
<TABLE>
<CAPTION>
DOLLAR FUND ADVISOR CLASS +++
Year Ended
December 31, June 1, 1995
---------------------------- to
June 30, December 31,
1998 1997 1996 1995
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Net investment income ............................ 0.023 0.045 0.044 0.030
Distributions from net investment income ......... (0.023) (0.045) (0.044) (0.030)
----------- ----------- ----------- -----------
Net asset value (unchanged during the period) .... $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== ===========
Total investment return(b) ....................... 2.25% 4.61% 4.50% 2.92%
Ratios and supplemental data:
Net assets, end of period (in 000's) ............. $ 7,631 $ 6,780 $ 14,978 $ 2,096
Ratio of net investment income to average net
assets:
With expense reductions, waivers, and
reimbursement(a) .............................. 4.61% 4.50% 4.39% 4.94%
Without expense reductions, waivers, and
reimbursement(a) .............................. 4.61% 4.45% 4.33% 4.91%
Ratio of expenses to average net assets:
With expense reductions, waivers, and
reimbursement(a) .............................. 0.93% 0.98% 0.99% 0.97%
Without expense reductions, waivers, and
reimbursements(a) ............................. 0.93% 1.03% 1.05% 1.0%
</TABLE>
- --------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
ADDITIONAL INFORMATION ABOUT THE AGREEMENT
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be
consummated are set forth in the Agreement. Significant provisions of the
Agreement are summarized below; however, this summary is qualified in its
entirety by reference to the Agreement, a copy of which is attached as Appendix
I to this Proxy Statement/Prospectus.
17
<PAGE> 28
THE REORGANIZATION
Money Market will acquire all of the assets of Dollar Fund in exchange
for shares of Money Market and the assumption by Money Market of the liabilities
of Dollar Fund. Consummation of the Reorganization (the "Closing") is expected
to occur on December 21, 1998, at 8:00 a.m. Central Time (the "Effective Time")
on the basis of values calculated as of the close of regular trading on the NYSE
on the preceding business day.
At the Closing, all of the assets and all of the liabilities of Dollar
Fund will be transferred to Money Market, Money Market will assume all of the
liabilities of Dollar Fund, and AFG will issue directly (i) to Dollar Fund's
Class A and Advisor Class shareholders, Money Market Cash Reserves Shares, and
(ii) directly to Dollar Fund's Class B shareholders, Money Market Class B
Shares, having an aggregate net asset value equal to the net value of the Dollar
Fund assets transferred to Money Market. Shareholders will not pay any initial
sales charge in connection with the Reorganization. It is expected that the
value of each shareholder's account with Money Market immediately after the
Reorganization will be the same as the value of such shareholder's account with
Dollar Fund immediately prior to the Reorganization.
OTHER TERMS
The Agreement may be amended without shareholder approval by mutual
agreement of AIP and AFG. If any amendment is made to the Agreement which
effects a material change to the Agreement and the Reorganization, such change
will be submitted to the shareholders for their approval.
Each of AIP and AFG has made representations and warranties in the
Agreement that are customary in matters such as the Reorganization. The
obligations of AIP and AFG pursuant to the Agreement are subject to various
conditions, including the following: (a) the assets of Dollar Fund to be
acquired by Money Market shall constitute at least 90% of the fair market value
of the net assets and at least 70% of the fair market value of the gross assets
held by Dollar Fund immediately prior to the Reorganization; (b) AFG's
Registration Statement on Form N-14 under the Securities Act of 1933 (the "1933
Act") shall have been filed with the SEC and such Registration Statement shall
have become effective, and no stop-order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceeding for that
purpose shall have been initiated or threatened by the SEC (and not withdrawn or
terminated); (c) the shareholders of Dollar Fund shall have approved the
Agreement; and (d) AIP and AFG shall have received an opinion from Ballard Spahr
Andrews & Ingersoll, LLP, that the Reorganization will not result in the
recognition of gain or loss for Federal income tax purposes for Dollar Fund,
Money Market or their shareholders.
Money Market has agreed to bear its expenses in connection with the
Reorganization , which are expected to be minimal. AIM Advisors has agreed to
reimburse Dollar Fund for its expenses incurred in connection with the
Reorganization, including the costs of printing and mailing this Proxy
Statement/Prospectus and the cost of shareholder solicitation.
18
<PAGE> 29
The Board of Trustees of AIP may waive without shareholder approval any
default by AFG or any failure by AFG to satisfy any of the conditions to AIP's
obligations as long as such a waiver will not have a material adverse effect on
the benefits intended under the Agreement for the shareholders of Dollar Fund.
The Agreement may be terminated and the Reorganization may be abandoned by
either AIP or AFG at any time by mutual agreement of AIP and AFG, or by either
party in the event that Dollar Fund shareholders do not approve the Agreement or
if the Closing does not occur on or before February 27, 1999.
FEDERAL TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
consequences of the Reorganization and is based upon the current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the existing
Treasury regulations thereunder, current administrative rulings of the Internal
Revenue Service ("IRS") and judicial decisions, all of which are subject to
change. The principal Federal income tax consequences that are expected to
result from the Reorganization, under currently applicable law, are as follows:
(i) the Reorganization will qualify as a "reorganization" within the meaning of
Section 368(a) of the Code; (ii) no gain or loss will be recognized by Dollar
Fund upon the transfer of its assets to Money Market; (iii) no gain or loss will
be recognized by any shareholder of Dollar Fund upon the exchange of shares of
Dollar Fund solely for shares of Money Market; (iv) the tax basis of the shares
of Money Market to be received by a shareholder of Dollar Fund will be the same
as the tax basis of the shares of Dollar Fund surrendered in exchange therefor;
(v) the holding period of the shares of Money Market to be received by a
shareholder of Dollar Fund will include the holding period for which such
shareholder held the shares of Dollar Fund exchanged therefor, provided that
such shares of Dollar Fund are capital assets in the hands of such shareholder
as of the Closing; (vi) no gain or loss will be recognized by Money Market on
the receipt of assets of Dollar Fund in exchange for shares of Money Market and
Money Market's assumption of Dollar Fund's liabilities; (vii) the tax basis of
the assets of Dollar Fund in the hands of Money Market will be the same as the
tax basis of such assets in the hands of Dollar Fund immediately prior to the
Reorganization; and (viii) the holding period of the assets of Dollar Fund to be
received by Money Market will include the holding period of such assets in the
hands of Dollar Fund immediately prior to the Reorganization.
As a condition to Closing, Ballard Spahr Andrews & Ingersoll, LLP will
render a favorable opinion to AIP and AFG as to the foregoing Federal income tax
consequences of the Reorganization, which opinion will be conditioned upon the
accuracy, as of the date of Closing, of certain representations upon which
Ballard Spahr Andrews & Ingersoll, LLP will rely in rendering its opinion, which
representations include, but are not limited to, the following (taking into
account for purposes thereof any events that are part of the plan of
reorganization): (A) there is no plan or intention by the shareholders of Dollar
Fund to redeem a number of shares of Money Market received in the Reorganization
that would reduce the Dollar Fund shareholders' ownership of Money Market shares
to a number of shares having a value, as of the Closing Date, of less than 50%
of the value of all of the formerly outstanding shares of Dollar Fund as of the
Closing Date; (B) following the Reorganization, Money Market will continue the
historic
19
<PAGE> 30
business of Dollar Fund (for this purpose "historic business" shall mean the
business most recently conducted by Dollar Fund which was not entered into in
connection with the Reorganization) or use a significant portion of Dollar
Fund's historic business assets in its business; (C) at the direction of Dollar
Fund, Money Market will issue directly to Dollar Fund's shareholders pro rata
the shares of Money Market that Dollar Fund constructively receives in the
Reorganization and Dollar Fund will distribute its other properties (if any) to
its shareholders on, or as promptly as practicable after, the Closing; (D) Money
Market has no plan or intention to reacquire any of its shares issued in the
Reorganization, except to the extent that Money Market is required by the 1940
Act to redeem any of its shares presented for redemption; (E) Money Market does
not plan or intend to sell or otherwise dispose of any of the assets of Dollar
Fund acquired in the Reorganization, except for dispositions made in the
ordinary course of its business or dispositions necessary to maintain its status
as a "regulated investment company" ("RIC") under the Code; (F) Money Market,
Dollar Fund and the shareholders of Dollar Fund will pay their respective
expenses, if any, incurred in connection with the Reorganization subject to the
reimbursement of Dollar Fund by AIM Advisors of only those expenses of Dollar
Fund that are solely and directly related to the Reorganization in accordance
with current IRS guidelines; (G) Money Market will acquire at least 90 percent
of the fair market value of the net assets, and at least 70 percent of the fair
market value of the gross assets, held by Dollar Fund immediately before the
Reorganization, including for this purpose any amounts used by Dollar Fund to
pay its reorganization expenses and all redemptions and distributions made by
Dollar Fund immediately before the Dollar Fund Reorganization (other than
redemptions pursuant to a demand of a shareholder in the ordinary course of
Dollar Fund's business as an open-end diversified management investment company
under the 1940 Act and regular, normal dividends not in excess of the
requirements of Section 852 of the Code); and (H) Money Market and Dollar Fund
have each elected to be taxed as a RIC under Section 851 of the Code and will
each have qualified for the special Federal tax treatment afforded RICs under
the Code for all taxable periods (including the last short taxable period of
Dollar Fund ending on the Closing and the taxable year of Money Market that
includes the Closing).
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES
OF ANY SHAREHOLDER OF DOLLAR FUND. DOLLAR FUND SHAREHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF THE
REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to Money Market of the assets of Dollar Fund
will be the same as the book cost basis of such assets to Dollar Fund.
20
<PAGE> 31
RIGHTS OF SHAREHOLDERS
AIP is organized as a Delaware business trust and AFG is a Delaware
business trust. The operations of AIP and AFG, as Delaware business trusts, are
governed by their Agreements and Declarations of Trust (the "Declaration of
Trust") and Delaware law.
LIABILITY OF SHAREHOLDERS
The Delaware Business Trust Act provides that shareholders of a Delaware
business trust shall be entitled to the same limitations of liability extended
to shareholders of private for-profit corporations. There is, however, a remote
possibility that, under certain circumstances, shareholders of a Delaware
business trust may be held personally liable for that trust's obligations to the
extent the courts of another state which does not recognize such limited
liability were to apply the laws of such state to a controversy involving such
obligations. The Declaration of Trust for AFG and the Declaration of Trust for
AIP provide that a shareholder shall not be subject to any personal liability
for acts or obligations of the trust and that every written agreement,
obligation or other undertaking made or issued by the trust shall contain a
provision to the effect that shareholders are not personally liable thereunder.
In addition, the Declaration of Trust for AFG and the Declaration of Trust for
AIP provide for indemnification out of trust property for any shareholder held
personally liable solely by reason of his or her being or having been a
shareholder. Therefore, the risk of any shareholder incurring financial loss
beyond his investment due to shareholder liability is limited to circumstances
in which AFG or AIP itself is unable to meet its obligations and the express
disclaimer of shareholder liabilities is determined not to be effective. Given
the nature of the assets and operations of AFG and AIP, the possibility of their
being unable to meet their obligations is considered remote, and even if a claim
were brought against one of them and a court determined that shareholders were
personally liable, it would likely not impose a material obligation on a
shareholder.
ELECTION OF TRUSTEES; ANNUAL SHAREHOLDER MEETINGS
The shareholders of AFG initially elected the trustees of AFG and are,
thereafter, entitled to vote for the election of trustees only to the extent
such vote may be required by the 1940 Act, by the Declaration of Trust or by
AFG's Bylaws. AFG is not otherwise required to hold annual shareholder meetings.
The initial trustees of AIP are named in its Declaration of Trust.
Shareholders are entitled to vote for the election of trustees only to the
extent such vote may be required by the 1940 Act, by the Declaration of Trust or
by AIP's Bylaws. AIP is not otherwise required to hold annual shareholder
meetings.
TERMS OF TRUSTEES
The Declaration of Trust for AFG and the Declaration of Trust for AIP
provide that the trustees of the trust shall hold office during the lifetime of
the trust except as follows: (a) any trustee may resign or retire; (b) any
trustee may be removed by the other trustee or the shareholders of the trust (as
discussed below); or (c) any trustee who has died or become
21
<PAGE> 32
incapacitated and is unable to serve may be retired by a written instrument
signed by a majority of the trustees. The Bylaws of AFG and AIP provide that a
trustee shall hold office until the next election of trustees is held or until
his successor is duly elected and qualified.
REMOVAL OF TRUSTEES
A trustee of AFG or AIP may be removed by a vote of two-thirds of the
outstanding shares at any meeting of the shareholders or at any time by written
instrument signed by at least two-thirds of the trustees and specifying when
such removal becomes effective. The Declaration of Trust for AFG and the
Declaration of Trust for AIP provide that in the case of refusal to serve,
death, resignation, retirement or removal of a trustee, the remaining trustees
may either fill the vacancy or leave the vacancy unfilled or reduce the number
of trustees. Any appointment of a trustee shall be evidenced by a written
instrument signed by a majority of the trustees in office.
SPECIAL MEETINGS OF SHAREHOLDERS
AFG's Declaration of Trust provides that trustees may call special
meetings of shareholders. In addition, AFG's Bylaws provide that holders of 10%
of the outstanding shares of AFG may require that the trustees call a special
meeting for the removal of a trustee. AIP's Bylaws provide that a special
meeting of shareholders may be called by any trustee.
LIABILITY OF TRUSTEES AND OFFICERS
Under AFG's Declaration of Trust, the trustees of AFG shall not be liable
for any act or omission or any conduct whatsoever in their capacity as trustees,
except for liability to the trust or shareholders due to willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of trustee. While AFG's Declaration of Trust does not
contain any provision limiting the liability of officers, under Delaware
business trust law, the officers of AFG are not personally liable to any person
other than AFG or shareholders for any act, omission or obligation of AFG or its
trustees. AFG's Declaration of Trust and Bylaws allow for the indemnification of
trustees and officers to the fullest extent permitted by Delaware law and AFG's
Bylaws. Delaware law allows a business trust to indemnify and hold harmless any
trustee or other person from and against any and all claims and demands
whatsoever.
Under AIP's Declaration of Trust, the trustees of AIP shall not be liable
for any act or omission or any conduct whatsoever in their capacity as trustees,
except for liability to the trust or shareholders due to willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of trustee. While AIP's Declaration of Trust does not
contain any provision limiting the liability of officers, under Delaware
business trust law, the officers of AIP are not personally liable to any person
other than AIP or shareholders for any act, omission or obligation of AIP or its
trustees. AIP's Declaration of Trust and Bylaws allow for the indemnification of
trustees and officers to the fullest extent permitted by Delaware law and
22
<PAGE> 33
AIP's Bylaws. Delaware law allows a business trust to indemnify and hold
harmless any trustee or other person from and against any and all claims and
demands whatsoever.
TERMINATION
AFG's Declaration of Trust provides that AFG may be terminated at any
time (i) by the vote of shareholders holding a majority of shares outstanding
provided that the trustees have submitted the termination of AFG to the
shareholders for their approval or (ii) by the trustees by written notice to
shareholders provided that as of the date on which they have determined to so
terminate there are fewer than 100 holders of record of AFG. Any portfolio of
AFG may be terminated at any time (i) by a vote of the shareholders entitled to
vote and holding at least a majority of the shares of such portfolio provided
that the trustees have submitted the termination of such portfolio to the
shareholders for their approval or (ii) by the trustees by written notice to
such shareholders provided that, as of the date on which the trustees have
determined to terminate the portfolio, there are fewer than 100 holders of
record of such portfolio.
AIP's Declaration of Trust provides that AIP may be terminated at any
time (i) by the vote of shareholders holding a majority of shares outstanding or
(ii) by the trustees by written notice to shareholders provided that as of the
date on which they have determined to so terminate there are fewer than 100
holders of record of AIP. Any portfolio of AIP may be terminated at any time (i)
by a vote of the shareholders entitled to vote and holding at least a majority
of the shares of such portfolio provided that the trustees have submitted the
termination of such portfolio to the shareholders for their approval or (ii) by
the trustees by written notice to such shareholders provided that, as of the
date on which the trustees have determined to terminate the portfolio, there are
fewer than 100 holders of record of such portfolio.
VOTING RIGHTS OF SHAREHOLDERS
AFG's Declaration of Trust grants shareholders power to do the following:
(i) elect trustees, provided that a meeting of shareholders has been called for
that purpose; (ii) remove trustees, provided that a meeting of shareholders has
been called for that purpose; (iii) approve the termination of AFG or any
portfolio or class of shares of AFG, provided that a meeting of shareholders has
been called for that purpose, unless, as of the date on which the trustees have
determined to so terminate AFG or such portfolio or class, there are fewer than
100 holders of record of AFG or such terminating portfolio or class of shares of
AFG; (iv) approve the sale of all or substantially all of the assets of AFG or
of any portfolio or class of shares of AFG, unless the primary purpose of such
sale is to change AFG's domicile or form of organization or form of business
trust; (v) approve the merger or consolidation of AFG or any portfolio or class
of shares of AFG with and into another company unless (A) the primary purpose of
such merger or consolidation is to change AFG's domicile or form of organization
or form of business trust, or (B) after giving effect to such merger or
consolidation, based on the number of shares outstanding as of a date selected
by the trustees, the shareholders of AFG or such portfolio or class will have a
majority of the outstanding shares of the surviving company or portfolio or
class, as the case may be; (vi) approve any amendment to their voting rights;
and (vii) approve
23
<PAGE> 34
such additional matters as may be required by law or as the trustees, in their
sole discretion, shall determine.
AIP's Declaration of Trust grants shareholders power to do the following:
(i) elect trustees provided that a meeting of shareholders has been called for
that purpose; (ii) remove trustees provided that a meeting of shareholders has
been called for that purpose; (iii) approve the termination of AIP or any
portfolio or class of shares of AIP, provided that a meeting of shareholders has
been called for that purpose; (iv) amend the Declaration of Trust; (v) approve
the sale of all or substantially all of the assets of AIP or of any portfolio,
unless the primary purpose of such sale is to change AIP's domicile or form of
organization or form of business trust; (vi) approve the merger or consolidation
of AIP or any portfolio with and into another company or a series or portfolio
unless (A) the primary purpose of such merger or consolidation is to change
AIP's domicile or form of organization or form of business trust, or (B) after
giving effect to such merger or consolidation, based on the number of shares
outstanding as of a date selected by trustees, the shareholders of AIP or such
portfolio or class will have a majority of the outstanding shares of the
surviving company or series or portfolio, as the case may be; (vi) approve any
such additional matters related to AIP as may be required by law or the trustees
may consider desirable.
DISSENTERS' RIGHTS
Neither Delaware law nor AFG's or AIP's Declaration of Trust or Bylaws
provide AFG's or AIP's shareholders with dissenters' rights.
AMENDMENTS TO ORGANIZATION DOCUMENTS
The trustees of AFG may, without shareholder approval, amend the
Declaration of Trust at any time, except that no amendment may be made to change
the voting power of the shareholders of AFG as set forth in the Declaration of
Trust.
The trustees of AIP may, without shareholder approval, amend the
Declaration of Trust at any time, except that no amendment may be made that
would have the effect of reducing the indemnification provided thereby without
the affirmative vote of at least two-thirds of the outstanding shares entitled
to vote thereon.
OWNERSHIP OF MONEY MARKET AND DOLLAR FUND SHARES
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person
who as of October 13, 1998, to the knowledge of AIP, owned beneficially 5% or
more of the outstanding shares of Dollar Fund:
24
<PAGE> 35
<TABLE>
<CAPTION>
DOLLAR FUND: PERCENT
- ------------ NUMBER OF SHARES BENEFICIAL
NAME AND ADDRESS OWNED OWNERSHIP
- ---------------- ----- ---------
<S> <C> <C>
</TABLE>
Listed below is the name, address and percent ownership of each person
who as of October 13, 1998 to the knowledge of AFG, owned beneficially 5% or
more of the outstanding shares of Money Market:
<TABLE>
<CAPTION>
MONEY MARKET: PERCENT
- ------------ NUMBER OF SHARES BENEFICIAL
NAME AND ADDRESS OWNED OWNERSHIP
- ---------------- ----- ---------
<S> <C> <C>
</TABLE>
OWNERSHIP OF OFFICERS AND TRUSTEES
To the best of the knowledge of AFG, the beneficial ownership of shares
of Money Market by officers and trustees of AFG as a group constituted less than
1% of the outstanding shares of such fund as of the date of this Proxy
Statement/Prospectus. To the best of the knowledge of AIP, the beneficial
ownership of shares of Dollar Fund by officers or Trustees of AIP as a group
constituted less than 1% of the outstanding shares of such fund as of
________________.
CAPITALIZATION
The following table sets forth as of June 30, 1998, (i) the
capitalization of Money Market Cash Reserve Shares and Money Market Class B
Shares, (ii) the capitalization of Dollar Fund
25
<PAGE> 36
Class A, Class B and Advisor Class shares, and (iii) the proforma capitalization
of Money Market Cash Reserve and Class B shares as adjusted to give effect to
the transactions contemplated by the Agreement.
<TABLE>
<CAPTION>
PRO FORMA MONEY
MONEY MARKET CASH DOLLAR FUND DOLLAR FUND MARKET CASH RESERVE
RESERVES SHARES CLASS A SHARES ADVISOR SHARES SHARES AS ADJUSTED
------------------ ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
Net Assets $ 448,969,050 $ 291,300,510 $ 7,631,001 $ 747,900,561
Shares
Outstanding 448,954,447 291,360,629 7,630,975 747,946,051
Net Asset Value $ 1.00 $ 1.00 $ 1.00 $ 1.00
Per Shares
<CAPTION>
PRO FORMA MONEY
MONEY MARKET DOLLAR FUND MARKET CLASS B
CLASS B SHARES CLASS B SHARES SHARES AS ADJUSTED
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net Assets $ 155,215,789 $ 101,012,198 $ 256,227,987
Shares Outstanding 155,209,764 100,970,805 256,180,569
Net Asset Value
Per Shares $ 1.00 $ 1.00 $ 1.00
</TABLE>
LEGAL MATTERS
Certain legal matters concerning AFG and its participation in the
Reorganization, the issuance of shares of Money Market in connection with the
Reorganization and the tax consequences of the Reorganization will be passed
upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, 51st Floor,
Philadelphia, PA 19103-7599. Certain legal matters concerning AIP and its
participation in the Reorganization will be passed upon by Kirkpatrick &
Lockhart LLP 1800 Massachusetts Avenue, N.W., Washington, D.C. 20036-1800.
INFORMATION FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which AIP and
AFG have filed with the SEC pursuant to the requirements of the 1933 Act and the
1940 Act, to which reference is hereby made. The SEC file number for AIP's
registration statement containing the Prospectus and Statement of Additional
Information relating to Dollar Fund is Registration No. 2-74549. Such Prospectus
and Statement of Additional Information are incorporated herein by reference.
The SEC file number for AFG's registration statement containing the Prospectus
and Statement of Additional Information relating to Money Market is Registration
No. 2-27334. Such Prospectus and Statement of Additional Information are
incorporated herein by reference.
26
<PAGE> 37
AFG and AIP are subject to the informational requirements of the 1940 Act
and in accordance therewith file reports and other information with the SEC.
Reports, proxy statements, registration statements and other information filed
by AIP and AFG (including the Registration Statement of AFG relating to Money
Market on Form N-1 4 of which this Proxy Statement/Prospectus is a part and
which is hereby incorporated by reference) may be inspected without charge and
copied at the public reference facilities maintained by the SEC at Room 1014,
Judiciary Plaza, 450 Fifth Street, NW, Washington, DC 20549, and at the
following regional offices of the SEC: 7 World Trade Center, New York, New York
10048; and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661. Copies
of such material may also be obtained from the Public Reference Section of the
SEC at 450 Fifth Street, NW, Washington, DC 20549 at the prescribed rates. The
SEC maintains a Web site at http://www.sec.gov that contains information
regarding AFG, AIP and other registrants that file electronically with the SEC.
ADDITIONAL INFORMATION ABOUT MONEY MARKET AND
DOLLAR FUND
For more information with respect to AFG and Money Market concerning the
following topics, please refer to the AFG Prospectus as indicated: (i) see the
discussion "Investment Objectives," "Summary," The Funds," "Investment
Programs," "Management" and "General Information" for further information
regarding AFG and Money Market; (ii) see the discussion "Summary," "Investment
Programs," "Management" and "General Information" for further information
regarding management of Money Market; (iii) see the discussion "Summary,"
"Management," "Organization of the Trust," "Dividends, Distributions and Tax
Matters" and "General Information" for further information regarding the capital
stock of Money Market; (iv) see the discussion "Management," "How to Purchase
Shares," "Terms and Conditions of Purchase of the AIM Funds," "Special Plans,"
"Exchange Privilege," "Determination of Net Asset Value" and "How to Redeem
Shares" for further information regarding the purchase, redemption and
repurchase of Money Market.
For more information with respect to AIP and Dollar Fund concerning the
following topics, please refer to the Dollar Fund Prospectus as indicated: (i)
see the discussion "Summary," "The Fund," "Investment Program," "Management" and
"General Information" for further information regarding AIP and Dollar Fund;
(ii) see the discussion "Summary," "Investment Program," "Management" and
"General Information" for further information regarding management of Dollar
Fund; (iii) see the discussion "Summary," "Management," "Dividends,
Distributions and Tax Matters" and "General Information" for further information
regarding the capital stock of Dollar Fund; (iv) see the discussion
"Management," "How to Purchase Shares," "Terms and Conditions of Purchase of the
AIM Funds," "Special Plans," "Exchange Privilege," "Determination of Net Asset
Value" and "How to Redeem Shares" for further information regarding the
purchase, redemption and repurchase of Dollar Fund.
27
<PAGE> 38
APPENDIX I
AGREEMENT
and
PLAN OF REORGANIZATION
for
AIM DOLLAR FUND
a Portfolio of
AIM INVESTMENT PORTFOLIOS
September __, 1998
<PAGE> 39
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1 Reorganization of Dollar Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.2. Computation of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.5 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.6 Issuance of AFG Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.7. Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.8 Liabilities and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF AIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1 Organization; Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.2 Registration and Regulation of AIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.4 No Material Adverse Changes; Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . 7
Section 3.5 DF Shares; Liabilities; Business Operations . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.6 Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.7 Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.8 No Breaches or Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.9 Authorizations or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.10 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.11 No Actions, Suits or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.12 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.13 Properties and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.15 Benefit and Employment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.16 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.17 Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.18 State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.19 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.20 Prospectus and Statement of Additional Information . . . . . . . . . . . . . . . . . . . . 10
Section 3.21 No Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.22 Liabilities of Dollar Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.23 Value of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.24 Shareholder Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.25 Intercompany Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
i
<PAGE> 40
<TABLE>
<S> <C>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF AFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.1 Organization; Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.2 Registration and Regulation of AFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.4 No Material Adverse Changes; Contingent Liabilities . . . . . . . . . . . . . . . . . . . . 12
Section 4.5 Registration of Money Market Portfolio Cash Reserve Shares and Money Market Portfolio
Class B Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.6 Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.7 Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.8 No Breaches or Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.9 Authorizations or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.10 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.11 No Actions, Suits or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.13 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.14 Representations Concerning the Reorganization . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.15 Prospectus and Statement of Additional Information . . . . . . . . . . . . . . . . . . . . 15
Section 4.16 Value of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.17 Intercompany Indebtedness; Consideration . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 5
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.2 Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.5 Notice of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.6 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.7 Consents, Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.8 Submission of Agreement to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.1 Conditions Precedent of AFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.2 Mutual Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.3 Conditions Precedent of AIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 7
TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.2 Survival After Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 8
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.2 Law Governing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
ii
<PAGE> 41
<TABLE>
<S> <C> <C>
Section 8.3 Binding Effect, Persons Benefitting, No Assignment . . . . . . . . . . . . . . . . . . . . 21
Section 8.4 Obligations of AFG and AIP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.5 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.6 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.7 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.9 Entire Agreement; Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.11 Representation by AIM Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Schedule 6.1(d) Opinion of Counsel to AIP
Schedule 6.2(g) Tax Opinion
Schedule 6.3(d) Opinion of Counsel to AFG
</TABLE>
iii
<PAGE> 42
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of
__________________________, 1998, (this "Agreement"), by and among AIM
Investment Portfolios, a Delaware business trust ("AIP"), acting on behalf of
AIM Dollar Fund ("Dollar Fund"), AIM Funds Group, a Delaware business trust
("AFG"), acting on behalf of AIM Money Market Fund (the "Money Market
Portfolio") and AIM Advisors, Inc. ("AIM Advisors"), a Delaware corporation.
WITNESSETH
WHEREAS, AIP is an investment company registered with the
Securities and Exchange Commission (the "SEC") under the Investment Company Act
(as defined below) that offers separate classes of its shares representing
interests in its investment portfolio, Dollar Fund, for sale to the public; and
WHEREAS, AFG is an investment company registered with the SEC
under the Investment Company Act that offers separate classes of its shares
representing interests in several investment portfolios, including the Money
Market Portfolio, for sale to the public; and
WHEREAS, AIM Advisors provides investment advisory services to
both AFG and AIP; and
WHEREAS, Dollar Fund owns securities in which the Money Market
Portfolio is permitted to invest; and
WHEREAS, Dollar Fund desires to provide for its reorganization
through the transfer of substantially all of its assets to the Money Market
Portfolio in exchange for the assumption by the Money Market Portfolio of all
of the liabilities of Dollar Fund and the issuance by AFG of shares of the
Money Market Portfolio in the manner set forth in this Agreement; and
WHEREAS, this Agreement is intended to be and is adopted by
the parties hereto as a Plan of Reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
the agreements and undertakings contained in this Agreement, AFG and AIP agree
as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. For all purposes in
this Agreement, the following terms shall have
the respective meanings set forth in this
Section 1.1 (such definitions to be equally
applicable to both the singular and plural forms
of the terms herein defined):
<PAGE> 43
"Advisers Act" means the Investment Advisers Act of 1940, as
amended, and all rules and regulations of the SEC adopted pursuant thereto.
"AFG Registration Statement" means the registration statement
on Form N-1A of AFG, as amended, Registration No. 2-27334, that is applicable
to the Money Market Portfolio.
"Affiliated Person" means an affiliated person as defined in
Section 2(a)(3) of the Investment Company Act.
"AFG" means AIM Funds Group, a Delaware business trust.
"Agreement" means this Agreement and Plan of Reorganization,
together with all schedules and exhibits attached hereto and all amendments
hereto and thereof.
"AIM Advisors" means AIM Advisors, Inc., a Delaware
corporation.
"AIP" means AIM Investment Portfolios, a Delaware business
trust.
"AIP Registration Statement" means the registration statement
on Form N-1A of AIP, as amended, Registration No. 2-74577.
"Benefit Plan" means any material "employee benefit plan" (as
defined in Section 3(3) of ERISA) and any material bonus, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, vacation, retirement, profit sharing, welfare plans or
other plan, arrangement or understanding maintained or contributed to by AIP on
behalf of Dollar Fund, or otherwise providing benefits to any current or former
employee, officer or trustee of AIP.
"Closing" means the transfer of the assets of Dollar Fund to
the Money Market Portfolio, the assumption of all of Dollar Fund's liabilities
by the Money Market Portfolio and the issuance of Money Market Portfolio Cash
Reserve Shares and Money Market Portfolio Class B Shares by AFG directly to
the shareholders of Dollar Fund as described in Section 2.1 of this Agreement.
"Closing Date" means December 21, 1998, or such other date as
the parties may mutually determine.
"Code" means the Internal Revenue Code of 1986, as amended,
and all rules and regulations adopted pursuant thereto.
"Custodian" means State Street Bank and Trust Company acting
in its capacity as custodian for the assets of the Money Market Portfolio and
Dollar Fund.
"Dollar Fund" means AIM Dollar Fund, an investment portfolio
of AIP.
"DF Financial Statements" shall have the meaning set forth in
Section 3.3 of this Agreement.
2
<PAGE> 44
"DF Shareholders" means the holders of record as of the
Effective Time on the Closing Date of the issued and outstanding shares of
beneficial interest in Dollar Fund.
"DF Shareholders Meeting" means a meeting of the shareholders
of Dollar Fund convened in accordance with applicable law and the Agreement and
Declaration of Trust of AIP to consider and vote upon the approval of this
Agreement and the transactions contemplated by this Agreement.
"DF Shares" means the issued and outstanding shares of
beneficial interest in Dollar Fund.
"Effective Time" shall mean 8:00 a.m. Central Time on the
Closing Date.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all rules or regulations adopted pursuant thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and all rules and regulations adopted by the SEC pursuant thereto.
"Governmental Authority" means any foreign, United States or
state government, government agency, department, board, commission (including
the SEC) or instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including the National Association of
Securities Dealers, Inc., the Commodity Futures Trading Commission, the
National Futures Association, the Investment Management Regulatory Organization
Limited and the Office of Fair Trading).
"Investment Company Act" means the Investment Company Act of
1940, as amended, and all rules and regulations adopted by the SEC pursuant
thereto.
"Lien" means any pledge, lien, security interest, charge,
claim or encumbrance of any kind.
"Material Adverse Effect" means an effect that would cause a
change in the condition (financial or otherwise), properties, assets or
prospects of an entity having an adverse monetary effect in an amount equal to
or greater than $50,000.
"Money Market Portfolio" means AIM Money Market Fund, an
investment portfolio of AFG.
"Money Market Portfolio Cash Reserve Shares" means Cash
Reserve Shares of the Money Market Portfolio issued by AFG, each representing
an interest in the Money Market Portfolio.
"Money Market Portfolio Class B Shares" means Class B Shares
of the Money Market Portfolio issued by AFG, each representing an interest in
the Money Market Portfolio.
"Money Market Portfolio Financial Statements" shall have the
meaning set forth in Section 4.3 of this Agreement.
3
<PAGE> 45
"Person" means an individual or a corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.
"Reorganization" means the acquisition of the assets of Dollar
Fund by the Money Market Portfolio in consideration of the assumption by the
Money Market Portfolio of all of the liabilities of Dollar Fund and the
issuance by AFG of Money Market Portfolio Cash Reserve Shares and Money Market
Portfolio Class B Shares directly to DF Shareholders as described in this
Agreement.
"Required DF Shareholder Vote" shall have the meaning set
forth in Section 3.17 of this Agreement.
"Return" means any return, report or form or any attachment
thereto required to be filed with any taxing authority.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and all rules and regulations adopted by the SEC pursuant thereto.
"Tax" means any tax or similar governmental charge, impost or
levy (including income taxes (including alternative minimum tax and estimated
tax), franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross
receipts taxes, value added taxes, employment taxes, excise taxes, ad valorem
taxes, property taxes, withholding taxes, payroll taxes, minimum taxes, or
windfall profit taxes), together with any related penalties, fines, additions
to tax or interest, imposed by the United States or any state, county, local or
foreign government or subdivision or agency thereof.
"Valuation Date" shall have the meaning set forth in Section
2.3 of this Agreement.
ARTICLE 2
TRANSFER OF ASSETS
Section 2.1 Reorganization of Dollar Fund. At
the Effective Time, all of the assets of Dollar
Fund shall be transferred, assigned and
delivered to the Custodian for the account of
the Money Market Portfolio in exchange for the
assumption by the Money Market Portfolio of all
of the liabilities of any kind of Dollar Fund
and delivery by AFG directly to the DF
Shareholders, at the Effective Time on the
Closing Date and in the manner described in
Section 2.6 below, of a number of Money Market
Portfolio Shares (including, if applicable,
fractional shares rounded to the nearest
thousandth) having an aggregate net asset value
equal to the net value of the assets of Dollar
Fund so transferred, assigned and delivered, all
determined and adjusted as provided in Section
2.2 below. Upon delivery of such assets, the
Money Market Portfolio will receive good and
marketable title to such assets free and clear
of all Liens.
4
<PAGE> 46
Section 2.2 Computation of Net Asset Value.
(a) The net asset value of the Money Market Portfolio
Cash Reserve Shares and the Money Market Portfolio Class B Shares, and the net
value of the assets of Dollar Fund subject to this Agreement, shall, in each
case, be determined as of the close of regular trading on the NYSE on the
Valuation Date.
(b) The net asset value of the Money Market Portfolio
Cash Reserve Shares and the Money Market Portfolio Class B Shares shall be
computed in accordance with the policies and procedures of the Money Market
Portfolio as described in the AFG Registration Statement.
(c) The net value of the assets of Dollar Fund to be
transferred to the Money Market Portfolio pursuant to this Agreement shall be
computed in accordance with the policies and procedures of Dollar Fund as
described in the AIP Registration Statement.
(d) All computations of value regarding the net assets
of Dollar Fund and the net asset value of the Money Market Portfolio Cash
Reserve Shares and the Money Market Portfolio Class B Shares to be issued
pursuant to this Agreement shall be made by agreement of AFG and AIP. The
parties agree to use commercially reasonable efforts to resolve any material
pricing differences between the prices of portfolio securities determined in
accordance with their respective pricing policies and procedures.
Section 2.3 Valuation Date. The assets of
Dollar Fund and the net asset value per share of
the Money Market Portfolio Cash Reserve Shares
and the Money Market Portfolio Class B Shares
shall be valued as of the close of regular
trading on the NYSE on the business day next
preceding the Closing Date (the "Valuation
Date"). The share transfer books of Dollar Fund
will be permanently closed as of the close of
business on the Valuation Date and only requests
for the redemption of shares of Dollar Fund
received in proper form prior to the close of
regular trading on the NYSE on the Valuation
Date shall be accepted by Dollar Fund.
Redemption requests thereafter received by
Dollar Fund shall be deemed to be redemption
requests for Money Market Portfolio Cash Reserve
Shares or Money Market Portfolio Class B Shares,
as applicable (assuming that the transactions
contemplated by this Agreement have been
consummated) to be distributed to DF
Shareholders under this Agreement.
Section 2.4 Delivery.
(a) Assets held by Dollar Fund shall be delivered by
AIP to the Custodian on the Closing Date. No later than three (3) business
days preceding the Closing Date, AIP shall instruct the Custodian to transfer
such assets to the account of the Money Market Portfolio. The assets so
delivered shall be duly endorsed in proper form for transfer in such condition
as to constitute a good delivery thereof, in accordance with the custom of
brokers, and shall be accompanied by all necessary state stock transfer stamps,
if any, or a check for the appropriate purchase price thereof. Cash held by
Dollar Fund shall be delivered on
5
<PAGE> 47
the Closing Date and shall be in the form of currency or wire transfer in
Federal funds, payable to the order of the account of the Money Market
Portfolio at the Custodian.
(b) If, on the Closing Date, AIP is unable to make
delivery in the manner contemplated by Section 2.4(a) of securities held by
Dollar Fund for the reason that any of such securities purchased prior to the
Closing Date have not yet been delivered to Dollar Fund, its broker or brokers,
then, AFG shall waive the delivery requirements of Section 2.4(a) with respect
to said undelivered securities, if Dollar Fund has delivered to the Custodian
by or on the Closing Date and with respect to said undelivered securities,
executed copies of an agreement of assignment and escrow agreement and due
bills executed on behalf of said broker or brokers, together with such other
documents as may be required by AFG or the Custodian, including brokers'
confirmation slips.
Section 2.5 Dissolution. As soon as reasonably
practicable after the Closing Date, AIP shall
dissolve its corporate existence and terminate
its status as a registered investment company
under the Investment Company Act.
Section 2.6 Issuance of AFG Shares. At the
Effective Time, each DF Shareholder of record as
of the close of regular trading on the NYSE on
the Valuation Date holding Dollar Fund Class A
shares or Advisor Class shares shall be issued
that number of full and fractional shares of the
Money Market Portfolio Cash Reserve Shares
having a net asset value equal to the net asset
value of the Dollar Fund Class A shares or
Advisor Class shares held by such DF
Shareholders on the Valuation Date, and each DF
Shareholder of record as of the Valuation Date
holding Dollar Fund Class B shares shall be
issued that number of full and fractional shares
of the Money Market Portfolio Class B Shares
having a net asset value equal to the net asset
value of the Dollar Fund Class B Shares held by
such DF Shareholder on the Valuation Date. All
issued and outstanding shares of beneficial
interest of Dollar Fund shall thereupon be
canceled on the books of AIP. AIP shall provide
instructions to the transfer agent of AFG with
respect to the Money Market Portfolio Cash
Reserve Shares and Money Market Portfolio Class
B Shares to be issued to DF Shareholders. AFG
shall have no obligation to inquire as to the
validity, propriety or correctness of any such
instruction, but shall, in each case, assume
that such instruction is valid, proper and
correct. AFG shall record on its books the
ownership of the Money Market Portfolio Cash
Reserve and the Money Market Portfolio Class B
Shares by DF Shareholders and shall forward a
confirmation of such ownership to the DF
Shareholders. No redemption or repurchase of
such shares credited to former DF Shareholders
in respect of Dollar Fund shares represented by
unsurrendered shares certificates shall be
permitted until such certificates have been
surrendered to AFG for cancellation, or if such
certificates are lost or misplaced, until lost
certificate affidavits have been executed and
delivered to AFG.
6
<PAGE> 48
Section 2.7 Investment Securities. On or
prior to the Valuation Date, AIP shall deliver a
list setting forth the securities Dollar Fund
then owns together with the respective Federal
income tax bases thereof. AIP shall provide to
AFG on or before the Valuation Date, detailed
tax basis accounting records for each security
to be transferred to it pursuant to this
Agreement. Such records shall be prepared in
accordance with the requirements for specific
identification tax lot accounting and clearly
reflect the bases used for determination of gain
and loss realized on the sale of any security
transferred to the Money Market Portfolio
hereunder. Such records shall be made available
by AIP prior to the Valuation Date for
inspection by the Treasurer (or his designee) or
the auditors of AFG upon reasonable request.
Section 2.8 Liabilities and Expenses. Dollar
Fund shall use its reasonable best efforts to
discharge all known liabilities, so far as may
be possible, prior to the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF AIP
AIP, on behalf of Dollar Fund, represents and warrants to AFG
that:
Section 3.1 Organization; Authority. AIP is
duly organized, validly existing and in good
standing under the Delaware Business Trust Act,
with all requisite trust power and authority to
enter into this Agreement and perform its
obligations hereunder.
Section 3.2 Registration and Regulation of AIP.
AIP is duly registered with the SEC as an
investment company under the Investment Company
Act and all DF Shares which have been or are
being offered for sale have been duly registered
under the Securities Act and have been duly
registered, qualified or are exempt from
registration or qualification under the
securities laws of each state or other
jurisdiction in which such shares have been or
are being offered for sale, and no action has
been taken by AIP to revoke or rescind any such
registration or qualification. Dollar Fund is
in compliance in all material respects with all
applicable laws, rules and regulations,
including, without limitation, the Investment
Company Act, the Securities Act, the Exchange
Act and all applicable state securities laws.
Dollar Fund is in compliance in all material
respects with the applicable investment policies
and restrictions set forth in the AIP
Registration Statement currently in effect. The
value of the net assets of Dollar Fund is
determined using portfolio valuation methods
that comply in all material respects with the
requirements of the Investment Company Act and
the policies of Dollar Fund and all purchases
and
7
<PAGE> 49
redemptions of DF Shares have been effected at
the net asset value per share calculated in such
manner.
Section 3.3 Financial Statements. The books of
account and related records of Dollar Fund
fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with
generally accepted accounting principles applied
on a consistent basis. The audited financial
statements dated December 31, 1997, and the
unaudited financial statements dated June 30,
1998, of Dollar Fund previously delivered to AFG
(the "DF Financial Statements") present fairly
in all material respects the financial position
of Dollar Fund as at the dates indicated and the
results of operations and changes in net assets
for the periods then ended in accordance with
generally accepted accounting principles applied
on a consistent basis for the periods then
ended.
Section 3.4 No Material Adverse Changes;
Contingent Liabilities. Since June 30, 1998, no
material adverse change has occurred in the
financial condition, results of operations,
business, assets or liabilities of Dollar Fund
or the status of Dollar Fund as a regulated
investment company under the Code, other than
changes resulting from any change in general
conditions in the financial or securities
markets or the performance of any investments
made by Dollar Fund or occurring in the ordinary
course of business of Dollar Fund or AIP. There
are no contingent liabilities of Dollar Fund not
disclosed in the DF Financial Statements which
are required to be disclosed in accordance with
generally accepted accounting principles.
Section 3.5 DF Shares; Liabilities; Business
Operations.
(a) The DF Shares have been duly authorized and validly
issued and are fully paid and non-assessable.
(b) There is no plan or intention by the shareholders
of Dollar Fund who own five percent (5%) or more of the DF Shares, and to the
knowledge of AIP's management the remaining DF Shareholders have no present
plan or intention, of selling, exchanging, redeeming or otherwise disposing of
a number of the Money Market Portfolio Cash Reserve Shares or the Money Market
Portfolio Class B Shares received by them in connection with the Reorganization
that would reduce the DF Shareholders' ownership of Money Market Portfolio Cash
Reserve Shares and Money Market Portfolio Class B Shares to a number of shares
having a value, as of the Closing Date, of less than fifty percent (50%) of the
value of all of the formerly outstanding DF Shares as of the same date. For
purposes of this representation, DF Shares exchanged for cash or other property
or exchanged for cash in lieu of fractional shares of the Money Market
Portfolio will be treated as outstanding DF Shares on the date of the
Reorganization. Moreover, DF Shares and Money Market Portfolio Cash Reserve
Shares and Money Market Portfolio Class B Shares held by DF Shareholders and
otherwise sold, redeemed or disposed of prior or subsequent to the
Reorganization will be considered in making this representation, except for DF
Shares or Money Market Portfolio Cash Reserve Shares and Money Market Portfolio
Class B Shares which have been, or will be, redeemed by Dollar Fund
8
<PAGE> 50
or the Money Market Portfolio in the ordinary course of its business as an
open-end, diversified management investment company (or a series thereof) under
the Investment Company Act.
(c) At the time of the Reorganization, Dollar Fund
shall not have outstanding any warrants, options, convertible securities or any
other type of right pursuant to which any Person could acquire DF Shares,
except for the right of investors to acquire DF Shares at net asset value in
the ordinary course of its business as an open-end diversified management
investment company operating under the Investment Company Act.
(d) From the date it commenced operations on September
11, 1985, and ending on the Closing Date, Dollar Fund will have conducted its
historic business within the meaning of Section 1.368-1(d) of the Income Tax
Regulations under the Code in a substantially unchanged manner. In
anticipation of the Reorganization, Dollar Fund will not dispose of assets
that, in the aggregate, will result in less than fifty percent (50%) of its
historic business assets being transferred to the Money Market Portfolio.
(e) AIP does not have, and has not had during the six
(6) months prior to the date of this Agreement, any employees, and shall not
hire any employees from and after the date of this Agreement through the
Closing Date.
Section 3.6 Accountants. Price Waterhouse
Coopers, LLP, which has reported upon DF
Financial Statements for the period ended
December 31, 1997, are independent public
accountants as required by the Securities Act
and the Exchange Act.
Section 3.7 Binding Obligation. This Agreement
has been duly authorized, executed and delivered
by AIP on behalf of Dollar Fund and, assuming
this Agreement has been duly executed and
delivered by AFG and approved by the DF
Shareholders, constitutes the legal, valid and
binding obligation of AIP, enforceable against
AIP in accordance with its terms from and with
respect to the revenues and assets of Dollar
Fund, except as the enforceability hereof may be
limited by bankruptcy, insolvency,
reorganization or similar laws relating to or
affecting creditors' rights generally, or by
general equity principles (whether applied in a
court of law or a court of equity and including
limitations on the availability of specific
performance or other equitable remedies).
Section 3.8 No Breaches or Defaults. The
execution and delivery of this Agreement by AIP
on behalf of Dollar Fund and performance by AIP
of its obligations hereunder has been duly
authorized by all necessary trust action on the
part of AIP, other than DF Shareholder approval,
and (i) do not, and on the Closing Date will
not, result in any violation of the Agreement
and Declaration of Trust or by-laws of AIP and
(ii) do not, and on the Closing Date will not,
result in a breach of any of the terms or
provisions of, or constitute (with or without
the giving of notice or the lapse of time or
both) a default under, or give rise to a right
of termination, cancellation or acceleration of
any obligation or to the loss
9
<PAGE> 51
of a material benefit under, or result in the
creation or imposition of any Lien upon any
property or assets of Dollar Fund (except for
such breaches or defaults or Liens that would
not reasonably be expected, individually or in
the aggregate, to have a Material Adverse
Effect) under (A) any indenture, mortgage or
loan agreement or any other material agreement
or instrument to which AIP is a party or by
which it may be bound and which relates to the
assets of Dollar Fund or to which any of Dollar
Fund's properties may be subject; (B) any Permit
(as defined below); or (C) any existing
applicable law, rule, regulation, judgment,
order or decree of any Governmental Authority
having jurisdiction over AIP or any of Dollar
Fund's properties. AIP is not under the
jurisdiction of a court in a Title 11 of the
United States Code or similar case within the
meaning of Section 368(a)(3)(A) of the Code.
Section 3.9 Authorizations or Consents. Other
than those which shall have been obtained or
made on or prior to the Closing Date and those
that must be made after the Closing Date to
comply with Section 2.5 of this Agreement, no
authorization or approval or other action by,
and no notice to or filing with, any
Governmental Authority will be required to be
obtained or made by AIP in connection with the
due execution and delivery by AIP of this
Agreement and the consummation by AIP of the
transactions contemplated hereby.
Section 3.10 Permits. AIP has in full force
and effect all Federal, state, local and foreign
governmental approvals, consents,
authorizations, certificates, filings,
franchises, licenses, notices, permits and
rights (collectively, "Permits") necessary for
it to conduct its business as presently
conducted as it relates to Dollar Fund, and
there has occurred no default under any Permit,
except for the absence of Permits and for
defaults under Permits the absence or default of
which would not reasonably be expected to have,
individually or in the aggregate, a Material
Adverse Effect. To the knowledge of AIP there
are no proceedings relating to the suspension,
revocation or modification of any Permit, except
for such that would not reasonably be expected,
individually or in the aggregate, to have a
Material Adverse Effect.
Section 3.11 No Actions, Suits or Proceedings.
(a) There is no pending action, litigation or
proceeding, nor, to the knowledge of AIP, has any litigation been overtly
threatened in writing or, if probable of assertion, orally, against AIP before
any Governmental Authority which questions the validity or legality of this
Agreement or of the actions contemplated hereby or which seeks to prevent the
consummation of the transactions contemplated hereby, including the
Reorganization.
(b) There are no judicial, administrative or
arbitration actions, suits, or proceedings instituted or pending or, to the
knowledge of AIP, threatened in writing or, if probable of assertion, orally
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against AIP affecting any property, asset, interest, or right of Dollar Fund,
that could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect with respect to Dollar Fund. There are not in
existence on the date hereof any plea agreements, judgments, injunctions,
consents, decrees, exceptions or orders that were entered by, filed with or
issued by Governmental Authority relating to AIP's conduct of the business of
Dollar Fund affecting in any significant respect the conduct of such business.
AIP is not, and has not been, to the knowledge of AIP, the target of any
investigation by the SEC or any state securities administrator with respect to
its conduct of the business of Dollar Fund.
Section 3.12 Contracts. AIP is not in default
under any contract, agreement, commitment,
arrangement, lease, insurance policy or other
instrument to which it is a party and which
involves or affects the assets of Dollar Fund,
by which the assets, business, or operations of
Dollar Fund may be bound or affected, or under
which it or the assets, business or operations
of Dollar Fund receives benefits, and which
default could reasonably be expected,
individually or in the aggregate, to have a
Material Adverse Effect, and, to the knowledge
of AIP, there has not occurred any event that,
with the lapse of time or the giving of notice
or both, would constitute such a default.
Section 3.13 Properties and Assets. Dollar Fund
has good and marketable title to all properties
and assets reflected in the DF Financial
Statements as owned by it, free and clear of all
Liens, except as described in the DF Financial
Statements.
Section 3.14 Taxes.
(a) Dollar Fund has elected to be treated as a
regulated investment company under Subchapter M of the Code. Dollar Fund has
qualified as such for each taxable year since inception and that has ended
prior to the Closing Date and will have satisfied the requirements of Part I of
subchapter M of the Code to maintain such qualification for the period
beginning on the first day of its current taxable year and ending on the
Closing Date. Dollar Fund has no earnings and profits accumulated in any
taxable year in which the provisions of Subchapter M of the Code did not apply
to it. In order to (i) insure continued qualification of Dollar Fund as a
"regulated investment company" for tax purposes and (ii) eliminate any tax
liability of Dollar Fund arising by reason of undistributed investment company
taxable income or net capital gain, AIP will declare to the DF Shareholders of
record on or prior to the Valuation Date, a dividend or dividends that,
together with all previous such dividends shall have the effect of distributing
(A) all of Dollar Fund's investment company taxable income (determined without
regard to any deductions for dividends paid) for the taxable year ended
December 31, 1997 and for the short taxable year beginning on January 1, 1998
and ending on the Closing Date and (B) all of Dollar Fund's net capital gains
realized in its taxable year ended December 31, 1997 and in such short taxable
year (after reduction for any capital loss carryover).
(b) Dollar Fund has timely filed all Returns required
to be filed by it and all Taxes with respect thereto have been paid, except
where the failure so to file or so to pay, would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. Adequate
provision has been made in the financial statements of Dollar Fund for all
Taxes in respect of all periods ending on or before the date of such financial
statements, except where the failure to make such provisions would not
reasonably be
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expected, individually or in the aggregate, to have a Material Adverse Effect.
No deficiencies for any Taxes have been proposed, assessed or asserted in
writing by any taxing authority against Dollar Fund, and no deficiency has been
proposed, assessed or asserted, in writing, where such deficiency would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No waivers of the time to assess any such Taxes are
outstanding nor are any written requests for such waivers pending and no Return
of Dollar Fund is currently being or has been audited with respect to income
taxes or other Taxes by any Federal, state, local, or foreign Tax authority.
(c) Dollar Fund's fiscal year has not been changed for
tax purposes since the date on which it commenced operations.
Section 3.15 Benefit and Employment Obligations.
On or prior to the Closing Date, Dollar Fund
has no obligation to provide any post-
retirement or post-employment benefit to any
Person, including but not limited to under any
Benefit Plan, and has no obligation to provide
unfunded deferred compensation or other unfunded
or self-funded benefits to any Person.
Section 3.16 Brokers. No broker, finder or
similar intermediary has acted for or on behalf
of AIP or Dollar Fund in connection with this
Agreement or the transactions contemplated
hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's,
finder's or similar fee or other commission in
connection therewith based on any agreement,
arrangement or understanding with AIP or any
action taken by it.
Section 3.17 Voting Requirements. The vote of a
majority of the holders of the DF Shares cast at
a meeting at which a quorum is present (the
"Required DF Shareholder Vote") are the only
votes of the holders of any class or series of
shares of beneficial interest of Dollar Fund
necessary to approve this Agreement and the
transactions contemplated by this Agreement.
Section 3.18 State Takeover Statutes. No state
takeover statute or similar statute or
regulation applies or purports to apply to the
Reorganization, this Agreement or any of the
transactions contemplated by this Agreement.
Section 3.19 Books and Records. The books and
records of AIP relating to Dollar Fund,
reflecting, among other things, the purchase and
sale of DF Shares by DF Shareholders, the number
of issued and outstanding shares owned by each
DF Shareholder and the state or other
jurisdiction in which such shares were offered
and sold, are complete and accurate in all
material respects.
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Section 3.20 Prospectus and Statement of
Additional Information. The current prospectus
and statement of additional information for
Dollar Fund as of the date on which they were
issued did not contain, and as supplemented by
any supplement thereto dated prior to or on the
Closing Date, do not contain any untrue
statement of a material fact or omit to state a
material fact required to be stated therein or
necessary to make the statements therein not
misleading.
Section 3.21 No Distribution. The Money Market
Portfolio Cash Reserve Shares and the Money
Market Portfolio Class B Shares are not being
acquired for the purpose of any distribution
thereof, other than in accordance with the terms
of this Agreement.
Section 3.22 Liabilities of Dollar Fund. The
liabilities of Dollar Fund that are to be
assumed by the Money Market Portfolio in
connection with the Reorganization, or which the
assets of Dollar Fund to be transferred in the
Reorganization are subject, were incurred by
Dollar Fund in the ordinary course of its
business. The fair market value of the assets
of Dollar Fund to be transferred to the Money
Market Portfolio in the Reorganization will
equal or exceed the sum of the liabilities to be
assumed by the Money Market Portfolio plus the
amount of liabilities, if any, to which such
transferred assets will be subject.
Section 3.23 Value of Shares. The fair market
value of the Money Market Portfolio Cash Reserve
Shares received by the DF Shareholders will be
approximately equal to the fair market value of
the Dollar Fund Class A shares and Advisor Class
shares constructively surrendered in exchange
therefor, and the fair market value of the Money
Market Portfolio Class B Shares received by the
DF Shareholders will be approximately equal to
the fair market value of the Dollar Fund Class B
shares constructively surrendered therefor.
Section 3.24 Shareholder Expenses. The DF
Shareholders will pay their own expenses, if
any, incurred in connection with the
Reorganization.
Section 3.25 Intercompany Indebtedness. There
is no intercompany indebtedness between AIP and
AFG that was issued, acquired, or will be
settled, at a discount.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF AFG
AFG, on behalf of the Money Market Portfolio, represents and
warrants to AIP as follows:
Section 4.1 Organization; Authority. AFG is
duly organized, validly existing and in good
standing under the Delaware Business Trust Act,
with all requisite trust power and authority to
enter into this Agreement and perform its
obligations hereunder.
Section 4.2 Registration and Regulation of AFG.
AFG is registered with the SEC under the
Investment Company Act as an open-end,
management, series, investment company. The
Money Market Portfolio is in compliance in all
material respects with all applicable laws,
rules and regulations, including without
limitation the Investment Company Act, the
Securities Act, the Exchange Act and all
applicable state securities laws. The Money
Market Portfolio is in compliance in all
material respects with the applicable investment
policies and restrictions set forth in the AFG
Registration Statement currently in effect. The
value of the net assets of the Money Market
Portfolio is determined using portfolio
valuation methods that comply in all material
respects with the requirements of the Investment
Company Act.
Section 4.3 Financial Statements. The books of
account and related records of the Money Market
Portfolio fairly reflect in reasonable detail
its assets, liabilities and transactions in
accordance with generally accepted accounting
principles applied on a consistent basis. The
audited financial statements dated December 31,
1997, and the unaudited financial statements
dated June 30, 1998, of the Money Market
Portfolio previously delivered to AIP (the
"Money Market Portfolio Financial Statements")
present fairly in all material respects the
financial position of the Money Market Portfolio
as at the dates indicated and the results of
operations and changes in net assets for the
periods then ended in accordance with generally
accepted accounting principles applied on a
consistent basis for the periods then ended.
Section 4.4 No Material Adverse Changes;
Contingent Liabilities. Since June 30, 1998, no
material adverse change has occurred in the
financial condition, results of operations,
business, assets or liabilities of the Money
Market Portfolio or the status of the Money
Market Portfolio as a regulated investment
company under the Code, other than changes
resulting from any change in general conditions
in the financial or securities markets or the
performance of any investments made by the Money
Market Portfolio or occurring in the ordinary
course of business of the Money Market Portfolio
or AFG. There are no contingent
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liabilities of the Money Market Portfolio not
disclosed in the Money Market Portfolio
Financial Statements which are required to be
disclosed in accordance with generally accepted
accounting principles.
Section 4.5 Registration of Money Market
Portfolio Cash Reserve Shares and Money Market
Portfolio Class B Shares.
(a) The shares of beneficial interest of AFG are
divided into nine portfolios, including the Money Market Portfolio. The Money
Market Portfolio currently has four classes of shares, Class A shares, Class B
shares, Class C shares and Cash Reserve shares. Under a Plan of
Reclassification adopted by the board of trustees of AFG on September 25, 1998,
the Money Market Portfolio Class A shares will be reclassified as the Money
Market Portfolio Cash Reserve Shares. Under the Delaware Business Trust Act
and its Agreement and Declaration of Trust, as amended, AFG is authorized to
issue an unlimited number of shares of any class representing an investment in
each of its portfolios, including the Money Market Portfolio.
(b) The Money Market Portfolio Cash Reserve Shares and
the Money Market Portfolio Class B Shares of AFG to be issued pursuant to
Section 2.6 shall on the Closing Date be duly registered under the Securities
Act by a Registration Statement on Form N-14 of AFG then in effect.
(c) The Money Market Portfolio Cash Reserve Shares and
the Money Market Portfolio Class B Shares to be issued pursuant to Section 2.6
are duly authorized and on the Closing Date will be validly issued and fully
paid and non-assessable and will conform to the description thereof contained
in the Registration Statement on Form N-14 then in effect. At the time of the
Reorganization, the Money Market Portfolio shall not have outstanding any
warrants, options, convertible securities or any other type of right pursuant
to which any Person could acquire Money Market Portfolio Cash Reserve or Class
B shares, except for the right of investors to acquire Money Market Portfolio
Cash Reserve Shares or Money Market Portfolio Class B Shares at net asset value
in the normal course of its business as an open-ended diversified management
investment company operating under the Investment Company Act.
(d) The combined proxy statement/prospectus (the
"Combined Proxy Statement/Prospectus") which forms a part of AFG's Registration
Statement on Form N-14 shall be furnished to AIP and DF Shareholders entitled
to vote at the DF Shareholders Meeting. The Combined Proxy
Statement/Prospectus and related Statement of Additional Information of the
Money Market Portfolio, when they become effective, shall conform to the
applicable requirements of the Securities Act and the Investment Company Act
and shall not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading, provided, however, that no representation or
warranty is made with respect to written information provided by AIP for
inclusion in the Combined /Proxy Statement/Prospectus.
(e) The shares of the Money Market Portfolio which have
been or are being offered for sale (other than Money Market Portfolio Cash
Reserve Shares and Money Market Portfolio Class B Shares to be issued in
connection with the Reorganization) have been duly registered under the
Securities Act by the AFG Registration Statement then in effect and have been
duly registered, qualified or are exempt from registration or qualification
under the securities laws of each state or other jurisdiction in which such
shares
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have been or are being offered for sale, and no action has been taken by AFG to
revoke or rescind any such registration or qualification.
Section 4.6 Accountants. KPMG Peat Marwick
LLP, which has reported upon the Money Market
Portfolio Financial Statements for the period
ended December 31, 1997, are independent public
accountants as required by the Securities Act
and the Exchange Act.
Section 4.7 Binding Obligation. This Agreement
has been duly authorized, executed and delivered
by AFG on behalf of the Money Market Portfolio
and, assuming this Agreement has been duly
executed and delivered by AIP, constitutes the
legal, valid and binding obligation of AFG,
enforceable against AFG in accordance with its
terms from and with respect to the revenues and
assets of the Money Market Portfolio, except as
the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization or
similar laws relating to or affecting creditors'
rights generally, or by general equity
principles (whether applied in a court or law or
a court of equity and including limitations on
the availability of specific performance or
other equitable remedies).
Section 4.8 No Breaches or Defaults. The
execution and delivery of this Agreement by AFG
on behalf of the Money Market Portfolio and
performance by AFG of its obligations hereunder
have been duly authorized by all necessary trust
action on the part of AFG and (i) do not, and on
the Closing Date will not, result in any
violation of the Agreement and Declaration of
Trust, as amended, or by-laws, as amended, of
AFG and (ii) do not, and on the Closing Date
will not, result in a breach of any of the terms
or provisions of, or constitute (with or without
the giving of notice or the lapse of time or
both) a default under, or give rise to a right
of termination, cancellation or acceleration of
any obligation or to the loss of a material
benefit under, or result in the creation or
imposition of any Lien upon any property or
assets of the assets of Money Market Portfolio
(except for such breaches or defaults or Liens
that would not reasonably be expected,
individually or in the aggregate, to adversely
affect the consummation of the Reorganization)
under (A) any indenture, mortgage or loan or any
other material agreement or instrument to which
AFG is a party or by which it may be bound which
relates to the assets of Money Market Portfolio
or to which any properties of the Money Market
Portfolio may be subject; (B) any Permit; or (C)
any existing applicable law, rule, regulation,
judgment, order or decree of any Governmental
Authority having jurisdiction over AFG or any of
the Money Market Portfolio's properties.
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Section 4.9 Authorizations or Consents. Other
than those which shall have been obtained or
made on or prior to the Closing Date, no
authorization or approval or other action by,
and no notice to or filing with, any
Governmental Authority will be required to be
obtained or made by AFG in connection with the
due execution and delivery by AFG of this
Agreement and the consummation by AFG of the
transactions contemplated hereby.
Section 4.10 Permits. AFG has in full force and
effect all Permits necessary for it to conduct
its business as presently conducted as it
relates to the Money Market Portfolio, and there
has occurred no default under any Permit, except
for the absence of Permits and for defaults
under Permits the absence or default of which
would not reasonably be expected to have,
individually or in the aggregate, a Material
Adverse Effect. To the knowledge of AFG there
are no proceedings relating to the suspension,
revocation or modification of any Permit, except
for such that would not reasonably be expected,
individually or in the aggregate, to have a
Material Adverse Effect.
Section 4.11 No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding,
nor, to the knowledge of AFG, has any litigation been overtly threatened in
writing or, if probable of assertion, orally, against AFG before any
Governmental Authority which questions the validity or legality of this
Agreement or of the transactions contemplated hereby, or which seeks to prevent
the consummation of the transactions contemplated hereby, including the
Reorganization.
(b) There are no judicial, administrative or
arbitration actions, suits, or proceedings instituted or pending or, to the
knowledge of AFG, threatened in writing or, if probable of assertion, orally
against AFG affecting any property, asset, interest, or right of the Money
Market Portfolio, that could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect with respect to the Money Market
Portfolio. There are not in existence on the date hereof any plea agreements,
judgments, injunctions, consents, decrees, exceptions or orders that were
entered by, filed with or issued by Governmental Authority relating to AFG's
conduct of the business of the Money Market Portfolio affecting in any
significant respect the conduct of such business. AFG is not, and has not
been, to the knowledge of AFG, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of the Money Market Portfolio.
Section 4.12 Taxes.
(a) The Money Market Portfolio has elected to be
treated as a regulated investment company under Subchapter M of the Code. The
Money Market Portfolio has qualified as such for each taxable year since
inception that has ended prior to the Closing Date and will satisfy the
requirements of Part I of subchapter M of the Code to maintain such
qualification for its current taxable year.
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(b) The Money Market Portfolio has timely filed all
Returns required to be filed by it and all Taxes with respect thereto have been
paid, except where the failure so to file or so to pay, would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
Adequate provision has been made in the financial statements of the Money
Market Portfolio for all Taxes in respect of all periods ending on or before
the date of such financial statements, except where the failure to make such
provisions would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect. No deficiencies for any Taxes have been
proposed, assessed or asserted in writing by any taxing authority against the
Money Market Portfolio, and no deficiency has been proposed, assessed or
asserted, in writing, where such deficiency would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No
waivers of the time to assess any such Taxes are outstanding nor are any
written requests for such waivers pending and no Return of the Money Market
Portfolio is currently being or has been audited with respect to income taxes
or other Taxes by any Federal, state, local, or foreign Tax authority.
(c) The Money Market Portfolio's fiscal year has not
been changed for tax purposes since the date on which it commenced operations.
Section 4.13 Brokers. No broker, finder or
similar intermediary has acted for or on behalf
of AFG or the Money Market Portfolio in
connection with this Agreement or the
transactions contemplated hereby, and no broker,
finder, agent or similar intermediary is
entitled to any broker's, finder's or similar
fee or other commission in connection therewith
based on any agreement, arrangement or
understanding with AFG or any action taken by
it.
Section 4.14 Representations Concerning the
Reorganization.
(a) The Money Market Portfolio does not own directly or
indirectly, nor will it have owned at any time during the five-year period
ending on the Closing Date, any shares of Dollar Fund.
(b) AFG has no plan or intention to reacquire any of
the Money Market Portfolio Cash Reserve Shares or the Money Market Portfolio
Class B Shares issued in the Reorganization, except to the extent that the
Money Market Portfolio is required by the Investment Company Act to redeem any
of its shares presented for redemption at net asset value in the ordinary
course of its business as an open-end, management investment company.
(c) The Money Market Portfolio has no plan or intention
to sell or otherwise dispose of any of the assets of Dollar Fund acquired in
the Reorganization, other than in the ordinary course of its business and to
the extent necessary to maintain its status as a "regulated investment company"
under the Code.
(d) Following the Reorganization, the Money Market
Portfolio will continue the "historic business" of Dollar Fund (within the
meaning of Section 1.368-1(d) of the Income Tax Regulations under the Code) or
use a significant portion of Dollar Fund's historic business assets in a
business.
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Section 4.15 Prospectus and Statement of
Additional Information. The current prospectus
and statement of additional information for the
Money Market Portfolio as of the date on which
they were issued did not contain, and as
supplemented by any supplement thereto dated
prior to or on the Closing Date do not contain,
any untrue statement of a material fact or omit
to state a material fact required to be stated
therein or necessary to make the statements
therein not misleading.
Section 4.16 Value of Shares. The fair market
value of the Money Market Fund Cash Reserve
Shares received by the DF Shareholders will be
approximately equal to the fair market value of
the Dollar Fund Class A shares and Advisor Class
shares constructively surrendered in exchange
therefor, and the fair market value of the Money
Market Portfolio Class B Shares received by the
DF Shareholders will be approximately equal to
the fair market value of the Dollar Fund Class B
shares constructively surrendered therefor.
Section 4.17 Intercompany Indebtedness;
Consideration. There is no intercompany
indebtedness between AIP and AFG that was issued
or acquired, or will be settled, at a discount.
No consideration other than the Money Market
Portfolio Cash Reserve Shares and Money Market
Portfolio Class B Shares (and the Money Market
Portfolio's assumption of Dollar Fund's
liabilities, including for this purpose all
liabilities to which the assets of Dollar Fund
are subject) will be issued in exchange for the
assets of Dollar Fund acquired by the Money
Market Portfolio in connection with the
Reorganization. The fair market value of the
assets of the Dollar Fund transferred to the
Money Market Portfolio in the Reorganization
will equal or exceed the sum of the liabilities
assumed by the Money Market Portfolio, plus the
amount of liabilities, if any, to which such
transferred assets are subject.
ARTICLE 5
COVENANTS
Section 5.1 Conduct of Business.
(a) From the date of this Agreement up to and including
the Closing Date (or, if earlier, the date upon which this Agreement is
terminated pursuant to Article 7), AIP shall conduct the business of Dollar
Fund only in the ordinary course and substantially in accordance with past
practices, and shall use its reasonable best efforts to preserve intact its
business organization and material assets and maintain the rights, franchises
and business and customer relations necessary to conduct the business of Dollar
Fund in the ordinary course in all material respects. Without limiting the
generality of the foregoing, AIP shall not do any of the following with respect
to Dollar Fund without the prior written consent of AFG, which consent shall
not be unreasonably withheld:
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(i) split, combine or reclassify any of its shares
of beneficial interest or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for its shares
of beneficial interest;
(ii) amend its Agreement and Declaration of Trust
or by-laws;
(iii) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization
or division thereof or any assets that are material, individually or
in the aggregate, to Dollar Fund taken as a whole, except purchases of
assets in the ordinary course of business consistent with past
practice;
(iv) sell, lease or otherwise dispose of any of its
material properties or assets, or mortgage or otherwise encumber or
subject to any Lien any of its material properties or assets, other
than in the ordinary course of business;
(v) incur any indebtedness for borrowed money or
guarantee any indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities
of Dollar Fund, guarantee any debt securities of another Person, enter
into any "keep well" or other agreement to maintain any financial
statement condition of another Person, or enter into any arrangement
having the economic effect of any of the foregoing;
(vi) settle or compromise any income tax liability
or make any material tax election;
(vii) pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than in the ordinary
course of business;
(viii) change its methods of accounting, except as
required by changes in generally accepted accounting principles as
concurred in by its independent auditors, or change its fiscal year;
(ix) make or agree to make any material severance,
termination, indemnification or similar payments except pursuant to
existing agreements; or
(x) adopt any Benefit Plan.
(b) From the date of this Agreement up to and including
the Closing Date (or, if earlier, the date upon which this Agreement is
terminated pursuant to Article 7), AFG shall conduct the business of the Money
Market Portfolio only in the ordinary course and substantially in accordance
with past practices, and shall use its reasonable best efforts to preserve
intact its business organization and material assets and maintain the rights,
franchises and business relations necessary to conduct the business operations
of the Money Market Portfolio in the ordinary course in all material respects.
Section 5.2 Announcements. AIP and AFG shall
consult with each other before issuing any
press release or otherwise making any public
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statements with respect to this Agreement and
the transactions contemplated by this Agreement,
and neither AIP nor AFG shall issue any such
press release or make any public statement
without the prior written approval of the other
party to this Agreement, such approval not to be
unreasonably withheld, except as may be required
by law.
Section 5.3 Expenses. Dollar Fund and the
Money Market Portfolio shall each bear the
expenses it incurs in connection with this
Agreement and the Reorganization and other
transactions contemplated hereby. AIM Advisors
shall reimburse Dollar Fund for all of the costs
and expenses it incurs in connection with the
Reorganization, including the costs of printing
and mailing the Combined Proxy
Statement/Prospectus and of shareholder
solicitation.
Section 5.4 Further Assurances. Each of the
parties hereto shall execute such documents and
other papers and perform such further acts as
may be reasonably required to carry out the
provisions hereof and the transactions
contemplated hereby. Each such party shall, on
or prior to the Closing Date, use its reasonable
best efforts to fulfill or obtain the
fulfillment of the conditions precedent to the
consummation of the Reorganization, including
the execution and delivery of any documents,
certificates, instruments or other papers that
are reasonably required for the consummation of
the Reorganization.
Section 5.5 Notice of Events. AFG shall give
prompt notice to AIP, and AIP shall give prompt
notice to AFG, of (i) the occurrence or
nonoccurrence of any event which to the
knowledge of AFG or to the knowledge of AIP, the
occurrence or non-occurrence of which would be
likely to result in any of the conditions
specified in (x) in the case of AFG, Sections
6.1 and 6.2 or (y) in the case of AIP, Sections
6.2 and 6.3, not being satisfied so as to permit
the consummation of the Reorganization and (ii)
any material failure on its part, or on the part
of the other party hereto of which it has
knowledge, to comply with or satisfy any
covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided,
however, that the delivery of any notice
pursuant to this Section 5.5 shall not limit or
otherwise affect the remedies available
hereunder to any party.
Section 5.6 Access to Information.
(a) AIP will, during regular business hours and on reasonable
prior notice, allow AFG and its authorized representatives reasonable access to
the books and records of AIP pertaining to the assets of Dollar Fund and to
officers of AIP knowledgeable thereof; provided, however, that any such access
shall not significantly interfere with the business or operations of AIP.
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<PAGE> 63
(b) AFG will, during regular business hours and on reasonable
prior notice, allow AIP and its authorized representatives reasonable access to
the books and records of AFG pertaining to the assets of the Money Market
Portfolio and to officers of AFG knowledgeable thereof; provided, however, that
any such access shall not significantly interfere with the business or
operations of AFG.
Section 5.7 Consents, Approvals and Filings.
Each of AIP and AFG shall make all necessary
filings, as soon as reasonably practicable,
including, without limitation, those required
under the Securities Act, the Exchange Act, the
Investment Company Act and the Advisers Act, in
order to facilitate prompt consummation of the
Reorganization and the other transactions
contemplated by this Agreement. In addition,
each of AIP and AFG shall use its reasonable
best efforts, and shall cooperate fully with
each other (i) to comply as promptly as
reasonably practicable with all requirements of
Governmental Authorities applicable to the
Reorganization and the other transactions
contemplated herein and (ii) to obtain as
promptly as reasonably practicable all necessary
permits, orders or other consents of
Governmental Authorities and consents of all
third parties necessary for the consummation of
the Reorganization and the other transactions
contemplated herein. Each of AIP and AFG shall
use reasonable efforts to provide such
information and communications to Governmental
Authorities as such Governmental Authorities may
request.
Section 5.8 Submission of Agreement to
Shareholders. AIP shall take all action
necessary in accordance with applicable law and
its Agreement and Declaration of Trust and
by-laws to convene the DF Shareholders Meeting.
AIP shall, through its Board of Trustees,
recommend to the DF Shareholders approval of
this Agreement and the transactions contemplated
by this Agreement. AIP shall use its reasonable
best efforts to hold the DF Shareholders Meeting
as soon as practicable after the date hereof.
ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION
Section 6.1 Conditions Precedent of AFG. The
obligation of AFG to consummate the
Reorganization is subject to the satisfaction,
at or prior to the Closing Date, of all of the
following conditions, any one or more of which
may be waived in writing by AFG.
(a) The representations and warranties of AIP on behalf
of Dollar Fund set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date
with the same effect as though all such representations and warranties had been
made as of the Closing Date.
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<PAGE> 64
(b) AIP shall have complied with and satisfied in all
material respects all agreements and conditions set forth herein on its part to
be performed or satisfied at or prior to the Closing Date.
(c) AFG shall have received at the Closing Date (i) a
certificate, dated as of the Closing Date, from an officer of AIP on behalf of
AIP, in such individual's capacity as an officer of AIP and not as an
individual, to the effect that the conditions specified in Section 6.1(a) and
(b) have been satisfied and (ii) a certificate, dated as of the Closing Date,
from the Secretary or Assistant Secretary of AIP certifying as to the accuracy
and completeness of the attached Agreement and Declaration of Trust and by-laws
of AIP, and resolutions, consents and authorizations of or regarding AIP with
respect to the execution and delivery of this Agreement and the transactions
contemplated hereby.
(d) AFG shall have received the signed opinion of
Kirkpatrick & Lockhart LLP, counsel to AIP, or other counsel reasonably
acceptable to AFG, in form and substance reasonably acceptable to counsel for
AFG, as to the matters set forth in Schedule 6.1(d).
Section 6.2 Mutual Conditions. The obligations
of AIP and AFG to consummate the Reorganization
are subject to the satisfaction, at or prior to
the Closing Date, of all of the following
further conditions, any one or more may be
waived in writing by AIP and AFG, but only if
and to the extent that such waiver is mutual.
(a) All filings required to be made prior to the
Closing Date with, and all consents, approvals, permits and authorizations
required to be obtained on or prior to the Closing Date from Governmental
Authorities, in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein by AIP and AFG
shall have been made or obtained, as the case may be; provided, however, that
such consents, approvals, permits and authorizations may be subject to
conditions that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(b) This Agreement, the Reorganization and related
corporate matters shall have been approved and adopted at the DF Shareholders
Meeting by the shareholders of Dollar Fund on the record date by the Required
DF Shareholder Vote.
(c) The assets of Dollar Fund to be acquired by the
Money Market Portfolio shall constitute at least 90% of the fair market value
of the net assets and at least 70% of the fair market value of the gross assets
held by Dollar Fund immediately prior to the Reorganization. For purposes of
this Section 6.2(c), assets used by Dollar Fund to pay the expenses it incurs
in connection with this Agreement and the Reorganization and to effect all
shareholder redemptions and distributions (other than regular, normal dividends
and regular, normal redemptions pursuant to the Investment Company Act, and not
in excess of the requirements of Section 852 of the Code, occurring in the
ordinary course of Dollar Fund's business as an open-end diversified management
investment company) after the date of this Agreement shall be included as
assets of Dollar Fund held immediately prior to the Reorganization.
(d) No temporary restraining order, preliminary or
permanent injunction or other order issued by any Governmental Authority
preventing the consummation of the Reorganization on the Closing
23
<PAGE> 65
Date shall be in effect; provided, however, that the party or parties invoking
this condition shall use reasonable efforts to have any such order or
injunction vacated.
(e) The Registration Statement on Form N-14 filed by
AFG with respect to the Money Market Portfolio Cash Reserve Shares and the
Money Market Portfolio Class B Shares to be issued to DF Shareholders in
connection with the Reorganization shall have become effective under the
Securities Act and no stop order suspending the effectiveness thereof shall
have been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the Securities Act.
(f) AIP and AFG shall have received on or before the
Closing Date an opinion of Ballard Spahr Andrews & Ingersoll, LLP in form,
scope and substance satisfactory to AIP and AFG, set forth on Schedule 6.2(f).
(g) The dividend or dividends described in the last
sentence of Section 3.14(a) shall have been declared.
Section 6.3 Conditions Precedent of AIP. The
obligation of AIP to consummate the
Reorganization is subject to the satisfaction,
at or prior to the Closing Date, of all of the
following conditions, any one or more of which
may be waived in writing by AIP.
(a) The representations and warranties of AFG on behalf
of the Money Market Portfolio set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date with the same effect as though all such representations and
warranties had been made as of the Closing Date.
(b) AFG shall have complied with and satisfied in all
material respects all agreements and conditions set forth herein on its part to
be performed or satisfied at or prior to the Closing Date.
(c) AIP shall have received on the Closing Date (i) a
certificate, dated as of the Closing Date, from an officer of AFG on behalf of
AFG, in such individual's capacity as an officer of AFG and not as an
individual, to the effect that the conditions specified in Section 6.3(a) and
(b) have been satisfied and (ii) a certificate, dated as of the Closing Date,
from the Secretary or Assistant Secretary of AFG certifying as to the accuracy
and completeness of the attached Agreement and Declaration of Trust, as
amended, and by-laws, as amended, of AFG and resolutions, consents and
authorizations of or regarding AFG with respect to the execution and delivery
of this Agreement and the transactions contemplated hereby.
(d) AIP shall have received the signed opinion of
Ballard Spahr Andrews & Ingersoll, LLP, counsel to AFG, or other counsel
reasonably acceptable to AIP, in form and substance reasonably acceptable to
counsel for AIP, as to the matters set forth on Schedule 6.3(d).
24
<PAGE> 66
ARTICLE 7
TERMINATION OF AGREEMENT
Section 7.1 Termination.
(a) This Agreement may be terminated on or prior to the
Closing Date as follows:
(i) by mutual written consent of AIP and AFG;
or
(ii) at the election of AIP or AFG:
(A) if the Closing Date shall not be on
or before February 28, 1999, or such later date as
the parties hereto may agree upon, unless the
failure to consummate the Reorganization is the
result of a willful and material breach of this
Agreement by the party seeking to terminate this
Agreement;
(B) if, upon a vote at DF Shareholders
Meeting or any adjournment thereof, the Required DF
Shareholder Vote shall not have been obtained as
contemplated by Section 5.8; or
(C) if any Governmental Authority shall
have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or
otherwise prohibiting the Reorganization and such
order, decree, ruling or other action shall have
become final and nonappealable.
(b) The termination of this Agreement shall be
effectuated by the delivery by the terminating party to the other party of a
written notice of such termination.
Section 7.2 Survival After Termination. If this
Agreement is terminated in accordance with
Section 7.1 hereof and the transactions
contemplated hereby are not consummated, this
Agreement shall become void and of no further
force and effect, except for the provisions of
Section 5.3.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Survival of Representations and
Warranties. The representations, warranties and
covenants in this Agreement or in any
certificate or instrument delivered pursuant to
this Agreement shall survive the consummation of
the transactions contemplated hereunder for a
period of three (3) years following the Closing
Date.
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<PAGE> 67
Section 8.2 Law Governing. This Agreement
shall be construed and interpreted according to
the laws of the State of Delaware applicable to
contracts made and to be performed wholly within
such state.
Section 8.3 Binding Effect, Persons
Benefitting, No Assignment. This Agreement
shall inure to the benefit of and be binding
upon the parties hereto and the respective
successors and assigns of the parties and such
Persons. Nothing in this Agreement is intended
or shall be construed to confer upon any entity
or Person other than the parties hereto and
their respective successors and permitted
assigns any right, remedy or claim under or by
reason of this Agreement or any part hereof.
Without the prior written consent of the parties
hereto, this Agreement may not be assigned by
any of the parties hereto.
Section 8.4 Obligations of AFG and AIP.
(a) AIP and AFG hereby acknowledge and agree that the
Money Market Portfolio is a separate investment portfolio of AFG, that AFG is
executing this Agreement on behalf of the Money Market Portfolio, and that any
amounts payable by AFG under or in connection with this Agreement shall be
payable solely from the revenues and assets of the Money Market Portfolio. AIP
further acknowledges and agrees that this Agreement has been executed by a duly
authorized officer of AFG in his or her capacity as an officer of AFG intending
to bind AFG as provided herein, and that no officer, trustee or shareholder of
AFG shall be personally liable for the liabilities or obligations of AFG
incurred hereunder.
(b) AIP and AFG hereby acknowledge and agree that
Dollar Fund is a separate investment portfolio of AIP, that AIP is executing
this Agreement on behalf of Dollar Fund and that any amounts payable by AIP
under or in connection with this Agreement shall be payable solely from the
revenues and assets of Dollar Fund. AFG further acknowledges and agrees that
this Agreement has been executed by a duly authorized officer of AIP in his or
her capacity as an officer of AIP intending to bind AIP as provided herein, and
that no officer, trustee or shareholder of AIP shall be personally liable for
the liabilities of AIP incurred hereunder.
Section 8.5 Amendments. This Agreement may not
be amended, altered or modified except by a
written instrument executed by AIP and AFG.
Section 8.6 Enforcement. The parties agree
irreparable damage would occur in the event that
any of the provisions of this Agreement were not
performed in accordance with their specific
terms or were otherwise breached. It is
accordingly agreed that the parties shall be
entitled to an injunction or injunctions to
prevent breaches of this Agreement and to
enforce specifically the terms and provisions of
this Agreement in any court of the United States
or any state having jurisdiction, in addition to
any other remedy to which they are entitled at
law or in equity.
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<PAGE> 68
Section 8.7 Interpretation. When a reference
is made in this Agreement to a Section or
Schedule, such reference shall be to a Section
of, or a Schedule to, this Agreement unless
otherwise indicated. The table of contents and
headings contained in this Agreement are for
reference purposes only and shall not affect in
any way the meaning or interpretation of this
Agreement. Whenever the words "include",
"includes" or "including" are used in this
Agreement, they shall be deemed to be followed
by the words "without limitation". Each
representation and warranty contained in Article
3 or 4 that relates to a general category of a
subject matter shall be deemed superseded by a
specific representation and warranty relating to
a subcategory thereof to the extent of such
specific representation or warranty.
Section 8.8 Counterparts. This Agreement may
be executed in counterparts, each of which shall
be deemed an original and each of which shall
constitute one and the same instrument.
Section 8.9 Entire Agreement; Schedules. This
Agreement, including the Schedules, certificates
and lists referred to herein, and any documents
executed by the parties simultaneously herewith
or pursuant thereto, constitute the entire
understanding and agreement of the parties
hereto with respect to the subject matter hereof
and supersedes all other prior agreements and
understandings, written or oral, between the
parties with respect to such subject matter.
Section 8.10 Notices. All notices, requests,
demands and other communications hereunder shall
be in writing and shall be deemed to have been
duly given when delivered by hand or by
overnight courier, two days after being sent by
registered mail, return receipt requested, or
when sent by telecopier (with receipt
confirmed), provided, in the case of a
telecopied notice, a copy is also sent by
registered mail, return receipt requested, or by
courier, addressed as follows (or to such other
address as a party may designate by notice to
the other):
(a) If to AFG:
AIM Funds Group
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
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<PAGE> 69
with a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
Attn: William H. Rheiner, Esq.
Fax: (215) 864-8999
(b) If to AIP:
AIM Investment Portfolios
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
with a copy to:
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, DC 20036-1800
Attn: Arthur J. Brown, Esq.
Fax: (202) 778-9100
Section 8.11 Representation by AIM Advisors.
In its capacity as investment adviser to AFG,
AIM Advisors represent to AIP that to the best
of its knowledge the representations and
warranties of AFG and Money Market contained in
this Agreement are true and correct as of the
date of this Agreement. For purposes of this
Section 8.11, the best knowledge standard shall
be deemed to mean that the officers of AIM
Advisors who have substantive responsibility for
the provision of investment advisory services to
AFG and Money Market do not have actual
knowledge to the contrary.
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<PAGE> 70
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
AIM INVESTMENT PORTFOLIOS, acting
on behalf of AIM Dollar Fund
By:
-------------------------------
AIM FUNDS GROUP, acting
on behalf of AIM Money Market Fund
By:
-------------------------------
<PAGE> 71
Schedule 6.1(d)
Opinion of Counsel to AIP
1. AIP is duly organized and validly existing as a business
trust under the Delaware Business Trust Act.
2. AIP is an open-end, management investment company registered
under the Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by
AIP have been duly authorized and approved by all requisite
trust action on the part of AIP. The Agreement has been duly
executed and delivered by AIP and constitutes the valid and
binding obligation of Dollar Fund.
4. The DF Shares outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are
non-assessable.
5. AIP is not required to submit any notice, report or other
filing with or obtain any authorization, consent or approval
from any governmental authority or self regulatory
organization prior to the consummation of the transactions
contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer
who is the current primary contact for AIP or who has devoted substantive
attention on behalf of AIP during the preceding twelve months and who is still
currently employed by or is currently a member of this firm, no litigation or
governmental proceeding is pending or threatened in writing against Dollar Fund
(i) with respect to the Agreement or (ii) which involves in excess of $500,000
in damages.
<PAGE> 72
Schedule 6.2(f)
Tax Opinions
(i) The transfer of the assets of Dollar Fund to the
Money Market Portfolio in exchange for the Portfolio Shares distributed
directly to the DF Shareholders, as provided in the Agreement, will constitute
a "reorganization" within the meaning of Section 368(a) of the Code and that
Dollar Fund and AFG will each be a "party to a reorganization" within the
meaning of 368(b) of the Code.
(ii) In accordance with Section 361(a) and Section
361(c)(1) of the Code, no gain or loss will be recognized by Dollar Fund on the
transfer of its assets to the Money Market Portfolio solely in exchange for
Money Market Portfolio Cash Reserve Shares and Money Market Portfolio Class B
Shares or on the distribution of such Money Market Cash Reserve Shares and
Money Market Class B Shares to the DF Shareholders.
(iii) In accordance with Section 1032 of the Code, no gain
or loss will be recognized by the Money Market Portfolio upon the receipt of
assets of Dollar Fund in exchange for Money Market Portfolio Cash Reserve
Shares and Money Market Class B Shares issued directly to the DF Shareholders.
(iv) In accordance with Section 354(a)(1) of the Code, no
gain or loss will be recognized by DF Shareholders on the receipt of Money
Market Portfolio Cash Reserve Shares and Money Market Class B Shares in
exchange for their DF Shares.
(v) In accordance with Section 362(b) of the Code, the
basis to the Money Market Portfolio of the assets of Dollar Fund transferred to
it will be the same as the basis of such assets in the hands of Dollar Fund
immediately prior to the Reorganization.
(vi) In accordance with Section 358(a) of the Code, a DF
Shareholder's basis for Money Market Portfolio Cash Reserve Shares and Money
Market Class B Shares received by such DF Shareholder will be the same as his
basis for DF Shares exchanged therefor.
(vii) In accordance with Section 1223(1) of the Code, a DF
Shareholder's holding period for Money Market Portfolio Cash Reserve Shares and
Money Market Class B Shares will be determined by including said DF
Shareholder's holding period for the DF Shares exchanged therefor, provided
that DF Shareholder held such DF Shares as a capital asset.
(viii) In accordance with Section 1223(2) of the Code, the
holding period with respect to the assets of Dollar Fund transferred to the
Money Market Portfolio in the Reorganization will include the holding period
for such assets in the hands of Dollar Fund.
<PAGE> 73
Schedule 6.3(d)
Opinion of Counsel to AFG
1. AFG is duly organized and validly existing as a business trust
under the Delaware Business Trust Act.
2. AFG is an open-end, management investment company registered
under the Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by
AFG have been duly authorized and approved by all requisite
trust action on the part of AFG. The Agreement has been duly
executed and delivered by AFG and constitutes the valid and
binding obligation of the Money Market Portfolio.
4. The Money Market Portfolio Cash Reserve Shares outstanding on
the date hereof have been duly authorized and validly issued,
are fully paid and are non-assessable.
5. AFG is not required to submit any notice, report or other
filing with or obtain any authorization, consent or approval
from any governmental authority or self regulatory
organization prior to the consummation of the transactions
contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer
who is the current primary contact for AFG or who has devoted substantive
attention on behalf of AFG during the preceding twelve months and who is still
currently employed by or is currently a member of this firm, no litigation or
governmental proceeding is pending or threatened in writing against the Money
Market Portfolio (i) with respect to the Agreement or (ii) which involves in
excess of $500,000 in damages.
<PAGE> 74
APPENDIX II
[APPLICATION INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
AIM BALANCED FUND
AIM GLOBAL UTILITIES FUND
AIM HIGH YIELD FUND
AIM INCOME FUND
AIM INTERMEDIATE GOVERNMENT FUND
AIM MONEY MARKET FUND
AIM MUNICIPAL BOND FUND
AIM SELECT GROWTH FUND
AIM VALUE FUND
(SERIES PORTFOLIOS OF AIM FUNDS GROUP)
PROSPECTUS
MAY 1, 1998
AS REVISED JULY 1, 1998
This Prospectus contains information about the nine mutual funds listed above
(the "Funds") which are separate series portfolios of AIM Funds Group (the
"Trust"), a Delaware business trust. The investment objectives of the Funds are
listed on the inside cover page.
This Prospectus sets forth basic information about the Funds that prospective
investors should know before investing. It should be read and retained for
future reference. A Statement of Additional Information, dated May 1, 1998, 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. 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. Additional information
about the Funds may also be obtained on the Web at http://www.aimfunds.com.
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. 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE> 75
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 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 SELECT 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 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 over 50 investment
company portfolios encompassing a broad range of investment objectives. 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 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
2
<PAGE> 76
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 declare dividends from net investment income on a daily basis and pay
such dividends on a monthly basis. AIM BALANCED FUND declares and pays dividends
from net investment income on a quarterly basis. AIM SELECT GROWTH FUND and AIM
VALUE FUND 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." All Funds
other than AIM INTERMEDIATE GOVERNMENT FUND and AIM MUNICIPAL BOND FUND may
invest in foreign securities. See "Risk Factors Regarding Foreign 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." 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, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos and La Familia AIM de Fondos and Design are registered
service marks and Invest With Discipline and AIM Bank Connection are service
mark of A I M Management Group Inc.
3
<PAGE> 77
THE FUNDS
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor in the Funds understand
the various costs that an investor will bear, both directly and indirectly. The
fees and expenses set forth in the table for Class A and Class B shares of the
Funds and the AIM Cash Reserve Shares of AIM MONEY MARKET FUND are based on the
expenses for the 1997 fiscal year. The fees and expenses set forth in the table
for Class C shares are based on the estimated expenses for the current fiscal
year. 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
BALANCED UTILITIES HIGH YIELD INCOME
FUND FUND FUND FUND
--------------------- --------------------- --------------------- ---------------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B C A B C A B C A B C
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <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
offering price)...... 4.75% None None 5.50% None None 4.75% None None 4.75% None None
Maximum sales load on
reinvested
dividends............ 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* 5.00% 1.00% None* 5.00% 1.00% None* 5.00% 1.00% None* 5.00% 1.00%
Redemption fee......... 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
Annual Fund Operating
Expenses
(as a % of average net
assets)
Management fees........ 0.54% 0.54% 0.54% 0.58% 0.58% 0.58% 0.48% 0.48% 0.48% 0.45% 0.45% 0.45%
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%
Interest expense....... -- -- -- -- -- -- -- -- -- -- -- --
All other expenses..... 0.19% 0.25% 0.25% 0.30% 0.33% 0.33% 0.17% 0.17% 0.17% 0.24% 0.24% 0.24%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total fund
operating
expenses....... 0.98% 1.79% 1.79% 1.13% 1.91% 1.91% 0.90% 1.65% 1.65% 0.94% 1.69% 1.69%
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
AIM
INTERMEDIATE
GOVERNMENT
FUND
---------------------
CLASS CLASS CLASS
A B C
----- ----- -----
<S> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum sales load
imposed on purchase
of shares (as a % of
offering price)...... 4.75% None None
Maximum sales load on
reinvested
dividends............ None None None
Deferred sales load (as
a % of
original purchase
price or
redemption proceeds,
whichever is
lower)............... None* 5.00% 1.00%
Redemption fee......... None None None
Exchange fee........... None None None
Annual Fund Operating
Expenses
(as a % of average net
assets)
Management fees........ 0.48% 0.48% 0.48%
Rule 12b-1 distribution
plan payments........ 0.25% 1.00% 1.00%
Interest expense....... 0.11% 0.11% 0.11%
All other expenses..... 0.27% 0.28% 0.28%
---- ---- ----
Total fund
operating
expenses....... 1.11% 1.87% 1.87%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
AIM
MONEY AIM
MARKET FUND AIM SELECT AIM
------------------------------- MUNICIPAL GROWTH VALUE
AIM BOND FUND FUND FUND
CASH --------------------- --------------------- -----
CLASS CLASS CLASS RESERVE CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B C SHARES A B C 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
offering price)................... 5.50% None None None 4.75% None None 5.50% 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* 5.00% 1.00% None None* 5.00% 1.00% None* 5.00% 1.00% None*
Redemption fee...................... 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).......................... 0.55% 0.55% 0.55% 0.55% 0.46% 0.46% 0.46% 0.67% 0.67% 0.67% 0.61%(1)
Rule 12b-1 distribution plan
payments.......................... 0.25% 1.00% 1.00% 0.25% 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25%
All other expenses.................. 0.25% 0.25% 0.25% 0.25% 0.19% 0.20% 0.20% 0.21% 0.32% 0.32% 0.18%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total fund operating
expenses.................... 1.05% 1.80% 1.80% 1.05% 0.90% 1.66% 1.66% 1.13% 1.99% 1.99% 1.04%
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
<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
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)............................ 5.00% 1.00%
Redemption fee...................... 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.................. 0.24% 0.24%
---- ----
Total fund operating
expenses.................... 1.85% 1.85%
==== ====
</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> 78
- --------------------------------------------------------------------------------
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
AIM GLOBAL HIGH AIM INTERMEDIATE MONEY MUNICIPAL SELECT AIM
BALANCED UTILITIES YIELD INCOME GOVERNMENT MARKET BOND GROWTH VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ---- ------ ------------ ------ --------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year............................... $ 57 $ 66 $ 56 $ 57 $ 58 $ 65 $ 56 $ 66 $ 65
3 years.............................. 77 89 75 76 87 87 75 89 86
5 years.............................. 99 114 95 97 106 110 95 114 109
10 years............................. 162 185 153 157 176 176 153 185 175
</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
AIM GLOBAL HIGH AIM INTERMEDIATE MONEY MUNICIPAL SELECT AIM
BALANCED UTILITIES YIELD INCOME GOVERNMENT MARKET BOND GROWTH VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ---- ------ ------------ ------ --------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year............................... $ 68 $ 69 $ 67 $ 67 $ 69 $ 68 $ 67 $ 70 $ 69
3 years.............................. 86 90 82 83 89 87 82 92 88
5 years.............................. 117 123 110 112 121 117 110 127 120
10 years*............................ 189 203 175 180 199 192 176 209 196
</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
AIM GLOBAL HIGH AIM INTERMEDIATE MONEY MUNICIPAL SELECT AIM
BALANCED UTILITIES YIELD INCOME GOVERNMENT MARKET BOND GROWTH VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ---- ------ ------------ ------ --------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year............................... $ 18 $ 19 $ 17 $ 17 $ 19 $ 18 $ 17 $ 20 $ 19
3 years.............................. 56 60 52 53 59 57 52 62 58
5 years.............................. 97 103 90 92 101 97 90 107 100
10 years*............................ 189 203 175 180 199 192 176 209 196
</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 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
AIM GLOBAL HIGH AIM INTERMEDIATE MONEY MUNICIPAL SELECT AIM
BALANCED UTILITIES YIELD INCOME GOVERNMENT MARKET BOND GROWTH VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ---- ------ ------------ ------ --------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year............................... $ 28 $ 29 $ 27 $ 27 $ 29 $ 28 $ 27 $ 30 $ 29
3 years.............................. 56 60 52 53 59 57 52 62 58
</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
AIM GLOBAL HIGH AIM INTERMEDIATE MONEY MUNICIPAL SELECT AIM
BALANCED UTILITIES YIELD INCOME GOVERNMENT MARKET BOND GROWTH VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ---- ------ ------------ ------ --------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year............................... $ 18 $ 19 $ 17 $ 17 $ 19 $ 18 $ 17 $ 20 $ 19
3 years.............................. 56 60 52 53 59 57 52 62 58
</TABLE>
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..................................................... 33
5 years..................................................... 58
10 years.................................................... 128
</TABLE>
As a result of 12b-1 distribution plan payments, a long-term shareholder of
the Funds may pay more than the economic equivalent of the maximum front-end
sales charges permitted by rules of the National Association of Securities
Dealers, Inc. Given the maximum front-end and contingent deferred sales charges
and the 12b-1 distribution plan payments applicable to Class A shares, 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.
5
<PAGE> 79
- --------------------------------------------------------------------------------
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 HIGH YIELD FUND, AIM
INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM MUNICIPAL BOND FUND, AIM
SELECT GROWTH FUND and AIM VALUE FUND for (i) all periods presented for AIM
BALANCED FUND and (ii) the years ended December 31, 1997, 1996, 1995, 1994 and
1993 for the Funds other than AIM BALANCED FUND have been audited by KPMG Peat
Marwick LLP, independent auditors, whose unqualified reports on the Funds'
financial statements and related notes appear in the Statement of Additional
Information. The per share data, ratios and supplemental data for the Class A
shares of AIM GLOBAL UTILITIES FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH 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.
(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
---------------------------------------------- DECEMBER 31,
1997 1996 1995 1994 1993
-------- -------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 21.84 $ 19.22 $ 14.62 $ 16.10 $ 15.97
Income from investment operations:
Net investment income................ 0.60 0.66 0.49 0.44 0.10
Net gains or losses on securities
(both realized and unrealized)....... 4.66 2.99 4.57 (1.31) 0.18
-------- -------- ------- ------- --------
Total from investment operations..... 5.26 3.65 5.06 (0.87) 0.28
-------- -------- ------- ------- --------
Less distributions:
Dividends from net investment
income............................. (0.55) (0.55) (0.46) (0.39) (0.15)
Distributions from net realized
capital gains...................... (0.77) (0.48) -- (0.22) --
-------- -------- ------- ------- --------
Total distributions.................. (1.32) (1.03) (0.46) (0.61) (0.15)
-------- -------- ------- ------- --------
Net asset value, end of period........ $ 25.78 $ 21.84 $ 19.22 $ 14.62 $ 16.10
======== ======== ======= ======= ========
Total return(a)....................... 24.41% 19.25% 34.97% (5.44)% 1.76%
======== ======== ======= ======= ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................... $683,633 $334,189 $92,241 $37,572 $ 23,520
======== ======== ======= ======= ========
Ratio of expenses to average net
assets............................. 0.98%(b)(c) 1.15% 1.43%(d) 1.25%(e) 2.17%(f)
======== ======== ======= ======= ========
Ratio of net investment income to
average net assets................... 2.48%(b) 2.97% 2.81%(d) 3.07%(e) 1.81%(f)
======== ======== ======= ======= ========
Portfolio turnover rate.............. 66% 72% 77% 76% 233%
======== ======== ======= ======= ========
Average broker commission rate
paid(g)............................ $ 0.0570 $ 0.0558 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)........................ 21,792 9,778 3,173 2,061 1,305
Average amount of debt per share
during the period.................. -- -- -- -- --
<CAPTION>
YEAR ENDED AUGUST 31,
---------------------------------------------------
1993 1992 1991 1990 1989
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 12.77 $ 12.04 $ 9.73 $ 10.67 $ 9.08
Income from investment operations:
Net investment income................ 0.32 0.29 0.28 0.32 0.39
Net gains or losses on securities
(both realized and unrealized)....... 3.18 0.74 2.33 (0.91) 1.63
------- -------- -------- -------- --------
Total from investment operations..... 3.50 1.03 2.61 (0.59) 2.02
------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................. (0.30) (0.30) (0.30) (0.35) (0.43)
Distributions from net realized
capital gains...................... -- -- -- -- --
------- -------- -------- -------- --------
Total distributions.................. (0.30) (0.30) (0.30) (0.35) (0.43)
------- -------- -------- -------- --------
Net asset value, end of period........ $ 15.97 $ 12.77 $ 12.04 $ 9.73 $ 10.67
======= ======== ======== ======== ========
Total return(a)....................... 27.75% 8.66% 27.41% (5.67)% 22.96%
======= ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................... $19,497 $ 11,796 $ 11,750 $ 10,965 $ 14,405
======= ======== ======== ======== ========
Ratio of expenses to average net
assets............................. 2.07% 2.12% 2.39% 2.15% 1.94%
======= ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 2.23% 2.32% 2.74% 3.18% 3.99%
======= ======== ======== ======== ========
Portfolio turnover rate.............. 154% 166% 208% 307% 149%
======= ======== ======== ======== ========
Average broker commission rate
paid(g)............................ N/A N/A 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)........................ 1,046 939 1,051 1,238 1,589
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 $530,358,031.
(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) The average commission rate paid is the total brokerage commission paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased or sold, which is required to be
disclosed for fiscal year beginning September 1, 1995 and thereafter.
(h) Averages computed on a daily basis.
+ 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 HIGH YIELD FUND, AIM
INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM MUNICIPAL BOND FUND, AIM
SELECT GROWTH 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.
6
<PAGE> 80
AIM GLOBAL UTILITIES FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(a)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 16.01 $ 14.59 $ 11.85 $ 14.09 $ 13.31 $ 13.75
Income from investment
operations:
Net investment income....... 0.47 0.55 0.55 0.59 0.60 0.67
Net gains or losses on
securities (both realized
and unrealized)........... 3.26 1.43 2.71 (2.20) 1.02 0.36
-------- -------- -------- -------- -------- --------
Total from investment
operations................ 3.73 1.98 3.26 (1.61) 1.62 1.03
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income......... (0.47) (0.56) (0.52) (0.60) (0.61) (0.68)
Distributions from net
realized capital gains.... (0.01) -- -- -- (0.23) (0.79)
Returns of capital.......... -- -- -- (0.03) -- --
-------- -------- -------- -------- -------- --------
Total distributions......... (0.48) (0.56) (0.52) (0.63) (0.84) (1.47)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period...................... $ 19.26 $ 16.01 $ 14.59 $ 11.85 $ 14.09 $ 13.31
======== ======== ======== ======== ======== ========
Total return(b).............. 23.70% 13.88% 28.07% (11.57)% 12.32% 7.92%
======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)............ $179,456 $164,001 $170,624 $150,515 $200,016 $111,771
======== ======== ======== ======== ======== ========
Ratio of expenses to average
net assets................ 1.13%(c)(d) 1.17% 1.21% 1.18% 1.16% 1.17%
======== ======== ======== ======== ======== ========
Ratio of net investment
income to average net
assets.................... 2.79%(c) 3.62% 4.20% 4.67% 4.21% 4.96%
======== ======== ======== ======== ======== ========
Portfolio turnover rate..... 26% 48% 88% 101% 76% 148%
======== ======== ======== ======== ======== ========
Average broker commission
rate paid(h).............. $ 0.0465 $ 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(b).............. 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%(e) 1.05%(e) 1.22%(e)(f)
======== ======== ======== =======
Ratio of net investment
income to average net
assets.................... 5.36% 5.21%(g) 6.13%(g) 7.63%(f)(g)
======== ======== ======== =======
Portfolio turnover rate..... 169% 123% 115% 87%
======== ======== ======== =======
Average broker commission
rate paid(h).............. N/A 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 are not annualized for periods
of less than one year.
(c) Ratios are based on average daily net assets of $164,764,424.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been 1.12%.
(e) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22%, 1.11% and 1.69% (annualized) for 1990-1988, respectively.
(f) Annualized.
(g) 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.
(h) The average broker commission rate paid is the total brokerage commission
paid on applicable purchases and sales of securities for the period divided
by the total number of related shares purchased or sold, which is required
to be disclosed for fiscal year beginning September 1, 1995 and thereafter.
* Commencement of operations.
7
<PAGE> 81
AIM HIGH YIELD FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(a) 1991
---------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 9.88 $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07
Income from investment operations:
Net investment income.................. 0.90 0.92 0.93 0.96 0.97 1.04 1.02
Net gains or losses on securities (both
realized and unrealized)............. 0.28 0.46 0.52 (1.12) 0.69 0.55 1.81
---------- ---------- -------- -------- -------- -------- --------
Total from investment operations....... 1.18 1.38 1.45 (0.16) 1.66 1.59 2.83
---------- ---------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.90) (0.93) (0.95) (0.96) (1.01) (1.05) (1.04)
---------- ---------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 10.16 $ 9.88 $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86
========== ========== ======== ======== ======== ======== ========
Total return(b)......................... 12.52% 15.44% 16.86% (1.67)% 18.40% 18.60% 42.18%
========== ========== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $1,786,352 $1,272,974 $886,106 $578,959 $550,760 $324,518 $259,677
========== ========== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 0.90%(c)(d) 0.97% 0.96% 1.00% 1.12% 1.15% 1.22%
========== ========== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 9.08%(c) 9.67% 9.95% 10.07% 9.82% 11.00% 12.67%
========== ========== ======== ======== ======== ======== ========
Portfolio turnover rate................ 80% 77% 61% 53% 53% 56% 61%
========== ========== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1990 1989 1988
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 8.94 $ 10.01 $ 9.67
Income from investment operations:
Net investment income.................. 1.09 1.21 1.18
Net gains or losses on securities (both
realized and unrealized)............. (1.84) (1.07) 0.34
-------- -------- --------
Total from investment operations....... (0.75) 0.14 1.52
-------- -------- --------
Less distributions:
Dividends from net investment income... (1.12) (1.21) (1.18)
-------- -------- --------
Net asset value, end of period.......... $ 7.07 $ 8.94 $ 10.01
======== ======== ========
Total return(b)......................... (9.03)% 1.18% 16.41%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $204,932 $261,920 $274,631
======== ======== ========
Ratio of expenses to average net
assets............................... 1.21%(e) 0.99% 0.96%(e)
======== ======== ========
Ratio of net investment income to
average net assets................... 13.59%(f) 12.40% 11.84%(f)
======== ======== ========
Portfolio turnover rate................ 27% 36% 76%
======== ======== ========
</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 $1,479,737,639.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been 0.89%.
(e) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22% and 1.00% for 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 1990 and 1988, respectively.
AIM INCOME FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(a) 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 8.24 $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41
Income from investment operations:
Net investment income.................. 0.55 0.57 0.58 0.58 0.60 0.60 0.61
Net gains or losses on securities (both
realized and unrealized)............. 0.39 0.09 1.00 (1.22) 0.61 (0.03) 0.66
-------- -------- -------- -------- -------- -------- --------
Total from investment operations....... 0.94 0.66 1.58 (0.64) 1.21 0.57 1.27
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.52) (0.59) (0.61) (0.49) (0.60) (0.61) (0.61)
Distributions from net realized capital
gains................................ (0.09) -- -- (0.01) (0.19) -- --
Returns of capital..................... -- -- -- (0.11) -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions.................... (0.61) (0.59) (0.61) (0.61) (0.79) (0.61) (0.61)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 8.57 $ 8.24 $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07
======== ======== ======== ======== ======== ======== ========
Total return(b)......................... 11.92% 8.58% 22.77% (7.65)% 15.38% 7.42% 18.00%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $340,608 $286,183 $251,280 $201,677 $244,168 $218,848 $231,798
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 0.94%(c)(d) 0.98% 0.98% 0.98% 0.98% 0.99%(e) 1.00%(e)
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 6.55%(c) 7.13% 7.52% 7.53% 7.01% 7.54%(e) 7.97%(e)
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate................ 54% 80% 227% 185% 99% 82% 67%
======== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1990 1989 1988
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 7.80 $ 7.53 $ 7.55
Income from investment operations:
Net investment income.................. 0.65 0.66 0.68
Net gains or losses on securities (both
realized and unrealized)............. (0.39) 0.32 (0.02)
-------- -------- --------
Total from investment operations....... 0.26 0.98 0.66
-------- -------- --------
Less distributions:
Dividends from net investment income... (0.65) (0.71) (0.68)
Distributions from net realized capital
gains................................ -- -- --
Returns of capital..................... -- -- --
-------- -------- --------
Total distributions.................... (0.65) (0.71) (0.68)
-------- -------- --------
Net asset value, end of period.......... $ 7.41 $ 7.80 $ 7.53
======== ======== ========
Total return(b)......................... 3.65% 13.56% 9.01%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $215,987 $229,222 $218,946
======== ======== ========
Ratio of expenses to average net
assets............................... 1.00% 0.96% 0.95%
======== ======== ========
Ratio of net investment income to
average net assets................... 8.73% 8.56% 8.81%
======== ======== ========
Portfolio turnover rate................ 106% 222% 361%
======== ======== ========
</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 $299,824,848.
(d) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average daily net assets would have been the same.
(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 and 1991, respectively. Ratios
of net investment income to average net assets prior to waiver of advisory
fees and expense reimbursements were 7.53% and 7.94% for 1992 and 1991,
respectively.
8
<PAGE> 82
AIM INTERMEDIATE GOVERNMENT FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(a) 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 9.28 $ 9.70 $ 8.99 $ 10.05 $ 10.19 $ 10.34 $ 9.95
Income from investment operations:
Net investment income................... 0.63 0.63 0.69 0.68 0.74 0.77 0.82
Net gains or losses on securities (both
realized and unrealized).............. 0.18 (0.42) 0.73 (1.02) (0.04) (0.15) 0.41
-------- -------- -------- -------- -------- -------- --------
Total from investment operations........ 0.81 0.21 1.42 (0.34) 0.70 0.62 1.23
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income.... (0.61) (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...................... (0.02) (0.04) (0.04) (0.10) -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions..................... (0.63) (0.63) (0.71) (0.72) (0.84) (0.77) (0.84)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period........... $ 9.46 $ 9.28 $ 9.70 $ 8.99 $ 10.05 $ 10.19 $ 10.34
======== ======== ======== ======== ======== ======== ========
Total return(b).......................... 9.07% 2.35% 16.28% (3.44)% 7.07% 6.26% 12.98%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)........................ $167,427 $174,344 $176,318 $158,341 $139,586 $123,484 $101,409
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets
(exclusive of interest expense)(c).... 1.00%(d)(e) 1.00% 1.08% 1.04% 1.00% 0.98% 1.00%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets(f)................. 6.77%(d) 6.76% 7.36% 7.34% 7.08% 7.53% 8.15%
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate................. 99% 134% 140% 109% 110% 42% 26%
======== ======== ======== ======== ======== ======== ========
Borrowings for the period:
-------- -------- -------- -------- -------- -------- --------
Amount of debt outstanding at end of
period (000s omitted)................. $ -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Average amount of debt outstanding
during the period (000s omitted)(g)... $ 4,433 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Average number of shares outstanding
during the period (000s omitted)(g)... 17,470 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Average amount of debt per share during
the period............................ $ 0.2537 -- -- -- -- -- --
======== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1990 1989 1988
-------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period..... $ 9.91 $ 9.70 $ 9.92
Income from investment operations:
Net investment income................... 0.87 0.90 0.89
Net gains or losses on securities (both
realized and unrealized).............. 0.01 0.15 (0.27)
-------- ------- -------
Total from investment operations........ 0.88 1.05 0.62
-------- ------- -------
Less distributions:
Dividends from net investment income.... (0.84) (0.84) (0.84)
Distributions from net realized capital
gains................................. -- -- --
Returns of capital...................... -- -- --
-------- ------- -------
Total distributions..................... (0.84) (0.84) (0.84)
-------- ------- -------
Net asset value, end of period........... $ 9.95 $ 9.91 $ 9.70
======== ======= =======
Total return(b).......................... 9.39% 11.28% 6.43%
======== ======= =======
Ratios/supplemental data:
Net assets, end of period
(000s omitted)........................ $ 61,463 $57,077 $48,372
======== ======= =======
Ratio of expenses to average net assets
(exclusive of interest expense)(c).... 1.00% 1.00% 1.00%
======== ======= =======
Ratio of net investment income to
average net assets(f)................. 8.85% 9.10% 9.11%
======== ======= =======
Portfolio turnover rate................. 16% 15% 15%
======== ======= =======
Borrowings for the period:
Amount of debt outstanding at end of
-------- ------- -------
period (000s omitted)................. -- -- --
-------- ------- -------
Average amount of debt outstanding
during the period (000s omitted)(g)... -- -- --
-------- ------- -------
Average number of shares outstanding
during the period (000s omitted)(g)... -- -- --
-------- ------- -------
Average amount of debt per share during
the period............................ -- -- --
======== ======= =======
</TABLE>
- ---------------
(a) The Fund changed investment advisors on June 30, 1992.
(b) Total returns do not deduct sales charges.
(c) Ratios of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement were 1.05%, 1.04%, 1.04%, 1.10%, 1.13%, 1.08% and
1.08% for 1994-1988, respectively.
(d) Ratios are based on average net assets of $162,149,081.
(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 fee and expense reimbursement were 7.32%, 7.04%, 7.48%, 8.05%,
8.72%, 9.03% and 9.03% for 1994-1988, respectively.
(g) Averages computed on a daily basis.
9
<PAGE> 83
AIM MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(a) 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 8.19 $ 8.31 $ 7.78 $ 8.61 $ 8.27 $ 8.13 $ 7.66
Income from investment operations:
Net investment income.................. 0.42 0.43 0.43 0.46 0.48 0.51 0.52
Net gains or losses on securities (both
realized and unrealized)............. 0.16 (0.12) 0.56 (0.78) 0.46 0.21 0.46
-------- -------- -------- -------- -------- -------- --------
Total from investment operations....... 0.58 0.31 0.99 (0.32) 0.94 0.72 0.98
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.43) (0.43) (0.43) (0.45) (0.48) (0.51) (0.51)
Distributions from net realized capital
gains................................ -- -- -- (0.03) (0.11) (0.07) --
Returns of capital..................... -- -- (0.03) (0.03) (0.01) -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions.................... (0.43) (0.43) (0.46) (0.51) (0.60) (0.58) (0.51)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 8.34 $ 8.19 $ 8.31 $ 7.78 $ 8.61 $ 8.27 $ 8.13
======== ======== ======== ======== ======== ======== ========
Total return(b)......................... 7.27% 3.90% 13.05% (3.79)% 11.66% 9.10% 13.30%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $318,469 $278,812 $284,803 $257,456 $294,209 $271,205 $273,037
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 0.90%(c)(d) 0.80% 0.88% 0.89% 0.91% 0.90% 0.94%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 5.14%(c) 5.29% 5.26% 5.61% 5.65% 6.15% 6.58%
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate................ 24% 26% 36% 43% 24% 160% 289%
======== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1990 1989 1988
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 7.81 $ 7.64 $ 7.32
Income from investment operations:
Net investment income.................. 0.53 0.54 0.53
Net gains or losses on securities (both
realized and unrealized)............. (0.14) 0.18 0.34
-------- -------- --------
Total from investment operations....... 0.39 0.72 0.87
-------- -------- --------
Less distributions:
Dividends from net investment income... (0.53) (0.55) (0.55)
Distributions from net realized capital
gains................................ -- -- --
Returns of capital..................... (0.01) -- --
-------- -------- --------
Total distributions.................... (0.54) (0.55) (0.55)
-------- -------- --------
Net asset value, end of period.......... $ 7.66 $ 7.81 $ 7.64
======== ======== ========
Total return(b)......................... 5.27% 9.70% 12.33%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $258,194 $262,997 $243,480
======== ======== ========
Ratio of expenses to average net
assets............................... 0.91% 0.89% 0.87%
======== ======== ========
Ratio of net investment income to
average net assets................... 6.91% 6.97% 7.11%
======== ======== ========
Portfolio turnover rate................ 230% 305% 381%
======== ======== ========
</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 $293,030,139.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
AIM SELECT GROWTH FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(a) 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 14.78 $ 13.05 $ 10.32 $ 11.32 $ 12.28 $ 14.73 $ 12.35
Income from investment operations:
Net investment income................. 0.01(b) 0.07 0.02(b) -- -- 0.06 0.11
Net gains or losses on securities
(both realized and unrealized)...... 2.82 2.34 3.50 (0.57) 0.41 (0.04) 4.33
-------- -------- -------- -------- -------- -------- --------
Total from investment operations...... 2.83 2.41 3.52 (0.57) 0.41 0.02 4.44
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income.............................. (0.01) -- -- -- -- (0.06) (0.13)
Distributions from net realized
capital gains....................... (1.93) (0.68) (0.79) (0.43) (1.37) (2.41) (1.93)
-------- -------- -------- -------- -------- -------- --------
Total distributions................... (1.94) (0.68) (0.79) (0.43) (1.37) (2.47) (2.06)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period......... $ 15.67 $ 14.78 $ 13.05 $ 10.32 $ 11.32 $ 12.28 $ 14.73
======== ======== ======== ======== ======== ======== ========
Total return(c)........................ 19.54% 18.61% 34.31% (4.99)% 3.64% 0.19% 37.05%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $266,168 $227,882 $168,217 $123,271 $146,723 $168,395 $185,461
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets.............................. 1.13%(d)(e) 1.18% 1.28% 1.22% 1.17% 1.17% 1.21%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets.................. 0.04%(d) 0.46% 0.20% 0.02% 0.02% 0.42% 0.73%
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate............... 110% 97% 87% 201% 192% 133% 73%
======== ======== ======== ======== ======== ======== ========
Average broker commission rate
paid(f)............................. $ 0.0568 $ 0.0621 N/A N/A N/A N/A N/A
======== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1990 1989 1988
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period... $ 13.92 $ 11.93 $ 11.04
Income from investment operations:
Net investment income................. 0.21 0.25 0.23
Net gains or losses on securities
(both realized and unrealized)...... (0.91) 3.16 0.89
-------- -------- --------
Total from investment operations...... (0.70) 3.41 1.12
-------- -------- --------
Less distributions:
Dividends from net investment
income.............................. (0.20) (0.27) (0.23)
Distributions from net realized
capital gains....................... (0.67) (1.15) --
-------- -------- --------
Total distributions................... (0.87) (1.42) (0.23)
-------- -------- --------
Net asset value, end of period......... $ 12.35 $ 13.92 $ 11.93
======== ======== ========
Total return(c)........................ (5.04)% 28.87% 10.13%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $153,245 $187,805 $180,793
======== ======== ========
Ratio of expenses to average net
assets.............................. 1.16% 1.00% 0.98%
======== ======== ========
Ratio of net investment income to
average net assets.................. 1.41% 1.62% 1.73%
======== ======== ========
Portfolio turnover rate............... 61% 53% 38%
======== ======== ========
Average broker commission rate
paid(f)............................. 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 are based on average net assets of $253,479,200.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(f) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
10
<PAGE> 84
AIM VALUE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992(a) 1991
---------- ---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 29.15 $ 26.81 $ 21.14 $ 20.82 $ 18.24 $ 17.55 $ 13.75
Income from investment operations:
Net investment income.................. 0.17 0.43(b) 0.14 0.16 0.04 0.12 0.13
Net gains on securities
(both realized and
unrealized).......................... 6.78 3.42 7.21 0.52 3.34 2.68 5.73
---------- ---------- ---------- ---------- -------- -------- --------
Total from investment operations....... 6.95 3.85 7.35 0.68 3.38 2.80 5.86
---------- ---------- ---------- ---------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.04) (0.41) (0.09) (0.16) (0.03) (0.12) (0.14)
Distributions from net realized capital
gains................................ (3.64) (1.10) (1.59) (0.20) (0.77) (1.99) (1.92)
---------- ---------- ---------- ---------- -------- -------- --------
Total distributions.................... (3.68) (1.51) (1.68) (0.36) (0.80) (2.11) (2.06)
---------- ---------- ---------- ---------- -------- -------- --------
Net asset value, end
of period.............................. $ 32.42 $ 29.15 $ 26.81 $ 21.14 $ 20.82 $ 18.24 $ 17.55
========== ========== ========== ========== ======== ======== ========
Total return(c)......................... 23.95% 14.52% 34.85% 3.28% 18.71% 16.39% 43.45%
========== ========== ========== ========== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $6,745,253 $5,100,061 $3,408,952 $1,358,725 $765,305 $239,663 $152,149
========== ========== ========== ========== ======== ======== ========
Ratio of expenses to average net
assets(d)............................ 1.04%(e)(f) 1.11% 1.12% 0.98% 1.09% 1.16% 1.22%
========== ========== ========== ========== ======== ======== ========
Ratio of net investment income to
average net assets(g)................ 0.57%(e) 1.65% 0.74% 0.92% 0.30% 0.75% 0.89%
========== ========== ========== ========== ======== ======== ========
Portfolio turnover rate................ 137% 126% 151% 127% 177% 170% 135%
========== ========== ========== ========== ======== ======== ========
Average broker commission rate
paid(h).............................. $ 0.0481 $ 0.0436 N/A N/A N/A N/A N/A
========== ========== ========== ========== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1990 1989 1988
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 14.53 $ 12.79 $ 11.47
Income from investment operations:
Net investment income.................. 0.26 0.40 0.26
Net gains on securities
(both realized and
unrealized).......................... 0.01 3.58 2.07
-------- -------- --------
Total from investment operations....... 0.27 3.98 2.33
-------- -------- --------
Less distributions:
Dividends from net investment income... (0.26) (0.43) (0.26)
Distributions from net realized capital
gains................................ (0.79) (1.81) (0.75)
-------- -------- --------
Total distributions.................... (1.05) (2.24) (1.01)
-------- -------- --------
Net asset value, end
of period.............................. $ 13.75 $ 14.53 $ 12.79
======== ======== ========
Total return(c)......................... 1.88% 31.54% 20.61%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $ 86,565 $ 76,444 $ 60,076
======== ======== ========
Ratio of expenses to average net
assets(d)............................ 1.21% 1.00% 1.00%
======== ======== ========
Ratio of net investment income to
average net assets(g)................ 1.87% 2.65% 1.98%
======== ======== ========
Portfolio turnover rate................ 131% 152% 124%
======== ======== ========
Average broker commission rate
paid(h).............................. 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 1.06%, 1.13%, 1.13%, 1.23%, 1.09% and 1.08% for 1997, 1996, 1995,
1990-1988, respectively.
(e) Ratios are based on average net assets of $6,039,532,925.
(f) Ratio 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 0.55%, 1.63%, 0.73%, 1.85%, 2.56% and 1.90% for 1997,
1996, 1995, 1990-1988, respectively.
(h) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
11
<PAGE> 85
The following per share data, ratios and supplemental data for the Class B and
Class C shares of AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH YIELD
FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM MUNICIPAL BOND
FUND, AIM SELECT GROWTH FUND and AIM VALUE FUND for the periods indicated have
been audited by KPMG Peat Marwick LLP, independent auditors, whose unqualified
reports on the Funds' financial statements and related notes appear in the
Statement of Additional Information. This information should be read in
conjunction with the Funds' financial statements included in the Statement of
Additional Information.
AIM BALANCED FUND
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
---------------------------------------------------------------------- ------------------
YEAR ENDED DECEMBER 31, OCTOBER 18, 1993* AUGUST 4, 1997*
------------------------------------------------- TO TO
1997 1996 1995 1994 DECEMBER 31, 1993 DECEMBER 31, 1997
-------- -------- ------- ------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 21.83 $ 19.22 $ 14.62 $ 16.11 $16.69 $ 25.55
Income from investment operations:
Net investment income.............. 0.38 0.48 0.31 0.31 0.04 0.16
Net gains (losses) on securities
(both realized and unrealized)... 4.68 2.99 4.61 (1.31) (0.58) 1.01
-------- -------- ------- ------- ------ -------
Total from investment operations... 5.06 3.47 4.92 (1.00) (0.54) 1.17
-------- -------- ------- ------- ------ -------
Less distributions:
Dividends from net investment
income........................... (0.37) (0.38) (0.32) (0.27) (0.04) (0.19)
Distributions from net realized
capital gains.................... (0.77) (0.48) -- (0.22) -- (0.77)
-------- -------- ------- ------- ------ -------
Total distributions................ (1.14) (0.86) (0.32) (0.49) (0.04) (0.96)
-------- -------- ------- ------- ------ -------
Net asset value, end of period...... $ 25.75 $ 21.83 $ 19.22 $ 14.62 $16.11 $ 25.76
======== ======== ======= ======= ====== =======
Total return(a)..................... 23.42% 18.28% 33.93% (6.23)% (3.23)% 4.67%
======== ======== ======= ======= ====== =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)......................... $486,506 $237,082 $72,634 $20,245 $2,754 $ 9,394
======== ======== ======= ======= ====== =======
Ratio of expenses to average net
assets........................... 1.79%(b)(c) 1.97% 2.21%(d) 1.98%(e) 2.83%(f) 1.78%(c)(g)
======== ======== ======= ======= ====== =======
Ratio of net investment income to
average net assets............... 1.67%(b) 2.15% 2.03%(d) 2.34%(e) 1.15%(f) 1.68%(g)
======== ======== ======= ======= ====== =======
Portfolio turnover rate............ 66% 72% 77% 76% 233% 66%
======== ======== ======= ======= ====== =======
Average broker commission rate
paid(h).......................... $ 0.0570 $ 0.0558 N/A N/A N/A $0.0570
======== ======== ======= ======= ====== =======
</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 $351,722,707.
(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) Ratios are annualized and based on average net assets of $3,167,605.
(h) The average commission rate paid is the total brokerage commission paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased or sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
* Date sales commenced.
12
<PAGE> 86
AIM GLOBAL UTILITIES FUND
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
----------------------------------------------------------------- -----------------
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993* AUGUST 4, 1997*
-------------------------------------------- TO TO
1997 1996 1995 1994 DECEMBER 31, 1993 DECEMBER 31, 1997
------- ------- ------- ------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 16.01 $ 14.60 $ 11.84 $ 14.08 $ 15.30 $ 17.67
Income from investment operations:
Net investment income.................. 0.34 0.42 0.44 0.47 0.17 0.13
Net gains (losses) on securities (both
realized and unrealized)............. 3.25 1.44 2.73 (2.19) (0.98) 1.58
------- ------- ------- ------- ------- -------
Total from investment operations....... 3.59 1.86 3.17 (1.72) (0.81) 1.71
------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income... (0.35) (0.45) (0.41) (0.49) (0.17) (0.13)
Distributions from net realized capital
gains................................ (0.01) -- -- -- (0.24) (0.01)
Returns of capital..................... -- -- -- (0.03) -- --
------- ------- ------- ------- ------- -------
Total distributions.................... (0.36) (0.45) (0.41) (0.52) (0.41) (0.14)
------- ------- ------- ------- ------- -------
Net asset value, end of period.......... $ 19.24 $ 16.01 $ 14.60 $ 11.84 $ 14.08 $ 19.24
======= ======= ======= ======= ======= =======
Total return(a)......................... 22.74% 12.98% 27.16% (12.35)% (5.32)% 9.74%
======= ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $94,227 $79,530 $70,693 $42,568 $23,892 1,183
======= ======= ======= ======= ======= =======
Ratio of expenses to average net
assets............................... 1.91%(b)(c) 1.96% 1.97% 2.07% 1.99%(d) 1.90%(b)(c)(d)
======= ======= ======= ======= ======= =======
Ratio of net investment income to
average net assets................... 2.01%(b) 2.83% 3.44% 3.78% 3.38%(d) 2.02%(b)(d)
======= ======= ======= ======= ======= =======
Portfolio turnover rate................ 26% 48% 88% 101% 76% 26%
======= ======= ======= ======= ======= =======
Average broker commission rate
paid(e).............................. $0.0465 $0.0460 N/A N/A N/A $0.0465
======= ======= ======= ======= ======= =======
</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 $83,218,352 and $378,512,
respectively for Class B and Class C shares.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same for
Class B and 1.89% (annualized) for Class C.
(d) Annualized.
(e) The average commission rate paid is the total brokerage commission paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased or sold, which is required to be
disclosed for fiscal year beginning September 1, 1995 and thereafter.
* Date sales commenced.
AIM HIGH YIELD FUND
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
------------------------------------------------------------------------- ------------------
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993* AUGUST 4, 1997*
---------------------------------------------------- TO TO
1997 1996 1995 1994 DECEMBER 31, 1993 DECEMBER 31, 1997
---------- ---------- -------- -------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 9.88 $ 9.42 $ 8.92 $ 10.04 $ 9.96 $ 10.04
Income from investment
operations:
Net investment income.......... 0.83 0.85 0.85 0.87 0.32 0.35
Net gains (losses) on
securities (both realized and
unrealized).................. 0.28 0.47 0.52 (1.10) 0.07 0.10
---------- ---------- -------- -------- ------- -------
Total from investment
operations................... 1.11 1.32 1.37 (0.23) 0.39 0.45
---------- ---------- -------- -------- ------- -------
Less distributions:
Dividends from net investment
income....................... (0.83) (0.86) (0.87) (0.89) (0.31) (0.35)
---------- ---------- -------- -------- ------- -------
Net asset value, end of
period......................... $ 10.16 $ 9.88 $ 9.42 $ 8.92 $ 10.04 $ 10.14
========== ========== ======== ======== ======= =======
Total return(a)................. 11.71% 14.68% 15.91% (2.48)% 4.00% 4.49%
========== ========== ======== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)..................... $1,647,801 $1,068,060 $557,926 $191,338 $31,264 $26,177
========== ========== ======== ======== ======= =======
Ratio of expenses to average
net assets................... 1.65%(b)(c) 1.68% 1.73% 1.80% 1.93%(d) 1.68%(b)(c)(d)
========== ========== ======== ======== ======= =======
Ratio of net investment income
to average net assets........ 8.33%(b) 8.95 9.18% 9.27% 8.99%(d) 8.30%(b)(d)
========== ========== ======== ======== ======= =======
Portfolio turnover rate........ 80% 77% 61% 53% 53% 80%
========== ========== ======== ======== ======= =======
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $1,345,322,915 and $10,445,598,
respectively, for Class B and Class C shares.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same for
Class B and 1.66% (annualized) for Class C shares.
(d) Annualized.
* Date sales commenced.
13
<PAGE> 87
AIM INCOME FUND
<TABLE>
<CAPTION>
CLASS C
CLASS B SHARES SHARES
--------------------------------------------------------------- ---------------
SEPTEMBER 7, AUGUST 4,
1993* 1997*
YEAR ENDED DECEMBER 31, TO TO
----------------------------------------------- DECEMBER 31, DECEMBER 31,
1997 1996 1995 1994 1993 1997
-------- ------- ------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 8.23 $ 8.15 $ 7.18 $ 8.43 $ 8.95 $ 8.38
Income from investment operations:
Net investment income..................... 0.48 0.50 0.53 0.52 0.19 0.19
Net gains (losses) on securities (both
realized and unrealized)................ 0.38 0.11 0.98 (1.23) (0.34) 0.22
-------- ------- ------- ------- ------- -------
Total from investment operations.......... 0.86 0.61 1.51 (0.71) (0.15) 0.41
-------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income...... (0.45) (0.53) (0.54) (0.42) (0.18) (0.16)
Distributions from net realized capital
gains................................... (0.09) -- -- (0.01) (0.19) (0.09)
Returns of capital........................ -- -- -- (0.11) -- --
-------- ------- ------- ------- ------- -------
Total distributions....................... (0.54) (0.53) (0.54) (0.54) (0.37) (0.25)
-------- ------- ------- ------- ------- -------
Net asset value, end of period............. $ 8.55 $ 8.23 $ 8.15 $ 7.18 $ 8.43 $ 8.54
======== ======= ======= ======= ======= =======
Total return(a)............................ 10.89% 7.87% 21.72% (8.46)% (0.75)% 4.96%
======== ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted).. $125,871 $85,343 $44,304 $12,321 $ 3,602 $ 2,552
======== ======= ======= ======= ======= =======
Ratio of expenses to average net assets... 1.69%(b)(c) 1.80% 1.79% 1.83%(d) 1.75%(d)(e) 1.69%(b)(c)(e)
======== ======= ======= ======= ======= =======
Ratio of net investment income to average
net assets.............................. 5.80%(b) 6.30% 6.71% 6.69%(d) 6.24%(d)(e) 5.80%(b)(e)
======== ======= ======= ======= ======= =======
Portfolio turnover rate................... 54% 80% 227% 185% 99% 54%
======== ======= ======= ======= ======= =======
</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 $100,307,548 and $739,696,
respectively, for Class B and Class C shares.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been 1.68% for Class
B and Class C shares.
(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.
* Date sales commenced.
AIM INTERMEDIATE GOVERNMENT FUND
<TABLE>
<CAPTION>
CLASS C
CLASS B SHARES SHARES
--------------------------------------------------------------- -----------
SEPTEMBER 7, AUGUST 4,
1993* 1997*
YEAR ENDED DECEMBER 31, TO TO
------------------------------------------------ DECEMBER 31, DECEMBER 31,
1997 1996 1995 1994 1993 1997
-------- -------- -------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 9.28 $ 9.69 $ 8.99 $ 10.04 $ 10.44 $ 9.33
Income from investment operations:
Net investment income....................... 0.56 0.55 0.63 0.61 0.21 0.24
Net gains (losses) on securities (both
realized and unrealized).................. 0.17 (0.41) 0.70 (1.02) (0.27) 0.10
-------- -------- -------- -------- ------- -------
Total from investment operations............ 0.73 0.14 1.33 (0.41) (0.06) 0.34
-------- -------- -------- -------- ------- -------
Less distributions:
Dividends from net investment income........ (0.53) (0.51) (0.59) (0.50) (0.20) (0.22)
Distributions from net realized capital
gains..................................... -- -- -- (0.04) (0.14) --
Returns of capital.......................... (0.02) (0.04) (0.04) (0.10) -- (0.01)
-------- -------- -------- -------- ------- -------
Total distributions......................... (0.55) (0.55) (0.63) (0.64) (0.34) (0.23)
-------- -------- -------- -------- ------- -------
Net asset value, end of period............... $ 9.46 $ 9.28 $ 9.69 $ 8.99 $ 10.04 $ 9.44
======== ======== ======== ======== ======= =======
Total return(a).............................. 8.16% 1.61% 15.22% (4.13)% (0.52)% 3.64%
======== ======== ======== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted).... $ 89,265 $ 79,443 $ 61,300 $ 23,415 $ 6,160 $ 1,851
======== ======== ======== ======== ======= =======
Ratio of expenses to average net assets
(exclusive of interest expense)(b)........ 1.76%(c)(d) 1.76% 1.86% 1.82% 1.71%(e) 1.76%(c)(d)(e)
======== ======== ======== ======== ======= =======
Ratio of net investment income to average
net assets(f)............................. 6.01%(c) 6.00% 6.58% 6.56% 6.37%(e) 6.01%(c)(e)
======== ======== ======== ======== ======= =======
Portfolio turnover rate..................... 99% 134% 140% 109% 110% 99%
======== ======== ======== ======== ======= =======
Borrowings for the period:
Amount of debt outstanding at end of period
(000s omitted)............................ $ -- -- -- -- -- $ --
Average amount of debt outstanding during
the period (000s omitted)(g).............. $ 2,215 -- -- -- -- $ 25
Average number of shares outstanding during
the period (000s omitted)(g).............. 8,726 -- -- -- -- 99
Average amount of debt per share during the
period.................................... $ 0.2537 -- -- -- -- $0.2537
</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 $81,024,622 and $931,755,
respectively, for Class B and Class C shares.
(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) 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.
(g) Averages computed on a daily basis.
* Date sales commenced.
14
<PAGE> 88
AIM MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
-------------------------------------------------------------- ------------------
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993* AUGUST 4, 1997*
----------------------------------------- TO TO
1997 1996 1995 1994 DECEMBER 31, 1993 DECEMBER 31, 1997
------- ------- ------- ------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 8.19 $ 8.31 $ 7.78 $ 8.61 $ 8.71 $ 8.30
Income from investment operations:
Net investment income.................. 0.36 0.37 0.39 0.39 0.14 0.15
Net gains (losses) on securities (both
realized and unrealized)............. 0.17 (0.13) 0.54 (0.78) 0.01 0.04
------- ------- ------- ------ ------ -------
Total from investment operations....... 0.53 0.24 0.93 (0.39) 0.15 0.19
------- ------- ------- ------ ------ -------
Less distributions:
Dividends from net investment income... (0.36) (0.36) (0.37) (0.38) (0.13) (0.14)
Distributions from net realized capital
gains................................ -- -- -- (0.03) (0.11) --
Returns of capital..................... -- -- (0.03) (0.03) (0.01) --
------- ------- ------- ------ ------ -------
Total distributions.................... (0.36) (0.36) (0.40) (0.44) (0.25) (0.14)
------- ------- ------- ------ ------ -------
Net asset value, end of period.......... $ 8.36 $ 8.19 $ 8.31 $ 7.78 $ 8.61 $ 8.35
======= ======= ======= ====== ====== =======
Total return(a)......................... 6.59% 2.99% 12.14% (4.57)% 1.95% 2.36%
======= ======= ======= ====== ====== =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $47,185 $33,770 $21,478 $9,175 $2,319 $ 825
======= ======= ======= ====== ====== =======
Ratio of expenses to average net
assets(b)............................ 1.66%(c)(d) 1.61% 1.68% 1.67% 1.65%(e) 1.67%(c)(d)(e)
======= ======= ======= ====== ====== =======
Ratio of net investment income to
average net assets(b)................ 4.38%(c) 4.49% 4.46% 4.83% 4.91%(e) 4.37%(c)(e)
======= ======= ======= ====== ====== =======
Portfolio turnover rate................ 24% 26% 36% 43% 24% 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 $39,861,298 and $367,550,
respectively, for Class B and Class C shares.
(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.
* Date sales commenced.
AIM SELECT GROWTH FUND
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
-------------------------------------------------------------------- ------------------
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993* AUGUST 4, 1997*
----------------------------------------------- TO TO
1997 1996 1995 1994 DECEMBER 31, 1993 DECEMBER 31, 1997
-------- -------- -------- ------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 14.32 $ 12.77 $ 10.21 $ 11.31 $ 12.83 $ 17.65
Income from investment operations:
Net investment income (loss)......... (0.13)(a) (0.05) (0.08)(a) (0.06) (0.01) (0.04)(a)
Net gains (losses) on securities
(both realized and unrealized)..... 2.72 2.28 3.43 (0.61) (0.14) (0.70)
-------- -------- -------- ------- ------- -------
Total from investment operations..... 2.59 2.23 3.35 (0.67) (0.15) (0.74)
-------- -------- -------- ------- ------- -------
Less distributions:
Distributions from net realized
capital gains...................... (1.93) (0.68) (0.79) (0.43) (1.37) (1.93)
-------- -------- -------- ------- ------- -------
Total distributions.................. (1.93) (0.68) (0.79) (0.43) (1.37) (1.93)
-------- -------- -------- ------- ------- -------
Net asset value, end of period........ $ 14.98 $ 14.32 $ 12.77 $ 10.21 $ 11.31 $ 14.98
======== ======== ======== ======= ======= =======
Total return(b)....................... 18.50% 17.60% 33.00% (5.88)% (0.92)% (3.86)%
======== ======== ======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................... $356,186 $280,807 $138,034 $38,448 $11,053 $ 1,189
======== ======== ======== ======= ======= =======
Ratio of expenses to average net
assets............................. 1.99%(c)(d) 2.03% 2.13% 2.18% 1.91% (e) 1.95%(f)(g)
======== ======== ======== ======= ======= =======
Ratio of net investment income (loss) f
to average net assets.............. (0.82)%(c) (0.39)% (0.65)% (0.94)% (0.72)%(e) 0.77%(f)
======== ======== ======== ======= ======= =======
Portfolio turnover rate.............. 110% 97% 87% 201% 192% 110%
======== ======== ======== ======= ======= =======
Average broker commission rate
paid(h)............................ $ 0.0568 $ 0.0621 N/A N/A N/A $0.0568
======== ======== ======== ======= ======= =======
</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 $328,478,309 for Class B shares.
(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) Ratios are annualized and based on average net assets of $625,699 for Class
C shares.
(g) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been
1.94%.
(h) The average commission rate paid is the total brokerage commission paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased or sold, which is required to be
disclosed for fiscal year beginning September 1, 1995 and thereafter.
* Date sales commenced.
15
<PAGE> 89
AIM VALUE FUND
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
------------------------------------------------------------------------- -----------------
YEAR ENDED DECEMBER 31, OCTOBER 18, 1993* AUGUST 4, 1997*
----------------------------------------------------- TO TO
1997 1996 1995 1994 DECEMBER 31, 1993 DECEMBER 31, 1997
---------- ---------- ---------- -------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 28.92 $ 26.65 $ 21.13 $ 20.82 $ 21.80 $ 35.60
Income from investment operations:
Net investment income............ (0.07) 0.20(a) (0.01) -- 0.02 (0.01)
Net gains (losses) on securities
(both realized and
unrealized).................... 6.68 3.38 7.12 0.51 (0.21) (0.05)
---------- ---------- ---------- -------- ------- -------
Total from investment
operations..................... 6.61 3.58 7.11 0.51 (0.19) (0.06)
---------- ---------- ---------- -------- ------- -------
Less distributions:
Dividends from net investment
income......................... -- (0.21) -- -- (0.02) --
Distributions from net realized
capital gains.................. (3.64) (1.10) (1.59) (0.20) (0.77) (3.64)
---------- ---------- ---------- -------- ------- -------
Total distributions.............. (3.64) (1.31) (1.59) (0.20) (0.79) (3.64)
---------- ---------- ---------- -------- ------- -------
Net asset value, end of period.... $ 31.89 $ 28.92 $ 26.65 $ 21.13 $ 20.82 $ 31.90
========== ========== ========== ======== ======= =======
Total return(b)................... 22.96% 13.57% 33.73% 2.46% (0.74)% (0.08)%
========== ========== ========== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)....................... $6,831,796 $4,875,933 $2,860,531 $680,119 $63,215 $32,900
========== ========== ========== ======== ======= =======
Ratio of expenses to average net
assets(c)...................... 1.85%(d)(e) 1.94% 1.94% 1.90% 1.85%(f) 1.84%(d)(e)(f)
========== ========== ========== ======== ======= =======
Ratio of net investment income
(loss) to average net
assets(c)...................... (0.24)%(d) 0.82% (0.08)% 0.00% (0.46)%(f) (0.23)%(d)(f)
========== ========== ========== ======== ======= =======
Portfolio turnover rate.......... 137% 126% 151% 127% 177% 137%
========== ========== ========== ======== ======= =======
Average broker commission rate
paid(g)........................ $ 0.0481 $ 0.0436 N/A N/A N/A $0.0481
========== ========== ========== ======== ======= =======
</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 1.87%, 1.96% and 1.96%, for 1997-1995, respectively, for Class B
shares, and 1.86% for 1997 for Class C shares. The ratio of net investment
income (loss) to average net assets prior to waiver of advisory fees were
(0.26)%, 0.81% and (0.09%), for 1997-1995, respectively, for Class B shares
and (0.25)% for 1997 for Class C shares.
(d) Ratios are based on average net assets of $5,962,133,311 for Class B and
$15,391,746 for Class C, respectively.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same for
Class B shares, and 1.83% for Class C shares.
(f) Annualized.
(g) The average commission rate paid is the total brokerage commission paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased or sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
* Date sales commenced.
16
<PAGE> 90
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, 1997, 1996, 1995 and 1994 and the period October
16, 1993 (date operations commenced) through December 31, 1993, and for the
Class C shares for the period August 4, 1997 (date sales commenced) through
December 31, 1997, have been audited by KPMG Peat Marwick LLP, independent
auditors, whose unqualified report on the Fund's financial statements and
related notes appears in the Statement of Additional Information. 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, CLASS C AND AIM CASH RESERVE SHARES
<TABLE>
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------
OCTOBER 16,
YEAR ENDED DECEMBER 31, 1993 TO
---------------------------------------------- DECEMBER 31,
1997 1996 1995 1994 1993
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income.................. 0.0453 0.0433 0.0495 0.0337 0.0048
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.0453) (0.0433) (0.0495) (0.0337) (0.0048)
-------- -------- -------- -------- --------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return(a)......................... 4.63% 4.42% 5.06% 3.43% 2.27%
======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $376,012 $287,905 $221,487 $148,886 $ 81,460
======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 1.05%(b)(c) 1.07% 1.03% 0.97%(d) 1.00%(d)(e)
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 4.55%(b) 4.34% 4.91% 3.53%(d) 2.27%(d)(e)
======== ======== ======== ======== ========
<CAPTION>
CLASS B SHARES
--------
YEAR ENDED DECEMBER 31,
--------
1997
--------
<S> <C>
Net asset value, beginning of period.... $ 1.00
Income from investment operations:
Net investment income.................. 0.0378
--------
Less distributions:
Dividends from net investment income... (0.0378)
--------
Net asset value, end of period.......... $ 1.00
========
Total return(a)......................... 3.84%
========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $116,058
========
Ratio of expenses to average net
assets............................... 1.80%(b)(c)
========
Ratio of net investment income to
average net assets................... 3.80%(b)
========
<CAPTION>
CLASS C
SHARES
CLASS B SHARES
--------------------------------------------- AUGUST 4, --------
OCTOBER 16, 1997*
YEAR ENDED DECEMBER 31, 1993 to to
------------------------------ DECEMBER 31, DECEMBER 31, --------
1996 1995 1994 1993 1997 1997
-------- -------- -------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income.................. 0.0360 0.0419 0.0259 0.0032 0.0158 0.0456
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.0360) (0.0419) (0.0259) (0.0032) (0.0158) (0.0456)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return(a)......................... 3.66% 4.27% 2.62% 1.51% 3.92% 4.66%
======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $ 91,148 $ 69,857 $ 33,999 $ 1,289 $ 8,287 $344,117
======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 1.81% 1.78% 1.78%(f) 1.75%(e)(f) 1.80%(b)(c)(e) 1.05%(b)(c)
======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 3.60% 4.14% 3.14%(f) 1.54%(e)(f) 3.80%(b)(c) 4.55%(b)
======== ======== ======== ======== ======== ========
<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%
======== ======== ======== ========
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% 1.04% 0.99%(g) 1.00%(e)(g)
======== ======== ======== ========
Ratio of net investment income to
average net assets................... 4.32% 4.92% 3.49%(g) 2.27%(e)(g)
======== ======== ======== ========
</TABLE>
- ---------------
(a) Does not deduct sales charges or contingent deferred sales charges, where
applicable, and are annualized for periods less than one year.
(b) Ratios are based on average daily net assets as follows: Class A
Shares - $340,257,685, Class B Shares - $119,512,069, Class C
Shares - $5,256,063 and AIM Cash Reserve Shares - $372,492,695.
(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.
* Date sales commenced.
17
<PAGE> 91
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Funds will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of a Fund's shares. 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 front-end sales
charge at the time of purchase. Standardized total return for Class B and Class
C shares reflects the deduction of the maximum applicable contingent deferred
sales charge on a redemption of shares held for the period.
A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested. A cumulative total return reflects the Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
compounded annual rate of return that would have produced the same cumulative
total return if the Fund's performance had been constant over the entire period.
BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE FUND'S RETURN,
INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL YEAR-
BY-YEAR RESULTS. To illustrate the components of overall performance, a Fund may
separate its cumulative and average annual returns into income results and
capital gains or losses.
Yield is computed in accordance with standardized formulas described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, 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 and 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).
18
<PAGE> 92
- --------------------------------------------------------------------------------
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;
however, shareholders will receive prior notice of any change in that Fund's
investment objective. 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 (or a
comparable rating of any other nationally recognized statistical rating
organizations "NRSROs") or unrated securities determined by AIM to be of
comparable quality. These types of non-investment grade debt securities are
commonly known as "junk bonds." During 1997, 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 NRSROs) or unrated bonds which AIM determines to be
of comparable quality. During 1997, 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
19
<PAGE> 93
expected to have less stability than those of more developed countries. Such
countries may have relatively unstable governments, 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 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, 1997, see the chart on page 23.
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 by
Moody's or S&P (or comparable ratings by other NRSROs) or unrated securities
determined by AIM to be of comparable quality. These types of non-investment
grade debt securities 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, 1997, see the chart on page 23.
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
20
<PAGE> 94
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 Banks 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 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, or that are issued by a registered investment company that is a money
market fund or are government securities.
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.
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.
21
<PAGE> 95
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. Securities in which
the Fund invests may be insured by financial insurance companies. Since a
limited number of entities provide such insurance, the Fund may invest more than
25% of its total assets in securities insured by the same insurance company.
In addition, the Fund will invest at least 80% of its total invested assets in
municipal bonds. At least 80% of the Fund's total assets will be invested in
municipal securities rated within the four highest ratings of Moody's, S&P or
any other NRSRO. The Fund may invest up to 20% of its total assets in municipal
securities that are rated below Baa/BBB (or a comparable rating of any other
NRSRO) or that are unrated. For purposes of the foregoing percentage
limitations, municipal securities (i) which have been collateralized with U.S.
Government obligations held in escrow until the municipal securities' scheduled
redemption date or final maturity, but (ii) which have not been rated by a NRSRO
subsequent to the date of escrow collateralization, will be treated by the Fund
as the equivalent of Aaa/AAA rated securities. During 1997, 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 SELECT 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, and that the Fund's portfolio will include securities of three
basic categories: (1) "core" companies, which AIM considers to have experienced
above-average and consistent long-term growth in earnings and to have excellent
prospects for outstanding future growth, (2) "earnings acceleration" companies,
which AIM believes are currently enjoying a dramatic increase in profits, and
(3) companies whose securities are judged by AIM to be undervalued relative to
(i) the issuing company's current or projected earnings, (ii) current market
values of the issuing company's assets, or (iii) the equity market generally.
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
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<PAGE> 96
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.
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 1997, 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..................................................... 5.94% 14.01%
AA/Aa....................................................... 0.01% 10.79%
A/A......................................................... 1.34% 20.73%
BBB/Baa..................................................... 0.36% 22.09%
BB/Ba....................................................... 11.13% 11.22%
B/B......................................................... 60.58% 11.70%
CCC/Caa..................................................... 12.22% 0.37%
CC/Ca....................................................... 0.21% 0%
C/C......................................................... 0% 0%
Not rated................................................... 8.21% 3.09%
------ ------
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 en-
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<PAGE> 97
gage in portfolio transactions in order to honor a when-issued or delayed
delivery commitment. In a delayed delivery transaction, the Fund relies on the
other party to complete the transaction. If the transaction is not completed,
the Fund may miss a price or yield considered to be advantageous. A Fund will
employ techniques designed to reduce such risks. If a Fund purchases a
when-issued security, the Fund's custodian bank will segregate liquid assets in
an amount equal to the when-issued commitment. If the market value of such
securities declines, additional liquid assets 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 liquid assets 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 liquid assets. 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. 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.
BORROWING. Each of the Funds may borrow money to a limited extent from banks
(including the Funds' custodian bank) for temporary or emergency purposes
subject to the limitations under the 1940 Act. The Funds will restrict
borrowings, reverse repurchase agreements and dollar roll transactions to an
aggregate of 33- 1/3% of each Fund's respective total assets at the time of the
transaction. None of the Funds will purchase additional securities when
borrowings exceed 5% of its respective total assets.
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 SELECT 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 mar-
24
<PAGE> 98
ket value of a Fund's total assets. See the Statement of Additional Information
for a description of a Fund's investments in futures contracts and options on
futures contracts, including certain additional risks.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets (10% of
the net assets of AIM MONEY MARKET FUND) in securities that are illiquid.
Illiquid securities include securities that have no readily available market
quotations and cannot be disposed of promptly (within seven days) in the normal
course of business at a price at which they are valued. Illiquid securities may
include securities that are subject to restrictions on resale because they have
not been registered under the Securities Act of 1933. Restricted securities may,
in certain circumstances, be resold pursuant to Rule 144A, and thus may or may
not constitute illiquid securities. Limitations on the resale of restricted
securities may have an adverse effect on their marketability, which may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering such securities for resale, and the risk of
substantial delays in effecting such registrations. The Trust's Board of
Trustees is responsible for developing and 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.
REAL ESTATE INVESTMENT TRUSTS ("REITS"). To the extent consistent with their
respective investment objectives and policies, AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND and AIM VALUE FUND may each invest up to 25% of its total assets
and AIM INCOME FUND and AIM HIGH YIELD FUND may each invest up to 10% of its
net assets in equity and/or debt securities issued by REITS.
REITs are trusts which sell equity or debt securities to investors and use the
proceeds to invest in real estate or interests therein. A REIT may focus on
particular projects, such as apartment complexes, or geographic regions, such
as the Southeastern United States, or both.
To the extent that a Fund has the ability to invest in REITs, such Fund could
conceivably own real estate directly as a result of a default on the securities
it owns. A Fund, therefore, may be subject to certain risks associated with
the direct ownership of real estate including difficulties in valuing and
trading real estate, declines in the value of real estate, risks related to
general and local economic conditions, adverse changes in the climate for real
estate, increases in property taxes and operating expenses, changes in zoning
laws, casualty or condemnation losses, limitations on rents, changes in
neighborhood values, the appeal of properties to tenants, and increases in
interest rates.
In addition to the risks described above, equity REITs may be affected by any
changes in the value of the underlying property owned by the trusts, while
mortgage REITs may be affected by the quality of any credit extended. Equity
and mortgage REITs are dependent upon management skill, are not diversified,
and are therefore subject to the risk of financing single or a limited number
of projects. Such trusts are also subject to heavy cash flow dependency,
defaults by borrowers, self-liquidation, and the possibility of failing to
maintain exemption from the 1940 Act. Changes in interest rates may also
affect the value of debt securities held by a Fund. By investing in REITs
indirectly through a Fund, a shareholder will bear not only his/her
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of the REITs.
25
<PAGE> 99
INVESTMENTS IN FOREIGN SECURITIES. (All Funds except AIM INTERMEDIATE
GOVERNMENT FUND and AIM MUNICIPAL BOND FUND). Each Fund may invest up to 25% of
its total assets (up to 20% for AIM BALANCED FUND, 40% for AIM INCOME FUND, 50%
for AIM MONEY MARKET FUND and 80% for AIM GLOBAL UTILITIES FUND) in foreign
securities, although AIM MONEY MARKET FUND may only invest in foreign securities
denominated in U.S. dollars. To the extent it invests in securities denominated
in foreign currencies, each Fund bears the risks of changes in the exchange
rates between U.S. currency and the foreign currency, as well as the
availability and status of foreign securities markets. Each Fund (other than AIM
MONEY MARKET FUND) may invest in securities of foreign issuers which are in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), or other securities representing underlying securities of foreign
issuers, and such investments are treated as foreign securities for purposes of
percentage limitations on investments in foreign securities. For a discussion of
the risks pertaining to investments in foreign securities. See "Risk Factors
Regarding Foreign Securities" below.
FOREIGN EXCHANGE TRANSACTIONS. (All Funds except AIM INTERMEDIATE GOVERNMENT
FUND, AIM MONEY MARKET FUND and AIM MUNICIPAL BOND FUND). Each Fund has
authority to deal in foreign exchange between currencies of the different
countries in which it will invest as a hedge against possible variations in the
foreign exchange rates between those countries. This may be accomplished through
direct purchases or sales of foreign currency, purchases of options on futures
contracts with respect to foreign currency, and contractual agreements to
purchase or sell a specified currency at a specified future date (up to one
year) at a price set at the time of the contract. Such contractual commitments
may be forward contracts entered into directly with another party or exchange
traded futures contracts.
The Funds may purchase and sell options on futures contracts, forward
contracts or futures contracts which are denominated in a particular foreign
currency to hedge the risk of fluctuations in the value of another currency.
Each Fund's dealings in foreign exchange will be limited to hedging involving
either specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of foreign currency with respect to specific receivables or
payables of the Fund accruing in connection with the purchase or sale of its
portfolio securities, the sale and redemption of shares of the Fund, or the
payment of dividends and distributions by the Fund. Position hedging is the
purchase or sale of foreign currency with respect to portfolio security
positions denominated or quoted in a foreign currency. The Funds will not
speculate in foreign exchange. No Fund will commit a larger percentage of its
total assets to foreign exchange hedges than the percentage of its total assets
which it could invest in foreign securities. Further information concerning
futures contracts and related options is set forth above.
RISK FACTORS REGARDING FOREIGN SECURITIES. Investments by a Fund in foreign
securities, whether denominated in U.S. dollars or foreign currencies, may
entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs or
similar securities also may entail some or all of the risks described below.
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.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, and Spain are members of the European Economic and
Monetary Union (the "EEMU"). The EEMU intends to establish a common European
currency for participating countries which will be known as the "euro." It is
anticipated that each participating country will supplement its existing
currency with the euro on January 1, 1999, and will replace its existing
currency with the euro on July 1, 2002. Any other European country which is a
member of the EEMU may elect to participate in the EEMU and may supplement its
existing currency with the euro after January 1, 1999.
The expected introduction of the euro presents unique risks and uncertainties,
including whether the payment and operational systems of banks and other
financial institutions will be ready by January 1, 1999; how outstanding
financial contracts will be treated after January 1, 1999; the establishment of
exchange rates for existing currencies and the euro; and the creation of
suitable clearing and settlement systems for the euro. These and other factors
could cause market disruptions before or after the introduction of the euro and
could adversely affect the value of securities held by each Fund.
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.
26
<PAGE> 100
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 herein. 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.
For a discussion of AIM Management and its subsidiaries' Year 2000 Compliance
Project, see "General Information -- Year 2000 Compliance Project."
INVESTMENT ADVISOR. A I M Advisors, Inc., 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 over 50 investment company portfolios
encompassing a broad range of investment objectives.
Under the terms of the Advisory Agreement, AIM supervises all aspects of each
Fund's operations and provides investment advisory services to the Funds. AIM
obtains and evaluates economic, statistical and financial information to
formulate and implement investment programs for the Funds. The Advisory
Agreement also provides that, upon the request of the Board of Trustees, AIM may
perform or arrange for certain accounting and other administrative services for
the Funds which are not required to be performed by AIM under the Advisory
Agreement. The Board of Trustees has made such a request. As a result, AIM and
the Trust have entered into a Master Administrative Services Agreement
("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 135
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-
27
<PAGE> 101
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. He has been associated with AIM
and/or its subsidiaries since 1992 and has been an investment professional since
1976. Robert G. Alley is Senior Vice President of AIM Capital; Vice President of
AIM and of the Trust; and has been responsible for the Fund since 1993. He has
been associated with AIM and/or its subsidiaries since 1992 and has been an
investment professional since 1972. Craig A. Smith is Vice President of AIM
Capital and has been responsible for the Fund since 1996. He has been associated
with AIM since he began working as an investment professional in 1989. Carolyn
L. Gibbs is Vice President of AIM Capital and has been responsible for the Fund
since 1998. She has been associated with AIM since 1992 and has been an
investment professional since 1983.
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 High Yield Fund. John L. Pessarra is Vice President of AIM Capital and has
been responsible for the Fund since 1992. He has been associated with AIM since
1990 and has been an investment professional since 1984. Kevin E. Rogers is Vice
President of AIM Capital and has been responsible for the Fund since 1995. He
has been associated with AIM and/or its subsidiaries since 1991 and has been an
investment professional since 1986.
AIM Income Fund. Robert G. Alley and John L. Pessarra have been responsible
for the management of the Fund since 1992, and Carolyn L. Gibbs has been
responsible for the Fund since 1995. Mr. Alley's background is discussed above
with respect to the management of AIM BALANCED FUND, Mr. Pessarra's background
is discussed above with respect to the management of AIM HIGH YIELD FUND, and
Ms. Gibbs' background is discussed above with respect to the management of AIM
BALANCED FUND.
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. She has been associated with AIM and/or its
subsidiaries since 1989 and has been an investment professional since 1982.
Meggan Walsh is Vice President of AIM Capital and has been responsible for the
Fund since 1992. She has been associated with AIM and/or its subsidiaries since
1991 and has been an investment professional since 1987. Paula A. Permenter has
been responsible for the Fund since 1996. She has been associated with AIM
and/or its subsidiaries since 1996 and has been an investment professional since
1986. 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. He has been associated with AIM
and/or its subsidiaries since 1987 and has been an investment professional since
1968. Stephen D. Turman is Vice President of AIM Capital and has been
responsible for the Fund since 1992. He has been associated with AIM and/or its
subsidiaries since 1985 and has been an investment professional since 1983.
AIM Select Growth Fund. The Fund is managed by a select committee comprised of
various equity research analysts employed by AIM and AIM Capital, who provide
knowledge regarding a variety of equity market capitalization sectors and
investment styles. The Committee for the Fund meets periodically to discuss
investment opportunities and ideas; however, purchases and sales of securities
by the Fund will have the prior approval of one of the following persons:
Jonathan C. Schoolar, Robert M. Kippes or Joel E. Dobberpuhl. Jonathan C.
Schoolar is Senior Vice President 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 been an investment
professional since 1983. Robert M. Kippes is Vice President of AIM Capital and
has been responsible for the Fund since 1994. He has been associated with AIM
and/or its subsidiaries since he began working as an investment professional in
1989. Joel E. Dobberpuhl is Vice President of AIM Capital and has been
responsible for the Fund since 1998. He has been associated with AIM and/or its
subsidiaries since 1990 and has been an investment professional since 1989.
AIM Value Fund. Joel E. Dobberpuhl has been responsible for the Fund since
1992. Mr. Dobberpuhl's background is discussed above with respect to the
management of AIM SELECT GROWTH FUND. Robert A. Shelton is an 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 been an
investment professional since 1991. Prior to 1995, he was a financial analyst
for CS First Boston.
Evan G. Harrell is a portfolio manager of AIM Capital and has been responsible
for the Fund since 1998. Mr. Harrell has been associated with AIM and/or its
subsidiaries since May 1998 and has been an investment professional since 1983.
Prior to 1998, Mr. Harrell was a Vice President of Van Kampen American Capital
Asset Management, Inc. and a portfolio manager of various growth and equity
funds. From 1987 to 1994, Mr. Harrell was a Vice President and Principal of
Fayez Sarofim & Co.
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<PAGE> 102
FEES AND EXPENSES. For the fiscal year ended December 31, 1997, 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 CLASS C
COMPENSATION EXPENSE EXPENSE EXPENSE
TO AIM RATIO RATIO RATIO*
------------ ------- ------- -------
<S> <C> <C> <C> <C>
AIM BALANCED FUND...................... 0.54% 0.98% 1.79% 1.78%
AIM GLOBAL UTILITIES FUND.............. 0.58% 1.13% 1.91% 1.90%
AIM HIGH YIELD FUND.................... 0.48% 0.90% 1.65% 1.68%
AIM INCOME FUND........................ 0.45% 0.94% 1.69% 1.69%
AIM INTERMEDIATE GOVERNMENT FUND....... 0.48% 1.00% 1.76% 1.76%
AIM MUNICIPAL BOND FUND................ 0.46% 0.90% 1.66% 1.67%
AIM SELECT GROWTH FUND................. 0.67% 1.13% 1.99% 1.95%
AIM VALUE FUND......................... 0.61%** 1.04% 1.85% 1.84%
</TABLE>
- ---------------
* Annualized.
** Net of advisory fee waivers. Without such waivers, the amount would have been
0.63%
For the year ended December 31, 1997, 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', Class C shares' and AIM Cash Reserve
Shares' total expenses for such period were 1.05%, 1.80%, 1.80% and 1.05% of
each Class' average daily net assets, respectively.
For the fiscal year ended December 31, 1997, 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........................................... 0.01%
AIM GLOBAL UTILITIES FUND................................... 0.03%
AIM HIGH YIELD FUND......................................... 0.004%
AIM INCOME FUND............................................. 0.02%
AIM INTERMEDIATE GOVERNMENT FUND............................ 0.03%
AIM MONEY MARKET FUND....................................... 0.01%
AIM MUNICIPAL BOND FUND..................................... 0.02%
AIM SELECT GROWTH FUND...................................... 0.01%
AIM VALUE FUND.............................................. 0.002%
</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, 1997, AIM VALUE FUND waived 0.02%
in advisory fees.
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
29
<PAGE> 103
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 and the
AIM Cash Reserve Shares of AIM MONEY MARKET FUND (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 or Class C shares of the Funds or the AIM Cash Reserve Shares of AIM
MONEY MARKET FUND.
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, and the AIM Cash Reserve Shares of AIM MONEY MARKET 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 or AIM Cash
Reserve Shares of AIM MONEY MARKET 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 the AIM Cash
Reserve Shares of AIM MONEY MARKET FUND, and who provide continuing personal
shareholder services to their customers who own Class A or Class C shares of a
Fund or AIM Cash Reserve Shares of AIM MONEY MARKET 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 daily net assets of such Fund
attributable to the customers of such dealers or financial institutions are
characterized as a service fee, and 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.
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 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.
For additional information concerning the operation of the Plans see the
Statement of Additional Information.
30
<PAGE> 104
- --------------------------------------------------------------------------------
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.
31
<PAGE> 105
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<PAGE> 106
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 FLEX FUND AIM GLOBAL UTILITIES FUND
AIM ADVISOR INTERNATIONAL VALUE FUND AIM HIGH INCOME MUNICIPAL FUND
AIM ADVISOR LARGE CAP VALUE FUND AIM HIGH YIELD FUND
AIM ADVISOR MULTIFLEX FUND AIM INCOME FUND
AIM ADVISOR REAL ESTATE FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM AGGRESSIVE GROWTH FUND AIM INTERNATIONAL EQUITY FUND
AIM ASIAN GROWTH FUND AIM LIMITED MATURITY TREASURY FUND
AIM BALANCED FUND AIM MONEY MARKET FUND(*)
AIM BLUE CHIP FUND AIM MUNICIPAL BOND FUND
AIM CAPITAL DEVELOPMENT FUND AIM SELECT GROWTH FUND
AIM CHARTER FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM CONSTELLATION FUND AIM TAX-EXEMPT CASH FUND(*)
AIM EUROPEAN DEVELOPMENT FUND AIM TAX-FREE INTERMEDIATE FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM VALUE FUND
AIM GLOBAL GROWTH FUND AIM WEINGARTEN FUND
AIM GLOBAL INCOME FUND
</TABLE>
(*) Class A shares of AIM TAX-EXEMPT CASH FUND and AIM Cash Reserve Shares of
AIM MONEY MARKET FUND are offered to investors at net asset value, without
payment of a sales charge, as described below. Other funds, including the
Class A, 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.
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") or Roth IRA is $250.
There are no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, Simplified Employee Pension
("SEP") accounts, Salary Reduction ("SARSEP") accounts, Savings Incentive Match
Plans for Employee IRA ("SIMPLE IRA") accounts, 403(b) plans or 457 (state
deferred compensation) plans (except that the minimum initial investment for
salary deferrals for such plans is $25), or for investment of dividends and
distributions of any of the AIM Funds into any existing AIM Funds account.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus are offered
pursuant to separate prospectuses. Copies of other prospectuses may be obtained
by calling (800) 347-4246.
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INITIAL AND SUBSEQUENT 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>
HOW TO PURCHASE ADDITIONAL SHARES. Additional shares may be purchased directly
through AIM Distributors or through any dealer who has entered into an agreement
with AIM Distributors. 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.
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.
BY AIM BANK CONNECTION(SM): To purchase additional shares by electronic funds
transfer, please contact the Client Services Department of AFS for detail.
- --------------------------------------------------------------------------------
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 FLEX 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 ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BLUE CHIP
FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND,
AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH INCOME
MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT GROWTH FUND,
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-FREE INTERMEDIATE FUND, AIM
VALUE FUND and AIM WEINGARTEN FUND, collectively (other than AIM AGGRESSIVE
GROWTH FUND, AIM LIMITED MATURITY TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT and AIM TAX-FREE INTERMEDIATE 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 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 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-05/98
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<PAGE> 108
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 ASIAN GROWTH FUND, AIM BLUE CHIP
FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND,
AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL UTILITIES FUND, AIM INTERNATIONAL
EQUITY FUND, AIM MONEY MARKET FUND, AIM SELECT GROWTH 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 ADVISOR REAL ESTATE FUND,
AIM BALANCED FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND,
AIM GLOBAL INCOME FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM
INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM MUNICIPAL BOND FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT.
<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."
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<PAGE> 109
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 the Class A shares of each of AIM LIMITED MATURITY TREASURY
FUND and AIM TAX-FREE INTERMEDIATE 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 $ 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 Class A shares of each of AIM LIMITED MATURITY TREASURY FUND and AIM
TAX-FREE INTERMEDIATE FUND 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 Class A shares of AIM
LIMITED MATURITY TREASURY FUND, and in an amount up to 0.25% of such purchases
of Class A shares of AIM TAX-FREE INTERMEDIATE FUND.
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 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 of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. 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. These commissions
are not paid on sales to investors exempt from the CDSC, including shareholders
of record on April 30, 1995 who purchase additional shares in any of the Funds
on or after May 1, 1995, and in circumstances where AIM Distributors grants an
exemption on particular transactions.
MCF-05/98
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<PAGE> 110
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 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 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 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."
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; however, they are subject to the other fees and expenses described
in the prospectus for AIM MONEY MARKET FUND.
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon 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.
MCF-05/98
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<PAGE> 111
SPECIAL INFORMATION RELATING TO AIM MONEY MARKET FUND AND AIM TAX-EXEMPT CASH
FUND (THE "MONEY MARKET FUNDS"). Because each Money Market Fund uses the
amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of such funds will remain constant at $1.00 per share.
However, there is no assurance that 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, 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, Roth 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"), a Savings Incentive Match
Plans for Employees IRA ("SIMPLE IRA") where the employer has notified AIM
Distributors in writing that all of its related employee SEP, SARSEP or
SIMPLE IRA accounts should be linked;
- 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 vir-
MCF-05/98
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<PAGE> 112
tue 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, 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 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 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 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,
MCF-05/98
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<PAGE> 113
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 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; (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; (i) any employee, or any member of the immediate
family (including spouse, children, parents and parents of spouse) of any
employee, of Triformis Inc; and (j) former or current Class A shareholders of
the AIM/GT Funds (those funds which are advised by AIM and sub-advised by
INVESCO (NY), Inc.), but only to the extent that their purchase order is
entered with an instruction to have all or a portion of the proceeds from a
redemption of Class A shares of the AIM/GT Funds (on which a sales charge was
paid) invested in Class A shares of the AIM Funds.
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 (measured on an annual basis) 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 Class A shares of AIM LIMITED MATURITY TREASURY FUND sold at net asset
value to an employee benefit plan in accordance with this paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A shares of such funds may also be purchased at net asset
value by other unit investment trusts approved by the Board of Directors of AIM
Equity Funds, Inc. Unit holders of such trusts may elect to invest cash
distributions from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND at net asset value, including: (a) distributions of any
dividend income or other income received by such trusts; (b) distributions of
any net capital gains received in respect of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sale of Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such trusts;
and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided: (a) that the investment in Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND is effected within 30 days of such
redemption or repurchase; and (b) that the unit holder or his dealer provides
AIM Distributors with a letter which: (i) identifies the name, address and
telephone number of the dealer who sold to the unit holder the units to be
redeemed or repurchased; and (ii) states that the investment in Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND is being funded exclusively by
the proceeds from the redemption or repurchase of units of such trusts.
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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 amounts (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 and AIM Cash
Reserve Shares of AIM MONEY MARKET 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 regular systematic
investments may establish an Automatic Investment Plan. Under this plan
withdrawal is made on the shareholder's bank account in the amount specified by
the shareholder (minimum $50 per investment, per account) and on a day or
date(s) specified by the shareholder. The proceeds are invested in shares of the
designated AIM Fund at the applicable offering price determined on the date of
the withdrawal. An Automatic Investment Plan may be discontinued upon 10 days'
prior notice to the Transfer Agent or AIM Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; 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
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<PAGE> 115
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 HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM
TAX-EXEMPT CASH 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; Roth IRA plans;
SARSEP plans; SEP plans; and SIMPLE IRA 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-05/98
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- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds,
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds, 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 FUND
CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR INTERNATIONAL AIM GLOBAL INCOME AIM TAX-FREE INTERMEDIATE FUND
VALUE FUND -- CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR LARGE CAP AIM GLOBAL UTILITIES NO LOAD FUNDS:
VALUE FUND -- CLASS A FUND -- CLASS A
AIM ADVISOR MULTIFLEX AIM HIGH INCOME MUNICIPAL AIM MONEY MARKET FUND
FUND -- CLASS A FUND -- CLASS A -- AIM CASH RESERVE SHARES
AIM ADVISOR REAL ESTATE AIM HIGH YIELD FUND -- CLASS A AIM TAX-EXEMPT CASH FUND -- CLASS A
FUND -- CLASS A AIM INCOME FUND -- CLASS A
AIM AGGRESSIVE GROWTH AIM INTERMEDIATE GOVERNMENT
FUND -- CLASS A FUND -- CLASS A
AIM ASIAN GROWTH FUND -- CLASS A AIM INTERNATIONAL EQUITY
AIM BALANCED FUND -- CLASS A FUND -- CLASS A
AIM BLUE CHIP FUND -- CLASS A AIM MONEY MARKET
AIM CAPITAL DEVELOPMENT FUND -- CLASS A
FUND -- CLASS A AIM MUNICIPAL BOND
AIM CHARTER FUND -- CLASS A FUND -- CLASS A
AIM CONSTELLATION AIM SELECT GROWTH FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM EUROPEAN DEVELOPMENT OF CONNECTICUT -- CLASS A
FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM GLOBAL AGGRESSIVE GROWTH AIM WEINGARTEN FUND -- CLASS A
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) Load Fund share
purchases of $1,000,000 or more which are subject to a contingent deferred sales
charge may not be exchanged for Lower Load Funds or for AIM TAX-EXEMPT CASH
FUND; (II) LOWER LOAD FUND SHARE PURCHASES OF $1,000,000 OR MORE AND 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; (iii) Class A shares may be exchanged for Class A shares, (iv) Class B
shares may be exchanged only for Class B shares; (v) Class C shares may only be
exchanged for Class C shares; and (vi) 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-05/98
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<PAGE> 117
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,
apply if No Load shares were Offering 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.
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
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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 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-
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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 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).
Waivers. 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 in a particular AIM Fund;
(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;
(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.
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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 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 transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information; and (e) the proceeds of the
redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form if they reasonably believe such request to be gen-
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uine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction.
EXPEDITED REDEMPTIONS (AIM MONEY MARKET FUND ONLY). If a redemption order is
received prior to 11:30 a.m. Eastern Time, the redemption will be effective on
that day and AIM MONEY MARKET FUND will endeavor to transmit payment on that
same business day. If the redemption order is received after 11:30 a.m. and
prior to NYSE Close, the redemption will be made at the next determined net
asset value and payment will generally be transmitted on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND and 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
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 made 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 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 or electronic funds transfer instructions; and (8)
written redemptions or exchanges of shares previously reported as lost, whether
or not the redemption amount is under $50,000 or the proceeds are to be sent to
the address of record. These requirements may be waived or modified upon notice
to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the Securities and
Exchange Commission ("SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the NYSE Medallion Signature Program,
provided that in either event, the amount of the transaction involved does not
exceed
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the surety coverage amount indicated on the medallion. For information regarding
whether a particular institution or organization qualifies as an "eligible
guarantor institution," an investor should contact the Client Services
Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY). Within 90 days of a redemption,
a shareholder may invest all or part of the redemption proceeds in Class A
shares of any AIM Fund 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 Class A shares of either AIM LIMITED MATURITY TREASURY
FUND or AIM TAX-FREE INTERMEDIATE FUND, 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
HIGH INCOME MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT and AIM TAX-FREE INTERMEDIATE FUND 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 FLEX FUND..................... declared and paid quarterly quarterly 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 ASIAN 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 EUROPEAN DEVELOPMENT 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 HIGH INCOME MUNICIPAL FUND............ declared daily; paid monthly 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 FUND........ 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 SELECT GROWTH FUND.................... declared and paid annually 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 FUND............ 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 (iii) dividends and distributions attributable
to Class A shares may not be reinvested in 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 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. Dividends on all shares may also be
affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such
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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 HIGH INCOME MUNICIPAL FUND, AIM
MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT
CASH FUND, and AIM TAX-FREE INTERMEDIATE FUND (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 INTERNATIONAL VALUE FUND, AIM ADVISOR REAL ESTATE
FUND, AIM ASIAN GROWTH FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM GLOBAL
AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM HIGH
INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED MATURITY TREASURY
FUND, 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 FUND 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 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
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other taxable securities. For additional information concerning the alternative
minimum tax and certain collateral tax consequences of the receipt of
exempt-interest dividends, see the Statements of Additional Information
applicable to the Tax-Exempt Funds.
The Tax-Exempt Funds may pay dividends to shareholders which are taxable, but
will endeavor to avoid investments which would result in taxable dividends. The
percentage of dividends which constitute exempt-interest dividends, and the
percentage thereof (if any) which constitute an item of tax preference, will be
determined annually. This percentage may differ from the actual percentages for
any particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional shares.
Distributions of net long-term capital gains will be taxable as long-term
capital gains, whether received in cash or additional shares, and regardless of
the length of time a particular shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM INTERMEDIATE GOVERNMENT FUND and AIM LIMITED MATURITY TREASURY
FUND -- 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 ASIAN GROWTH FUND, AIM EUROPEAN
DEVELOPMENT 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.
Shareholders should also note that the IRS is currently considering whether
and when the introduction of a single European currency (euro) in 1999 will
cause gain or loss to be realized on foreign financial instruments denominated
in certain European currencies, which could affect the amount of distributions
made by AIM Funds investing in such instruments.
- --------------------------------------------------------------------------------
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 HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM LIMITED MATURITY TREASURY FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE
INTERMEDIATE FUND, for which The Bank of New York, 90 Washington Street, 11th
Floor, New York, New York 10286, serves as custodian. Chase Bank of Texas, N.A.,
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, LLP,
Philadelphia, Pennsylvania, serves as counsel to the AIM Funds and passes upon
legal matters.
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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties (the "Software"). Many
software systems in use today are unable to distinguish between the year 2000
from the year 1900. This defect if not cured will likely adversely affect the
services that AIM Management, its subsidiaries and other service providers
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the fourth quarter of
1998. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm Year 2000 compliance
upon installation.
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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.
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APPENDIX A
- --------------------------------------------------------------------------------
DESCRIPTION OF MONEY MARKET INSTRUMENTS
The following list does not purport to be an exhaustive list of all Money
Market Instruments, and the Funds reserve the right to invest in Money Market
Instruments other than those listed below:
U.S. GOVERNMENT DIRECT OBLIGATIONS -- Bills, notes and bonds issued by the U.S.
Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES -- Certain federal agencies such as the
Government National Mortgage Association have been established as
instrumentalities of the U.S. Government to supervise and finance certain types
of activities. Issues of these agencies, while not direct obligations of the
U.S. Government, are either backed by the full faith and credit of the United
States or are guaranteed by the Treasury or supported by the issuing agencies'
right to borrow from the Treasury.
BANKERS' ACCEPTANCES -- A bill of exchange or time draft drawn on and accepted
by a commercial bank. It is used by corporations to finance the shipment and
storage of goods and to furnish dollar exchange. Maturities are generally six
months or less.
CERTIFICATES OF DEPOSIT -- A negotiable interest-bearing instrument with a
specific maturity. Certificates of deposit are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market, prior to maturity.
TIME DEPOSITS -- A non-negotiable receipt issued by a bank in exchange for the
deposit of funds. Like a certificate of deposit, it earns a specified rate of
interest over a definite period of time; however, it cannot be traded in the
secondary market.
COMMERCIAL PAPER -- The term used to designate unsecured short-term promissory
notes issued by corporations and other entities. Maturities on these issues vary
from a few days to nine months.
REPURCHASE AGREEMENTS -- A repurchase agreement is a contractual undertaking
whereby the seller of securities (limited to U.S. Government securities,
including securities issued or guaranteed by the U.S. Treasury or the various
agencies and instrumentalities of the U.S. Government, including mortgage-backed
securities issued by U.S. Government agencies) agrees to repurchase the
securities at a specified price on a future date determined by negotiations.
MASTER NOTES -- Unsecured demand notes that permit investment of fluctuating
amounts of money at varying rates of interest pursuant to arrangements with
issuers who meet the quality criteria of a Fund. The interest rate on a master
note may fluctuate based upon changes in specified interest rates or be reset
periodically according to a prescribed formula or may be a set rate. Although
there is no secondary market in master notes, if such notes have a demand
feature, the payee may demand payment of the principal amount of the note on
relatively short notice.
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks or corporations,
may carry variable or floating rates of interest. Such instruments bear interest
at rates which are not fixed, but which vary with changes in specified market
rates or indices, such as a Federal Reserve composite index.
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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 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.
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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.
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> 130
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> 131
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>
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for 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-05/98
B-1
<PAGE> 132
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. 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").
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 redemptions must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "How to Redeem
Shares -- Redemptions by Mail").
MCF-05/98
B-2
<PAGE> 133
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
TABLE OF CONTENTS
INVESTMENT OBJECTIVES.................... 2
Investment Advisor SUMMARY.................................. 2
A I M Advisors, Inc. THE FUNDS................................ 4
11 Greenway Plaza, Suite 100 Table of Fees and Expenses............. 4
Houston, TX 77046-1173 Financial Highlights................... 6
Performance............................ 18
Transfer Agent About the Funds........................ 18
A I M Fund Services, Inc. Investment Programs.................... 19
P.O. Box 4739 Certain Investment Strategies and
Houston, TX 77210-4739 Policies............................... 23
Management............................. 26
Custodian Organization of the Trust.............. 30
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110 INVESTOR'S GUIDE TO THE AIM FAMILY OF
FUNDS--Registered Trademark--.......... A-1
The Bank of New York Introduction to The AIM Family of
90 Washington Street Funds.................................. A-1
New York, NY 10286 How to Purchase Shares................. A-1
[AIM Municipal Bond Fund only] Terms and Conditions of Purchase of the
AIM Funds........................... A-2
Principal Underwriter Special Plans.......................... A-9
A I M Distributors, Inc. Exchange Privilege..................... A-11
P.O. Box 4739 How to Redeem Shares................... A-13
Houston, TX 77210-4739 Determination of Net Asset Value....... A-17
Dividends, Distributions and Tax
Independent Accountants Matters................................ A-18
KPMG Peat Marwick LLP General Information.................... A-20
700 Louisiana Appendix A............................. A-22
Houston, TX 77002 Appendix B............................. A-23
Appendix C............................. A-25
Application Instructions................. B-1
</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.
AFG-PRO-1
<PAGE> 134
AIM FUNDS GROUP
AIM MONEY MARKET FUND
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 347-4246
AIM INVESTMENT PORTFOLIOS
AIM DOLLAR FUND
c/o AIM Funds
San Francisco, CA 94120-7345
Toll Free: (800) 347-4246
STATEMENT OF ADDITIONAL INFORMATION
(1998 Special Meeting of Shareholders of AIM Dollar Fund)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement and Prospectus dated
October __, 1998 of AIM Funds Group (the "Company") for use in connection with
the Special Meeting of Shareholders of AIM Dollar Fund ("Dollar Fund") to be
held on December 11, 1998. Copies of the Combined Proxy Statement and Prospectus
may be obtained at no charge by writing the Company at the address shown above
or by calling 1-800-347-4246.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement and Prospectus.
A Statement of Additional Information for the Company dated May 1,
1998, as supplemented on July 1, 1998, has been filed with the Securities and
Exchange Commission and is attached hereto as Appendix I which is incorporated
herein by this reference.
The date of this Statement of Additional Information is October __,
1998.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE COMPANY..................................................................................................... 2
DESCRIPTION OF PERMITTED INVESTMENTS............................................................................ 2
TRUSTEES AND OFFICERS OF THE COMPANY............................................................................ 2
ADVISORY AND MANAGEMENT - RELATED SERVICES AGREEMENTS AND PLANS OF DISTRIBUTION................................. 2
PORTFOLIO TRANSACTIONS.......................................................................................... 2
DESCRIPTION OF SHARES........................................................................................... 2
DETERMINATION OF NET ASSET VALUE................................................................................ 2
TAXES........................................................................................................... 2
PERFORMANCE DATA................................................................................................ 3
FINANCIAL INFORMATION........................................................................................... 3
</TABLE>
Appendix I - AIM Funds Group Statement of Additional Information
Appendix II - AIM Money Market Fund Semiannual Report
Appendix III - Annual Report of G T Global Dollar Fund (predecessor
to AIM Dollar Fund)
Appending IV - AIM Dollar Fund Semiannual Report
Appendix V - Pro Forma Financial Statements
<PAGE> 135
THE COMPANY
This Statement of Additional Information relates to AIM Funds Group (the
"Company") and the AIM Money Market Fund ("Money Market"). AFG is registered as
an open-end management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"). Money Market is a separate series of shares
of beneficial interest in the Company.
DESCRIPTION OF PERMITTED INVESTMENTS
For a discussion of the fundamental and nonfundamental investment policies of
Money Market adopted by the Company's Board of Trustees, see heading "Investment
Restrictions" in the Company's Statement of Additional Information attached
hereto as Appendix I.
TRUSTEES AND OFFICERS OF THE COMPANY
For a disclosure of the names and a brief occupational biography of each of the
Company's officers and trustees identifying those who are interested persons of
the Company as well as stating their aggregate renumeration, see heading
"Management of the Trust? in the Company's Statement of Additional Information
attached hereto as Appendix I.
ADVISORY AND MANAGEMENT - RELATED SERVICES AGREEMENTS AND PLANS OF DISTRIBUTION
For a discussion of the Company's advisory and management-related services
agreements and plans of distribution, see headings "Investment Advisory and
Other Services," "The Distribution Plans," and "The Distributor" in the
Company's Statement of Additional Information attached hereto as Appendix I.
PORTFOLIO TRANSACTIONS
For a discussion of the Company's brokerage policy, see heading "Portfolio
Transactions and Brokerage" in the Company's Statement of Additional Information
attached hereto as Appendix I.
DESCRIPTION OF SHARES
For a discussion of the Company's authorized securities and the characteristics
of the Company's shares of beneficial interest, see heading "General Information
about the Trust" in the Company's Statement of Additional Information attached
hereto as Appendix I.
DETERMINATION OF NET ASSET VALUE
For a discussion of the Company's valuation and pricing procedures and a
description of its purchase and redemption procedures, see heading
"Determination of Net Asset Value" in the Company's Statement of Additional
Information attached hereto as Appendix I.
TAXES
For a discussion of any tax information relating to ownership of the Company's
shares, see heading "Tax Matters" in the Company's Statement of Additional
information attached hereto as Appendix I.
PERFORMANCE DATA
For a description and quotation of certain performance data used by the Company,
see heading "General Information about the Trust" in the Company's Statement of
Additional Information attached hereto as Appendix I.
S-2
<PAGE> 136
FINANCIAL INFORMATION
The audited financial statements of Money Market and the report thereon by KPMG
Peat Marwick, LLP, are set forth under the heading ?Financial Statements? in the
Company?s Statement of Additional Information attached hereto as Appendix I. The
unaudited interim financial statements for Money Market for the six-month period
ended June 30, 1998, are set forth in the Semiannual Report of Money Market,
which is attached hereto as Appendix II.
The audited financial statements of Dollar Fund and the report thereon by
PricewaterhouseCoopers, LLP, are set forth in the Annual Report of GT Global
Dollar Fund, the predecessor to Dollar Fund, dated December 31, 1997, which is
incorporated herein by reference and attached hereto as Appendix III. The
unaudited interim financial statements for Dollar Fund for the six-month period
ended June 30, 1998, are set forth in the Semiannual Report of G T Global Dollar
Fund, which is attached hereto as Appendix IV.
Pro forma financial statements for Money Market, giving effect to the
Reorganization, are attached hereto as Appendix V.
<PAGE> 137
APPENDIX I
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 SELECT GROWTH FUND
AIM VALUE FUND
Supplement dated July 1, 1998
to the Statement of Additional Information dated May 1, 1998
The first sentence in the first paragraph under the caption "INVESTMENT
OBJECTIVES AND POLICIES - Futures Contracts: All Funds Except Money Market
Fund" on page 15 is deleted and replaced in its entirety by the following:
"In cases of purchases of futures contracts, an amount of liquid
assets, equal to the cost of the futures contracts (less any related margin
deposits), will be segregated to collateralize the position and ensure that the
use of such futures contracts is unleveraged."
<PAGE> 138
STATEMENT OF
ADDITIONAL INFORMATION
AIM FUNDS GROUP
AIM BALANCED FUND AIM MONEY MARKET FUND
AIM GLOBAL UTILITIES FUND AIM MUNICIPAL BOND FUND
AIM HIGH YIELD FUND AIM SELECT GROWTH FUND
AIM INCOME FUND AIM VALUE FUND
AIM INTERMEDIATE GOVERNMENT 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 A I M DISTRIBUTORS,
INC., P.O. BOX 4739, HOUSTON, TEXAS 77210-4739.
-------------------------
Statement of Additional Information Dated: May 1, 1998
Relating to the Prospectus Dated: May 1, 1998
<PAGE> 139
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
Allocation of Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 28(e) Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Transactions with Regular Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Brokerage Commissions Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
All Funds except AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
AIM Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
AIM Global Utilities Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Lending Portfolio Securities: All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Covered Call Options: All Funds except AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . 13
Put Options: AIM Global Utilities Fund, AIM Select Growth Fund and AIM Value Fund . . . . . . . . . . . . . 14
Combined Option Positions: AIM Global Utilities Fund, AIM Select Growth Fund and AIM
Value Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Short Sales: AIM Balanced Fund and AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Futures Contracts: All Funds except AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . 15
Options on Futures Contracts: All Funds except AIM Money Market Fund . . . . . . . . . . . . . . . . . . . 16
Risks as to Futures Contracts and Related Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Delayed Delivery Agreements: All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
When-Issued Securities: All Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Foreign Exchange Transactions: All Funds (except AIM Intermediate Government Fund, AIM
Money Market Fund and AIM Municipal Bond Fund) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Rule 144A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
AIM Balanced Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
AIM Global Utilities Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
AIM Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
AIM Intermediate Government Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
AIM Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
AIM Select Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
AIM Value Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
i
<PAGE> 140
<TABLE>
<S> <C>
MANAGEMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
THE DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
THE DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
HOW TO PURCHASE AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
QUALIFYING FOR A REDUCED FRONT-END SALES CHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
PROGRAMS AND SERVICES FOR SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Dividend Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
DESCRIPTION OF MONEY MARKET INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Money Market Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Custodians and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
RATINGS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS
</TABLE>
ii
<PAGE> 141
INTRODUCTION
AIM Funds Group (the "Trust") is a series mutual fund. The rules and
regulations of the Securities and Exchange Commission (the "SEC") require all
mutual funds to furnish prospective investors certain information concerning
the activities of a fund being considered for investment. This information is
included in a Prospectus (the "Prospectus"), dated May 1, 1998, 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 further
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. The Trust Agreement was
amended on May 1, 1998, to change the name of AIM Growth Fund to AIM SELECT
GROWTH FUND. Shares of beneficial interest of the Trust are redeemable at
their net asset value at the option of the shareholder or at the option of the
Trust in certain circumstances. For information concerning the methods
of redemption and the rights of share
1
<PAGE> 142
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>
2
<PAGE> 143
Each Fund may also compare its performance to performance data of
similar mutual funds as published by the following services:
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 SELECT 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> 144
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, 1997, were as follows:
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1997
-------------------------------
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS
-------------- ------ ------- --------
<S> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . . . . . . . . 18.50% 15.81% 14.79%
AIM Global Utilities Fund . . . . . . . . . . . . . . . . 16.91% 11.12% 13.36%*
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . 7.20% 10.97% 11.77%
AIM Income Fund . . . . . . . . . . . . . . . . . . . . . 6.62% 8.65% 9.41%
AIM Intermediate Government Fund . . . . . . . . . . . . . 3.92% 5.03% 7.12%
AIM Municipal Bond Fund . . . . . . . . . . . . . . . . . 2.16% 5.22% 7.53%
AIM Select Growth Fund . . . . . . . . . . . . . . . . . . 12.97% 12.13% 12.61%
AIM Value Fund . . . . . . . . . . . . . . . . . . . . . . 17.12% 17.27% 19.59%
</TABLE>
* The inception date of the Class A shares of AIM GLOBAL UTILITIES
FUND was January 18, 1988.
The average annual total returns for each of the named Funds, with
respect to its Class B shares, for the periods ended December 31, 1997, were as
follows:
<TABLE>
<CAPTION>
CLASS B SHARES: PERIODS ENDED DECEMBER 31, 1997
-------------- -------------------------------
1 YEAR SINCE INCEPTION**
------ -----------------
<S> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . . . . 18.42% 14.30%
AIM Global Utilities Fund . . . . . . . . . . . . 17.74% 8.84%
AIM High Yield Fund . . . . . . . . . . . . . . . 6.71% 9.58%
AIM Income Fund . . . . . . . . . . . . . . . . . 5.89% 6.31%
AIM Intermediate Government Fund . . . . . . . . . 3.16% 4.20%
AIM Municipal Bond Fund . . . . . . . . . . . . . 1.59% 3.86%
AIM Select Growth Fund . . . . . . . . . . . . . . 13.50% 13.16%
AIM Value Fund . . . . . . . . . . . . . . . . . . 17.96% 16.19%
</TABLE>
**The inception date of the Class B shares of AIM GLOBAL UTILITIES
FUND, AIM HIGH YIELD FUND, AIM MUNICIPAL BOND FUND and AIM SELECT
GROWTH 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, 1997 were -1.29%, -1.16% and 4.66%, respectively;
and since inception (October 16, 1993) were 2.85%, 3.07% and 4.28%,
respectively.
Standard total return quotes may be accompanied by total return
figures calculated by alternative methods. For example, average annual total
return may be calculated without assuming payment of the full sales load
according to the following formula:
4
<PAGE> 145
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.
Since quotations of average annual total return for periods of less
than one year may be misleading, and the Class C shares of the Funds have been
offered for less than one year, the performance of the Class C shares is
provided below in the form of cumulative total return. For the period August
4, 1997 (inception date) through December 31, 1997, the cumulative total
returns of the Class C shares of the Funds were as follows:
<TABLE>
<CAPTION>
CLASS C SHARES: PERIOD ENDED DECEMBER 31, 1997
-------------- ------------------------------
<S> <C>
AIM Balanced Fund . . . . . . . . . . . . . . . . . . . . . . . . 3.67%
AIM Global Utilities Fund . . . . . . . . . . . . . . . . . . . . 8.74%
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . . 3.49%
AIM Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . 3.96%
AIM Intermediate Government Fund . . . . . . . . . . . . . . . . . 2.64%
AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . . 0.59%
AIM Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . 1.36%
AIM Select Growth Fund . . . . . . . . . . . . . . . . . . . . . . -4.71%
AIM Value Fund . . . . . . . . . . . . . . . . . . . . . . . . . -0.98%
</TABLE>
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.
5
<PAGE> 146
Tax-equivalent yield for AIM MUNICIPAL BOND FUND will be calculated by
dividing that portion of the yield of the Fund (as determined above) which is
tax-exempt by one minus a stated income tax rate and adding the product to that
portion of the yield that is not tax-exempt.
The yields for each of the named Funds were as follows:
<TABLE>
<CAPTION>
30 DAYS ENDED DECEMBER 31, 1997
---------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- -------------- --------------
<S> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . 2.22% 1.51% 1.51%
AIM Global Utilities Fund . . . . . . . 2.10% 1.47% 1.47%
AIM High Yield Fund . . . . . . . . . . 7.63%* 7.26%* 7.26%*
AIM Income Fund . . . . . . . . . . . . 6.04% 5.54% 5.54%
AIM Intermediate Government Fund . . . . 5.71% 5.22% 5.22%
AIM Municipal Bond Fund . . . . . . . . 3.89%** 3.29%** 3.29%**
</TABLE>
* The relatively high yields in this Fund, like that of other junk
bond funds, reflect a substantial premium for the high default
risk perceived by the market. Investors should not consider these
yields a measure of income potential.
** The tax-equivalent yield, assuming a tax rate of 39.6%, for the
Class A shares, Class B shares and Class C shares of AIM
MUNICIPAL BOND FUND was 6.44%, 5.45% and 5.45%, 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 stated
1 period.
The annualized yield for each of the Class A, Class B and Class C
shares and AIM Cash Reserve Shares of AIM MONEY MARKET FUND for the 7 days ended
December 31, 1997, was 4.76%, 3.99%, 3.99% and 4.83%, respectively.
The standard formula for calculating effective annualized yield for AIM
Money Market Fund, as described in the Prospectus, is as follows:
365/7
EY = (Y+1) -1
Where EY = effective annualized yield.
Y = annualized yield, as determined above.
The effective annualized yield for each of the Class A, Class B and
Class C shares and AIM Cash Reserve Shares of AIM MONEY MARKET FUND for the 7
days ended December 31, 1997, was 4.87%, 4.06%, 4.06% and 4.95%, respectively.
For the purpose of determining the annualized yield and effective
annualized yield, the net change in the value of the hypothetical AIM MONEY
MARKET FUND account reflects the value of additional shares purchased with
dividends from the original shares and any such additional shares, and all fees
charged, other
6
<PAGE> 147
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 or income other than investment income.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
A I M Advisors, Inc. ("AIM") makes decisions to buy and sell securities
for each Fund, selects broker-dealers, effects the Funds' investment portfolio
transactions, allocates brokerage fees in such transactions, and where
applicable, negotiates commissions and spreads on transactions. AIM's primary
consideration in effecting a security transaction is to obtain the most
favorable execution of the order, which includes the best price on the security
and a low commission rate. While AIM seeks reasonably competitive commission
rates, the Funds may not pay the lowest commission or spread available. See
"Section 28(e) Standards" below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. In such transactions, a Fund deals directly with
dealers who make markets in the securities involved, except when better prices
are available elsewhere. Portfolio transactions placed through dealers who are
primary market makers are effected at net prices without commissions, but which
include compensation in the form of a mark up or mark down.
Traditionally, commission rates have not been negotiated on stock
markets outside the United States. Although in recent years many overseas
stock markets have adopted a system of negotiated rates, a number of markets
maintain an established schedule of minimum commission rates.
AIM may determine target levels of commission business with various
brokers on behalf of its clients (including the Funds) over a certain time
period. The target levels will be based upon the following factors, among
others: (1) the execution services provided by the broker; (2) the research
services provided by the broker; and (3) the broker's interest in mutual funds
in general and in the Funds and other mutual funds advised by AIM or A I M
Capital Management, Inc. (collectively, the "AIM Funds") in particular,
including sales of the Funds and of the other AIM Funds. In connection with
(3) above, the Funds' trades may be executed directly by dealers that sell
shares of the AIM Funds or by other broker-dealers with which such dealers have
clearing arrangements. AIM will not use a specific formula in connection with
any of these considerations to determine the target levels.
AIM will seek, whenever possible, to recapture for the benefit of a
Fund any commissions, fees, brokerage or similar payments paid by the Fund on
portfolio transactions. Normally, the only fees which AIM can recapture are the
soliciting dealer fees on the tender of a Fund's portfolio securities in a
tender or exchange offer.
The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of a Fund, provided the conditions of an exemptive order received by
the Funds from the SEC are met. In addition, a Fund may purchase or sell a
security from or to another AIM Fund provided the Funds follow procedures
adopted by the Boards of Directors/Trustees of the various AIM Funds, including
the Trust. These inter-fund transactions do not generate brokerage commissions
but may result in custodial fees or taxes or other related expenses.
Under the 1940 Act, certain persons affiliated with the Trust are
prohibited from dealing with the Funds as principal in any purchase or sale of
securities unless an exemptive order allowing such transactions is
obtained from the SEC. The 1940 Act also prohibits the Funds from purchasing a
security being publicly underwritten by a syndicate of which certain persons
affiliated with the Trust are members except in accordance with certain
conditions. These conditions may restrict the ability of a Fund to purchase
municipal securities being publicly underwritten by such syndicate, and the
Fund may be required to wait until the
7
<PAGE> 148
syndicate has been terminated before buying such securities. At such time, the
market price of the securities may be higher or lower than the original offering
price. A person affiliated with the Trust may, from time to time, serve as
placement agent or financial advisor to an issuer of municipal securities and be
paid a fee by such issuer. Each Fund may purchase such municipal securities
directly from the issuer, provided that the purchase is reviewed by the Board of
Trustees and a determination is made that the placement fee or other
remuneration paid by the issuer to a person affiliated with the Trust is fair
and reasonable in relation to the fees charged by others performing similar
services.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage several other investment accounts. Some
of these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by one of
the Funds and by another Fund or one or more of these investment accounts.
However, the position of each account in the same securities and the length of
time that each account may hold its investment in the same securities may 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 the Fund(s) and one or more of these accounts, and
is considered at or about the same time, AIM will fairly allocate transactions
in such securities among the Fund(s) and these accounts. AIM may combine such
transactions, in accordance with applicable laws and regulations, to obtain the
most favorable execution. Simultaneous transactions could, however, adversely
affect a Fund's ability to obtain or dispose of the full amount of a security
which it seeks to purchase or sell.
Sometimes 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,
AIM considers the 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.
SECTION 28(e) STANDARDS
Section 28(e) of the Securities Exchange Act of 1934 provides that AIM,
under certain circumstances, lawfully may cause an account to pay a higher
commission than the lowest available. Under 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."
The services provided by the broker also must lawfully and appropriately assist
AIM in the performance of its investment decision-making responsibilities.
Accordingly, in recognition of research services provided to it, a Fund may pay
a broker higher commissions than those available from another broker.
Research services received from broker-dealers supplement AIM's own
research (and the research of its affiliates), and may include the following
types of information: statistical and background information on the U.S. and
foreign economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
accounts; 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. Broker-dealers may communicate such information electronically, orally
or in written form. Research services may also include the providing of
custody services, as well as the providing of equipment used to communicate
research information, the providing of specialized consultations with AIM
personnel with respect to computerized systems and data furnished to AIM as a
component of other research services, the arranging of meetings with management
of companies, and the providing of access to consultants who supply research
information.
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The outside research assistance is useful to AIM since the
broker-dealers used by AIM tend to follow a broader universe of securities and
other matters than AIM's staff can follow. In addition, the research provides
AIM with a diverse perspective on financial markets. Research services
provided to AIM by broker-dealers are available for the benefit of all accounts
managed or advised by AIM or by its affiliates. 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. However, the Funds are not
under any obligation to deal with any broker-dealer in the execution of
transactions in portfolio securities.
In some cases, the research services are available only from the
broker-dealer providing them. In other cases, the research services may be
obtainable from alternative sources in return for cash payments. AIM believes
that the research services are beneficial in supplementing AIM's research and
analysis and that they improve the quality of AIM's investment advice. The
advisory fee paid by the Funds is not reduced because AIM receives such
services. However, to the extent that AIM would have purchased research
services had they not been provided by broker-dealers, the expenses to AIM
could be considered to have been reduced accordingly.
TRANSACTIONS WITH REGULAR BROKERS
As of December 31, 1997, 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,
Goldman Sachs Pierce Fenner &
& Co. Smith Inc.
-------------- ---------------
<S> <C> <C>
AIM High Yield Fund $ 42,498,660 --
AIM Intermediate Government Fund 26,089,190 --
AIM Money Market Fund 21,619,327 --
AIM Value Fund 1,009,483,498 200,000,000
</TABLE>
As of December 31, 1997, AIM BALANCED FUND, AIM SELECT GROWTH FUND and
AIM VALUE FUND held an amount of common stock issued by Merrill Lynch & Co.
Inc. having a market value of $2,917,500, $2,844,563 and $151,841,288.
BROKERAGE COMMISSIONS PAID
For the year ended December 31, 1997, AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM SELECT GROWTH FUND and AIM VALUE FUND directed certain
brokerage transactions to broker-dealers that provided AIM with research,
statistical and other information: $34,314,244, $4,960,864, $74,595,852 and
$1,925,874,330, respectively. For the same period, AIM BALANCED FUND, AIM
GLOBAL UTILITIES FUND, AIM SELECT GROWTH FUND,and AIM VALUE FUND paid the
following in related brokerage commissions: $51,902, $7,994, $65,579 and
$1,737,500, respectively.
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, 1997, 1996 and 1995.
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<PAGE> 150
<TABLE>
<CAPTION>
FUND 1997 1996 1995
---- ------- -------- --------
(000) (000) (000)
<S> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . $ 726 $ 357 $ 117
AIM Global Utilities Fund . . . . . . . . . 150 275 596
AIM High Yield Fund . . . . . . . . . . . . 102 87 -0-
AIM Income Fund . . . . . . . . . . . . . . 28 11 4
AIM Intermediate Government Fund . . . . . -0- -0- -0-
AIM Municipal Bond Fund . . . . . . . . . . -0- -0- -0-
AIM Select Growth Fund . . . . . . . . . . 1,101 929 520
AIM Value Fund . . . . . . . . . . . . . . 35,473 29,515 17,964
</TABLE>
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 SELECT 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
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<PAGE> 151
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 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.
Securities in which the Fund invests may be insured by financial insurance
companies. Since a limited number of entities provide such insurance, the Fund
may invest more than 25% of its assets in securities insured by the same
insurance company.
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
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<PAGE> 152
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 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 deregulation and 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.
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<PAGE> 153
LENDING PORTFOLIO SECURITIES: ALL FUNDS
Consistent with applicable regulatory requirements, the Funds may lend
their portfolio securities (principally to broker-dealers) to the extent of
one-third of their respective total assets. Such loans would be callable at
any time and would be continuously secured by collateral equal to no less than
the market value, determined daily, of the loaned securities. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or
any of its agencies. The Funds would continue to receive the income on loaned
securities and would, at the same time, earn interest on the loan collateral or
on the investment of the loan collateral if it were cash. Any cash collateral
pursuant to these loans would be invested in short-term money market
instruments. Where voting or consent rights with respect to loaned securities
pass to the borrower, the 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. Each of AIM GLOBAL UTILITIES FUND, AIM SELECT GROWTH
FUND and AIM VALUE FUND, as non-fundamental policies (a) will not write covered
call options such that the aggregate value of the securities underlying all such
options exceeds 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.
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<PAGE> 154
PUT OPTIONS: AIM GLOBAL UTILITIES FUND, AIM SELECT GROWTH FUND AND AIM VALUE
FUND
Each of AIM GLOBAL UTILITIES FUND, AIM SELECT 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 SELECT 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.
COMBINED OPTION POSITIONS: AIM GLOBAL UTILITIES FUND, AIM SELECT 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. This technique, called a "collar," 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 stock appreciation. Another possible
combined position would involve writing a covered call option at one strike
price and buying a call option at a higher 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
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<PAGE> 155
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 liquid assets,
equal to the cost of the futures contracts (less any related margin deposits),
will be segregated with a Fund's custodian to collateralize the position and
ensure that the use of such futures contracts is unleveraged. Unlike when a
Fund purchases or sells a security, no price is paid or received by a Fund upon
the purchase or sale of a futures contract. Initially, a Fund will be required
to deposit with its custodian for the account of the broker a stated amount, as
called for by the particular contract, of liquid assets. 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 SELECT 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")
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<PAGE> 156
An interest rate futures contract is an agreement between two parties to
buy and sell a debt security for a set price on a future date. Currently,
there are futures contracts based on long-term U.S. Treasury bonds, U.S.
Treasury notes, U.S. Treasury bills, Eurodollars and the Bond Buyer Municipal
Bond Index.
Foreign Currency Futures Contracts - All Funds (except AIM INTERMEDIATE
GOVERNMENT FUND, AIM MONEY MARKET FUND and AIM MUNICIPAL BOND FUND)
Futures contracts may also be used to hedge the risk of changes in the
exchange rates of foreign currencies.
OPTIONS ON FUTURES CONTRACTS: ALL FUNDS EXCEPT AIM MONEY MARKET FUND
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the option exercise period.
The writer of the option is required upon exercise to assume an offsetting
futures position (a short position if the option is a call and a long position
if the option is a put) at a specified exercise price at any time during the
period of the option. Upon exercise of the option, the assumption of
offsetting futures positions by the writer and holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's futures
margin account which represents the amount by which the market price of the
futures contract, at exercise, exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract.
If an option on a futures contract is exercised on the last trading date prior
to the expiration date of the option, the settlement will be made entirely in
cash equal to the difference between the exercise price of the option and the
closing price of the futures contract on the expiration date.
A Fund may purchase and sell put and call options on futures contracts in
order to hedge the value of 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.
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Positions in futures contracts or options may be closed out only on an
exchange on which such contracts are traded. Although the Funds intend to
purchase or sell futures contracts or purchase options only on exchanges or
boards of trade where there appears to be an active market, there is no
assurance that a liquid market on an exchange or board of trade will exist for
any particular contract or at any particular time. If there is not a liquid
market at a particular time, it may not be possible to close a futures position
or purchase an option at such time. In the event of adverse price movements
under those circumstances, the Fund would continue to be required to segregate
additional liquid assets for payment 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 liquid assets 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 liquid assets
in the same fashion as required for a delayed delivery agreement. Such
segregated liquid 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
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applicable, changes in the level of interest rates. Therefore, if a Fund is to
remain substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a possibility that the market
value of the Fund's assets will fluctuate to a greater degree. Furthermore,
when the time comes for the Fund to meet its obligations under when-issued
commitments, the Fund will do so by using then available cash flow, by sale of
the segregated liquid 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 resale 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 their respective 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 or assets shall not
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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 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
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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 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.
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4. Act as a securities underwriter.
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 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.
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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.
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.
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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).
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.
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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.
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.
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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 SELECT 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.
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 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
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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 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.
As a non-fundamental policy, none of the Funds will 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.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 2, 1998, 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 10.89% of the outstanding AIM
Cash Reserve Shares of AIM MONEY MARKET FUND, and 1.48% of the outstanding
Class A shares of AIM MUNICIPAL BOND FUND.
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 February 2, 1998, and the percentage of the outstanding shares
held by such holders are set forth below:
26
<PAGE> 167
<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 7.16% -0-
Class A shares Qualified Retirement Plans
Merrill Lynch Grp Empl Svcs
265 Davidson Ave. 4th Fl.
Somerset, NJ 08873
Merrill Lynch, Pierce, 6.41% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 12.83% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class C shares Merrill Lynch, Pierce, 33.29% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
AIM Global Utilities Fund - Merrill Lynch, Pierce, 8.39% -0-
Class B shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class C shares Wheat First Securities, Inc. 34.13% -0-
Penelope R. Best
6068 Barnhill Ct.
Frederick, MD 21701
Bear Stearns Securities Corp. 6.04% -0-
FBO 629-01820-10
1 Metrotech Center North
Brooklyn, NY 11201
ITC Cust. IRA FBO 5.50% -0-
Arlie Albeck
342 N. 75th St.
Seattle, WA 98103
</TABLE>
- ----------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
27
<PAGE> 168
<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, 7.65% -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
Class C shares Merrill Lynch, Pierce, 28.51% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
AIM Income Fund - Merrill Lynch, Pierce, 5.47% -0-
Class A shares Fenner & Smith
Mutual Fund Operations
P.O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 11.25% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class C shares Merrill Lynch, Pierce, 21.58% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
</TABLE>
- ----------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
28
<PAGE> 169
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address Owned of and
Fund of Owner Record* Beneficially
- ---- ---------------- -------- ------------
<S> <C> <C> <C>
Sharon Copeland Tr Young's Inc. 6.20% -0-
401K PSP Sharon Copeland Ttee
Dtd. 01/17/80
3121 SE 6th
Topeka, KS 66607
ITC Cust. IRA FBO 5.74% -0-
Charles Dee Slovak
2532 Yorktown
Houston, TX 77056
AIM Intermediate Government Fund - Merrill Lynch, Pierce, 8.00% -0-
Class A shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 17.68% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class C shares ITC Cust. IRA FBO 18.59% -0-
John R. Baker
Plan 09/16/92
301 Elizabeth St.
Summerville, SC 29483
ITC Cust. 403B Plan 16.74% -0-
First-Plymouth Conge. Church FBO
John M. Levick Jr.
2454 Ryons St.
Lincoln, NE 68502
Arden W. Richards and 15.11% -0-
Velma T. Richards
2401 E. Seventh St.
Tucson, AZ 85719
</TABLE>
- ----------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
29
<PAGE> 170
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address Owned of and
Fund of Owner Record* Beneficially
- ---- ---------------- -------- ------------
<S> <C> <C> <C>
Victor P. Biasella Ttee 7.46% -0-
Victor P. Biasella Rev. Liv. Tr.
Dtd. 11-07-96
1509 Bailey Rd.
Cuyohoga Falls, OH 44221
Merrill Lynch, Pierce 5.50% -0-
Fenner Smith
Mutual Fund Operations
P.O. Box 45286
Jacksonville, FL 32232-5286
AIM Money Market Fund - Fahnestock & Co. Inc. FBO 5.34% -0-
Class C shares Frederick Mark Kuhlmann Rev. Lvg. Tr.
125 Broad St.
New York, NY 10004
ITC Cust. Rollover IRA FBO 5.07% -0-
Everett M. Devaney
7015 Wensley Way
Jacksonville, FL 32217
AIM Cash Reserve Shares A I M Advisors, Inc. 10.77% -0-
11 Greenway Plaza
Suite 100
Attn: David Hessel
Houston, TX 77046
Charles T. Bauer and 7.36% -0-
Ruth J. Bauer
11 Greenway Plaza, Suite 100
Houston, TX 77046
AIM Fund Services FBO 5.39% -0-
AIM Family of Fund Shareholders
Red. Acct., Attn: Rob Frazer
11 Greenway Plaza
Houston, TX 77046
</TABLE>
- ----------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
30
<PAGE> 171
<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 11.76% -0-
Class B shares Fenner Smith
Mutual Fund Operations
P.O. Box 45286
Jacksonville, FL 32232-5286
Class C shares Merrill Lynch, Pierce, 23.75% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Ellen D. Rogers 13.67% -0-
2316 Brookmanor Dr.
Birmingham, AL 35223
Patricia C. Chernow 13.43% -0-
4 Fox Run Ln.
Westport, CT 06880
Donaldson Lufkin Jenrette 11.42% -0-
Securities Corp. Inc.
P.O. Box 2052
Jersey City, NY 07303
Alice R. St John 8.54% -0-
600 6th Avenue S.E.
Cullman, AL 35055
NFSC FEBO #ASX-112330 6.95% -0-
Carl H. Sorgen
P.O. Box 310
Port Clinton, Oh 43452
Massih Zahedirad and 6.87% -0-
Atyeh Zahedirad
2219 Fiesta Dr.
Newport Beach, CA 92668
</TABLE>
- ----------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
31
<PAGE> 172
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address Owned of and
Fund of Owner Record* Beneficially
- ---- ---------------- -------- ------------
<S> <C> <C> <C>
AIM Select Growth Fund - Merrill Lynch, Pierce, 17.00% -0-
Class B shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class C shares Merrill Lynch, Pierce, 48.77% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Patricia C. Chernow 9.73% -0-
4 Fox Run Ln.
Westport, CT 06880
AIM Value Fund - Merrill Lynch, Pierce, 9.58% -0-
Class A shares Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class B shares Merrill Lynch, Pierce, 16.21% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
Class C shares Merrill Lynch, Pierce, 31.90% -0-
Fenner & Smith
Mutual Fund Operations
P. O. Box 45286
Jacksonville, FL 32232-5286
</TABLE>
- ----------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
32
<PAGE> 173
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.
<TABLE>
<CAPTION>
POSITIONS
HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
- --------------------- ---------- ------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (79) Trustee and Chairman of the Board of Directors, A I M Management
Chairman Group Inc., A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company; and Vice
Chairman and Director, AMVESCAP PLC.
BRUCE L. CROCKETT (54) Trustee Director, ACE Limited (insurance company). Formerly,
906 Frome Lane Director, President and Chief Executive Officer, COMSAT
McLean, VA 22102 Corporation and Chairman, Board of Governors of INTELSAT
(international communications company).
OWEN DALY II (73) Trustee Director, Cortland Trust Inc. (investment company).
Six Blythewood Road Formerly, Director, CF & I Steel Corp., Monumental Life
Baltimore, MD 21210 Insurance Company and Monumental General Insurance
Company; and Chairman of the Board of Equitable
Bancorporation.
EDWARD K. DUNN, JR. (62) Trustee Chairman of the Board of Directors, Mercantile Mortgage
Mercantile Mortgage Corp. Corp.; and Director, AEGON USA (insurance company).
P.O. Box 1477 Formerly, Vice Chairman of the Board of Directors and
Baltimore, MD 21203 President, Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares.
JACK FIELDS (46) Trustee Chief Executive Officer, Texana Global, Inc. (foreign
Jetero Plaza, Suite E trading company). Formerly, Member of the U.S. House of
8810 Will Clayton Parkway Representatives.
Humble, TX 77338
**CARL FRISCHLING (61) Trustee Partner, Kramer, Levin, Naftalis & Frankel (law firm).
919 Third Avenue Director, ERD Waste, Inc. (waste management company),
New York, NY 10022 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).
</TABLE>
- -------------------------
* A trustee who is an "interested person" of the Trust and A I M
Advisors, Inc. as defined in the 1940 Act.
** A trustee who is an "interested person" of the Trust as defined in the
1940 Act.
33
<PAGE> 174
<TABLE>
<CAPTION>
POSITIONS
HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
- --------------------- ---------- ------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (51) Trustee and Director, President and Chief Executive Officer, A I M
President Management Group Inc.; Director and President, A I M
Advisors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc. and Fund Management Company;
Director, AMVESCAP PLC; Chairman of the Board of
Directors and President, INVESCO Holdings Canada Inc.;
and Director, AIM Funds Group Canada Inc. and INVESCO
G.P. Canada Inc.
JOHN F. KROEGER (73) Trustee Director, Flag Investors International Fund, Inc., Flag
37 Pippins Way Investors Emerging Growth Fund, Inc., Flag Investors
Morristown, NJ 07960 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 (55) Trustee Attorney in private practice in Houston, Texas.
6363 Woodway, Suite 825
Houston, TX 77057
IAN W. ROBINSON (75) Trustee Formerly, Executive Vice President and Chief Financial
183 River Drive Officer, Bell Atlantic Management Services, Inc.
Tequesta, FL 33469 (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 (58) 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
</TABLE>
- -------------------------
* A trustee who is an "interested person" of the Trust and A I M
Advisors, Inc. as defined in the 1940 Act.
34
<PAGE> 175
<TABLE>
<CAPTION>
POSITIONS
HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
- --------------------- ---------- ------------------------------------
<S> <C> <C>
***JOHN J. ARTHUR (53) Senior Vice Director, Senior Vice President and Treasurer, A I M
President and Advisors, Inc.; Vice President and Treasurer, A I M
Treasurer Management Group Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc. and
Fund Management Company.
GARY T. CRUM (50) Senior Vice Director and President, A I M Capital Management, Inc.;
President Director and Senior Vice President, A I M Management
Group Inc. and A I M Advisors, Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP PLC.
***CAROL F. RELIHAN (43) Senior Vice Director, Senior Vice President, General Counsel and
President Secretary, A I M Advisors, Inc.; Vice President, General
and Secretary Counsel and Secretary, A I M Management Group Inc.;
Director, Vice President and General Counsel, Fund Management
Company; Vice President and General Counsel, A I M Fund Services, Inc.;
and Vice President, A I M Capital Management, Inc. and A I M
Distributors, Inc.
DANA R. SUTTON (39) Vice President Vice President and Fund Controller, A I M Advisors, Inc.;
and Assistant and Assistant Vice President and Assistant Treasurer,
Treasurer Fund Management Company.
ROBERT G. ALLEY (49) Vice President Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
STUART W. COCO (42) Vice President Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
MELVILLE B. COX (54) Vice President Vice President and Chief Compliance Officer, A I M
Advisors, Inc., A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc. and Fund
Management Company.
KAREN DUNN KELLEY (37) Vice President Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
JONATHAN C. SCHOOLAR (36) Vice President Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, 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.
35
<PAGE> 176
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn,
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), Dunn, 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, Dunn, 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.
All of the Trust's trustees also serve as directors or trustees of
some or all of the other investment companies managed or advised by AIM. All
of the Trust's executive officers hold similar offices with some or all of the
other investment companies managed or advised by AIM.
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.
36
<PAGE> 177
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 FROM ALL AIM
TRUSTEE TRUST(1) AIM FUNDS(2) FUNDS(3)
- ------- ------------ ------------- ------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
Bruce L. Crockett 19,559 67,774 84,000
Owen Daly II 19,559 103,542 84,000
Jack Fields 16,318 0 71,000
Carl Frischling(4) 19,559 96,520 84,000
Robert H. Graham 0 0 0
John F. Kroeger 19,223 94,132 82,500
Lewis F. Pennock 19,559 55,777 84,000
Ian W. Robinson 19,559 85,912 84,000
Louis S. Sklar 19,447 84,370 83,500
</TABLE>
- ----------------
(1) The total amount of compensation deferred by all Trustees of the Trust
during the fiscal year ended December 31, 1997, including amounts earned
thereon, was $94,233.
(2) During the fiscal year ended December 31, 1997, the total amount of
expenses allocated to the Trust in respect of such retirement benefits was
$112,579. Data reflect compensation estimated for the calendar year ended
December 31, 1997.
(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, 1997.
(4) During the year ended December 31, 1997, AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM SELECT
GROWTH FUND, and AIM VALUE FUND each paid $5,966, $4,839, $10,687, $5,159,
$4,849, $6,392, $5,021, $5,583, and $22,577, respectively, in legal fees to Mr.
Frischling's law firm, Kramer, Levin, Naftalis & Frankel for services
rendered.
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
37
<PAGE> 178
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 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, Fields, Frischling, Kroeger, Pennock,
Robinson and Sklar are 10, 11, 0, 20, 20, 16, 10 and 8 years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
Annual Retainer Paid
By All AIM Funds
--------------------
<S> <C> <C>
$80,000
Number of 10 $60,000
Years of 9 $54,000
Service With 8 $48,000
Applicable AIM 7 $42,000
Funds 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.
38
<PAGE> 179
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.
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 was organized in 1976, and along with its subsidiaries, manages or
advises over 50 investment company portfolios encompassing a broad range of
investment objectives. AIM is a direct, wholly owned subsidiary of A I M
Management Group Inc. ("AIM Management"), a holding company that has been
engaged in the financial services business since 1976. AIM 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, 11 Devonshire Square, London, EC2M 4YR, England. AMVESCAP PLC
and its subsidiaries are an independent investment management group engaged in
the business of investment management on an international basis. Certain of
the directors and officers of AIM are also executive officers of the Trust and
their affiliations are shown under "Management of the Trust" herein.
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.
AIM and the Trust have adopted a Code of Ethics which requires
investment personnel and certain other employees (a) to pre-clear all 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.
Pursuant to the Master Investment Advisory Agreement, AIM receives a
fee from each of AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND and AIM
MUNICIPAL BOND FUND calculated at the following annual rates, based on the
average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $200 million 0.50%
Next $300 million 0.40%
Next $500 million 0.35%
Amount over $1 billion 0.30%
</TABLE>
39
<PAGE> 180
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 SELECT 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:
<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
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<PAGE> 181
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, 1997, 1996 and
1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . $ 4,789,939 $ 2,151,655 $ 666,619
AIM Global Utilities Fund . . . . . . . . . 1,440,692 1,397,762 1,256,220
AIM High Yield Fund . . . . . . . . . . . . 13,632,090 9,277,005 5,717,303
AIM Income Fund . . . . . . . . . . . . . . 1,801,746 1,510,254 1,176,249
AIM Intermediate Government Fund . . . . . . 1,174,166 1,188,121 996,681
AIM Money Market Fund . . . . . . . . . . . 4,586,148 4,136,659 2,589,822
AIM Municipal Bond Fund . . . . . . . . . . 1,532,157 1,417,007 1,356,225
AIM Select Growth Fund . . . . . . . . . . . 3,901,342 2,874,943 1,715,406
AIM Value Fund . . . . . . . . . . . . . . . 72,810,450 50,259,125 25,332,486
</TABLE>
For the fiscal years ended December 31, 1997, 1996 and 1995, AIM waived
advisory fees for each Fund as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . -0- -0- $ 24,176
AIM Global Utilities 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- -0-
AIM Municipal Bond Fund . . . . . . . . . . -0- -0- -0-
AIM Select Growth Fund . . . . . . . . . . . -0- -0- -0-
AIM Value Fund . . . . . . . . . . . . . . . $ 2,501,999 $ 1,562,359 502,799
</TABLE>
For the fiscal years ended December 31, 1997, 1996 and 1995, AIM reimbursed
expenses as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . -0- -0- -0-
AIM Global Utilities 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- -0-
AIM Municipal Bond Fund . . . . . . . . . . -0- -0- $ 13,200
AIM Select Growth Fund . . . . . . . . . . . -0- -0- -0-
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
41
<PAGE> 182
authorities; the fees and expenses of independent accountants; costs of printing
and mailing registration statements, prospectuses, proxy statements, and annual
and periodic reports to shareholders; custodian and transfer agent fees;
brokerage commissions and securities transactions costs incurred by the Funds;
taxes and corporate fees; legal fees incurred in connection with the affairs of
the Funds; and expenses of meetings of shareholders and trustees.
AIM, at its own expense, furnishes to the Trust office space and
facilities. AIM furnishes to the Trust all personnel for managing the affairs
of the Trust and each of its series of shares and is reimbursed under the
Master Administrative Services Agreement for the services of a principal
financial officer of the Trust and his staff. The Master Administrative
Services Agreement between the Trust and AIM provides that AIM may perform or
arrange for the provision of certain accounting, and other administrative
services to each Fund which are not required to be performed by AIM under the
Master Investment Advisory Agreement. The Master Administrative Services
Agreement provides that such agreement will continue in effect from year to
year only if such continuance is specifically approved at least annually by the
Trust's Board of Trustees, including the Qualified Trustees, by votes cast in
person at a meeting called for such purpose. The Master Administrative
Services Agreement was 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,
1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
PERCENTAGE PERCENTAGE PERCENTAGE
OF AVERAGE OF AVERAGE OF AVERAGE
AMOUNT PAID NET ASSETS AMOUNT PAID NET ASSETS AMOUNT PAID NET ASSETS
----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
AIM Balanced Fund . . . . . . . $ 87,375 .01% 72,493 .02% $ 67,928 .07%
AIM Global Utilities Fund . . . . . 77,375 .03% 80,256 .03% 69,813 .03%
AIM High Yield Fund . . . . . . . 111,767 .004% 98,734 .01% 82,116 .01%
AIM Income Fund . . . . . . . . . . 81,464 .02% 75,132 .02% 82,185 .03%
AIM Intermediate Government Fund . 70,736 .03% 71,348 .03% 71,765 .04%
AIM Money Market Fund . . . . . . . 68,947 .01% 58,665 .01% 55,020 .01%
AIM Municipal Bond Fund . . . . . . 70,780 .02% 71,857 .02% 65,899 .02%
AIM Select Growth Fund . . . . . . 74,201 .01% 72,903 .02% 67,618 .03%
AIM Value Fund . . . . . . . . . 225,784 .002% 196,586 .002% 137,307 .003%
</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 (the "Class A and C Plan"). Such plan provides that the Class A shares
and AIM Cash Reserve Shares pay 0.25% per annum of their 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 the Class A
shares and AIM Cash Reserve Shares. Under the Class A and C Plan, Class C
shares of the Funds pay compensation to AIM Distributors at an annual rate of
1.00% of the average daily net assets attributable to Class C shares for the
purpose of financing any activity which is primarily intended to result in the
sale of Class C
42
<PAGE> 183
shares. Of such amount, the Funds pay a service fee of 0.25%
of the average daily net assets attributable to Class C shares to selected
dealers and other institutions which furnish continuing personal shareholder
services to their customers who purchase and own Class C shares. 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 and C Plan.
THE CLASS B PLAN. The Trust has also adopted a Master Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act relating to Class B shares of
the Funds (the "Class B Plan", and collectively with the Class A and 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.
43
<PAGE> 184
Under a Shareholder Service Agreement, a Fund agrees to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement will be calculated at the end of each payment period for each
business day of the Funds during such period at the annual rate of 0.25% of the
average daily net asset value of the Funds' shares purchased or acquired
through exchange. Fees calculated in this manner shall be paid only to those
selected dealers or other institutions who are dealers or institutions of
record at the close of business on the last business day of the applicable
payment period for the account in which such Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc. ("NASD"). The Plans conform to rules of the NASD by limiting payments
made to dealers and other financial institutions who provide continuing
personal shareholder services to their customers who purchase and own shares of
the Funds to no more than 0.25% per annum of the average daily net assets of
the Funds attributable to the customers of such dealers or financial
institutions, and by imposing a cap on the total sales charges, including asset
based sales charges, that may be paid by the Funds and their respective
classes.
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, 1997 (the period from August 4, 1997
to December 31, 1997 for Class C shares), 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 CLASS C SHARES
-------------- -------------- --------------
<S> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . $ 1,325,895 $ 3,517,227 $13,018
AIM Global Utilities Fund . . . . . . . . 411,911 832,184 1,555
AIM High Yield Fund . . . . . . . . . . . 3,699,344 13,453,229 42,927
AIM Income Fund . . . . . . . . . . . . . 749,562 1,003,075 3,040
AIM Intermediate Government Fund . . . . 405,373 810,246 3,829
AIM Money Market Fund . . . . . . . . . . 850,644 1,195,121 21,600
AIM Municipal Bond Fund . . . . . . . . . 732,575 398,613 1,511
AIM Select Growth Fund . . . . . . . . . 633,698 3,284,783 2,571
AIM Value Fund . . . . . . . . . . . . . 15,098,832 59,621,333 63,254
</TABLE>
For the year ended December 31, 1997, the AIM Cash Reserve Shares of
AIM MONEY MARKET FUND paid $931,232 to AIM Distributors pursuant to the Class A
and C Plan.
An estimate by category of the allocation of actual fees paid by Class
A shares of the Funds under the Class A and C Plan during the year ended
December 31, 1997, was as follows:
<TABLE>
<CAPTION>
PRINTING COMPENSATION
ADVERTISING AND MAILING SEMINARS TO DEALERS
----------- ----------- -------- ------------
<S> <C> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . $ 68,337 $ 6,145 $15,517 $ 1,235,896
AIM Global Utilities Fund . . . . . . . . . 4,332 393 999 406,187
AIM High Yield Fund . . . . . . . . . . . . 96,139 8,528 20,149 3,574,528
AIM Income Fund . . . . . . . . . . . . . . 15,443 1,356 3,212 729,551
AIM Intermediate Government Fund . . . . . 9,818 898 2,055 392,602
AIM Money Market Fund - Class A shares . . 46,715 4,249 10,073 789,607
AIM Municipal Bond Fund . . . . . . . . . . 18,292 1,648 4,070 708,565
AIM Select Growth Fund . . . . . . . . . . 10,400 914 2,538 619,846
AIM Value Fund . . . . . . . . . . . . . . 414,145 36,818 92,709 14,555,160
</TABLE>
44
<PAGE> 185
During the year ended December 31, 1997, an estimate by category of
the allocation of actual fees paid by AIM Cash Reserve Shares of AIM MONEY
MARKET FUND under the Class A and C Plan was as follows: $276,956 was spent on
advertising, $24,785 was spent on printing and mailing, $63,399 was spent on
seminars and $566,092 was spent on compensation to dealers.
An estimate by category of the allocation of actual fees paid by the
Funds under the Class B Plan during the year ended December 31, 1997, was as
follows:
<TABLE>
<CAPTION>
PRINTING COMPENSATION COMPENSATION
ADVERTISING AND MAILING SEMINARS TO UNDERWRITERS TO DEALERS
----------- ----------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . $ 333,768 $29,895 $ 70,156 $ 2,637,920 $ 445,488
AIM Global Utilities Fund . . . . . . . 24,665 2,165 5,551 624,138 175,665
AIM High Yield Fund . . . . . . . . . . 1,056,737 94,258 236,236 10,089,922 1,976,076
AIM Income Fund . . . . . . . . . . . . 74,331 6,435 15,889 752,307 154,113
AIM Intermediate Government Fund . . . 44,829 4,042 9,246 607,685 144,445
AIM Money Market Fund . . . . . . . . . 94,721 8,237 21,840 896,341 173,982
AIM Municipal Bond Fund . . . . . . . . 29,306 2,772 5,133 298,960 62,442
AIM Select Growth Fund . . . . . . . . 171,990 15,476 39,466 2,463,587 594,264
AIM Value Fund . . . . . . . . . . . . 3,030,508 268,918 675,024 44,716,000 10,930,883
</TABLE>
An estimate by category of the allocation of actual fees paid by Class
C shares of the Funds under the Class A and C Plan for the period from August
4, 1997 through December 31, 1997, was as follows:
<TABLE>
<CAPTION>
PRINTING COMPENSATION COMPENSATION
ADVERTISING AND MAILING SEMINARS TO UNDERWRITERS TO DEALERS
----------- ----------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . $ 2,593 $ 238 $ 329 $ 9,763 $ 95
AIM Global Utilities Fund . . . . . . . 367 21 -0- 1,167 1
AIM High Yield Fund . . . . . . . . . . 8,036 722 949 32,195 1,025
AIM Income Fund . . . . . . . . . . . . 351 33 -0- 2,280 376
AIM Intermediate Government Fund . . . 611 47 -0- 2,872 299
AIM Money Market Fund . . . . . . . . . 1,464 129 350 16,200 3,457
AIM Municipal Bond Fund . . . . . . . . 314 61 -0- 1,133 2
AIM Select Growth Fund . . . . . . . . 614 10 -0- 1,929 18
AIM Value Fund . . . . . . . . . . . . 11,735 1,020 1,772 47,440 1,287
</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.
45
<PAGE> 186
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 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. In the event the Class A and C Plan is
amended in a manner which the Board of Trustees determines would materially
increase the charges paid by holders of Class A shares under the Class A and C
Plan, the Class B shares of the Funds will no longer convert into Class A
shares of the Funds unless the Class B shares, voting separately, approve such
amendment. If the Class B shareholders do not approve such amendment, the
Board of Trustees will (i) create a new class of shares of the Funds which is
identical in all material respects to the Class A shares as they existed prior
to the implementation of the amendment, and (ii) ensure that the existing Class
B shares of the Funds will be exchanged or converted into such new class of
shares no later than the date the Class B shares were scheduled to convert into
Class A shares.
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 June 11, 1997. 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.
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<PAGE> 187
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 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 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.
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 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 of the Class C shares sold plus an
advance of the first year service fee of 0.25% with respect to such shares.
AIM Distributors will retain all payments received by it relating to Class C
shares for the first year after they are purchased. The portion of the
payments to AIM Distributors under the Class A and C Plan attributable to Class
C shares which constitutes an asset-based sales charge (0.75%) is intended in
part to permit AIM Distributors to recoup a portion of on-going sales
commissions to dealers plus financing costs, if any. 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 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.
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, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . $ 4,100,493 $ 672,146 $ 3,212,414 $ 611,603 $ 979,475 $ 165,692
AIM Global Utilities Fund . . . . . . 376,255 57,864 545,746 95,058 745,539 106,920
AIM High Yield Fund . . . . . . . . . 12,115,351 2,043,967 10,452,011 1,965,594 8,338,447 1,388,106
AIM Income Fund . . . . . . . . . . . 1,158,790 203,261 1,346,651 248,078 914,135 154,679
AIM Intermediate Government Fund . . 648,578 116,124 1,056,724 204,498 876,411 144,669
AIM Money Market Fund . . . . . . . . 2,470,808 443,904 3,696,001 736,782 2,845,276 494,184
AIM Municipal Bond Fund . . . . . . . 480,346 87,434 624,162 122,269 684,242 116,667
AIM Select Growth Fund . . . . . . . 895,672 143,669 1,266,626 219,373 892,904 146,533
AIM Value Fund . . . . . . . . . . . 31,118,675 4,660,735 46,277,225 7,792,991 52,075,064 7,659,031
</TABLE>
The following chart reflects the contingent deferred sales charges
paid by Class A and Class B shareholders for the years ended December 31, 1997,
1996 and 1995, and by Class C shareholders for the period from August 4, 1997
through December 31, 1997:
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<PAGE> 188
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
AIM Balanced Fund . . . . . . . . . . . . . . . . . . . . . . $ 99,075 $ 50,028 $ 92,409
AIM Global Utilities Fund . . . . . . . . . . . . . . . . . . . 88,250 145,184 167,444
AIM High Yield Fund . . . . . . . . . . . . . . . . . . . . . . 581,549 976,702 655,591
AIM Income Fund . . . . . . . . . . . . . . . . . . . . . . . . 45,242 65,445 48,320
AIM Intermediate Government Fund . . . . . . . . . . . . . . . 131,697 82,525 101,233
AIM Money Market Fund . . . . . . . . . . . . . . . . . . . . . 344,545 211,316 256,618
AIM Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . 44,830 49,906 31,956
AIM Select Growth Fund . . . . . . . . . . . . . . . . . . . . 109,547 105,215 169,092
AIM Value Fund . . . . . . . . . . . . . . . . . . . . . . . . 1,752,662 1,988,299 2,052,439
</TABLE>
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner in which shares of the Funds may
be purchased appears in the Prospectus under the headings "How to Purchase
Shares," "Terms and Conditions of Purchase of the AIM Funds" and "Special
Plans."
The sales charge normally deducted on purchases of Class A shares is
used to compensate AIM Distributors and participating dealers for their
expenses incurred in connection with the distribution of the Funds' Class A
shares. Since there is little expense associated with unsolicited orders
placed directly with AIM Distributors by persons who, because of their
relationship with the Funds or with AIM and its affiliates, are familiar with
the Funds, or whose programs for purchase involve little expense (e.g., because
of the size of the transaction and shareholder records required), AIM
Distributors believes that it is appropriate and in the Funds' best interests
that such persons, and certain other persons whose purchases result in
relatively low expenses of distribution, be permitted to purchase Class A
shares of the Funds through AIM Distributors without payment of a sales charge.
The persons who may purchase Class A shares of the Funds without a sales charge
are set forth in the Prospectus.
Complete information concerning the method of exchanging shares of the
Funds for shares of the other AIM Funds is set forth in the Prospectus under
the heading "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in
the Prospectus under the heading "How to Redeem Shares." In addition to the
Funds' obligation to redeem shares, AIM Distributors may also repurchase shares
as an accommodation to shareholders. To effect a repurchase, those dealers who
have executed Selected Dealer Agreements with AIM Distributors must phone
orders to the order desk of the Funds at (800) 959-4246 and guarantee delivery
of all required documents in good order. A repurchase is effected at the net
asset value per share of the applicable Fund next determined after the
repurchase order is received. Such an arrangement is subject to timely receipt
by A I M Fund Services, Inc., the Funds' transfer agent, of all required
documents in good order. If such documents are not received within a
reasonable time 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.
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<PAGE> 189
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.
For all other Funds: The following formula may be used to determine
the public offering price per Class A share of an investor's investment:
Net Asset Value / (1 - Sales Charge as % of Offering Price) = Offering
Price.
For example, at the close of business on December 31, 1997,AIM VALUE
FUND - Class A shares had 208,074,043 shares outstanding, net assets of
$6,745,252,900 and a net asset value per share of $32.42. The offering price,
therefore, was $34.31.
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
49
<PAGE> 190
by dividing the value of the Fund's securities, cash and other assets (including
interest accrued but not collected) attributable to a particular class, less all
its liabilities (including accrued expenses and dividends payable) attributable
to that class, by the number of shares outstanding of that Class and rounding
the resulting per share net asset value to the nearest one cent. Determination
of the net asset value per share is made in accordance with generally accepted
accounting principles.
The securities of the Fund are valued on the basis of amortized cost.
This method values a security at its cost on the date of purchase and
thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the security. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if the security were
sold. During such periods, the daily yield on shares of the Fund computed as
described under "Performance Information" may differ somewhat from an identical
computation made by another investment company with identical investments
utilizing available indications as to the market value of its portfolio
securities.
The valuation of portfolio instruments based upon their amortized cost
and the concomitant maintenance of the net asset value per share of $1.00 for
the Fund is permitted in accordance with applicable rules and regulations of
the SEC which require the Fund to adhere to certain conditions. These rules
require, among other things, that the Fund maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of 397 calendar days or less and invest only in securities
determined by the Board of Trustees to be "Eligible Securities" (as defined in
Rule 2a-7 under the 1940 Act) and to present minimal credit risk to the Fund.
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
50
<PAGE> 191
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 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 on the basis of
amortized cost. For purposes of determining net asset value per share, futures
and options contracts generally will be valued 15 minutes after the close of
trading of the NYSE.
Generally, trading in foreign securities, corporate bonds, U.S.
Government securities and money market instruments is substantially completed
each day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of each Fund's shares are
determined at such times. Foreign currency exchange rates are also generally
determined prior the close of the NYSE. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which such values are determined and the close of the NYSE which will not be
reflected in the computation of a Fund's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by or
under the supervision of the Board of Trustees.
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, 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. 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 (net investment
taxable income and the excess of net short-term capital gains over net
long-term capital gains) 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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<PAGE> 192
The Code and the regulations promulgated thereunder are 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 taxable at 20% 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 BALANCED FUND and AIM HIGH YIELD FUND: These Funds may engage in
certain hedging transactions (such as short sales "against the box") that may
result in "constructive sales" of offsetting appreciated positions under
section 1259 of the Code. In the event of such a constructive sale, a Fund
will be deemed to recognize gain as if the offsetting position were sold or
otherwise terminated at its fair market value and will take such gain into
account in the taxable year in which the appreciated position was hedged.
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. If the election is made, 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, 1997, 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
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<PAGE> 193
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. 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. For
taxable years beginning after 1997, however, certain small corporations are
wholly exempt from the alternative minimum tax.
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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<PAGE> 194
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.
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.
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.
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
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of the underlying obligation are less than the repurchase price. Repurchase
agreements are considered to be loans by a Fund under the 1940 Act.
Rule 2a-7 under the 1940 Act provides that AIM MONEY MARKET FUND may
not invest more than 5% of its total assets in securities issued by the issuer
of that security, provided that the Fund may invest more than 5% of its total
assets in the First Tier securities of a single issuer for a period of up to
three business days after the purchase thereof; provided further, that the Fund
may not make more than one investment in accordance with the foregoing proviso
at any time. Under Rule 2a-7, for purposes of determining the percentage of
the Fund's total assets that are invested in securities of an issuer, a
repurchase agreement shall be deemed to be an acquisition of the underlying
securities, provided that the obligation of the seller to repurchase the
securities from the Fund is fully collateralized. To be fully collateralized,
the collateral must, among other things, consist entirely of cash items, 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, and the repurchase agreement must qualify under a provision of
applicable insolvency law providing an exclusion from any automatic stay of
creditors' rights against the seller.
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 (i) for temporary emergency purposes, such as to meet unanticipated
net redemptions so as to avoid liquidating other portfolio securities during
unfavorable market conditions; (ii) to cover short-term cash requirements
resulting from the timing of trade settlements; or (iii) to take advantage of
market situations where the interest income to be earned from the investment of
the proceeds of the transaction is greater than the interest expense of the
transaction. At the time it enters into a reverse repurchase agreement, a Fund
will segregate liquid assets having a dollar value equal to the repurchase
price. 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, 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, LLP, 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 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
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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.
Chase Bank of Texas, N. A., 712 Main, Houston, Texas 77002, serves as
Sub-Custodian for retail purchases of the AIM Funds.
RATINGS OF SECURITIES
The following is a description of the factors underlying the
commercial paper and debt ratings of Moody's, S&P, Fitch and Duff & Phelps:
MOODY'S BOND RATINGS
Moody's describes its ratings for corporate bonds as follows:
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. These are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime
in the future.
Baa: Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
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C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in 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 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 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.
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MOODY'S SHORT-TERM LOAN RATINGS
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in bond
risk, long-term secular trends for example, may be less important over the
short run.
A short-term rating may also be assigned on an issue having a demand
feature 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.
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PRIME-2: Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
PRIME-3: Issuers rated Prime-3 (or related supported institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime
rating categories.
S&P BOND RATINGS
S&P describes its ratings for corporate bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the 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+).
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S&P MUNICIPAL NOTE RATINGS
A S&P note rating reflects the liquidity factors and market-access
risks unique to notes. Notes maturing in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment: amortization schedule (the larger the final maturity relative
to other maturities, the more likely the issue will be treated as a note); and
source of payment (the more the issue depends 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
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guarantor, as well as the economic and political environment that might affect
the issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be
provided by insurance policies or financial guaranties unless otherwise
indicated.
Bonds 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.
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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.
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.
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FITCH SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating
on the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as for issues assigned "F-1+" and "F-1" ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse changes could cause these securities to be rated
below investment grade.
F-S: Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are vulnerable
to near-term adverse changes in financial and economic conditions.
D: Default. Issues assigned this rating are in actual or imminent payment
default.
LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
DUFF & PHELPS LONG-TERM RATINGS
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA and AA-: High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
A+, A and A-: Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
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.
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B+, B and B-: Below investment grade and possessing risk that obligations
will not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or
into a higher or lower rating grade.
CCC: Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP: Preferred stock with dividend arrearages.
DUFF & PHELPS SHORT-TERM RATINGS
D - 1+: Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding and safety is just below risk-free U.S. Treasury short-term
obligations.
D - 1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
D - 1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D - 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
D - 3: Satisfactory liquidity and other protection factors qualify issue as
to investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
D - 4: Speculative investment characteristics. Liquidity is not sufficient
to insure against disruption in debt service. Operating factors and market
access may be subject to a high degree of variation.
D - 5: Issuer failed to meet scheduled principal and/or interest payments.
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FINANCIAL STATEMENTS
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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, 1997, 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,
the four-month period ended December 31, 1993, and the
year 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 and financial highlights. Our procedures
included confirmation of securities owned as of December
31, 1997, 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, 1997, 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, the four-month
period ended December 31, 1993, and the year ended August
31, 1993, in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
February 6, 1998
FS-1
<PAGE> 207
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC BONDS & NOTES-25.68%
AIRLINES-2.38%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 $ 500,000 $ 562,815
- ---------------------------------------------------------------
America West Airlines, Pass
Through Ctfs., 6.86%, 07/02/04 5,989,758 6,034,801
- ---------------------------------------------------------------
American Airlines, Equipment
Trust, 9.90%, 01/15/11 2,955,000 3,726,344
- ---------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 5,000,000 5,912,050
- ---------------------------------------------------------------
Medium Term Notes, 8.52%,
01/30/04 2,000,000 2,179,580
- ---------------------------------------------------------------
Northwest Airlines Corp., Pass
Through Ctfs., 7.248%, 07/02/14 5,000,000 5,056,250
- ---------------------------------------------------------------
United Air Lines, Inc., Pass
Through Ctfs., 9.56%, 10/19/18 3,750,000 4,611,525
- ---------------------------------------------------------------
28,083,365
- ---------------------------------------------------------------
AUTOMOBILES-0.04%
General Motors Corp., Deb.,
8.80%, 03/01/21 400,000 491,084
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.42%
First Union Corp,
Sub. Deb., 7.50%, 04/15/35 3,000,000 3,427,290
- ---------------------------------------------------------------
Sub. Notes, 6.375%, 01/15/09 800,000 785,288
- ---------------------------------------------------------------
Wachovia Corp., Sub. Notes,
6.375%, 02/01/09 800,000 789,624
- ---------------------------------------------------------------
5,002,202
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-1.17%
Bankers Trust New York Corp.,
Gtd. Notes, 7.875%, 02/25/27 3,000,000 3,092,895
- ---------------------------------------------------------------
Sub. Notes, 7.50%, 11/15/15 3,000,000 3,128,310
- ---------------------------------------------------------------
Deutsche Bank Financial, Gtd.
Unsec. Sub. Deb., 6.70%,
12/13/06 3,500,000 3,575,985
- ---------------------------------------------------------------
Marshall & Ilsley-Series D,
Medium Term Notes, 6.43%,
10/15/02 4,000,000 4,046,960
- ---------------------------------------------------------------
13,844,150
- ---------------------------------------------------------------
BANKS (REGIONAL)-1.59%
HSBC Americas Inc., Sub. Notes,
7.00%, 11/01/06 4,000,000 4,082,080
- ---------------------------------------------------------------
Mercantile Bancorp Inc.,
Sub. Notes, 6.375%, 01/15/04 700,000 697,914
- ---------------------------------------------------------------
Unsec. Sub. Notes, 7.30%,
06/15/07 3,000,000 3,158,790
- ---------------------------------------------------------------
Signet Banking Corp., Sub. Notes,
7.80%, 09/15/06 5,000,000 5,444,100
- ---------------------------------------------------------------
BANKS (REGIONAL)-(CONTINUED)
Swiss Bank Corp.-NY, Sub. Deb.,
7.375%, 07/15/15 $ 5,000,000 $ 5,340,400
- ---------------------------------------------------------------
18,723,284
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.29%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.24%,
06/20/20(a) 15,000,000 3,397,950
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.79%
Cablevision Systems Corp., Sr.
Notes, 7.875%, 12/15/07 4,200,000 4,310,250
- ---------------------------------------------------------------
Comcast Cable Communications,
Notes, 8.50%, 05/01/27 3,400,000 3,969,500
- ---------------------------------------------------------------
TCI Communications Inc., Sr.
Notes, 8.00%, 08/01/05 1,000,000 1,071,860
- ---------------------------------------------------------------
9,351,610
- ---------------------------------------------------------------
CHEMICALS-0.79%
Solutia Inc., Bonds, 6.72%,
10/15/37 4,150,000 4,222,750
- ---------------------------------------------------------------
Union Carbide Corp., Deb., 6.79%,
06/01/25 5,000,000 5,136,000
- ---------------------------------------------------------------
9,358,750
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.43%
Millennium America Inc., Sr.
Unsec. Notes, 7.00%, 11/15/06 5,000,000 5,079,300
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-0.27%
Platinum Technology, Inc., Conv.
Sub. Notes, 6.25%, 12/15/02
(acquired 12/11/97; cost
$3,000,000)(b) 3,000,000 3,221,250
- ---------------------------------------------------------------
CONSUMER FINANCE-1.46%
Commercial Credit Co.,
Notes, 6.625%, 06/01/15 2,000,000 2,037,140
- ---------------------------------------------------------------
Putable Notes, 7.875%, 02/01/25 4,000,000 4,606,720
- ---------------------------------------------------------------
Countrywide Funding Corp., Sub.
Notes, 8.25%, 07/15/02 500,000 536,105
- ---------------------------------------------------------------
Ford Motor Credit Co.,
Notes, 6.125%, 01/09/06 1,500,000 1,472,910
- ---------------------------------------------------------------
Notes, 6.75%, 08/15/08 800,000 816,896
- ---------------------------------------------------------------
GMAC, Notes, 9.00%, 10/15/02 4,175,000 4,645,439
- ---------------------------------------------------------------
Household Finance Corp., Notes,
7.125%, 09/01/05 3,000,000 3,116,880
- ---------------------------------------------------------------
17,232,090
- ---------------------------------------------------------------
ELECTRIC COMPANIES-1.91%
CMS Energy Corp., Sr. Notes,
7.375%, 11/15/00 (acquired
11/04/97; cost $3,497,095)(b) 3,500,000 3,518,690
- ---------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 208
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ELECTRIC COMPANIES-(CONTINUED)
El Paso Electric Co.,
Series D Sec. First Mortgage
Bonds, 8.90%, 02/01/06 $ 4,750,000 $ 5,258,962
- ---------------------------------------------------------------
Series E Sec. First Mortgage
Bonds, 9.40%, 05/01/11 4,000,000 4,523,200
- ---------------------------------------------------------------
UtiliCorp United, Inc., Sr.
Notes, 6.70%, 10/15/06 3,000,000 3,057,510
- ---------------------------------------------------------------
Western Resources Inc., Sr.
Notes, 7.125%, 08/01/09 6,000,000 6,179,040
- ---------------------------------------------------------------
22,537,402
- ---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.09%
Raytheon Co., Deb., 7.20%,
08/15/27 1,000,000 1,049,630
- ---------------------------------------------------------------
ENTERTAINMENT-1.26%
Time Warner, Inc.,
Notes, 8.18%, 08/15/07 925,000 1,015,853
- ---------------------------------------------------------------
Deb., 9.125%, 01/15/13 6,290,000 7,513,657
- ---------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 2,500,000 2,534,625
- ---------------------------------------------------------------
Viacom, Inc., Sr. Notes, 7.75%,
06/01/05 3,750,000 3,853,912
- ---------------------------------------------------------------
14,918,047
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.83%
Associates Corp. of North
America, Series B Sr. Deb.,
7.95%, 02/15/10 5,900,000 6,601,510
- ---------------------------------------------------------------
BellSouth Capital Funding, Deb.,
6.04%, 11/15/26 4,000,000 4,110,320
- ---------------------------------------------------------------
Chrysler Financial Corp., Deb.,
8.50%, 02/01/18 150,000 156,225
- ---------------------------------------------------------------
Finova Capital Corp., Unsec.
Notes, 7.40%, 05/06/06 3,750,000 3,952,463
- ---------------------------------------------------------------
General Electric Capital Corp.,
Deb., 8.30%, 09/20/09 500,000 579,100
- ---------------------------------------------------------------
US West Cap Funding Inc., Unsec.
Bonds, 6.95%, 01/15/37 6,000,000 6,203,220
- ---------------------------------------------------------------
21,602,838
- ---------------------------------------------------------------
FOODS-1.00%
ConAgra Inc., Sr. Unsec. Notes,
7.125%, 10/01/26 7,000,000 7,459,480
- ---------------------------------------------------------------
Grand Metro Investment, Gtd.
Bonds, 7.45%, 04/15/35 4,000,000 4,387,720
- ---------------------------------------------------------------
11,847,200
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.36%
Atrix Labs Inc., Conv. Sub.
Notes, 7.00%, 12/01/04
(acquired 11/21/97; cost
$2,000,000)(b) 2,000,000 1,910,000
- ---------------------------------------------------------------
Nexstar Pharmaceuticals, Conv.
Sub. Deb., 6.25%, 08/01/04
(acquired 07/28/97; cost
$2,500,000)(b) 2,500,000 2,375,000
- ---------------------------------------------------------------
4,285,000
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.32%
Tenet Healthcare Corp., Sr.
Notes, 8.00%, 01/15/05 $ 3,750,000 $ 3,825,000
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.97%
Alternative Living Services,
Conv. Sub. Deb., 5.25%,
12/15/02 5,000,000 5,762,500
- ---------------------------------------------------------------
Assisted Living Concepts, Inc.,
Conv. Sub. Deb., 6.00%,
11/01/02 3,000,000 3,067,500
- ---------------------------------------------------------------
Sunrise Assisted Living, Inc.,
Conv. Sub. Notes, 5.50%,
06/15/02 (acquired 06/03/97;
cost $2,000,000)(b) 2,000,000 2,582,500
- ---------------------------------------------------------------
11,412,500
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.50%
Omnicare, Inc., Sub. Deb., 5.00%,
12/01/07 (acquired 12/04/97;
cost $3,500,000)(b) 3,500,000 3,552,500
- ---------------------------------------------------------------
Res-Care Inc., Conv. Sub. Notes,
6.00%, 12/01/04 (acquired
11/18/97; cost $2,000,000)(b) 2,000,000 2,300,000
- ---------------------------------------------------------------
5,852,500
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.37%
Torchmark Corp., Notes, 7.875%,
05/15/23 4,000,000 4,309,360
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.66%
Florida Windstorm-MBIA, Sr.
Notes, 6.85%, 08/25/07
(acquired 09/05/07; cost
$7,500,000)(b) 7,500,000 7,743,750
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.27%
JPM Capital Trust II, Bonds,
7.95%, 02/01/27 3,000,000 3,199,170
- ---------------------------------------------------------------
LODGING-HOTELS-0.49%
Hilton Hotels Corp., Notes,
7.20%, 12/15/09 5,000,000 5,040,500
- ---------------------------------------------------------------
ITT Corp., Unsec. Gtd. Deb.,
7.375%, 11/15/15 750,000 770,663
- ---------------------------------------------------------------
5,811,163
- ---------------------------------------------------------------
NATURAL GAS-0.74%
Enron Corp.,
Notes, 6.75%, 08/01/09 6,000,000 6,072,420
- ---------------------------------------------------------------
Sr. Sub. Deb., 6.75%, 07/01/05 800,000 806,360
- ---------------------------------------------------------------
Ferrellgas Partners, Series B Sr.
Sec. Gtd. Notes, 9.375%,
06/15/06 1,000,000 1,065,000
- ---------------------------------------------------------------
PanEnergy Corp., Notes, 7.875%,
08/15/04 750,000 815,257
- ---------------------------------------------------------------
8,759,037
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.36%
Pride Petroleum Services, Inc.,
Conv. Sub. Deb., 6.25%,
02/15/06 2,000,000 4,232,060
- ---------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 209
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)-1.01%
Louis Dreyfus Natural Gas Corp.,
Notes, 6.875%, 12/01/07
(acquired 12/04/97; cost
$4,969,600)(b) $ 5,000,000 $ 4,987,550
- ---------------------------------------------------------------
Tennessee Gas Pipeline Co.,
Bonds, 7.00%, 03/15/27 4,000,000 4,217,600
- ---------------------------------------------------------------
Union Pacific Resources Group
Inc., Deb., 7.50%, 10/15/26 2,500,000 2,674,075
- ---------------------------------------------------------------
11,879,225
- ---------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.50%
AES Corp.,
Sr. Sub. Notes, 10.25%,
07/15/06 1,000,000 1,087,500
- ---------------------------------------------------------------
Sr. Sub. Notes, 8.375%,
08/15/07 3,000,000 3,007,500
- ---------------------------------------------------------------
Indiana Michigan Power, Sec.
Lease Obligation Bonds, 9.82%,
12/07/22 1,357,579 1,776,406
- ---------------------------------------------------------------
5,871,406
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.98%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 4,900,000 5,829,579
- ---------------------------------------------------------------
Sr. Gtd. Putable Bonds, 7.43%,
10/01/26 5,450,000 5,713,071
- ---------------------------------------------------------------
11,542,650
- ---------------------------------------------------------------
RAILROADS-0.54%
Norfolk Southern Corp., Putable
Bonds, 7.05%, 05/01/37 3,000,000 3,180,030
- ---------------------------------------------------------------
Union Pacific Corp., Notes,
7.25%, 11/01/08 3,000,000 3,145,590
- ---------------------------------------------------------------
6,325,620
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.17%
J.C. Penney Co., Inc., Notes,
6.50%, 06/15/02 2,015,000 2,030,777
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.30%
Sovereign Bancorp, Inc., Sub.
Notes, 8.00%, 03/15/03 3,325,000 3,503,619
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.22%
Atria Communities Inc., Conv.
Sub. Notes, 5.00%, 10/15/02
(acquired 10/10/97; cost
$2,500,000)(b) 2,500,000 2,565,625
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.26%
Personnel Group of America, Inc.,
Conv. Sub. Notes, 5.75%,
07/01/04 (acquired 06/17/97;
cost $2,750,000)(b) 2,750,000 3,028,300
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.36%
360 Communications Co.,
Sr. Notes, 7.60%, 04/01/09 2,000,000 2,116,200
- ---------------------------------------------------------------
Sr. Unsec. Notes, 7.50%,
03/01/06 2,000,000 2,096,820
- ---------------------------------------------------------------
4,213,020
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.27%
MCI Communications Corp., Putable
Deb., 7.125%, 06/15/27 $ 3,000,000 $ 3,139,620
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.31%
WMX Technologies, Inc., Unsec.
Notes, 7.10%, 08/01/26 3,500,000 3,622,395
- ---------------------------------------------------------------
Total Domestic Bonds & Notes 302,891,949
- ---------------------------------------------------------------
DOMESTIC COMMON STOCKS-50.19%
AIR FREIGHT-0.15%
AirNet Systems, Inc.(c) 80,100 $ 1,722,150
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.23%
NationsBank Corp. 45,000 2,736,563
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-0.92%
BankAmerica Corp. 30,000 2,190,000
- ---------------------------------------------------------------
Chase Manhattan Corp. 45,000 4,927,500
- ---------------------------------------------------------------
Citicorp 30,000 3,793,125
- ---------------------------------------------------------------
10,910,625
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.72%
Citizens National Bank of Texas 125,500 1,568,750
- ---------------------------------------------------------------
Southwest Bancorp of Texas,
Inc.(c) 80,300 2,499,338
- ---------------------------------------------------------------
TCF Financial Corp. 130,000 4,411,875
- ---------------------------------------------------------------
8,479,963
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.17%
PepsiCo, Inc. 56,000 2,040,500
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-1.14%
CBS Corp. 175,000 5,151,562
- ---------------------------------------------------------------
Heftel Broadcasting Corp.(c) 80,000 3,740,000
- ---------------------------------------------------------------
Univision Communications Inc.(c) 65,000 4,537,813
- ---------------------------------------------------------------
13,429,375
- ---------------------------------------------------------------
BUILDING MATERIALS-0.35%
Group Maintenance America
Corp.(c) 200,000 3,362,500
- ---------------------------------------------------------------
White Cap Industries, Inc.(c) 43,700 813,913
- ---------------------------------------------------------------
4,176,413
- ---------------------------------------------------------------
CHEMICALS-0.26%
IMC Global, Inc. 95,000 3,111,250
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-2.21%
ADC Telecommunications, Inc.(c) 105,000 4,383,750
- ---------------------------------------------------------------
Brightpoint, Inc.(c) 90,000 1,248,750
- ---------------------------------------------------------------
Comverse Technology, Inc.(c) 60,000 2,340,000
- ---------------------------------------------------------------
Corsair Communications, Inc.(c) 26,800 435,500
- ---------------------------------------------------------------
Excel Switching Corp.(c) 20,900 373,588
- ---------------------------------------------------------------
Lucent Technologies, Inc. 43,200 3,450,600
- ---------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 210
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Motorola, Inc. 50,000 $ 2,853,125
- ---------------------------------------------------------------
NEXTLINK Communications,
Inc.-Class A(c) 64,900 1,383,181
- ---------------------------------------------------------------
Qwest Communications
International Inc.(c) 116,200 6,913,900
- ---------------------------------------------------------------
Tellabs, Inc.(c) 50,000 2,643,750
- ---------------------------------------------------------------
26,026,144
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-1.18%
Compaq Computer Corp. 85,000 4,797,187
- ---------------------------------------------------------------
Dell Computer Corp.(c) 40,000 3,360,000
- ---------------------------------------------------------------
International Business Machines
Corp. 37,000 3,868,813
- ---------------------------------------------------------------
Sun Microsystems, Inc.(c) 46,000 1,834,250
- ---------------------------------------------------------------
13,860,250
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.35%
Cisco Systems, Inc.(c)(d) 75,000 4,181,250
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.40%
Adaptec, Inc.(c) 41,000 1,522,125
- ---------------------------------------------------------------
EMC Corp.(c) 120,000 3,292,500
- ---------------------------------------------------------------
4,814,625
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-2.15%
America Online, Inc.(c)(d) 58,000 5,172,875
- ---------------------------------------------------------------
Computer Associates
International, Inc. 49,500 2,617,313
- ---------------------------------------------------------------
HBO & Co. 100,000 4,800,000
- ---------------------------------------------------------------
J.D. Edwards & Co.(c) 52,900 1,560,550
- ---------------------------------------------------------------
Microsoft Corp.(c) 20,000 2,585,000
- ---------------------------------------------------------------
Midway Games Inc.(c) 71,900 1,307,681
- ---------------------------------------------------------------
Sterling Commerce, Inc.(c) 35,000 1,345,313
- ---------------------------------------------------------------
USWeb Corp.(c) 250,000 2,343,750
- ---------------------------------------------------------------
Veritas Software Corp.(c) 50,000 2,550,000
- ---------------------------------------------------------------
Vestcom International, Inc.(c) 50,000 1,118,750
- ---------------------------------------------------------------
25,401,232
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.13%
Blyth Industries, Inc.(c) 52,500 1,571,719
- ---------------------------------------------------------------
CONSUMER FINANCE-0.79%
First Alliance Corp.(c) 90,000 1,653,750
- ---------------------------------------------------------------
Green Tree Financial Corp. 65,000 1,702,188
- ---------------------------------------------------------------
MBNA Corp. 71,250 1,946,016
- ---------------------------------------------------------------
SLM Holding Corp. 29,000 4,034,625
- ---------------------------------------------------------------
9,336,579
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.45%
Cardinal Health, Inc. 40,000 3,005,000
- ---------------------------------------------------------------
Fine Host Corp.(c) 75,000 759,375
- ---------------------------------------------------------------
Weider Nutrition International,
Inc. 128,000 1,592,000
- ---------------------------------------------------------------
5,356,375
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.40%
General Electric Co. 29,710 $ 2,179,971
- ---------------------------------------------------------------
SCI Systems, Inc.(c) 58,000 2,526,625
- ---------------------------------------------------------------
4,706,596
- ---------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.27%
Kent Electronics Corp.(c) 55,000 1,381,875
- ---------------------------------------------------------------
OSI Systems, Inc.(c) 150,000 1,837,500
- ---------------------------------------------------------------
3,219,375
- ---------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.70%
Analog Devices, Inc.(c) 70,000 1,938,125
- ---------------------------------------------------------------
General Scanning, Inc.(c) 120,000 2,070,000
- ---------------------------------------------------------------
Intel Corp. 60,000 4,215,000
- ---------------------------------------------------------------
8,223,125
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTORS)-0.20%
Applied Materials, Inc.(c) 80,000 2,410,000
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.95%
American Express Co. 35,000 3,123,750
- ---------------------------------------------------------------
CIT Group, Inc. (The)(c) 93,700 3,021,825
- ---------------------------------------------------------------
Fannie Mae 55,000 3,138,438
- ---------------------------------------------------------------
Finova Group, Inc. 50,000 2,484,375
- ---------------------------------------------------------------
Franchise Mortgage Acceptance Co.
LLC(c) 155,000 2,848,125
- ---------------------------------------------------------------
Freddie Mac 68,000 2,851,750
- ---------------------------------------------------------------
Medallion Financial Corp. 67,900 1,493,800
- ---------------------------------------------------------------
MGIC Investment Corp. 60,000 3,990,000
- ---------------------------------------------------------------
22,952,063
- ---------------------------------------------------------------
FOODS-0.41%
American Italian Pasta Co.-Class
A(c) 57,600 1,440,000
- ---------------------------------------------------------------
Ralston-Ralston Purina Group 36,000 3,345,750
- ---------------------------------------------------------------
4,785,750
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.58%
Abbott Laboratories 32,500 2,130,781
- ---------------------------------------------------------------
American Home Products Corp. 53,000 4,054,500
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 56,000 5,299,000
- ---------------------------------------------------------------
Johnson & Johnson 43,000 2,832,625
- ---------------------------------------------------------------
Warner-Lambert Co. 35,000 4,340,000
- ---------------------------------------------------------------
18,656,906
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.80%
Dura Pharmaceuticals, Inc.(c) 100,000 4,587,500
- ---------------------------------------------------------------
Forest Laboratories, Inc.(c) 50,000 2,465,625
- ---------------------------------------------------------------
Spiros Development Corp. II(c) 137,000 2,346,125
- ---------------------------------------------------------------
9,399,250
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-1.59%
Lilly (Eli) & Co. 90,000 6,266,250
- ---------------------------------------------------------------
</TABLE>
FS-5
<PAGE> 211
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-(CONTINUED)
Merck & Co., Inc. 43,000 $ 4,568,750
- ---------------------------------------------------------------
Pfizer Inc. 60,000 4,473,750
- ---------------------------------------------------------------
Schering-Plough Corp. 56,000 3,479,000
- ---------------------------------------------------------------
18,787,750
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.18%
Tenet Healthcare Corp.(c) 65,000 2,153,125
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.40%
Sunrise Assisted Living, Inc.(c) 110,000 4,743,750
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.18%
United Healthcare Corp. 43,000 2,136,562
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-1.67%
Arterial Vascular Engineering,
Inc.(c) 60,000 3,900,000
- ---------------------------------------------------------------
Baxter International Inc. 41,500 2,093,156
- ---------------------------------------------------------------
Becton, Dickinson & Co. 30,000 1,500,000
- ---------------------------------------------------------------
Boston Scientific Corp.(c) 40,000 1,835,000
- ---------------------------------------------------------------
Guidant Corp. 40,000 2,490,000
- ---------------------------------------------------------------
Medtronic, Inc. 110,000 5,754,375
- ---------------------------------------------------------------
Quintiles Transnational Corp.(c) 56,000 2,142,000
- ---------------------------------------------------------------
19,714,531
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.44%
AmeriPath, Inc.(c) 68,400 1,162,800
- ---------------------------------------------------------------
Boron, LePore & Associates,
Inc.(c) 18,300 503,250
- ---------------------------------------------------------------
MAXIMUS, Inc.(c) 90,000 2,176,875
- ---------------------------------------------------------------
Omnicare, Inc. 43,000 1,333,000
- ---------------------------------------------------------------
5,175,925
- ---------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES-0.36%
Ethan Allen Interiors, Inc. 110,000 4,241,875
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.59%
Colgate-Palmolive Co. 30,000 2,205,000
- ---------------------------------------------------------------
Kimberly-Clark Corp. 55,000 2,712,187
- ---------------------------------------------------------------
Procter & Gamble Co. 25,000 1,995,312
- ---------------------------------------------------------------
6,912,499
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.67%
AmerUs Life Holdings, Inc.-Class A 66,700 2,459,563
- ---------------------------------------------------------------
Equitable Companies, Inc. 85,000 4,228,750
- ---------------------------------------------------------------
Hartford Life, Inc.-Class A 80,000 3,625,000
- ---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 140,000 5,057,500
- ---------------------------------------------------------------
PAULA Financial(c) 36,300 834,900
- ---------------------------------------------------------------
ReliaStar Financial Corp. 85,000 3,500,937
- ---------------------------------------------------------------
19,706,650
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.55%
CIGNA Corp. 18,000 $ 3,115,125
- ---------------------------------------------------------------
Travelers Group, Inc. 61,999 3,340,196
- ---------------------------------------------------------------
6,455,321
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.73%
Chubb Corp. 32,000 2,420,000
- ---------------------------------------------------------------
Everest Reinsurance Holdings,
Inc. 92,000 3,795,000
- ---------------------------------------------------------------
Travelers Property Casualty
Corp.-Class A 55,000 2,420,000
- ---------------------------------------------------------------
8,635,000
- ---------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.25%
Merrill Lynch & Co., Inc. 40,000 2,917,500
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.04%
Conning Corp.(c) 27,200 455,600
- ---------------------------------------------------------------
INVESTMENTS-0.15%
Security Capital Group Inc.-Class
B(c) 55,700 1,810,250
- ---------------------------------------------------------------
LAND DEVELOPMENT-0.56%
Parkway Properties, Inc. 60,000 2,058,750
- ---------------------------------------------------------------
Silverleaf Resorts, Inc.(c) 65,800 1,612,100
- ---------------------------------------------------------------
Trendwest Resorts, Inc.(c) 130,000 2,973,750
- ---------------------------------------------------------------
6,644,600
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.63%
Coach USA, Inc.(c) 120,000 4,020,000
- ---------------------------------------------------------------
Florida Panthers Holdings,
Inc.(c) 100,000 1,725,000
- ---------------------------------------------------------------
Steinway Musical Instruments(c) 75,000 1,734,375
- ---------------------------------------------------------------
7,479,375
- ---------------------------------------------------------------
LODGING-HOTELS-0.18%
Marriott International, Inc. 30,000 2,077,500
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.53%
Case Corp. 26,000 1,571,375
- ---------------------------------------------------------------
Caterpillar Inc. 55,000 2,670,937
- ---------------------------------------------------------------
Deere & Co. 34,000 1,982,625
- ---------------------------------------------------------------
6,224,937
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.54%
Diebold, Inc. 30,000 1,518,750
- ---------------------------------------------------------------
Superior TeleCom Inc.(c) 76,000 2,626,750
- ---------------------------------------------------------------
US Filter Corp.(c) 75,000 2,245,313
- ---------------------------------------------------------------
6,390,813
- ---------------------------------------------------------------
METAL FABRICATORS-0.30%
Metals USA(c) 229,000 3,492,250
- ---------------------------------------------------------------
NATURAL GAS-1.93%
Coastal Corp. 42,000 2,601,375
- ---------------------------------------------------------------
Columbia Gas System, Inc. 25,000 1,964,062
- ---------------------------------------------------------------
</TABLE>
FS-6
<PAGE> 212
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NATURAL GAS-(CONTINUED)
Consolidated Natural Gas Co. 25,000 $ 1,512,500
- ---------------------------------------------------------------
El Paso Natural Gas Co. 37,000 2,460,500
- ---------------------------------------------------------------
Energen Corp. 68,900 2,738,775
- ---------------------------------------------------------------
KN Energy, Inc. 48,000 2,592,000
- ---------------------------------------------------------------
MCN Corp. 45,000 1,816,875
- ---------------------------------------------------------------
Sonat, Inc. 72,000 3,294,000
- ---------------------------------------------------------------
Williams Companies, Inc. (The) 132,000 3,745,500
- ---------------------------------------------------------------
22,725,587
- ---------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-0.35%
Exxon Corp. 35,000 2,141,562
- ---------------------------------------------------------------
Mobil Corp. 27,000 1,949,062
- ---------------------------------------------------------------
4,090,624
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-2.63%
Bayard Drilling Technologies,
Inc.(c) 69,600 1,131,000
- ---------------------------------------------------------------
Cooper Cameron Corp.(c) 48,000 2,928,000
- ---------------------------------------------------------------
Diamond Offshore Drilling, Inc. 60,000 2,887,500
- ---------------------------------------------------------------
EVI, Inc.(c) 45,000 2,328,750
- ---------------------------------------------------------------
Halliburton Co. 60,000 3,116,250
- ---------------------------------------------------------------
Hanover Compressor Co.(c) 105,000 2,145,938
- ---------------------------------------------------------------
Nabors Industries, Inc.(c) 102,000 3,206,625
- ---------------------------------------------------------------
Newpark Resources, Inc.(c) 187,000 3,272,500
- ---------------------------------------------------------------
Patterson Energy, Inc.(c) 97,800 3,783,637
- ---------------------------------------------------------------
Pride International, Inc.(c) 50,000 1,262,500
- ---------------------------------------------------------------
Santa Fe International Corp. 25,100 1,021,256
- ---------------------------------------------------------------
SEACOR Holdings Inc.(c) 28,000 1,687,000
- ---------------------------------------------------------------
Willbros Group, Inc.(c) 150,000 2,250,000
- ---------------------------------------------------------------
31,020,956
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.74%
Burlington Resources, Inc. 45,750 2,050,172
- ---------------------------------------------------------------
Carrizo Oil & Gas, Inc.(c) 115,000 905,625
- ---------------------------------------------------------------
Nuevo Energy Co.(c) 60,000 2,445,000
- ---------------------------------------------------------------
Swift Energy Co.(c) 44,000 926,750
- ---------------------------------------------------------------
Vintage Petroleum, Inc. 124,000 2,356,000
- ---------------------------------------------------------------
8,683,547
- ---------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.13%
Tosco Corp. 40,000 1,512,500
- ---------------------------------------------------------------
PERSONAL CARE-0.86%
Avon Products, Inc. 54,000 3,314,250
- ---------------------------------------------------------------
Estee Lauder Cos.-Class A 25,000 1,285,938
- ---------------------------------------------------------------
Gillette Co. 55,000 5,524,063
- ---------------------------------------------------------------
10,124,251
- ---------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.50%
AES Corp.(c) 46,000 $ 2,144,750
- ---------------------------------------------------------------
Calenergy, Inc.(c) 130,000 3,737,500
- ---------------------------------------------------------------
5,882,250
- ---------------------------------------------------------------
PUBLISHING-0.27%
Meredith Corp. 50,000 1,784,375
- ---------------------------------------------------------------
Petersen Companies, Inc.
(The)-Class A(c) 58,900 1,354,700
- ---------------------------------------------------------------
3,139,075
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST-3.13%
Alexandria Real Estate Equities,
Inc. 90,800 2,865,875
- ---------------------------------------------------------------
Bay Apartment Communities, Inc. 40,000 1,560,000
- ---------------------------------------------------------------
Boston Properties, Inc. 115,000 3,802,187
- ---------------------------------------------------------------
Cali Realty Corp. 80,000 3,280,000
- ---------------------------------------------------------------
Captec Net Lease Realty, Inc.(c) 90,000 1,546,875
- ---------------------------------------------------------------
CCA Prison Realty Trust 136,200 6,077,925
- ---------------------------------------------------------------
Crescent Real Estate Equities,
Co. 40,000 1,575,000
- ---------------------------------------------------------------
Entertainment Properties Trust 166,700 3,229,812
- ---------------------------------------------------------------
Golf Trust of America, Inc. 37,700 1,093,300
- ---------------------------------------------------------------
Imperial Credit Commercial
Mortgage Investment Corp. 131,100 1,917,338
- ---------------------------------------------------------------
Mid-Atlantic Realty Trust 175,900 2,583,531
- ---------------------------------------------------------------
Patriot American Hospitality,
Inc. 120,000 3,457,500
- ---------------------------------------------------------------
Starwood Lodging 67,000 3,877,625
- ---------------------------------------------------------------
36,866,968
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.32%
CompUSA, Inc.(c) 85,000 2,635,000
- ---------------------------------------------------------------
Ingram Micro, Inc.-Class A(c) 40,000 1,165,000
- ---------------------------------------------------------------
3,800,000
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.19%
Ross Stores, Inc. 60,000 2,182,500
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.60%
American Stores Co. 100,000 2,056,250
- ---------------------------------------------------------------
Safeway, Inc.(c) 80,000 5,060,000
- ---------------------------------------------------------------
7,116,250
- ---------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.31%
Dayton-Hudson Corp. 55,000 3,712,500
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-1.13%
Audio Book Club, Inc.(c) 185,000 901,875
- ---------------------------------------------------------------
Inacom Corp.(c) 75,000 2,104,688
- ---------------------------------------------------------------
Linens 'N Things, Inc.(c) 70,000 3,053,750
- ---------------------------------------------------------------
Polo Ralph Lauren Corp.(c) 120,000 2,917,500
- ---------------------------------------------------------------
Toys "R" Us, Inc.(c) 75,000 2,357,812
- ---------------------------------------------------------------
</TABLE>
FS-7
<PAGE> 213
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-(CONTINUED)
U.S. Office Products Co.(c) 102,000 $ 2,001,750
- ---------------------------------------------------------------
13,337,375
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.43%
Washington Mutual, Inc. 80,000 5,105,000
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.59%
Abacus Direct Corp.(c) 42,400 1,738,400
- ---------------------------------------------------------------
JLK Direct Distribution
Inc.-Class A(c) 25,800 722,400
- ---------------------------------------------------------------
Outdoor Systems, Inc.(c) 116,100 4,455,337
- ---------------------------------------------------------------
6,916,137
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-2.10%
American Residential Services,
Inc.(c) 130,000 2,031,250
- ---------------------------------------------------------------
Avis Rent A Car, Inc.(c) 118,300 3,778,206
- ---------------------------------------------------------------
Cendant Corp.(c) 148,992 5,121,607
- ---------------------------------------------------------------
Comfort Systems USA, Inc.(c) 149,200 2,946,700
- ---------------------------------------------------------------
Hertz Corp.-Class A 50,500 2,032,625
- ---------------------------------------------------------------
INSpire Insurance Solutions,
Inc.(c) 85,000 1,774,375
- ---------------------------------------------------------------
Metzler Group, Inc.(c) 55,000 2,206,875
- ---------------------------------------------------------------
Pegasus Systems, Inc.(c) 45,600 678,300
- ---------------------------------------------------------------
Service Corp. International 33,222 1,227,138
- ---------------------------------------------------------------
Trammell Crow Co.(c) 35,400 911,550
- ---------------------------------------------------------------
U.S. Rentals, Inc.(c) 87,700 2,060,950
- ---------------------------------------------------------------
24,769,576
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.61%
DST Systems, Inc.(c) 65,000 2,774,687
- ---------------------------------------------------------------
Equifax, Inc. 52,000 1,842,750
- ---------------------------------------------------------------
Learning Tree International,
Inc.(c) 90,000 2,598,750
- ---------------------------------------------------------------
7,216,187
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.56%
AccuStaff, Inc.(c) 120,000 2,760,000
- ---------------------------------------------------------------
Administaff, Inc.(c) 63,000 1,630,125
- ---------------------------------------------------------------
Hall, Kinion & Associates,
Inc.(c) 100,000 2,187,500
- ---------------------------------------------------------------
6,577,625
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.06%
LCC International, Inc.-Class
A(c) 45,000 652,500
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.84%
IXC Communications, Inc.(c) 110,000 3,451,250
- ---------------------------------------------------------------
Tel-Save Holdings, Inc.(c) 125,000 2,484,375
- ---------------------------------------------------------------
WinStar Communications, Inc.(c) 160,000 3,990,000
- ---------------------------------------------------------------
9,925,625
- ---------------------------------------------------------------
TELEPHONE-0.98%
Cincinnati Bell, Inc. 82,000 2,542,000
- ---------------------------------------------------------------
TELEPHONE-(CONTINUED)
Electric Lightwave, Inc.-Class
A(c) 250,000 $ 3,718,750
- ---------------------------------------------------------------
McLeodUSA Inc.-Class A(c) 45,000 1,440,000
- ---------------------------------------------------------------
Teleport Communications Group
Inc.-Class A(c) 70,000 3,841,250
- ---------------------------------------------------------------
11,542,000
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.10%
Liz Claiborne, Inc. 27,000 1,128,938
- ---------------------------------------------------------------
TOBACCO-0.42%
Philip Morris Companies, Inc. 110,000 4,984,375
- ---------------------------------------------------------------
TRUCKERS-0.28%
C.H. Robinson Worldwide, Inc. 105,900 2,369,512
- ---------------------------------------------------------------
Jevic Transportation, Inc.(c) 56,700 914,288
- ---------------------------------------------------------------
3,283,800
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.68%
Denali Inc.(c) 150,000 1,987,500
- ---------------------------------------------------------------
Thermo Instrument Systems,
Inc.(c) 62,500 2,152,344
- ---------------------------------------------------------------
USA Waste Services, Inc.(c) 55,000 2,158,750
- ---------------------------------------------------------------
Waterlink, Inc.(c) 107,200 1,768,800
- ---------------------------------------------------------------
8,067,394
- ---------------------------------------------------------------
Total Domestic Common Stocks 592,027,431
- ---------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-3.24%
AIR FREIGHT-0.22%
CNF Trust I-$2.50 Conv. Pfd. 45,000 2,632,500
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.27%
WBK Trust-$3.135 Conv. Pfd. 95,000 3,182,500
- ---------------------------------------------------------------
CONSUMER FINANCE-0.19%
Money Store, Inc. (The)-$1.72
Conv. Pfd. 100,000 2,206,250
- ---------------------------------------------------------------
ENTERTAINMENT-0.07%
Time Warner Inc.-Series M,
$102.50 PIK Conv. Pfd. 712 801,907
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.30%
Medpartners Inc.-$1.442 Conv.
Pfd. TAPS 158,000 3,476,000
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-0.14%
McKesson Corp.-$2.50 Conv. Pfd.
(acquired 02/13/97; cost
$1,105,000)(b) 22,100 1,675,047
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.38%
Conseco Inc.-$4.279 Conv. PRIDES 14,000 2,184,000
- ---------------------------------------------------------------
Penncorp Financial Group,
Inc.-$3.50 Conv. Pfd. (acquired
08/02/96-11/15/96; cost
$2,072,500)(b) 40,000 2,326,600
- ---------------------------------------------------------------
4,510,600
- ---------------------------------------------------------------
</TABLE>
FS-8
<PAGE> 214
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE)-0.16%
American Bankers Insurance
Group-$3.125 Conv. Pfd. 20,000 $ 1,873,750
- ---------------------------------------------------------------
INSURANCE BROKERS-0.25%
Frontier Financing Trust-$3.125
Conv. Pfd. (acquired 10/09/96;
cost $2,500,000)(b) 50,000 2,918,750
- ---------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.07%
Salomon Inc.-$3.484 Conv. Pfd. 14,600 865,050
- ---------------------------------------------------------------
LODGING-HOTELS-0.31%
Host Marriott Corp.-$3.375 Conv.
Pfd. 30,000 1,843,140
- ---------------------------------------------------------------
Royal Caribbean Cruises
Ltd.-$3.63 Conv. Pfd. 20,750 1,765,047
- ---------------------------------------------------------------
3,608,187
- ---------------------------------------------------------------
NATURAL GAS-0.13%
MCN Corp.-$2.013 Conv. PRIDES 46,000 1,575,500
- ---------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.43%
AES Trust I-$2.69 Conv. Pfd. 70,500 5,058,375
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.32%
WorldCom, Inc.-$2.68 Conv. Dep.
Pfd. 36,000 3,780,000
- ---------------------------------------------------------------
Total Domestic Convertible Preferred
Stocks 38,164,416
- ---------------------------------------------------------------
U.S. DOLLAR DENOMINATED FOREIGN
BONDS & NOTES-4.76%
CANADA-2.67%
Bell Canada
(Telecommunications-Long
Distance), Deb., 9.50%,
10/15/10 $ 1,750,000 $ 2,204,107
- ---------------------------------------------------------------
Great Atlantic & Pacific Tea Co.,
Inc. (Retail-Food Chains),
Yankee Gtd. Notes, 7.78%,
11/01/00 (acquired 10/18/95;
cost $500,000)(b) 500,000 516,453
- ---------------------------------------------------------------
Gulf Canada Resources, Ltd.
(Oil-International Integrated),
Sr. Yankee Unsec. Notes, 8.35%,
08/01/06 4,500,000 4,904,190
- ---------------------------------------------------------------
Husky Oil Ltd. (Oil-International
Integrated), Sr. Yankee Notes,
7.125%, 11/15/06 6,300,000 6,472,746
- ---------------------------------------------------------------
Laidlaw Inc. (Services-Commercial
& Consumer),
Deb., 6.65%, 10/01/04 4,000,000 4,028,360
- ---------------------------------------------------------------
Deb, 6.72%, 10/01/27 3,000,000 3,047,550
- ---------------------------------------------------------------
Nova Chemicals Ltd. (Chemicals),
Yankee Deb., 7.00%, 08/15/26 4,000,000 4,111,600
- ---------------------------------------------------------------
Province of Manitoba (Sovereign
Debt), Yankee Bonds, 7.75%,
07/17/16 1,500,000 1,717,050
- ---------------------------------------------------------------
Royal Bank of Canada (Banks-Major
Regional), Yankee Sub. Notes,
6.75%, 10/24/11 3,000,000 2,994,810
- ---------------------------------------------------------------
CANADA-(CONTINUED)
Talisman Energy (Oil &
Gas-Exploration & Production),
Yankee Deb., 7.125%, 06/01/07 $ 1,500,000 $ 1,549,140
- ---------------------------------------------------------------
31,546,006
- ---------------------------------------------------------------
CAYMAN ISLANDS-0.48%
Hutchison Whampoa Ltd.
(Shipping), Series D Sr. Gtd.
Unsec. Unsub. Deb., 6.988%,
08/01/37 (acquired 10/02/97;
cost $6,027,460)(b) 6,000,000 5,606,640
- ---------------------------------------------------------------
GERMANY-0.60%
Deutsche Bank Finance BV
(Financial-Diversified), Conv.
Gtd. Bonds, 3.80%, 02/12/17
(acquired 01/16/97; cost
$1,642,600)(a)(b) 4,000,000 1,790,000
- ---------------------------------------------------------------
Dresdner Bank A.G. (Banks-Major
Regional), Sub. Bonds, 6.00%,
11/03/08 4,000,000 3,840,000
- ---------------------------------------------------------------
Tarkett International (Household
Furniture & Appliances), Yankee
Sr. Sub. Notes, 9.00%, 03/01/02 1,500,000 1,477,500
- ---------------------------------------------------------------
7,107,500
- ---------------------------------------------------------------
NORWAY-0.22%
Petroleum Geo-Services A.S.A.
(Oil & Gas-Services), Yankee
Notes, 7.50%, 03/31/07 2,500,000 2,633,550
- ---------------------------------------------------------------
UNITED KINGDOM-0.79%
Royal Bank of Scotland PLC
(Banks-Major Regional), Yankee
Sub. Notes, 6.375%, 02/01/11 1,500,000 1,452,165
- ---------------------------------------------------------------
Terra Nova (U.K.) Holdings, Co.
(Insurance-Property), Gtd. Sr.
Secured Notes, 7.20%, 08/15/07 3,000,000 3,102,600
- ---------------------------------------------------------------
Videotron Holdings PLC
(Broadcasting-Television,
Radio, & Cable), Sr. Discount
Notes, 11.125%, 07/01/04(e) 5,000,000 4,725,000
- ---------------------------------------------------------------
9,279,765
- ---------------------------------------------------------------
Total U.S. Dollar Denominated
Foreign Bonds & Notes 56,173,461
- ---------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED FOREIGN
BONDS & NOTES-2.97%(f)
AUSTRALIA-0.53%
Australian Government (Sovereign
Debt), Bonds, 10.00%,
10/15/07 AUD 5,000,000 4,197,433
- ---------------------------------------------------------------
Queensland Treasury Corp.
(Sovereign Debt), Gtd. Bonds,
6.50%, 06/14/05 3,000,000 2,000,299
- ---------------------------------------------------------------
6,197,732
- ---------------------------------------------------------------
CANADA-1.13%
Bank of Montreal (Banks-Money
Center), Sub. Deb., 7.92%,
07/31/12 CAD 1,850,000 1,458,937
- ---------------------------------------------------------------
</TABLE>
FS-9
<PAGE> 215
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Bell Mobility Cellular Inc.
(Telecommunications-Cellular/Wireless),
Deb., 6.55%, 06/02/08 CAD 2,500,000 $ 1,761,065
- ---------------------------------------------------------------
Canadian Oil Debco Inc. (Oil &
Gas-Exploration & Production),
Deb., 11.00%, 10/31/00 1,500,000 1,176,551
- ---------------------------------------------------------------
NAV Canada (Services-Commercial &
Consumer), Bonds, 7.40%,
06/01/27 3,500,000 2,795,249
- ---------------------------------------------------------------
Province of Ontario (Sovereign
Debt), Sr. Unsec. Unsub. Global
Bonds, 8.00%, 03/11/03 2,300,000 1,783,331
- ---------------------------------------------------------------
Telegobe Canada, Inc.
(Telephone), Unsec. Deb.,
8.35%, 06/20/03 1,000,000 776,572
- ---------------------------------------------------------------
Trans-Canada Pipelines (Natural
Gas), Series Q Deb., 10.625%,
10/20/09 1,500,000 1,427,858
- ---------------------------------------------------------------
Westcoast Energy, Inc. (Oil &
Gas-Exploration & Production),
Deb., 6.45%, 12/18/06 3,000,000 2,152,619
- ---------------------------------------------------------------
13,332,182
- ---------------------------------------------------------------
NEW ZEALAND-0.47%
Fannie Mae
(Financial-Diversified), Notes,
7.25%, 06/20/02 NZD 9,850,000 5,595,978
- ---------------------------------------------------------------
UNITED KINGDOM-0.84%
Fannie Mae
(Financial-Diversified), Sr.
Unsec. Notes, 6.875%,
06/07/02 GBP 2,800,000 4,612,605
- ---------------------------------------------------------------
Sutton Bridge Financial Ltd.,
(Financial-Diversified), Gtd.
Bonds 8.625%, 06/30/22
(acquired 05/29/97; cost
$4,890,565)(b) 3,000,000 5,327,372
- ---------------------------------------------------------------
9,939,977
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Foreign Bonds &
Notes 35,065,869
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-4.15%
ARGENTINA-0.07%
Banco Rio de La Plata S.A.
(Banks-Money Center)(c) 62,900 $ 880,600
- ---------------------------------------------------------------
BRAZIL-0.19%
Uniao de Bancos Brasileiros
S.A.-GDR (Banks-Regional)(c) 68,300 2,198,406
- ---------------------------------------------------------------
CANADA-0.65%
Cadillac Fairview Corp. (Land
Development)(c) 144,800 3,402,800
- ---------------------------------------------------------------
MetroNet Communications
Corp.-Class B (Communications
Equipment)(c) 99,800 1,734,025
- ---------------------------------------------------------------
Newcourt Credit Group, Inc.
Warrants
(Financial-Diversified) 21,700 713,388
- ---------------------------------------------------------------
CANADA-(CONTINUED)
Philip Services Corp. (Waste
Management)(c) 125,000 $ 1,796,875
- ---------------------------------------------------------------
7,647,088
- ---------------------------------------------------------------
CHINA-0.08%
China Southern Airlines Co.
Ltd.-ADR (Airlines)(c) 75,200 991,700
- ---------------------------------------------------------------
FINLAND-0.14%
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 23,500 1,645,000
- ---------------------------------------------------------------
FRANCE-0.13%
AXA S.A.-ADR (Insurance-Life &
Health)(c) 40,000 1,560,000
- ---------------------------------------------------------------
IRELAND-0.16%
Warner Chilcott
Laboratories-SP-ADR (Health
Care-Drugs-Generic & Other)(c) 150,600 1,863,675
- ---------------------------------------------------------------
ISRAEL-0.49%
ECI Telecommunications Ltd.
(Communications Equipment) 24,000 612,000
- ---------------------------------------------------------------
Gilat Communications Ltd.
(Telecommunications-Cellular
/Wireless)(c) 200,000 1,475,000
- ---------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Health
Care-Drugs-Generic & Other) 45,000 2,129,063
- ---------------------------------------------------------------
Zag Industries Ltd.
(Chemicals-Speciality)(c) 180,000 1,597,500
- ---------------------------------------------------------------
5,813,563
- ---------------------------------------------------------------
NETHERLANDS-0.17%
New Holland N.V.
(Machinery-Diversified)() 75,000 1,982,812
- ---------------------------------------------------------------
NEW ZEALAND-0.12%
Sky Network Television Ltd.
(Broadcasting-Television, Radio
& Cable)(c) 93,700 1,405,500
- ---------------------------------------------------------------
NORWAY-0.17%
Petroleum Geo-Services ASA-ADR
(Oil & Gas-Drilling &
Equipment)(c) 30,000 1,942,500
- ---------------------------------------------------------------
PORTUGAL-0.09%
Telecel-Comunicacaoes Pessoais,
S.A.
(Telecommunications-Cellular
/Wireless)(c) 10,300 1,102,100
- ---------------------------------------------------------------
SWEDEN-0.17%
Telefonaktiebolaget LM
Ericsson-ADR (Communications
Equipment) 55,000 2,052,188
- ---------------------------------------------------------------
UNITED KINGDOM-1.52%
Avis Europe PLC
(Services-Commercial &
Consumer) (acquired
03/26/97;cost $1,535,109)(b)(c) 765,450 2,187,418
- ---------------------------------------------------------------
Bass PLC (Beverages-Alcoholic)() 64,350 998,197
- ---------------------------------------------------------------
Danka Business Systems PLC-ADR
(Office Equipment & Supplies) 60,000 956,250
- ---------------------------------------------------------------
ESG Re Limited
(Insurance-Life/Health)(c) 70,300 1,652,050
- ---------------------------------------------------------------
</TABLE>
FS-10
<PAGE> 216
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Railtrack Group PLC (Shipping)() 3,000,000 $ 4,764,457
- ---------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Health Care-Drugs-Major
Pharmaceuticals) 46,000 2,366,125
- ---------------------------------------------------------------
Stirling Cooke Brown Holdings
Ltd. (Insurance-Life/Health)(c) 39,400 965,300
- ---------------------------------------------------------------
Stolt Comex Seaway, S.A. (Oil &
Gas-Exploration &
Production)(c) 80,000 4,000,000
- ---------------------------------------------------------------
17,889,797
- ---------------------------------------------------------------
Total Foreign Stocks & Other Equity
Interests 48,974,929
===============================================================
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES-5.87%
U.S. TREASURY NOTES & BONDS-5.87%
Notes, 6.50%, 05/31/01 $17,000,000 $ 17,413,950
- ---------------------------------------------------------------
Notes, 7.25%, 08/15/04 2,500,000 2,703,400
- ---------------------------------------------------------------
Notes, 7.50%, 02/15/05 3,000,000 3,298,200
- ---------------------------------------------------------------
Notes, 6.50%, 10/15/06 $12,000,000 $ 12,570,480
- ---------------------------------------------------------------
Notes, 6.25%, 02/15/07 10,000,000 10,322,900
- ---------------------------------------------------------------
Bonds, 6.75%, 08/15/26 3,000,000 3,305,430
- ---------------------------------------------------------------
Bonds, 6.625%, 02/15/27 11,700,000 12,707,955
- ---------------------------------------------------------------
Bonds, 6.375%, 08/15/27 6,500,000 6,859,710
- ---------------------------------------------------------------
Total U.S. Treasury
Securities 69,182,025
- ---------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-0.35%
Tennessee Valley Authority,
Bonds, 5.98%, 04/01/36 4,000,000 4,093,880
- ---------------------------------------------------------------
REPURCHASE AGREEMENT-1.91%(g)
Smith Barney, Inc., 6.75%,
01/02/98(h) 22,553,820 22,553,820
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.12% 1,169,127,780
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.88% 10,404,456
- ---------------------------------------------------------------
NET ASSETS-100.00% $1,179,532,236
===============================================================
</TABLE>
Notes to Schedule of investments:
(a) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(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 12/31/97 was $60,133,445
which represented 5.10% of the Fund's net assets.
(c) Non-income producing security.
(d) A portion of this security is subject to call options written. See Note 7.
(e) Discounted bond at purchase. The interest rate represents the coupon rate
at which the bond will accrue at a specified future date.
(f) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(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 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations,
0% to 13.875%, due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
Investment abbreviations:
ADR - American Depositary Receipts
AUD - Australian Dollar
CAD - Canadian Dollar
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debenture
Dep. - Depository
GDR - Global Depositary Receipt
GBP - British Pounds
Gtd. - Guaranteed
NZD - New Zealand Dollar
Pfd. - Preferred
PIK - Payment in Kind
PRIDES- Preferred Redeemable Increased Dividend Equity Security
Sr. - Senior
Sub. - Subordinated
TAPS - Threshold Appreciation Price Securities
Unsec.- Unsecured
Unsub.- Unsubordinated
See Notes to Financial Statements.
FS-11
<PAGE> 217
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$972,947,165) $1,169,127,780
- ---------------------------------------------------------
Foreign currencies, at market value (cost
$92,811) 93,198
- ---------------------------------------------------------
Receivables for:
Investments sold 163,269
- ---------------------------------------------------------
Fund shares sold 6,660,956
- ---------------------------------------------------------
Interest and dividends 8,935,089
- ---------------------------------------------------------
Investment for deferred compensation plan 19,822
- ---------------------------------------------------------
Other assets 35,115
- ---------------------------------------------------------
Total assets 1,185,035,229
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,147,975
- ---------------------------------------------------------
Fund shares reacquired 2,491,186
- ---------------------------------------------------------
Options written 90,938
- ---------------------------------------------------------
Deferred compensation plan 19,822
- ---------------------------------------------------------
Accrued advisory fees 514,118
- ---------------------------------------------------------
Accrued administrative service fees 6,906
- ---------------------------------------------------------
Accrued distribution fees 914,189
- ---------------------------------------------------------
Accrued transfer agent fees 97,479
- ---------------------------------------------------------
Accrued trustees' fees 3,660
- ---------------------------------------------------------
Accrued operating expenses 216,720
- ---------------------------------------------------------
Total liabilities 5,502,993
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $1,179,532,236
=========================================================
NET ASSETS:
Class A $ 683,632,584
=========================================================
Class B $ 486,505,816
=========================================================
Class C $ 9,393,836
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 26,517,207
=========================================================
Class B 18,896,410
=========================================================
Class C 364,691
=========================================================
Class A:
Net asset value and redemption price
per share $ 25.78
=========================================================
Offering price per share:
(Net asset value of $25.78 divided by
95.25%) $ 27.07
=========================================================
Class B:
Net asset value and offering price per
share $ 25.75
=========================================================
Class C:
Net asset value and offering price per
share $ 25.76
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 23,898,243
- ---------------------------------------------------------
Dividends (net of $63,548 foreign
withholding tax) 6,646,446
- ---------------------------------------------------------
Total investment income 30,544,689
- ---------------------------------------------------------
EXPENSES:
Advisory fees 4,789,939
- ---------------------------------------------------------
Administrative service fees 87,375
- ---------------------------------------------------------
Custodian fees 90,832
- ---------------------------------------------------------
Distribution fees-Class A 1,325,895
- ---------------------------------------------------------
Distribution fees-Class B 3,517,227
- ---------------------------------------------------------
Distribution fees-Class C 13,018
- ---------------------------------------------------------
Trustees' fees 12,799
- ---------------------------------------------------------
Transfer agent fees-Class A 637,946
- ---------------------------------------------------------
Transfer agent fees-Class B 642,019
- ---------------------------------------------------------
Transfer agent fees-Class C 3,692
- ---------------------------------------------------------
Other 435,860
- ---------------------------------------------------------
Total expenses 11,556,602
- ---------------------------------------------------------
Less: Expenses paid indirectly (27,927)
- ---------------------------------------------------------
Net expenses 11,528,675
- ---------------------------------------------------------
Net investment income 19,016,014
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 30,048,747
- ---------------------------------------------------------
Foreign currencies (79,358)
- ---------------------------------------------------------
Futures contracts 4,307,606
- ---------------------------------------------------------
Option contracts 554,458
- ---------------------------------------------------------
34,831,453
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 134,971,145
- ---------------------------------------------------------
Foreign currencies (42,818)
- ---------------------------------------------------------
Option contracts 10,684
- ---------------------------------------------------------
134,939,011
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and
option contracts 169,770,464
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $188,786,478
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-12
<PAGE> 218
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 19,016,014 $ 9,321,617
- ---------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 34,831,453 12,716,582
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 134,939,011 41,965,393
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 188,786,478 64,003,592
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (12,472,168) (6,033,635)
- ---------------------------------------------------------------------------------------------
Class B (5,631,570) (3,100,998)
- ---------------------------------------------------------------------------------------------
Class C (29,666) --
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (19,245,568) (6,912,890)
- ---------------------------------------------------------------------------------------------
Class B (13,549,718) (4,888,186)
- ---------------------------------------------------------------------------------------------
Class C (198,011) --
- ---------------------------------------------------------------------------------------------
Net equalization credits 8,681,162 7,707,610
- ---------------------------------------------------------------------------------------------
Share transactions-net:
Class A 260,376,777 212,483,093
- ---------------------------------------------------------------------------------------------
Class B 192,163,146 143,138,052
- ---------------------------------------------------------------------------------------------
Class C 9,380,380 --
- ---------------------------------------------------------------------------------------------
Net increase in net assets 608,261,242 406,396,638
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 571,270,994 164,874,356
- ---------------------------------------------------------------------------------------------
End of period $1,179,532,236 $ 571,270,994
=============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 958,373,243 $ 496,452,940
- ---------------------------------------------------------------------------------------------
Undistributed net investment income 19,641,775 10,459,581
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities,
foreign currencies, futures and option contracts 5,338,635 3,118,901
- ---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 196,178,583 61,239,572
- ---------------------------------------------------------------------------------------------
$1,179,532,236 $ 571,270,994
=============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-13
<PAGE> 219
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 three different classes of shares: the Class A shares, the
Class B shares and the Class C shares. The new Class C shares commenced sales on
August 4, 1997. Class A shares are sold with a front-end sales charge. Class B
shares and Class C 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 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
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. 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 -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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
FS-14
<PAGE> 220
denominated in foreign currencies are translated into U.S. dollar amounts on
the respective dates of such transactions.
H. Foreign Currency Contracts -- A foreign 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 foreign 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 foreign 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.
J. 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 Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at such
earlier time at which the Fund effects a closing purchase transaction by
purchasing (at a price which may be higher than that received when the call
option was written) a call option identical to the one originally written.
The Fund will not write a covered call option if, immediately thereafter,
the aggregate value of the securities underlying all such options,
determined as of the dates such options were written, would exceed 5% of the
net assets of the Fund.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays 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.
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, 1997, AIM
was reimbursed $87,375 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, 1997, AFS
was paid $653,940 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted
distribution 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 the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of the Class C shares. The Fund
pursuant to the Class B Plan, pays AIM Distributors an annual rate of 1.00% of
the average daily net assets attributable to the Class B shares. Of these
amounts, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class A, Class B or Class C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee by the Class B or Class C shares under the
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
FS-15
<PAGE> 221
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, 1997, for the Class A shares and Class B shares, and the
period August 4, 1997 (date sales commenced) through December 31, 1997, for the
Class C shares, the Class A, Class B, and Class C shares paid AIM Distributors
$1,325,895, $3,517,227 and $13,018, respectively, as compensation under the
Plans.
AIM Distributors received commissions of $672,146 from sales of the Class A
shares of the Fund during the year ended December 31, 1997. 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, 1997,
AIM Distributors received $99,075 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, 1997, the Fund paid legal fees of $5,966
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-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced Fund
expenses by $3,714 during the year ended December 31, 1997. Also during the year
ended December 31, 1997 the Fund received reductions in transfer agency fees
from AFS (an affiliate of AIM) and reductions in custodian fees of $9,699 and
$14,514, respectively, under expense offset arrangements. The effect of the
above arrangements resulted in reductions of the Fund's total expenses of
$27,927 during the year ended December 31, 1997.
NOTE 4-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 5-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) $500,000,000 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 15, 1997, the Fund was
limited to borrowing up to the lesser of (i) $325,000,000 or (ii) the limits set
by its prospectus for borrowings. During the year ended December 31, 1997, 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 0.05% 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 6-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, 1997 was
$999,679,075 and $562,878,959, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $210,448,136
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (14,427,520)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $196,020,616
=========================================================
</TABLE>
Cost of investments for tax purposes is $973,107,164.
NOTE 7-OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of year -- --
- -------------------------------------------------------------------------------------
Written 2,585 $ 978,417
- -------------------------------------------------------------------------------------
Closed (1,700) (794,778)
- -------------------------------------------------------------------------------------
Exercised (135) (46,843)
- -------------------------------------------------------------------------------------
Expired (150) (35,174)
- -------------------------------------------------------------------------------------
End of year 600 $ 101,622
- -------------------------------------------------------------------------------------
</TABLE>
FS-16
<PAGE> 222
Open call option contracts written at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1997 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- ----------------------------------------------- -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
America Online, Inc. Jan. 98 95 300 $53,474 $41,251 $12,223
Cisco Systems, Inc. Jan. 98 56.67 300 48,148 49,687 (1,539)
--- -------- ------- -------
600 $101,622 $90,938 $10,684
=== ======== ======= =======
</TABLE>
NOTE 8-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 16,304,170 $ 379,544,296 11,936,333 $241,163,392
- ---------------------------------------------------------------------------------------------------------------------------
Class B 8,995,999 214,419,729 7,608,028 153,665,571
- ---------------------------------------------------------------------------------------------------------------------------
Class C* 363,376 9,356,324 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 1,215,553 29,691,206 571,269 11,884,617
- ---------------------------------------------------------------------------------------------------------------------------
Class B 710,951 17,509,949 347,628 7,257,995
- ---------------------------------------------------------------------------------------------------------------------------
Class C* 8,636 215,490 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (6,305,229) (148,858,725) (2,004,527) (40,564,916)
- ---------------------------------------------------------------------------------------------------------------------------
Class B (1,668,675) (39,766,532) (876,383) (17,785,514)
- ---------------------------------------------------------------------------------------------------------------------------
Class C* (7,321) (191,434) -- --
- ---------------------------------------------------------------------------------------------------------------------------
19,617,460 $ 461,920,303 17,582,348 $355,621,145
===========================================================================================================================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during each of the years in the four-year period ended December 31, 1997, the
four months ended December 31, 1993 and the year ended August 31, 1993, for a
share of Class B outstanding during each of the years in the four-year period
ended December 31, 1997 and the period October 18, 1993 (date sales commenced)
through December 31, 1993, and for a share of Class C outstanding during the
period August 4, 1997 (date sales commenced) through December 31, 1997. Prior to
October 15, 1993, the Fund was known as AIM Convertible Securities, Inc. and had
a different investment objective.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
DECEMBER 31, AUGUST 31,
----------------------------------------------------- ----------
1997 1996 1995 1994 1993 1993
-------- -------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.84 $ 19.22 $ 14.62 $ 16.10 $ 15.97 $ 12.77
- ------------------------------------------------------------ -------- -------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.60 0.66 0.49 0.44 0.10 0.32
- ------------------------------------------------------------ -------- -------- ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 4.66 2.99 4.57 (1.31) 0.18 3.18
- ------------------------------------------------------------ -------- -------- ------- ------- ------- -------
Total from investment operations 5.26 3.65 5.06 (0.87) 0.28 3.50
- ------------------------------------------------------------ -------- -------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.55) (0.55) (0.46) (0.39) (0.15) (0.30)
- ------------------------------------------------------------ -------- -------- ------- ------- ------- -------
Distributions from net realized gains (0.77) (0.48) -- (0.22) -- --
- ------------------------------------------------------------ -------- -------- ------- ------- ------- -------
Total distributions (1.32) (1.03) (0.46) (0.61) (0.15) (0.30)
- ------------------------------------------------------------ -------- -------- ------- ------- ------- -------
Net asset value, end of period $ 25.78 $ 21.84 $ 19.22 $ 14.62 $ 16.10 $ 15.97
============================================================ ======== ======== ======= ======= ======= =======
Total return(a) 24.41% 19.25% 34.97% (5.44)% 1.76% 27.75%
============================================================ ======== ======== ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $683,633 $334,189 $92,241 $37,572 $23,520 $19,497
============================================================ ======== ======== ======= ======= ======= =======
Ratio of expenses to average net assets 0.98%(b)(c) 1.15% 1.43%(d) 1.25%(d) 2.17%(f) 2.07%
============================================================ ======== ======== ======= ======= ======= =======
Ratio of net investment income to average net assets 2.48%(b) 2.97% 2.81%(e) 3.07%(e) 1.81%(f) 2.23%
============================================================ ======== ======== ======= ======= ======= =======
Portfolio turnover rate 66% 72% 77% 76% 233% 154%
============================================================ ======== ======== ======= ======= ======= =======
Average brokerage commission rate paid(g) $ 0.0570 $ 0.0558 N/A N/A N/A N/A
============================================================ ======== ======== ======= ======= ======= =======
</TABLE>
(a) Does not deduct sales charges and are not annualized for
periods less than one year.
(b) Ratios are based on average net assets of $530,358,031.
(c) Includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets
would have remained the same.
(d) After fee waivers and/or expense reimbursements. Ratios of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.46% and 1.68% for 1995 and
1994, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 2.78% and 2.64%
for 1995 and 1994, respectively.
(f) Annualized.
(g) The average commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of
securities for the period divided by the total number of
related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and
thereafter.
FS-17
<PAGE> 223
NOTE 9-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------------------------- -------
1997 1996 1995 1994 1993 1997
-------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.83 $ 19.22 $ 14.62 $ 16.11 $ 16.69 $ 25.55
- ----------------------------------------------- -------- -------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.38 0.48 0.31 0.31 0.04 0.16
- ----------------------------------------------- -------- -------- ------- ------- ------- -------
Net gains (losses) on securities (both
realized and unrealized) 4.68 2.99 4.61 (1.31) (0.58) 1.01
- ----------------------------------------------- -------- -------- ------- ------- ------- -------
Total from investment operations 5.06 3.47 4.92 (1.00) (0.54) 1.17
- ----------------------------------------------- -------- -------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.37) (0.38) (0.32) (0.27) (0.04) (0.19)
- ----------------------------------------------- -------- -------- ------- ------- ------- -------
Distributions from net realized gains (0.77) (0.48) -- (0.22) -- (0.77)
- ----------------------------------------------- -------- -------- ------- ------- ------- -------
Total distributions (1.14) (0.86) (0.32) (0.49) (0.04) (0.96)
- ----------------------------------------------- -------- -------- ------- ------- ------- -------
Net asset value, end of period $ 25.75 $ 21.83 $ 19.22 $ 14.62 $ 16.11 $ 25.76
=============================================== ======== ======== ======= ======= ======= =======
Total return(a) 23.42% 18.28% 33.93% (6.23)% (3.23)% 4.67%
=============================================== ======== ======== ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $486,506 $237,082 $72,634 $20,245 $ 2,754 $ 9,394
=============================================== ======== ======== ======= ======= ======= =======
Ratio of expenses to average net assets 1.79%(b)(c) 1.97% 2.21%(d) 1.98%(d) 2.83%(f) 1.78%(c)(g)
=============================================== ======== ======== ======= ======= ======= =======
Ratio of net investment income to average net
assets 1.67%(b) 2.15% 2.03%(e) 2.34%(e) 1.15%(f) 1.68%(g)
=============================================== ======== ======== ======= ======= ======= =======
Portfolio turnover rate 66% 72% 77% 76% 233% 66%
=============================================== ======== ======== ======= ======= ======= =======
Average brokerage commission rate paid(h) $ 0.0570 $ 0.0558 N/A N/A N/A $0.0570
=============================================== ======== ======== ======= ======= ======= =======
</TABLE>
(a) Does 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 $351,722,707.
(c) Includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets
would have remained the same.
(d) After fee waivers and/or expense reimbursements. Ratios of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 2.23% and 2.45% for 1995 and
1994, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 2.01% and 1.87%
for 1995 and 1994, respectively.
(f) Annualized.
(g) Ratios are annualized and based on average net assets of
$3,167,605.
(h) The average commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of
securities for the period divided by the total number of
related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and
thereafter.
FS-18
<PAGE> 224
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, 1997, 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 or periods in the five-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 and financial highlights. Our procedures
included confirmation of securities owned as of December
31, 1997, 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, 1997, 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 or periods in the five-year period
then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
February 6, 1998
FS-19
<PAGE> 225
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-48.27%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.67%
Univision Communications Inc.(a) 26,500 $ 1,850,031
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-3.06%
ADC Telecommunications, Inc.(a) 62,000 2,588,500
- --------------------------------------------------------------
Excel Switching Corp.(a) 4,900 87,587
- --------------------------------------------------------------
Lucent Technologies, Inc. 29,000 2,316,375
- --------------------------------------------------------------
NEXTLINK Communications, Inc.-Class
A(a) 15,900 338,869
- --------------------------------------------------------------
Qwest Communications International
Inc.(a) 34,100 2,028,950
- --------------------------------------------------------------
Tellabs, Inc.(a) 20,000 1,057,500
- --------------------------------------------------------------
8,417,781
- --------------------------------------------------------------
ELECTRIC COMPANIES-16.07%
Allegheny Energy, Inc. 106,500 3,461,250
- --------------------------------------------------------------
Carolina Power & Light Co. 57,000 2,418,937
- --------------------------------------------------------------
CINergy Corp. 57,000 2,183,813
- --------------------------------------------------------------
DQE, Inc. 110,000 3,863,750
- --------------------------------------------------------------
Edison International 61,000 1,658,437
- --------------------------------------------------------------
FPL Group, Inc. 80,000 4,735,000
- --------------------------------------------------------------
IPALCO Enterprises, Inc. 25,500 1,069,406
- --------------------------------------------------------------
New Century Energies, Inc. 65,200 3,125,525
- --------------------------------------------------------------
New York State Electric & Gas Corp. 75,000 2,662,500
- --------------------------------------------------------------
NIPSCO Industries, Inc. 85,000 4,202,188
- --------------------------------------------------------------
Pinnacle West Capital Corp. 150,000 6,356,250
- --------------------------------------------------------------
Public Service Company of New
Mexico 60,000 1,421,250
- --------------------------------------------------------------
Sierra Pacific Resources 45,500 1,706,250
- --------------------------------------------------------------
Southern Co. 109,000 2,820,375
- --------------------------------------------------------------
Teco Energy, Inc. 88,200 2,480,625
- --------------------------------------------------------------
44,165,556
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.43%
Superior TeleCom Inc.(a) 34,100 1,178,581
- --------------------------------------------------------------
NATURAL GAS-8.81%
Coastal Corp. (The) 17,500 1,083,906
- --------------------------------------------------------------
Columbia Gas System, Inc. 25,000 1,964,063
- --------------------------------------------------------------
El Paso Natural Gas Co. 103,000 6,849,500
- --------------------------------------------------------------
Energen Corp. 19,100 759,225
- --------------------------------------------------------------
KN Energy, Inc. 41,600 2,246,400
- --------------------------------------------------------------
Public Service Company of North
Carolina, Inc. 40,000 915,000
- --------------------------------------------------------------
Sonat, Inc. 76,500 3,499,875
- --------------------------------------------------------------
Williams Companies, Inc. (The) 242,600 6,883,775
- --------------------------------------------------------------
24,201,744
- --------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-1.20%
AES Corp.(a) 28,400 $ 1,324,150
- --------------------------------------------------------------
Calenergy, Inc.(a) 69,000 1,983,750
- --------------------------------------------------------------
3,307,900
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST-5.03%
Alexandria Real Estate Equities,
Inc. 27,500 867,969
- --------------------------------------------------------------
Boston Properties, Inc. 40,000 1,322,500
- --------------------------------------------------------------
Mack-Cali Realty Corp. 43,400 1,779,400
- --------------------------------------------------------------
Captec Net Lease Realty, Inc. 35,000 601,562
- --------------------------------------------------------------
CCA Prison Realty Trust 38,200 1,704,675
- --------------------------------------------------------------
Crescent Real Estate Equities, Co. 26,400 1,039,500
- --------------------------------------------------------------
Entertainment Properties Trust 30,400 589,000
- --------------------------------------------------------------
Golf Trust of America, Inc. 13,500 391,500
- --------------------------------------------------------------
Imperial Credit Commercial Mortgage
Investment Corp. 31,600 462,150
- --------------------------------------------------------------
Meditrust Corp. 25,594 937,380
- --------------------------------------------------------------
Parkway Properties, Inc. 15,000 514,688
- --------------------------------------------------------------
Patriot American Hospitality, Inc. 60,800 1,751,800
- --------------------------------------------------------------
Public Storage, Inc. 27,000 793,125
- --------------------------------------------------------------
Starwood Lodging Trust 18,500 1,070,688
- --------------------------------------------------------------
13,825,937
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.42%
IXC Communications, Inc.(a) 36,500 1,145,188
- --------------------------------------------------------------
WinStar Communications, Inc.(a) 61,500 1,533,656
- --------------------------------------------------------------
WorldCom, Inc.(a) 40,000 1,210,000
- --------------------------------------------------------------
3,888,844
- --------------------------------------------------------------
TELEPHONE-11.58%
Ameritech Corp. 65,400 5,264,700
- --------------------------------------------------------------
BellSouth Corp. 89,100 5,017,444
- --------------------------------------------------------------
Century Telephone Enterprises 66,800 3,327,475
- --------------------------------------------------------------
Cincinnati Bell, Inc. 234,000 7,254,000
- --------------------------------------------------------------
Electric Lightwave, Inc.-Class A(a) 80,000 1,190,000
- --------------------------------------------------------------
GTE Corp. 36,600 1,912,350
- --------------------------------------------------------------
McLeodUSA Inc.-Class A(a) 40,000 1,280,000
- --------------------------------------------------------------
SBC Communications, Inc. 63,800 4,673,350
- --------------------------------------------------------------
Teleport Communications Group
Inc.-Class A(a) 35,000 1,920,625
- --------------------------------------------------------------
31,839,944
- --------------------------------------------------------------
Total Domestic Common Stocks 132,676,318
- --------------------------------------------------------------
</TABLE>
FS-20
<PAGE> 226
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC PREFERRED STOCKS-3.53%
ENTERTAINMENT-0.36%
Time Warner Inc.-Series M, $102.50
PIK Pfd. 891 $ 1,002,672
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.14%
Salomon Inc.-$3.48 Conv. Pfd. 6,700 396,975
- --------------------------------------------------------------
NATURAL GAS-0.71%
MCN Corp.-$2.013 Conv. Pfd. PRIDES 57,000 1,952,250
- --------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-1.61%
AES Trust I-$2.69 Conv. Pfd. 54,000 3,874,500
- --------------------------------------------------------------
Citizens Utilities Co.-$2.50 Conv.
Pfd. 11,400 544,350
- --------------------------------------------------------------
4,418,850
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.71%
WorldCom, Inc.-$2.68 Conv. Pfd. 18,500 1,942,500
- --------------------------------------------------------------
Total Domestic Preferred Stocks 9,713,247
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-30.05%
ARGENTINA-0.70%
Central Costanera S.A.-Class B
(Electric Companies) 475,200 1,235,755
- --------------------------------------------------------------
Telefonica de Argentina S.A.-ADR
(Telephone) 18,300 681,675
- --------------------------------------------------------------
1,917,430
- --------------------------------------------------------------
AUSTRALIA-0.14%
Telstra Corp. Ltd. (Telephone)(a) 195,000 411,776
- --------------------------------------------------------------
AUSTRIA-0.48%
Oesterreichische
Elektrizitaetswirtschafts
A.G.-Class A (Electric Companies) 12,500 1,326,050
- --------------------------------------------------------------
BELGIUM-0.54%
Electrabel S.A. (Electric
Companies) 6,400 1,480,338
- --------------------------------------------------------------
BRAZIL-1.95%
Centrais Eletricas de Santa
Catarina S.A. (Electric
Companies) 590,000 734,824
- --------------------------------------------------------------
Companhia Paranaense de
Energia-Copel (Electric
Companies)(a) 45,700 625,519
- --------------------------------------------------------------
Eletricidade de Sao Paulo SA
(Electric Companies)(a) 3,990 750,773
- --------------------------------------------------------------
Telecomunicacoes Brasileiras
S.A.-Telebras-ADR (Telephone) 28,000 3,260,250
- --------------------------------------------------------------
5,371,366
- --------------------------------------------------------------
CANADA-1.82%
MetroNet Communications Corp.-Class
B (Communications Equipment)(a) 23,400 406,575
- --------------------------------------------------------------
Philip Services Corp. (Waste
Management)(a) 50,000 718,750
- --------------------------------------------------------------
TELUS Corp.
(Telecommunications-Cellular
/Wireless) 95,000 2,107,344
- --------------------------------------------------------------
Westcoast Energy Inc. (Natural Gas) 71,900 1,653,700
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Westshore Terminals Inc.
(Services-Facilities &
Environmental) 40,800 $ 102,782
- --------------------------------------------------------------
4,989,151
- --------------------------------------------------------------
CHILE-1.40%
Cia. de Telecomunicaciones de Chile
S.A.-ADR (Telephone) 80,750 2,412,406
- --------------------------------------------------------------
Enersis S.A.-ADR (Electric
Companies) 49,600 1,438,400
- --------------------------------------------------------------
3,850,806
- --------------------------------------------------------------
DENMARK-0.31%
Tele Danmark A.S.-ADR (Telephone) 27,500 847,344
- --------------------------------------------------------------
FINLAND-0.30%
Nokia Oy A.B.-Class A-ADR
(Communications Equipment) 11,600 812,000
- --------------------------------------------------------------
GERMANY-2.27%
RWE A.G. (Electric Companies) 28,100 1,507,310
- --------------------------------------------------------------
VEBA A.G.
(Manufacturing-Diversified) 46,500 3,166,342
- --------------------------------------------------------------
Viag A.G.
(Manufacturing-Diversified) 2,900 1,562,034
- --------------------------------------------------------------
6,235,686
- --------------------------------------------------------------
FRANCE-0.37%
France Telecom S.A.-ADR
(Telecommunications-Cellular
/Wireless)(a) 28,000 1,008,000
- --------------------------------------------------------------
HONG KONG-0.23%
China Telecom Ltd.-ADR
(Telecommunications-Cellular
/Wireless)(a) 19,000 637,688
- --------------------------------------------------------------
HUNGARY-0.40%
Magyar Tavkozlesi-ADR
(Telecommunications-Long
Distance)(a) 42,700 1,110,200
- --------------------------------------------------------------
INDONESIA-0.16%
PT Indosat-ADR (Telephone) 23,000 444,187
- --------------------------------------------------------------
ISRAEL-0.51%
ECI Telecommunications Ltd.
(Communications Equipment) 33,200 846,600
- --------------------------------------------------------------
Gilat Communications Ltd.
(Communications Equipment)(a) 75,000 553,125
- --------------------------------------------------------------
1,399,725
- --------------------------------------------------------------
ITALY-2.81%
Telecom Italia Mobile S.p.A.
(Telecommunications-Cellular
/Wireless) 578,300 2,668,222
- --------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 788,333 5,042,835
- --------------------------------------------------------------
7,711,057
- --------------------------------------------------------------
JAPAN-0.58%
Nippon Telegraph & Telephone Corp.
(Telephone) 850 729,111
- --------------------------------------------------------------
</TABLE>
FS-21
<PAGE> 227
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN-(CONTINUED)
Nippon Telegraph & Telephone Corp.-ADR
(Telephone) 20,000 $ 866,250
- ---------------------------------------------------------------
1,595,361
- ---------------------------------------------------------------
NETHERLANDS-0.66%
Royal PTT Nederland N.V.--ADR
(Telephone) 43,709 1,813,923
- ---------------------------------------------------------------
NEW ZEALAND-1.33%
Sky Network Television Ltd.
(Broadcasting-Television, Radio &
Cable)(a) 22,600 339,000
- ---------------------------------------------------------------
Telecom Corp. of New Zealand Ltd.-ADR
(Telephone) 85,600 3,317,000
- ---------------------------------------------------------------
3,656,000
- ---------------------------------------------------------------
PERU-0.48%
Luz del Sur S.A. (Power
Producers-Independent) 32,000 552,000
- ---------------------------------------------------------------
Telefonica del Peru S.A.-ADR
(Telephone) 33,000 769,313
- ---------------------------------------------------------------
1,321,313
- ---------------------------------------------------------------
PORTUGAL-1.57%
Electricidade de Portugal, S.A.-ADR
(Electric Companies)(a) 16,100 623,875
- ---------------------------------------------------------------
Portugal Telecom S.A.-ADR (Telephone) 68,100 3,200,700
- ---------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.
(Telecommunications-Cellular
/Wireless)(a) 4,600 492,200
- ---------------------------------------------------------------
4,316,775
- ---------------------------------------------------------------
SPAIN-2.38%
Autopistas Concesionaria Espanola S.A.
(Services-Commercial & Consumer) 77,000 1,033,574
- ---------------------------------------------------------------
Iberdrola S.A. (Electric Companies) 233,000 3,066,393
- ---------------------------------------------------------------
Telefonica de Espana-ADR (Telephone) 26,800 2,440,475
- ---------------------------------------------------------------
6,540,442
- ---------------------------------------------------------------
SWEDEN-0.68%
Telefonaktiebolaget LM Ericsson-ADR
(Communications Equipment) 50,000 1,865,625
- ---------------------------------------------------------------
UNITED KINGDOM-7.22%
Energy Group PLC (Power
Producers-Independent) 30,000 1,338,750
- ---------------------------------------------------------------
Hyder PLC (Water Utilities) 53,955 857,774
- ---------------------------------------------------------------
National Grid Group PLC (Electric
Companies) 154,737 734,442
- ---------------------------------------------------------------
National Power PLC (Electric Companies) 175,000 1,724,468
- ---------------------------------------------------------------
National Power PLC-ADR (Electric
Companies) 40,000 1,585,000
- ---------------------------------------------------------------
PowerGen PLC (Electric Companies) 209,500 2,725,053
- ---------------------------------------------------------------
PowerGen PLC-ADR (Electric Companies) 40,900 2,172,812
- ---------------------------------------------------------------
Scottish Power PLC (Electric Companies) 201,550 1,780,864
- ---------------------------------------------------------------
Southern Electric PLC (Electric
Companies) 124,061 1,030,983
- ---------------------------------------------------------------
United Utilities PLC (Water Utilities) 197,100 2,524,916
- ---------------------------------------------------------------
Wessex Water PLC (Water Utilities) 152,775 1,287,168
- ---------------------------------------------------------------
UNITED KINGDOM-(CONTINUED)
Yorkshire Water PLC (Water
Utilities) 262,440 $ 2,090,439
- --------------------------------------------------------------
19,852,669
- --------------------------------------------------------------
VENEZUELA-0.76%
Cia. Anonima Nacional Telefonos de
Venezuela--ADR
(Telecommunications-Long
Distance)(a) 49,900 2,077,088
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 82,592,000
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC NON-CONVERTIBLE BONDS &
NOTES-9.00%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.74%
Comcast Corp., Sr. Sub. Deb.,
9.50%, 01/15/08 $ 900,000 $ 961,875
- --------------------------------------------------------------
TCI Communications Inc., Sr.
Notes, 8.00%, 08/01/05 1,000,000 1,071,860
- --------------------------------------------------------------
2,033,735
- --------------------------------------------------------------
ELECTRIC COMPANIES-0.91%
El Paso Electric Co., Series D
Sec. 1st Mortgage Bonds, 8.90%,
02/01/06 1,425,000 1,577,688
- --------------------------------------------------------------
Western Resources Inc., Sr. Notes,
7.125%, 08/01/09 900,000 926,856
- --------------------------------------------------------------
2,504,544
- --------------------------------------------------------------
ENTERTAINMENT-0.89%
Time Warner, Inc.
Deb., 9.125%, 01/15/13 1,000,000 1,194,540
- --------------------------------------------------------------
Notes, 8.18%, 08/15/07 1,150,000 1,262,953
- --------------------------------------------------------------
2,457,493
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.55%
California Energy Co., Notes,
10.25%, 01/15/04 1,400,000 1,512,000
- --------------------------------------------------------------
NATURAL GAS-2.64%
Enron Corp., Sr. Sub. Deb., 6.75%,
07/01/05 3,750,000 3,779,812
- --------------------------------------------------------------
Ferrellgas Partners, Series B Sr.
Sec. Gtd. Notes, 9.375%,
06/15/06 1,000,000 1,065,000
- --------------------------------------------------------------
PanEnergy Corp., Notes, 7.875%,
08/15/04 2,205,000 2,396,857
- --------------------------------------------------------------
7,241,669
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.73%
Tennessee Gas Pipeline Co., Bonds,
7.00%, 03/15/27 1,900,000 2,003,360
- --------------------------------------------------------------
POWER PRODUCERS
(INDEPENDENT)-1.80%
AES Corp., Sr. Sub. Notes, 10.25%,
07/15/06 925,000 1,005,938
- --------------------------------------------------------------
Indiana Michigan Power, Sec. Lease
Obligation Bonds, 9.82%,
12/07/22 3,021,500 3,953,663
- --------------------------------------------------------------
4,959,601
- --------------------------------------------------------------
</TABLE>
FS-22
<PAGE> 228
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-0.74%
AT&T Corp., Sr. Notes, 7.75%,
03/01/07 $ 1,850,000 $ 2,027,767
- --------------------------------------------------------------
Total Domestic Non-Convertible
Bonds & Notes 24,740,169
- --------------------------------------------------------------
FOREIGN NON-CONVERTIBLE BONDS &
NOTES-3.97%
CANADA-3.97%(b)
Bell Canada
(Telecommunications-Cellular/Wireless),
Series EW Deb., 8.80%, 08/17/05 CAD 950,000 780,169
- --------------------------------------------------------------
Unsec. Deb., 10.875, 10/11/04 1,700,000 1,500,468
- --------------------------------------------------------------
Canadian Oil Debco Inc. (Oil &
Gas-Exploration & Production),
Deb., 11.00%, 10/31/00 1,750,000 1,372,643
- --------------------------------------------------------------
Ontario Hydro (Electric
Companies), Global Bonds, 9.00%,
06/24/02 2,500,000 1,985,357
- --------------------------------------------------------------
Telegobe Canada, Inc. (Telephone),
Unsec. Deb., 8.35%, 06/20/03 2,400,000 1,863,772
- --------------------------------------------------------------
CANADA-(CONTINUED)
Trans-Canada Pipelines (Oil &
Gas-Exploration & Production),
Series Q Deb., 10.625%, 10/20/09CAD 1,750,000 $ 1,665,834
- --------------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 2,150,000 1,741,650
- --------------------------------------------------------------
Total Foreign Non-Convertible
Bonds & Notes 10,909,893
- --------------------------------------------------------------
REPURCHASE AGREEMENT-4.69%(c)
Smith Barney, Inc., 6.75%,
01/02/98(d) $12,885,919 12,885,919
- --------------------------------------------------------------
TOTAL INVESTMENT SECURITIES-99.51% 273,517,546
- --------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.49% 1,348,748
- --------------------------------------------------------------
NET ASSETS-100.00% $274,866,294
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)Foreign denominated security. Par value and coupon are denominated in
Canadian dollars.
(c)Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(d)Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations, 0%
to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 at $408,000,323.
Abbreviations:
ADR - American Depositary Receipt
CAD - Canadian Dollars
Conv. - Convertible
Deb. - Debentures
Gtd. - Guaranteed
Pfd. - Preferred
PIK - Payment in Kind
PRIDES - Preferred Redeemable Increased Dividend Equity Securities
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
See Notes to Financial Statements.
FS-23
<PAGE> 229
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$185,929,099) $273,517,546
- ---------------------------------------------------------
Foreign currencies, at market value (cost
$88,841) 89,034
- ---------------------------------------------------------
Receivables for:
Investments sold 1,090,901
- ---------------------------------------------------------
Fund shares sold 709,629
- ---------------------------------------------------------
Dividends and interest 1,401,296
- ---------------------------------------------------------
Investment for deferred compensation plan 21,326
- ---------------------------------------------------------
Other assets 41,624
- ---------------------------------------------------------
Total assets 276,871,356
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 210,840
- ---------------------------------------------------------
Fund shares reacquired 1,155,229
- ---------------------------------------------------------
Dividends 80,868
- ---------------------------------------------------------
Deferred compensation 21,326
- ---------------------------------------------------------
Accrued advisory fees 130,112
- ---------------------------------------------------------
Accrued administrative service fees 4,301
- ---------------------------------------------------------
Accrued distribution fees 218,550
- ---------------------------------------------------------
Accrued trustees' fees 2,114
- ---------------------------------------------------------
Accrued transfer agent fees 86,224
- ---------------------------------------------------------
Accrued operating expenses 95,498
- ---------------------------------------------------------
Total liabilities 2,005,062
- ---------------------------------------------------------
Net assets applicable to shares outstanding $274,866,294
=========================================================
NET ASSETS:
Class A $179,456,316
=========================================================
Class B $ 94,226,860
=========================================================
Class C $ 1,183,118
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 9,317,846
=========================================================
Class B 4,897,285
=========================================================
Class C 61,490
=========================================================
Class A:
Net asset value and redemption price per
share $ 19.26
=========================================================
Offering price per share:
(Net asset value of $19.26 divided by
94.50%) $ 20.38
=========================================================
Class B:
Net asset value and offering price per
share $ 19.24
=========================================================
Class C:
Net asset value and offering price per
share $ 19.24
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $353,265 foreign
withholding tax) $ 6,525,168
- ---------------------------------------------------------
Interest 3,200,225
- ---------------------------------------------------------
Total investment income 9,725,393
- ---------------------------------------------------------
EXPENSES:
Advisory fees 1,440,692
- ---------------------------------------------------------
Administrative service fees 77,375
- ---------------------------------------------------------
Custodian fees 63,892
- ---------------------------------------------------------
Trustees' fees 9,921
- ---------------------------------------------------------
Distribution fees -- Class A 411,911
- ---------------------------------------------------------
Distribution fees -- Class B 832,184
- ---------------------------------------------------------
Distribution fees -- Class C 1,555
- ---------------------------------------------------------
Transfer agent fees -- Class A 298,837
- ---------------------------------------------------------
Transfer agent fees -- Class B 183,976
- ---------------------------------------------------------
Transfer agent fees -- Class C 315
- ---------------------------------------------------------
Other 129,993
- ---------------------------------------------------------
Total expenses 3,450,651
- ---------------------------------------------------------
Less: Expenses paid indirectly (4,257)
- ---------------------------------------------------------
Net expenses 3,446,394
- ---------------------------------------------------------
Net investment income 6,278,999
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
SECURITIES AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) from
Investment securities 10,287,778
- ---------------------------------------------------------
Foreign currency transactions (85,284)
- ---------------------------------------------------------
10,202,494
- ---------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 36,483,295
- ---------------------------------------------------------
Foreign currency transactions (14,239)
- ---------------------------------------------------------
36,469,056
- ---------------------------------------------------------
Net gain from investment securities and
foreign currency transactions 46,671,550
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $52,950,549
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-24
<PAGE> 230
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,278,999 $ 8,067,022
- --------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currency transactions 10,202,494 9,942,020
- --------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currency transactions 36,469,056 12,247,663
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 52,950,549 30,256,705
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (4,517,536) (6,101,120)
- --------------------------------------------------------------------------------------------
Class B (1,708,856) (2,294,587)
- --------------------------------------------------------------------------------------------
Class C (2,079)
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (99,987) --
- --------------------------------------------------------------------------------------------
Class B (52,584) --
- --------------------------------------------------------------------------------------------
Class C (629) --
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A (15,436,814) (21,359,001)
- --------------------------------------------------------------------------------------------
Class B (921,844) 1,711,797
- --------------------------------------------------------------------------------------------
Class C 1,124,595
- --------------------------------------------------------------------------------------------
Net increase in net assets 31,334,815 2,213,794
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 243,531,479 241,317,685
- --------------------------------------------------------------------------------------------
End of period $274,866,294 $243,531,479
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $186,636,908 $201,870,971
- --------------------------------------------------------------------------------------------
Undistributed net investment income 78,008 112,764
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currency transactions 567,427 (9,567,151)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currency transactions 87,583,951 51,114,895
- --------------------------------------------------------------------------------------------
$274,866,294 $243,531,479
============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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 three different classes of shares: the Class A shares,
Class B shares and Class C shares. The new Class C shares commenced sales on
August 4, 1997. Class A shares are sold with a front-end sales charge. The Class
B and Class C 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 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
FS-25
<PAGE> 231
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) 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 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, 1997 undistributed net investment
income was reduced and undistributed net realized gains increased by $85,284
in order to comply with the requirements of the American Institute of
Certified Public Accountants Statement of Position 93-2. Net assets of the
fund were unaffected by the reclassification discussed above.
C. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
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 foreign 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 foreign 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 foreign 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.
F. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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, 1997, AIM
was reimbursed $77,375 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, 1997, AFS
was paid $293,817 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("A I M Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted
distribution 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 the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of the Class A shares
and 1.00% of the average daily net
FS-26
<PAGE> 232
assets of the Class C shares. 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 these amounts, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A, Class B, or
Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee by the Class B or Class C shares under the 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, 1997 for the
Class A shares and Class B shares, and the period August 4, 1997 (date sales
commenced) through December 31, 1997 for the Class C shares, the Class A, Class
B and Class C shares paid AIM Distributors $411,911, $832,184 and $1,555,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $57,864 from sales of the Class A
shares of the Fund during the year ended December 31, 1997. 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, 1997,
AIM Distributors received $88,250 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, 1997, the Fund paid legal fees of $4,839
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-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced the
Fund's expenses by $873 during the year ended December 31, 1997. Also during the
year ended December 31, 1997 the Fund received reductions in transfer agency
fees from AFS (an affiliate of AIM) and reductions in custodian fees of $2,795
and $589, respectively, under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$4,257 during the year ended December 31, 1997.
NOTE 4-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 5-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) $500,000,000 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 15, 1997, the Fund was
limited to borrowing up to the lesser of (i) $325,000,000 or (ii) the limits set
by its prospectus for borrowings. During the year ended December 31, 1997, 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 0.05% 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 6-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, 1997 was
$61,910,794 and $81,509,097, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1997 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $88,905,655
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (1,317,208)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $87,588,447
=========================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 2,718,197 $46,163,286 2,473,508 $36,689,173
- ------------------------------------------------------------------------
Class B 765,587 13,195,278 1,424,455 21,097,067
- ------------------------------------------------------------------------
Class C* 62,085 1,135,211 -- --
- ------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 237,293 4,070,874 353,355 5,316,653
- ------------------------------------------------------------------------
Class B 87,895 1,505,898 127,578 1,926,340
- ------------------------------------------------------------------------
Class C* 94 1,781 -- --
- ------------------------------------------------------------------------
Reacquired:
Class A (3,882,294) (65,670,974) (4,274,871) (63,364,827)
- ------------------------------------------------------------------------
Class B (924,101) (15,623,020) (1,425,633) (21,311,610)
- ------------------------------------------------------------------------
Class C* (689) (12,397) -- --
- ------------------------------------------------------------------------
(935,933) $(15,234,063) (1,321,608) $(19,647,204)
=========================================================================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
FS-27
<PAGE> 233
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during each of the years in the five-year period ended December 31, 1997, for a
share of Class B outstanding during each of the years in the four-year period
ended December 31, 1997 and the period September 1, 1993 (date sales commenced)
through December 31, 1993 and for a share of Class C outstanding during the
period August 4, 1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.01 $ 14.59 $ 11.85 $ 14.09 $ 13.31
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.47 0.55 0.55 0.59 0.60
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 3.26 1.43 2.71 (2.20) 1.02
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 3.73 1.98 3.26 (1.61) 1.62
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.47) (0.56) (0.52) (0.60) (0.61)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (0.01) -- -- -- (0.23)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Returns of capital -- -- -- (0.03) --
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.48) (0.56) (0.52) (0.63) (0.84)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 19.26 $ 16.01 $ 14.59 $ 11.85 $ 14.09
- ------------------------------------------------------------ ======== ======== ======== ======== ========
Total return(a) 23.70% 13.88% 28.07% (11.57)% 12.32%
- ------------------------------------------------------------ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $179,456 $164,001 $170,624 $150,515 $200,016
- ------------------------------------------------------------ ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.13%(b)(c) 1.17% 1.21% 1.18% 1.16%
- ------------------------------------------------------------ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 2.79%(b) 3.62% 4.20% 4.67% 4.21%
- ------------------------------------------------------------ ======== ======== ======== ======== ========
Portfolio turnover rate 26% 48% 88% 101% 76%
- ------------------------------------------------------------ ======== ======== ======== ======== ========
Average brokerage commission rate paid(d) $ 0.0465 $ 0.0460 N/A N/A N/A
- ------------------------------------------------------------ ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $164,764,424.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been 1.12%.
(d) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------------------- -------
1997 1996 1995 1994 1993 1997
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.01 $ 14.60 $ 11.84 $ 14.08 $ 15.30 $ 17.67
- ------------------------------------------------------- -------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.34 0.42 0.44 0.47 0.17 0.13
- ------------------------------------------------------- -------- ------- ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 3.25 1.44 2.73 (2.19) (0.98) 1.58
- ------------------------------------------------------- -------- ------- ------- ------- ------- -------
Total from investment operations 3.59 1.86 3.17 (1.72) (0.81) 1.71
- ------------------------------------------------------- -------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.35) (0.45) (0.41) (0.49) (0.17) (0.13)
- ------------------------------------------------------- -------- ------- ------- ------- ------- -------
Distributions from net realized gains (0.01) -- -- -- (0.24) (0.01)
- ------------------------------------------------------- -------- ------- ------- ------- ------- -------
Returns of capital -- -- -- (0.03) --
- ------------------------------------------------------- -------- ------- ------- ------- ------- -------
Total distributions (0.36) (0.45) (0.41) (0.52) (0.41) (0.14)
- ------------------------------------------------------- -------- ------- ------- ------- ------- -------
Net asset value, end of period $ 19.24 $ 16.01 $ 14.60 $ 11.84 $ 14.08 $ 19.24
- ------------------------------------------------------- ======== ======== ======== ======== ======== =======
Total return(a) 22.74% 12.98% 27.16% (12.35)% (5.32)% 9.74%
- ------------------------------------------------------- ======== ======== ======== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $94,227 $79,530 $70,693 $42,568 $23,892 $1,183
- ------------------------------------------------------- ======== ======== ======== ======== ======== =======
Ratio of expenses to average net assets 1.91%(b)(c) 1.96% 1.97% 2.07% 1.99%(d) 1.90%(b)(c)(d)
- ------------------------------------------------------- ======== ======== ======== ======== ======== =======
Ratio of net investment income to average net assets 2.01%(b) 2.83% 3.44% 3.78% 3.38%(d) 2.02%(b)(d)
- ------------------------------------------------------- ======== ======== ======== ======== ======== =======
Portfolio turnover rate 26% 48% 88% 101% 76% 26%
- ------------------------------------------------------- ======== ======== ======== ======== ======== =======
Average brokerage commission rate paid(e) $ 0.0465 $0.0460 N/A N/A N/A $0.0465
- ------------------------------------------------------- ======== ======== ======== ======== ======== =======
</TABLE>
(a) Does 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 $83,218,352 and $378,512,
respectively, for Class B and Class C.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have remained the same for
Class B and would have been 1.89% for Class C.
(d) Annualized.
(e) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
FS-28
<PAGE> 234
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, 1997, 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 or periods in the five-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 and financial highlights. Our procedures
included confirmation of securities owned as of December
31, 1997, 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, 1997, 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 or periods in the five-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
February 6, 1998
FS-29
<PAGE> 235
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-83.14%
AEROSPACE/DEFENSE-0.16%
BE Aerospace, Inc.(a) 15,000 $ 401,250
- --------------------------------------------------------------
Precision Castparts Corp. 10,000 603,125
- --------------------------------------------------------------
1,004,375
- --------------------------------------------------------------
AIR FREIGHT-0.13%
CNF Transportation Inc. 21,800 836,575
- --------------------------------------------------------------
AIRLINES-0.06%
Southwest Airlines Co. 15,450 380,456
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.13%
Mark IV Industries, Inc. 37,590 822,281
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.21%
BankBoston Corp. 14,100 1,324,518
- --------------------------------------------------------------
BANKS (MONEY CENTER)-1.56%
BankAmerica Corp. 30,000 2,190,000
- --------------------------------------------------------------
Chase Manhattan Corp. 55,200 6,044,400
- --------------------------------------------------------------
Citicorp 12,000 1,517,250
- --------------------------------------------------------------
9,751,650
- --------------------------------------------------------------
BANKS (REGIONAL)-0.21%
AmSouth Bancorporation 15,000 814,687
- --------------------------------------------------------------
TCF Financial Corp. 14,000 475,125
- --------------------------------------------------------------
1,289,812
- --------------------------------------------------------------
BIOTECHNOLOGY-0.03%
Curative Health Services, Inc.(a) 5,500 167,062
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-1.17%
Clear Channel Communications,
Inc.(a) 76,700 6,092,856
- --------------------------------------------------------------
Jacor Communications, Inc.(a) 22,500 1,195,312
- --------------------------------------------------------------
7,288,168
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.09%
Crompton & Knowles Corp. 22,000 583,000
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-2.76%
ADC Telecommunications, Inc.(a) 119,700 4,997,475
- --------------------------------------------------------------
Brightpoint, Inc.(a) 21,600 299,700
- --------------------------------------------------------------
DSC Communications Corp.(a) 55,000 1,320,000
- --------------------------------------------------------------
Lucent Technologies, Inc. 40,200 3,210,975
- --------------------------------------------------------------
PairGain Technologies, Inc.(a) 113,700 2,202,937
- --------------------------------------------------------------
REMEC, Inc.(a) 5,000 112,500
- --------------------------------------------------------------
Scientific-Atlanta, Inc. 36,700 614,725
- --------------------------------------------------------------
Tellabs, Inc.(a) 83,800 4,430,925
- --------------------------------------------------------------
17,189,237
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-2.85%
Citrix Systems, Inc.(a) 41,100 3,123,600
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (HARDWARE)-(CONTINUED)
Comdisco, Inc. 27,600 $ 922,875
- --------------------------------------------------------------
Compaq Computer Corp. 54,050 3,050,446
- --------------------------------------------------------------
Concord EFS, Inc.(a) 47,700 1,186,537
- --------------------------------------------------------------
Dell Computer Corp.(a) 69,000 5,796,000
- --------------------------------------------------------------
IDX Systems Corp.(a) 10,000 370,000
- --------------------------------------------------------------
International Business Machines
Corp. 32,000 3,346,000
- --------------------------------------------------------------
17,795,458
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-0.25%
Bay Networks, Inc.(a) 60,000 1,533,750
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.02%
Adaptec, Inc.(a) 41,900 1,555,537
- --------------------------------------------------------------
EMC Corp.(a) 100,000 2,743,750
- --------------------------------------------------------------
Iomega Corp.(a) 65,000 808,437
- --------------------------------------------------------------
SMART Modular Technologies, Inc.(a) 20,000 460,000
- --------------------------------------------------------------
Storage Technology Corp.(a) 13,000 805,187
- --------------------------------------------------------------
6,372,911
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-7.43%
America Online, Inc.(a) 34,100 3,041,293
- --------------------------------------------------------------
Applied Voice Technology, Inc.(a) 5,000 141,250
- --------------------------------------------------------------
Autodesk, Inc. 10,500 388,500
- --------------------------------------------------------------
Avant! Corp.(a) 16,000 268,000
- --------------------------------------------------------------
BMC Software, Inc.(a) 54,000 3,543,750
- --------------------------------------------------------------
Broderbund Software, Inc.(a) 95,000 2,434,375
- --------------------------------------------------------------
Cadence Design Systems, Inc.(a) 100,000 2,450,000
- --------------------------------------------------------------
Computer Associates International,
Inc. 69,000 3,648,375
- --------------------------------------------------------------
Compuware Corp.(a) 104,000 3,328,000
- --------------------------------------------------------------
Electronic Arts, Inc.(a) 96,700 3,656,468
- --------------------------------------------------------------
Electronics for Imaging, Inc.(a) 6,400 106,400
- --------------------------------------------------------------
HBO & Co. 113,200 5,433,600
- --------------------------------------------------------------
Microsoft Corp.(a) 69,900 9,034,575
- --------------------------------------------------------------
Network Associates, Inc.(a) 3,800 200,925
- --------------------------------------------------------------
Parametric Technology Co.(a) 36,300 1,719,712
- --------------------------------------------------------------
Security Dynamics Technologies,
Inc.(a) 21,400 765,050
- --------------------------------------------------------------
Sterling Commerce, Inc.(a) 100,000 3,843,750
- --------------------------------------------------------------
Sybase, Inc.(a) 11,300 150,431
- --------------------------------------------------------------
Symantec Corp.(a) 23,000 504,562
- --------------------------------------------------------------
Synopsys, Inc.(a) 33,800 1,208,350
- --------------------------------------------------------------
Wind River Systems(a) 11,900 472,281
- --------------------------------------------------------------
46,339,647
- --------------------------------------------------------------
CONSUMER FINANCE-2.33%
Aames Financial Corp. 18,150 234,816
- --------------------------------------------------------------
Capital One Financial Corp. 18,000 975,375
- --------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 38,000 1,458,250
- --------------------------------------------------------------
</TABLE>
FS-30
<PAGE> 236
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE-(CONTINUED)
Green Tree Financial Corp. 53,000 $ 1,387,938
- --------------------------------------------------------------
Household International, Inc. 26,100 3,329,381
- --------------------------------------------------------------
IMC Mortgage Co.(a) 41,000 486,875
- --------------------------------------------------------------
MBNA Corp. 89,250 2,437,641
- --------------------------------------------------------------
Money Store, Inc. (The) 34,200 718,200
- --------------------------------------------------------------
Providian Financial Corp. 11,400 515,138
- --------------------------------------------------------------
SLM Holding Corp. 21,500 2,991,188
- --------------------------------------------------------------
14,534,802
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-1.01%
AmeriSource Health Corp.-Class A(a) 28,000 1,631,000
- --------------------------------------------------------------
Cardinal Health, Inc. 31,050 2,332,631
- --------------------------------------------------------------
McKesson Corp. 10,000 1,081,875
- --------------------------------------------------------------
Sysco Corp. 28,000 1,275,750
- --------------------------------------------------------------
6,321,256
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.38%
AVX Corp. 21,700 400,093
- --------------------------------------------------------------
American Power Conversion Corp.(a) 50,000 1,181,250
- --------------------------------------------------------------
Avid Technology, Inc.(a) 10,000 267,500
- --------------------------------------------------------------
Berg Electronics Corp.(a) 22,400 509,600
- --------------------------------------------------------------
Black Box Corp.(a) 10,700 378,512
- --------------------------------------------------------------
General Electric Co. 61,200 4,490,550
- --------------------------------------------------------------
SCI Systems, Inc.(a) 55,500 2,417,718
- --------------------------------------------------------------
Sanmina Corp.(a) 43,600 2,953,900
- --------------------------------------------------------------
Sawtek Inc.(a) 8,000 211,000
- --------------------------------------------------------------
Solectron Corp.(a) 49,000 2,036,562
- --------------------------------------------------------------
14,846,685
- --------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.35%
Arrow Electronics, Inc.(a) 26,600 862,837
- --------------------------------------------------------------
Avnet, Inc. 15,700 1,036,200
- --------------------------------------------------------------
Kent Electronics(a) 10,400 261,300
- --------------------------------------------------------------
2,160,337
- --------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-0.61%
Methode Electronics, Inc.-Class A 22,400 364,000
- --------------------------------------------------------------
Perkin-Elmer Corp. 18,800 1,335,975
- --------------------------------------------------------------
Tektronix, Inc. 14,250 565,546
- --------------------------------------------------------------
Waters Corp.(a) 41,000 1,542,625
- --------------------------------------------------------------
3,808,146
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-3.81%
Altera Corp.(a) 140,400 4,650,750
- --------------------------------------------------------------
ANADIGICS, Inc.(a) 15,000 451,875
- --------------------------------------------------------------
Analog Devices, Inc.(a) 40,000 1,107,500
- --------------------------------------------------------------
Atmel Corp.(a) 46,800 868,725
- --------------------------------------------------------------
Burr-Brown Corp.(a) 15,300 491,512
- --------------------------------------------------------------
Dallas Semiconductor Corp. 16,200 660,150
- --------------------------------------------------------------
Intel Corp. 36,000 2,529,000
- --------------------------------------------------------------
Linear Technology Corp. 44,400 2,558,550
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-(CONTINUED)
Maxim Integrated Products, Inc.(a) 70,000 $ 2,415,000
- --------------------------------------------------------------
Microchip Technology, Inc.(a) 52,000 1,560,000
- --------------------------------------------------------------
National Semiconductor Corp.(a) 60,000 1,556,250
- --------------------------------------------------------------
PMC-Sierra, Inc.(a) 105,800 3,279,800
- --------------------------------------------------------------
Unitrode Corp.(a) 8,000 172,000
- --------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 8,400 317,100
- --------------------------------------------------------------
Xilinx, Inc.(a) 32,200 1,129,013
- --------------------------------------------------------------
23,747,225
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.18%
Applied Materials, Inc.(a) 90,000 2,711,250
- --------------------------------------------------------------
BMC Industries, Inc. 5,300 85,463
- --------------------------------------------------------------
KLA-Tencor Corp.(a) 42,000 1,622,250
- --------------------------------------------------------------
Lam Research Corp.(a) 30,000 877,500
- --------------------------------------------------------------
Novellus Systems, Inc.(a) 25,200 814,275
- --------------------------------------------------------------
Teradyne, Inc.(a) 38,000 1,216,000
- --------------------------------------------------------------
7,326,738
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-2.75%
American Express Co. 40,100 3,578,925
- --------------------------------------------------------------
Fannie Mae 40,000 2,282,500
- --------------------------------------------------------------
Freddie Mac 82,700 3,468,231
- --------------------------------------------------------------
MBIA, Inc. 12,000 801,750
- --------------------------------------------------------------
MGIC Investment Corp. 78,400 5,213,600
- --------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 30,500 1,803,313
- --------------------------------------------------------------
17,148,319
- --------------------------------------------------------------
FOODS-0.18%
Sara Lee Corp. 20,000 1,126,250
- --------------------------------------------------------------
FOOTWEAR-0.08%
Wolverine World Wide, Inc. 21,275 481,347
- --------------------------------------------------------------
GAMING, LOTTERY & PARI-MUTUEL COMPANIES-0.14%
International Game Technology 13,500 340,875
- --------------------------------------------------------------
MGM Grand, Inc.(a) 14,600 526,513
- --------------------------------------------------------------
867,388
- --------------------------------------------------------------
HEALTHCARE (DIVERSIFIED)-1.44%
Abbott Laboratories 27,200 1,783,300
- --------------------------------------------------------------
Bristol-Myers Squibb Co. 31,700 2,999,613
- --------------------------------------------------------------
Johnson & Johnson 24,000 1,581,000
- --------------------------------------------------------------
Warner-Lambert Co. 20,900 2,591,600
- --------------------------------------------------------------
8,955,513
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.52%
Alpharma, Inc. 10,200 221,850
- --------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 17,900 821,163
- --------------------------------------------------------------
Forest Laboratories, Inc.(a) 25,100 1,237,744
- --------------------------------------------------------------
ICN Pharmaceuticals, Inc. 51,700 2,523,606
- --------------------------------------------------------------
Jones Medical Industries, Inc. 21,000 803,250
- --------------------------------------------------------------
Mylan Laboratories, Inc. 21,000 439,688
- --------------------------------------------------------------
</TABLE>
FS-31
<PAGE> 237
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DRUGS-GENERIC & OTHER)-(CONTINUED)
Watson Pharmaceuticals, Inc.(a) 105,000 $ 3,405,938
- --------------------------------------------------------------
9,453,239
- --------------------------------------------------------------
HEATH CARE (DRUGS-MAJOR PHARMACEUTICALS)-2.10%
Lilly (Eli) & Co. 48,300 3,362,888
- --------------------------------------------------------------
Merck & Co., Inc. 35,000 3,718,750
- --------------------------------------------------------------
Pfizer Inc. 80,400 5,994,825
- --------------------------------------------------------------
13,076,463
- --------------------------------------------------------------
HEALTH CARE (LONG-TERM CARE)-1.35%
Beverly Enterprises, Inc.(a) 47,000 611,000
- --------------------------------------------------------------
Health Care and Retirement Corp.(a) 72,450 2,916,113
- --------------------------------------------------------------
HEALTHSOUTH Corp.(a) 176,700 4,903,425
- --------------------------------------------------------------
8,430,538
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.96%
Concentra Managed Care, Inc.(a) 34,700 1,171,125
- --------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 17,300 1,038,000
- --------------------------------------------------------------
HealthCare COMPARE Corp.(a) 55,900 2,857,888
- --------------------------------------------------------------
PhyCor, Inc.(a) 33,600 907,200
- --------------------------------------------------------------
5,974,213
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-2.27%
Arterial Vascular Engineering,
Inc.(a) 7,900 513,500
- --------------------------------------------------------------
Becton, Dickinson & Co. 47,000 2,350,000
- --------------------------------------------------------------
Biomet, Inc. 20,600 527,875
- --------------------------------------------------------------
DENTSPLY International, Inc. 17,800 542,900
- --------------------------------------------------------------
DePuy, Inc. 9,600 276,000
- --------------------------------------------------------------
Guidant Corp. 35,800 2,228,550
- --------------------------------------------------------------
Henry Schein, Inc.(a) 7,717 270,095
- --------------------------------------------------------------
Medtronic, Inc. 18,900 988,706
- --------------------------------------------------------------
Physician Sales & Service, Inc.(a) 15,900 341,850
- --------------------------------------------------------------
Quintiles Transnational Corp.(a) 20,400 780,300
- --------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 5,000 325,313
- --------------------------------------------------------------
Stryker Corp. 40,400 1,504,900
- --------------------------------------------------------------
Sybron International Corp.(a) 74,500 3,496,844
- --------------------------------------------------------------
14,146,833
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.67%
Covance, Inc.(a) 42,650 847,669
- --------------------------------------------------------------
FPA Medical Management, Inc.(a) 31,900 594,138
- --------------------------------------------------------------
Omnicare, Inc. 71,400 2,213,400
- --------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 17,800 295,925
- --------------------------------------------------------------
PharMerica, Inc.(a) 21,390 221,918
- --------------------------------------------------------------
Transition Systems, Inc.(a) 400 8,850
- --------------------------------------------------------------
4,181,900
- --------------------------------------------------------------
HOMEBUILDING-0.15%
Clayton Homes, Inc. 40,000 720,000
- --------------------------------------------------------------
Oakwood Homes Corp. 5,600 185,850
- --------------------------------------------------------------
905,850
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOUSEHOLD FURNITURE & SUPPLIES-0.26%
Furniture Brands International,
Inc.(a) 28,000 $ 574,000
- --------------------------------------------------------------
Maytag Corp. 28,200 1,052,213
- --------------------------------------------------------------
1,626,213
- --------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.38%
Dial Corp. (The) 45,000 936,563
- --------------------------------------------------------------
Procter & Gamble Co. 18,000 1,436,625
- --------------------------------------------------------------
2,373,188
- --------------------------------------------------------------
HOUSEWARES-0.05%
Central Garden and Pet Co.(a) 11,300 296,625
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.88%
Conseco, Inc. 204,400 9,287,425
- --------------------------------------------------------------
Equitable Companies, Inc. 36,000 1,791,000
- --------------------------------------------------------------
Torchmark Corp. 15,300 643,556
- --------------------------------------------------------------
11,721,981
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-2.00%
Ace, Ltd. 18,000 1,737,000
- --------------------------------------------------------------
American International Group, Inc. 12,000 1,305,000
- --------------------------------------------------------------
Century Business Services, Inc.(a) 11,000 189,750
- --------------------------------------------------------------
Travelers Group, Inc. 171,050 9,215,319
- --------------------------------------------------------------
12,447,069
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-1.28%
Allstate Corp. 31,600 2,871,650
- --------------------------------------------------------------
CapMAC Holdings, Inc. 20,500 712,375
- --------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 56,100 2,314,125
- --------------------------------------------------------------
EXEL Ltd. 16,000 1,014,000
- --------------------------------------------------------------
Fremont General Corp. 18,000 985,500
- --------------------------------------------------------------
HCC Insurance Holdings, Inc. 5,300 112,625
- --------------------------------------------------------------
8,010,275
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.46%
Merrill Lynch & Co., Inc. 39,000 2,844,563
- --------------------------------------------------------------
INVESTMENT MANAGEMENT-0.93%
Affiliated Managers Group, Inc.(a) 54,300 1,574,700
- --------------------------------------------------------------
Franklin Resources, Inc. 21,650 1,882,197
- --------------------------------------------------------------
T. Rowe Price Associates, Inc. 36,900 2,320,088
- --------------------------------------------------------------
5,776,985
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.11%
Callaway Golf Co. 10,200 291,338
- --------------------------------------------------------------
North Face, Inc. (The)(a) 10,000 220,000
- --------------------------------------------------------------
Speedway Motorsports, Inc.(a) 8,100 200,981
- --------------------------------------------------------------
712,319
- --------------------------------------------------------------
LODGING (HOTELS)-0.53%
Choice Hotels International,
Inc.(a) 20,800 332,800
- --------------------------------------------------------------
Host Marriott Corp.(a) 10,000 196,250
- --------------------------------------------------------------
ITT Corp. 22,000 1,823,250
- --------------------------------------------------------------
</TABLE>
FS-32
<PAGE> 238
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LODGING (HOTELS)-(CONTINUED)
Promus Hotel Corp.(a) 22,500 $ 945,000
- --------------------------------------------------------------
3,297,300
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.37%
Dover Corp. 37,800 1,365,525
- --------------------------------------------------------------
Ingersoll-Rand Co. 22,500 911,250
- --------------------------------------------------------------
2,276,775
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.23%
Crane Co. 7,000 303,625
- --------------------------------------------------------------
U.S. Industries, Inc. 36,900 1,111,613
- --------------------------------------------------------------
1,415,238
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.81%
Cognex Corp.(a) 116,600 3,177,350
- --------------------------------------------------------------
Diebold, Inc. 36,400 1,842,750
- --------------------------------------------------------------
5,020,100
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.04%
HON INDUSTRIES, Inc. 3,800 224,200
- --------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-7.71%
Baker Hughes, Inc. 21,000 916,125
- --------------------------------------------------------------
BJ Services Co.(a) 33,400 2,402,713
- --------------------------------------------------------------
Camco International, Inc. 19,000 1,210,062
- --------------------------------------------------------------
Cooper Cameron Corp.(a) 50,000 3,050,000
- --------------------------------------------------------------
Diamond Offshore Drilling, Inc. 58,400 2,810,500
- --------------------------------------------------------------
ENSCO International, Inc. 28,400 951,400
- --------------------------------------------------------------
EVI, Inc.(a) 93,300 4,828,275
- --------------------------------------------------------------
Falcon Drilling Company, Inc.(a) 30,000 1,051,875
- --------------------------------------------------------------
Global Industries Ltd.(a) 191,000 3,247,000
- --------------------------------------------------------------
Input/Output, Inc.(a) 29,800 884,688
- --------------------------------------------------------------
Marine Drilling Companies, Inc.(a) 35,000 726,250
- --------------------------------------------------------------
Nabors Industries, Inc.(a) 180,000 5,658,750
- --------------------------------------------------------------
National-Oilwell, Inc.(a) 90,000 3,076,875
- --------------------------------------------------------------
Newpark Resources, Inc.(a) 18,000 315,000
- --------------------------------------------------------------
Noble Drilling Corp.(a) 100,000 3,062,500
- --------------------------------------------------------------
Pride International, Inc.(a) 32,900 830,725
- --------------------------------------------------------------
Rowan Companies, Inc.(a) 20,000 610,000
- --------------------------------------------------------------
Santa Fe International Corp. 74,000 3,010,875
- --------------------------------------------------------------
Schlumberger Ltd. 35,100 2,825,550
- --------------------------------------------------------------
Smith International, Inc.(a) 21,500 1,319,562
- --------------------------------------------------------------
Varco International, Inc.(a) 66,600 1,427,738
- --------------------------------------------------------------
Veritas DGC, Inc.(a) 12,600 497,700
- --------------------------------------------------------------
Western Atlas Inc.(a) 45,000 3,330,000
- --------------------------------------------------------------
48,044,163
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.25%
Apache Corp. 15,000 525,938
- --------------------------------------------------------------
Burlington Resources, Inc. 17,500 784,218
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION &
PRODUCTION)-(CONTINUED)
Pioneer Natural Resources Co. 8,000 $ 231,500
- --------------------------------------------------------------
1,541,656
- --------------------------------------------------------------
PERSONAL CARE-0.72%
Avon Products, Inc. 29,100 1,786,012
- --------------------------------------------------------------
Gillette Co. 20,500 2,058,969
- --------------------------------------------------------------
Perrigo Co.(a) 50,000 668,750
- --------------------------------------------------------------
4,513,731
- --------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-1.16%
AES Corp.(a) 154,600 7,208,225
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.12%
Gannett Co., Inc. 12,000 741,750
- --------------------------------------------------------------
RESTAURANTS-0.23%
Cracker Barrel Old Country Store,
Inc. 25,000 834,375
- --------------------------------------------------------------
Starbucks Corp.(a) 15,600 598,650
- --------------------------------------------------------------
1,433,025
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.26%
Fastenal Co. 7,300 279,225
- --------------------------------------------------------------
Home Depot, Inc. 22,600 1,330,575
- --------------------------------------------------------------
1,609,800
- --------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.56%
CHS Electronics, Inc.(a) 75,000 1,284,375
- --------------------------------------------------------------
CompUSA, Inc.(a) 104,300 3,233,300
- --------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 71,900 2,094,088
- --------------------------------------------------------------
Tech Data Corp.(a) 80,300 3,121,662
- --------------------------------------------------------------
9,733,425
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.56%
Federated Department Stores,
Inc.(a) 22,000 947,375
- --------------------------------------------------------------
Kohl's Corp.(a) 10,900 742,563
- --------------------------------------------------------------
Nordstrom, Inc. 15,200 917,700
- --------------------------------------------------------------
Proffitt's, Inc.(a) 30,000 853,125
- --------------------------------------------------------------
3,460,763
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-1.09%
Consolidated Stores Corp.(a) 86,593 3,804,680
- --------------------------------------------------------------
Dollar General Corp. 18,085 655,581
- --------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 22,950 949,556
- --------------------------------------------------------------
Ross Stores, Inc. 37,700 1,371,338
- --------------------------------------------------------------
6,781,155
- --------------------------------------------------------------
RETAIL (DRUG STORES)-1.39%
CVS Corp. 96,249 6,165,951
- --------------------------------------------------------------
Rite Aid Corp. 42,600 2,500,088
- --------------------------------------------------------------
8,666,039
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.65%
Kroger Co.(a) 114,900 4,244,119
- --------------------------------------------------------------
Quality Food Centers, Inc.(a) 21,600 1,447,200
- --------------------------------------------------------------
</TABLE>
FS-33
<PAGE> 239
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (FOOD CHAINS)-(CONTINUED)
Safeway, Inc.(a) 73,000 $ 4,617,250
- --------------------------------------------------------------
10,308,569
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-1.33%
Costco Companies, Inc.(a) 76,000 3,391,500
- --------------------------------------------------------------
Dayton Hudson Corp. 48,700 3,287,250
- --------------------------------------------------------------
Fred Meyer, Inc.(a) 43,800 1,593,225
- --------------------------------------------------------------
8,271,975
- --------------------------------------------------------------
RETAIL (HOME SHOPPING)-0.29%
CDW Computer Centers, Inc.(a) 23,050 1,201,481
- --------------------------------------------------------------
Micro Warehouse, Inc.(a) 42,500 592,344
- --------------------------------------------------------------
1,793,825
- --------------------------------------------------------------
RETAIL (SPECIALTY)-2.01%
Bed Bath & Beyond, Inc.(a) 45,900 1,767,150
- --------------------------------------------------------------
Hollywood Entertainment Corp.(a) 31,100 330,438
- --------------------------------------------------------------
Michaels Stores, Inc.(a) 25,000 731,250
- --------------------------------------------------------------
Office Depot, Inc.(a) 114,600 2,743,238
- --------------------------------------------------------------
Payless ShoeSource, Inc.(a) 10,400 698,100
- --------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 20,400 489,600
- --------------------------------------------------------------
Tiffany & Co. 22,700 818,618
- --------------------------------------------------------------
Viking Office Products, Inc.(a) 64,800 1,413,450
- --------------------------------------------------------------
Williams-Sonoma, Inc.(a) 85,000 3,559,375
- --------------------------------------------------------------
12,551,219
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.50%
Gap, Inc. 24,000 850,500
- --------------------------------------------------------------
TJX Companies, Inc. 65,400 2,248,125
- --------------------------------------------------------------
3,098,625
- --------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.70%
Ahmanson (H.F.) & Co. 39,600 2,650,725
- --------------------------------------------------------------
Dime Bancorp, Inc. 15,000 453,750
- --------------------------------------------------------------
Washington Mutual, Inc. 19,500 1,244,344
- --------------------------------------------------------------
4,348,819
- --------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.14%
Omnicom Group, Inc. 20,000 847,500
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-2.11%
Cendant Corp.(a) 120,395 4,138,589
- --------------------------------------------------------------
Cerner Corp.(a) 41,000 866,125
- --------------------------------------------------------------
Equity Corp. International(a) 11,200 259,000
- --------------------------------------------------------------
Service Corp. International 164,500 6,076,219
- --------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 28,650 1,335,806
- --------------------------------------------------------------
Trammell Crow Co.(a) 20,000 515,000
- --------------------------------------------------------------
13,190,739
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (COMPUTER SYSTEMS)-0.44%
Cambridge Technology Partners,
Inc.(a) 10,100 $ 420,413
- --------------------------------------------------------------
Gartner Group, Inc.(a) 23,000 856,750
- --------------------------------------------------------------
Shared Medical Systems Corp. 10,900 719,400
- --------------------------------------------------------------
SunGard Data Systems Inc.(a) 23,600 731,600
- --------------------------------------------------------------
2,728,163
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-2.12%
Affiliated Computer Services,
Inc.(a) 22,600 594,662
- --------------------------------------------------------------
BISYS Group, Inc.(a) 11,200 372,400
- --------------------------------------------------------------
CSG Systems International, Inc.(a) 90,000 3,600,000
- --------------------------------------------------------------
DST Systems, Inc.(a) 22,100 943,394
- --------------------------------------------------------------
Equifax, Inc. 72,400 2,565,675
- --------------------------------------------------------------
Fiserv, Inc.(a) 37,900 1,861,838
- --------------------------------------------------------------
National Data Corp. 32,000 1,156,000
- --------------------------------------------------------------
PMT Services, Inc.(a) 25,500 353,812
- --------------------------------------------------------------
Paychex, Inc. 34,600 1,751,625
- --------------------------------------------------------------
13,199,406
- --------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.20%
AccuStaff, Inc.(a) 53,700 1,235,100
- --------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-0.13%
Corrections Corp. of America(a) 22,500 833,906
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-2.45%
AT&T Corp. 30,000 1,837,500
- --------------------------------------------------------------
Billing Information Concepts
Corp.(a) 18,600 892,800
- --------------------------------------------------------------
CIENA Corp.(a) 41,100 2,512,238
- --------------------------------------------------------------
LCI International, Inc.(a) 40,000 1,230,000
- --------------------------------------------------------------
MCI Communications Corp. 62,800 2,688,625
- --------------------------------------------------------------
WorldCom, Inc.(a) 203,200 6,146,800
- --------------------------------------------------------------
15,307,963
- --------------------------------------------------------------
TEXTILES (APPAREL)-0.48%
Jones Apparel Group, Inc.(a) 26,200 1,126,600
- --------------------------------------------------------------
Liz Claiborne, Inc. 29,300 1,225,106
- --------------------------------------------------------------
Nautica Enterprises, Inc.(a) 28,800 669,600
- --------------------------------------------------------------
3,021,306
- --------------------------------------------------------------
TEXTILES (SPECIALTY)-0.17%
Unifi, Inc. 25,800 1,049,738
- --------------------------------------------------------------
TRUCKS & PARTS-0.02%
Wabash National Corp. 5,000 142,188
- --------------------------------------------------------------
WASTE MANAGEMENT-0.73%
American Disposal Services, Inc.(a) 10,000 365,000
- --------------------------------------------------------------
Thermo Instrument Systems, Inc.(a) 26,125 899,680
- --------------------------------------------------------------
</TABLE>
FS-34
<PAGE> 240
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
WASTE MANAGEMENT-(CONTINUED)
USA Waste Services, Inc.(a) 82,992 $ 3,257,436
- --------------------------------------------------------------
4,522,116
- --------------------------------------------------------------
Total Domestic Common Stocks 518,399,662
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-3.26%
BERMUDA-1.21%
Tyco International Ltd.
(Manufacturing-Diversified) 167,700 7,556,981
- --------------------------------------------------------------
CANADA-0.65%
Newcourt Credit Group, Inc.
(Financial-Diversified) 5,500 183,562
- --------------------------------------------------------------
Northern Telecom Ltd.-ADR
(Communications Equipment) 19,100 1,699,900
- --------------------------------------------------------------
Philip Services Corp. (Waste
Management)(a) 100,000 1,437,500
- --------------------------------------------------------------
Precision Drilling Corp. (Oil &
Gas-Drilling & Equipment)(a) 31,000 755,625
- --------------------------------------------------------------
4,076,587
- --------------------------------------------------------------
FINLAND-0.21%
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 18,350 1,284,500
- --------------------------------------------------------------
IRELAND-0.02%
CBT Group PLC-ADR
(Computers-Software &
Services)(a) 1,800 147,825
- --------------------------------------------------------------
ISRAEL-0.15%
Tecnomatix Technologies Ltd.
(Computers-Software &
Services)(a) 10,000 337,500
- --------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Health
Care-Drugs-Generic & Other) 13,000 615,063
- --------------------------------------------------------------
952,563
- --------------------------------------------------------------
SWEDEN-0.44%
Telefonaktiebolaget LM Ericsson-ADR
(Communications Equipment) 72,700 2,712,619
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TAIWAN-0.03%
Taiwan Semiconductor Manufacturing
Co. Ltd.-ADR
(Electronics-Semiconductors)(a) 10,000 $ 181,875
- --------------------------------------------------------------
UNITED KINGDOM-0.55%
SmithKline Beecham PLC-ADR (Health
Care-Drugs-Major Pharmaceuticals) 67,000 3,446,312
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 20,359,262
- --------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK-0.15%
LODGING (HOTELS)-0.15%
Host Marriott Corp., $3.375 Conv.
Pfd. 14,950 918,498
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC CONVERTIBLE CORPORATE NOTES-0.11%
COMPUTERS (PERIPHERALS)-0.11%
EMC Corp., 3.25%, Conv. Sub. Notes $ 500,000 674,875
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-7.16%
U.S. TREASURY BILLS(b)-7.16%
4.566%, 01/02/98(c) 44,700,000 44,693,909
- --------------------------------------------------------------
Total Investments, excluding
repurchase agreement 585,046,206
- --------------------------------------------------------------
REPURCHASE AGREEMENT(d)-10.64%
Dean Witter Reynolds, Inc., 6.75%,
01/02/98(e) 66,326,931 66,326,931
- --------------------------------------------------------------
TOTAL INVESTMENTS-104.46% 651,373,137
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(4.46%) (27,830,220)
- --------------------------------------------------------------
NET ASSETS-100.00% $623,542,917
==============================================================
</TABLE>
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 8.
(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 12/31/97 with a maturing value of
$200,075,000. Collateralized by $204,420,000 U.S. Government obligations,
0% to 8.80% due 01/09/98 to 11/15/29 with an aggregate market value at
12/31/97 of $204,000,245.
Investment Abbreviations:
ADR-American Depositary Receipt
Conv.-Convertible
Pfd.-Preferred
Sub.-Subordinated
See Notes to Financial Statements.
FS-35
<PAGE> 241
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase
agreement, at market value (cost
$466,409,789) $585,046,206
- ---------------------------------------------------------
Repurchase agreement 66,326,931
- ---------------------------------------------------------
Receivables for:
Investments sold 429,715
- ---------------------------------------------------------
Fund shares sold 722,005
- ---------------------------------------------------------
Dividends and interest 254,824
- ---------------------------------------------------------
Investment for deferred compensation plan 63,989
- ---------------------------------------------------------
Other assets 19,859
- ---------------------------------------------------------
Total assets 652,863,529
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 25,404,932
- ---------------------------------------------------------
Fund shares reacquired 2,649,663
- ---------------------------------------------------------
Variation margin 9,650
- ---------------------------------------------------------
Deferred compensation plan 63,989
- ---------------------------------------------------------
Accrued advisory fees 347,621
- ---------------------------------------------------------
Accrued administrative service fees 5,749
- ---------------------------------------------------------
Accrued distribution fees 596,362
- ---------------------------------------------------------
Accrued trustees' fees 2,890
- ---------------------------------------------------------
Accrued transfer agent fees 127,426
- ---------------------------------------------------------
Accrued operating expenses 112,330
- ---------------------------------------------------------
Total liabilities 29,320,612
- ---------------------------------------------------------
Net assets applicable to shares outstanding $623,542,917
=========================================================
NET ASSETS:
Class A $266,167,858
=========================================================
Class B $356,185,858
=========================================================
Class C $ 1,189,201
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 16,990,731
=========================================================
Class B 23,779,883
=========================================================
Class C 79,397
=========================================================
Class A:
Net asset value and redemption price per
share $ 15.67
=========================================================
Offering price per share:
(Net asset value of $15.67 divided by
94.50%) $ 16.58
=========================================================
Class B:
Net asset value and offering price per
share $ 14.98
=========================================================
Class C:
Net asset value and offering price per
share $ 14.98
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $31,497 foreign
withholding tax) $ 2,818,914
- ---------------------------------------------------------
Interest 4,030,884
- ---------------------------------------------------------
Total investment income 6,849,798
- ---------------------------------------------------------
EXPENSES:
Advisory fees 3,901,342
- ---------------------------------------------------------
Administrative service fees 74,201
- ---------------------------------------------------------
Custodian fees 145,850
- ---------------------------------------------------------
Transfer agent fees-Class A 369,991
- ---------------------------------------------------------
Transfer agent fees-Class B 731,596
- ---------------------------------------------------------
Transfer agent fees-Class C 750
- ---------------------------------------------------------
Trustees' fees 11,880
- ---------------------------------------------------------
Distribution fees-Class A 633,698
- ---------------------------------------------------------
Distribution fees-Class B 3,284,783
- ---------------------------------------------------------
Distribution fees-Class C 2,571
- ---------------------------------------------------------
Other 274,011
- ---------------------------------------------------------
Total expenses 9,430,673
- ---------------------------------------------------------
Less: Expenses paid indirectly (17,975)
- ---------------------------------------------------------
Net expenses 9,412,698
- ---------------------------------------------------------
Net investment income (loss) (2,562,900)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 59,302,302
- ---------------------------------------------------------
Foreign currencies (53,295)
- ---------------------------------------------------------
Futures contracts 9,324,974
- ---------------------------------------------------------
68,573,981
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 30,912,100
- ---------------------------------------------------------
Foreign currencies 21
- ---------------------------------------------------------
Futures contracts (1,308,102)
- ---------------------------------------------------------
29,604,019
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies and futures
contracts 98,178,000
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $95,615,100
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-36
<PAGE> 242
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (2,562,900) $ 124,753
- -------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and futures contracts 68,573,981 25,815,431
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies and futures contracts 29,604,019 41,005,363
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 95,615,100 66,945,547
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (115,803) --
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (28,869,623) (9,939,277)
- -------------------------------------------------------------------------------------------
Class B (40,478,955) (12,535,665)
- -------------------------------------------------------------------------------------------
Class C (105,058) --
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A 23,238,247 35,293,722
- -------------------------------------------------------------------------------------------
Class B 64,250,779 122,675,148
- -------------------------------------------------------------------------------------------
Class C 1,318,691 --
- -------------------------------------------------------------------------------------------
Net increase in net assets 114,853,378 202,439,475
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 508,689,539 306,250,064
- -------------------------------------------------------------------------------------------
End of period $623,542,917 $508,689,539
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $499,110,813 $412,932,159
- -------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (34,200) 66,315
- -------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and futures contracts 6,119,260 6,948,040
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and futures contracts 118,347,044 88,743,025
- -------------------------------------------------------------------------------------------
$623,542,917 $508,689,539
===========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 three different classes of shares: the Class A shares, the
Class B shares and the Class C shares. The new Class C shares commenced sales on
August 4, 1997. Class A shares are sold with a front-end sales charge. Class B
shares and Class C 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 investment 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 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
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
FS-37
<PAGE> 243
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 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 foreign 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 foreign currency contract for the purchase or
sales 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.
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, 1997,
paid-in capital was decreased by $2,629,063, undistributed net investment
income was increased by $2,578,188 and undistributed net realized gains
increased by $50,875 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.
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.
F. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
G. 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, 1997, AIM
was reimbursed $74,201 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,
1997, AFS was paid $608,362 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted
distribution 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 the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of the Class C shares. The Fund
pursuant to the Class B Plan,
FS-38
<PAGE> 244
pays AIM Distributors compensation at an annual rate of 1.00% of the average
daily net assets attributable to the Class B shares. Of these amounts, the Fund
may pay a service fee of 0.25% of the average daily net assets of the Class A,
Class B or Class C shares to selected dealers and financial institutions who
furnish continuing personal shareholder services to their customers who purchase
and own shares of the Fund. Any amounts not paid as a service fee by the Class B
or Class C shares under the 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, 1997, for the Class A shares
and Class B shares and the period August 4, 1997 through December 31, 1997 for
the Class C shares, the Class A, Class B, and Class C shares paid AIM
Distributors $633,698, $3,284,783 and $2,571 respectively, as compensation under
the Plans.
AIM Distributors received commissions of $143,669 from sales of the Class A
shares of the Fund during the year ended December 31, 1997. 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, 1997,
AIM Distributors received $109,547 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, 1997, the Fund paid legal fees of $5,583
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-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced Fund
expenses by $2,139 during the year ended December 31, 1997. Also during the year
ended December 31, 1997, the Fund received reductions in transfer agency fees
from AFS (an affiliate of AIM) and reductions in custodian fees of $6,509 and
$9,327, respectively, under expense offset arrangements. The effect of the above
arrangements resulted in reductions of the Fund's total expenses of $17,975
during the year ended December 31, 1997.
NOTE 4-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 5-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) $500,000,000 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 15, 1997, the Fund was
limited to borrowing up to the lesser of (i) $325,000,000 or (ii) the limits set
by its prospectus for borrowings. During the year ended December 31, 1997, 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 0.05% 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 6-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, 1997 was
$592,414,766 and $560,170,230, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $131,466,776
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (14,012,338)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $117,454,438
=========================================================
Cost of investments for tax purposes is
$467,591,768.
</TABLE>
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 14,466,946 $ 234,213,923 10,862,824 $ 152,766,558
- --------------------------------------------------------------------------------
Class B 7,100,475 113,053,525 12,013,218 167,088,540
- --------------------------------------------------------------------------------
Class C* 104,003 1,760,456 -- --
- --------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 1,802,991 27,333,257 657,046 9,474,936
- --------------------------------------------------------------------------------
Class B 2,600,309 37,704,454 845,350 11,809,495
- --------------------------------------------------------------------------------
Class C* 6,820 98,891 -- --
- --------------------------------------------------------------------------------
Reacquired:
Class A (14,695,429) (238,308,933) (8,993,672) (126,947,772)
- --------------------------------------------------------------------------------
Class B (5,524,470) (86,507,200) (4,060,745) (56,222,887)
- --------------------------------------------------------------------------------
Class C* (31,426) (540,656) -- --
- --------------------------------------------------------------------------------
5,830,219 $ 88,807,717 11,324,021 $ 157,968,870
================================================================================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
NOTE 8-OPEN FUTURES CONTRACTS
On December 31, 1997, $2,156,000 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for open futures
contracts.
Open futures contracts at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
NO. OF APPRECIATION
CONTRACT CONTRACTS MONTH COMMITMENT (DEPRECIATION)
<S> <C> <C> <C> <C>
193
S&P 500 Index contracts Mar. 98 Buy $(289,500)
=======================================================================
</TABLE>
FS-39
<PAGE> 245
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during each of the years in the five-year period ended December 31, 1997, for a
share of Class B outstanding during each of the years in the four-year period
ended December 31, 1997 and the period September 1, 1993 (date sales commenced)
through December 31, 1993, and for a share of Class C outstanding for the period
August 4, 1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.78 $ 13.05 $ 10.32 $ 11.32 $ 12.28
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.01(a) 0.07 0.02(a) -- --
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 2.82 2.34 3.50 (0.57) 0.41
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 2.83 2.41 3.52 (0.57) 0.41
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.01) -- -- -- --
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (1.93) (0.68) (0.79) (0.43) (1.37)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (1.94) (0.68) (0.79) (0.43) (1.37)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 15.67 $ 14.78 $ 13.05 $ 10.32 $ 11.32
============================================================ ======== ======== ======== ======== ========
Total return(b) 19.54% 18.61% 34.31% (4.99)% 3.64%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $266,168 $227,882 $168,217 $123,271 $146,723
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.13%(c)(d) 1.18% 1.28% 1.22% 1.17%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 0.04%(c) 0.46% 0.20% 0.02% 0.02%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 110% 97% 87% 201% 192%
============================================================ ======== ======== ======== ======== ========
Average broker commission rate paid(e) $ 0.0568 $ 0.0621 N/A N/A N/A
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $253,479,200.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------ -------
1997 1996 1995 1994 1993 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.32 $ 12.77 $ 10.21 $ 11.31 $ 12.83 $ 17.65
- ----------------------------------------------------- ------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) (0.13)(a) (0.05) (0.08)(a) (0.06) (0.01) (0.04)(a)
- ----------------------------------------------------- ------- ------- ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 2.72 2.28 3.43 (0.61) (0.14) (0.70)
- ----------------------------------------------------- ------- ------- ------- ------- ------- -------
Total from investment operations 2.59 2.23 3.35 (0.67) (0.15) (0.74)
- ----------------------------------------------------- ------- ------- ------- ------- ------- -------
Less distributions:
Distributions from net realized gains (1.93) (0.68) (0.79) (0.43) (1.37) (1.93)
- ----------------------------------------------------- ------- ------- ------- ------- ------- -------
Total distributions (1.93) (0.68) (0.79) (0.43) (1.37) (1.93)
- ----------------------------------------------------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 14.98 $ 14.32 $ 12.77 $ 10.21 $ 11.31 $ 14.98
===================================================== ======= ======= ======= ======= ======= =======
Total return(b) 18.50% 17.60% 33.00% (5.88)% (0.92)% (3.86)%
===================================================== ======= ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $356,186 $280,807 $138,034 $38,448 $11,053 $ 1,189
===================================================== ======= ======= ======= ======= ======= =======
Ratio of expenses to average net assets 1.99%(c)(d) 2.03% 2.13% 2.18% 1.91%(e) 1.95%(f)(g)
===================================================== ======= ======= ======= ======= ======= =======
Ratio of net investment income (loss) to average net
assets (0.82)%(c) (0.39)% (0.65)% (0.94)% (0.72)%(e) (0.77)%(f)
===================================================== ======= ======= ======= ======= ======= =======
Portfolio turnover rate 110% 97% 87% 201% 192% 110%
===================================================== ======= ======= ======= ======= ======= =======
Average broker commission rate paid(h) $0.0568 $0.0621 N/A N/A N/A $0.0568
===================================================== ======= ======= ======= ======= ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and are not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $328,478,309.
(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) Ratios are annualized and based on average net assets of $625,699.
(g) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been
1.94%.
(h)The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
FS-40
<PAGE> 246
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, 1997, 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 or periods in the five-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 and financial highlights. Our procedures
included confirmation of securities owned as of December
31, 1997, 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, 1997, 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 or periods in the five-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
February 6, 1998
FS-41
<PAGE> 247
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS & NOTES-88.63%
AEROSPACE/DEFENSE-0.46%
Earthwatch Inc., Sr. Notes,
12.50%, 03/01/01(a)(b)
(Acquired 03/14/97; Cost
$15,000,000) $ 15,500,000 $ 15,577,500
- ---------------------------------------------------------------
AGRICULTURAL PRODUCTS-0.68%
Advance Agro Public Co.
(Thailand), Sr. Unsec. Notes,
13.00%, 11/15/07(a)
(Acquired 12/04/97; Cost
$5,252,739) 5,700,000 5,016,000
- ---------------------------------------------------------------
Hines Horticulture, Inc., Series
B Sr. Gtd. Sub. Notes, 11.75%,
10/15/05 16,710,000 18,464,550
- ---------------------------------------------------------------
23,480,550
- ---------------------------------------------------------------
AIR FREIGHT-0.52%
Atlas Air, Inc., Sr. Notes,
10.75%, 08/01/05 16,750,000 17,755,000
- ---------------------------------------------------------------
AIRLINES-1.66%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 26,550,000 29,885,476
- ---------------------------------------------------------------
Amtran, Inc., Sr. Unsec. Notes,
10.50%, 08/01/04(a)
(Acquired 07/17/97-07/30/97;
Cost $21,636,875) 21,500,000 22,576,720
- ---------------------------------------------------------------
World Airways, Inc., Sub. Conv.
Deb., 8.00%, 08/26/04(a)
(Acquired 08/21/97; Cost
$5,000,000) 5,000,000 4,775,000
- ---------------------------------------------------------------
57,237,196
- ---------------------------------------------------------------
AUTOMOBILES-0.82%
Ford Brasil LTDA (Brazil),
Unsec. Eurobonds, 9.125%,
11/08/04 7,840,000 7,565,600
- ---------------------------------------------------------------
Unsec. Eurobonds, 9.25%,
01/22/07 21,710,000 20,733,050
- ---------------------------------------------------------------
28,298,650
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.18%
Exide Corp., Conv. Sr. Sub.
Notes, 2.90%, 12/15/05(a)
(Acquired 12/19/96-04/03/97;
Cost $5,643,750) 9,500,000 6,362,340
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.82%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.24%,
06/20/20(c) 125,000,000 28,316,250
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO
& CABLE)-6.79%
Capstar Broadcasting Partners,
Sr. Disc. Notes, 12.75%,
02/01/09(d) $ 28,500,000 $ 20,662,500
- ---------------------------------------------------------------
Diamond Cable Communications
PLC, (United Kingdom), Sr.
Yankee Disc. Notes, 11.75%,
12/15/05(d) 35,700,000 27,756,750
- ---------------------------------------------------------------
Digital Television Services, Sr.
Gtd. Sub. Notes, 12.50%,
08/01/07(a)
(Acquired 07/25/97-07/28/97;
Cost $25,571,400) 26,000,000 29,250,000
- ---------------------------------------------------------------
EchoStar Communications Corp.,
Sr. Sec. Gtd. Notes, 12.50%,
07/01/02 11,230,000 12,240,700
- ---------------------------------------------------------------
Fox Kids Worldwide, Inc., Sr.
Disc. Notes, 10.25%,
11/01/07(a)(d)
(Acquired 10/22/97; Cost
$19,851,085) 32,750,000 19,650,000
- ---------------------------------------------------------------
Frontiervision Holdings LP, Sr.
Disc. Notes, 11.875%,
09/15/07(d) 27,480,000 20,335,200
- ---------------------------------------------------------------
Kabelmedia Holdings GmbH
(Germany), Sr. Yankee Unsec.
Disc. Notes, 13.625%,
08/01/06(d) 26,000,000 19,110,000
- ---------------------------------------------------------------
Knology Holdings Inc., Sr. Disc.
Notes, 11.875%, 10/15/07(a)(d)(e)
(Acquired 10/16/97-11/14/97;
Cost $19,638,605) 35,650,000 19,429,250
- ---------------------------------------------------------------
Rifkin Acquisition Partners
L.L.P., Sr. Sub. Notes,
11.125%, 01/15/06 14,495,000 16,089,450
- ---------------------------------------------------------------
TeleWest Communications PLC
(United Kingdom), Sr. Yankee
Disc. Deb., 11.00%, 10/01/07(d) 34,620,000 27,090,150
- ---------------------------------------------------------------
United International Holdings, Inc.,
Series B Sr. Sec. Disc. Notes,
14.00%, 11/15/99(c) 18,790,000 15,501,750
- ---------------------------------------------------------------
Sr. Sec. Disc. Notes, 14.00%,
11/15/99(c)(f) 9,250,000 7,677,500
- ---------------------------------------------------------------
234,793,250
- ---------------------------------------------------------------
CHEMICALS-0.77%
Sterling Chemicals Holdings,
Sr. Unsec. Sub. Notes, 11.75%,
08/15/06 16,020,000 16,420,500
- ---------------------------------------------------------------
Sr. Sec. Disc. Notes, 13.50%,
08/15/08(d) 17,000,000 10,285,000
- ---------------------------------------------------------------
26,705,500
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.03%
Crain Industries, Inc., Sr. Sub.
Notes, 13.50%, 08/15/05 16,360,000 18,732,200
- ---------------------------------------------------------------
</TABLE>
FS-42
<PAGE> 248
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CHEMICALS (SPECIALTY)-(CONTINUED)
Key Plastics, Inc.,
Sr. Notes, 14.00%, 11/15/99 $ 1,900,000 $ 2,099,500
- ---------------------------------------------------------------
Sr. Sub. Notes, 10.25%,
03/15/07 14,000,000 14,910,000
- ---------------------------------------------------------------
35,741,700
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.24%
GST Telecommunications, Inc.,
Sr. Sub. Notes, 12.75%, 11/15/07 16,500,000 17,283,750
- ---------------------------------------------------------------
ProNet, Inc., Sr. Sub. Notes,
11.875%, 06/15/05 23,640,000 25,590,300
- ---------------------------------------------------------------
42,874,050
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.57%
Commemorative Brands, Sr. Sub.
Notes, 11.00%, 01/15/07 19,720,000 19,867,900
- ---------------------------------------------------------------
CONTAINERS & PACKAGING
(PAPER)-1.30%
BPC Holding Corp., Series B Sr.
Notes, 12.50%, 06/15/06 12,220,000 13,380,900
- ---------------------------------------------------------------
MVE Inc., Sr. Sec. Notes,
12.50%, 02/15/02 19,250,000 19,298,126
- ---------------------------------------------------------------
Tekni-Plex Inc., Sr. Sub. Notes,
11.25%, 04/01/07 11,400,000 12,340,500
- ---------------------------------------------------------------
45,019,526
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-1.87%
Core-Mark International, Inc.,
Sr. Sub. Notes, 11.375%,
09/15/03 16,340,000 17,361,250
- ---------------------------------------------------------------
Fleming Companies, Inc., Sr. Sub
Notes, 10.625%, 07/31/07(a)
(Acquired 07/18/97-09/02/97;
Cost $20,635,355) 20,700,000 21,942,000
- ---------------------------------------------------------------
Nebco Evans Holding Co., Sr.
Disc. Notes, 12.375%,
07/15/07(d) 38,760,000 25,387,800
- ---------------------------------------------------------------
64,691,050
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.55%
Electronic Retailing Systems
International, Inc., Sr. Disc.
Notes, 13.25%, 02/01/04(d) 28,652,000 19,196,840
- ---------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.96%
Advanced Micro Devices, Inc.,
Sr. Sec. Notes, 11.00%,
08/01/03 18,965,000 20,363,668
- ---------------------------------------------------------------
Panda Funding Corp. (China),
Series A-1 Pooled Project
Bonds, 11.625%, 08/20/12 11,775,869 13,012,335
- ---------------------------------------------------------------
33,376,003
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ENTERTAINMENT-0.39%
Ascent Entertainment Group, Sr.
Disc. Notes, 11.875%,
12/15/04(a)(d)
(Acquired 12/17/97-12/23/97;
Cost $13,184,531) $ 23,300,000 $ 13,630,500
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.23%
Emergent Group, Inc., Sr. Notes,
10.75%, 09/15/04(a)
(Acquired 09/18/97-09/23/97;
Cost $24,067,575) 23,860,000 23,979,300
- ---------------------------------------------------------------
Trump Castle Funding, Inc.,
Mortgage Notes, 11.75%,
11/15/03 20,000,000 18,600,000
- ---------------------------------------------------------------
42,579,300
- ---------------------------------------------------------------
FOODS-0.68%
Del Monte Corp./Foods Co., Sr.
Unsec. Sub. Notes, 12.25%,
04/15/07 20,720,000 23,517,200
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-4.41%
Alliance Gaming Corp., Sr. Sub.
Notes, 10.00%, 08/01/07(a)
(Acquired 09/12/97-11/13/97;
Cost $17,180,000) 17,500,000 17,675,000
- ---------------------------------------------------------------
Aztar Corp., Sr. Sub. Notes,
13.75%, 10/01/04 19,710,000 22,666,500
- ---------------------------------------------------------------
Coast Hotels & Casinos Inc.,
Series B Sec. First Mortgage
Gtd. Notes, 13.00%, 12/15/02 23,760,000 26,967,600
- ---------------------------------------------------------------
Resort At Summerlin LP, Sr. Sub.
Notes, 13.00%, 12/15/07(a)
(Acquired 12/23/97; Cost
$20,000,000) 20,000,000 20,100,000
- ---------------------------------------------------------------
Showboat Marina Casino
Partnership & Showboat Marina
Financial Corp., Series B Sec.
First Mortgage Notes, 13.50%,
03/15/03 21,600,000 26,244,000
- ---------------------------------------------------------------
Venetian Casino/LV Sands,
Mortgage Notes, 12.25%,
11/15/04(a)
(Acquired 11/06/97;
Cost $10,950,000) 10,950,000 11,018,437
- ---------------------------------------------------------------
Sr. Sub. Notes, 10.00%,
11/15/05(a)(d)
(Acquired 11/06/97-11/19/97;
Cost $28,877,170) 30,900,000 27,964,500
- ---------------------------------------------------------------
152,636,037
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-1.61%
Tenet Healthcare Corp., Sr. Sub.
Notes, 10.125%, 03/01/05 50,790,000 55,615,050
- ---------------------------------------------------------------
</TABLE>
FS-43
<PAGE> 249
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
HEALTH CARE (LONG TERM CARE)-1.16%
Paragon Health Network, Inc.,
Sr. Sub. Notes, 10.50%,
11/01/07(a)(d)
(Acquired 10/30/97-12/19/97;
Cost $21,134,680) $ 35,350,000 $ 22,005,375
- ---------------------------------------------------------------
Sun Healthcare Group, Inc., Sr.
Sub. Notes, 9.50%, 07/01/07(a)
(Acquired 07/01/97; Cost
$17,338,500) 17,430,000 18,040,050
- ---------------------------------------------------------------
40,045,425
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.90%
Dynacare Inc. (Canada), Sr.
Yankee Notes, 10.75%, 01/15/06 15,430,000 16,317,225
- ---------------------------------------------------------------
HealthCor Holdings, Inc., Sr.
Notes, 11.00%, 12/01/04(a)
(Acquired 11/24/97; Cost
$14,460,000) 14,460,000 14,857,650
- ---------------------------------------------------------------
31,174,875
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.79%
Alaris Medical Systems, Sr.
Unsec. Gtd. Sub. Deb., 9.75%,
01/01/06 22,870,000 24,127,850
- ---------------------------------------------------------------
Alliance Imaging Inc., Sr. Sub.
Notes, 10.0963%, 12/15/05 20,000,000 20,300,000
- ---------------------------------------------------------------
Dade International Inc., Series B
Sr. Sub. Notes, 11.125%,
05/01/06 15,710,000 17,438,100
- ---------------------------------------------------------------
61,865,950
- ---------------------------------------------------------------
HOMEBUILDING-0.52%
Continental Homes Holdings
Corp., Sr. Unsec. Gtd. Notes,
10.00%, 04/15/06 16,540,000 17,863,200
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.41%
Zeta Consumer Products, Sr.
Notes, 11.25%, 11/30/07(a)
(Acquired 11/20/97; Cost
$14,000,000) 14,000,000 14,315,000
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.30%
Superior National Capital Trust
Insurance, Gtd. Notes, 10.75%,
12/01/17(a)
(Acquired 11/26/97; Cost
$10,000,000) 10,000,000 10,275,000
- ---------------------------------------------------------------
IRON & STEEL-2.75%
GS Industries, Inc.,
Sr. Gtd. Notes, 12.00%,
09/01/04 15,755,000 17,310,806
- ---------------------------------------------------------------
Sr. Notes, 12.25%, 10/01/05 14,525,000 16,304,313
- ---------------------------------------------------------------
Gulf States Steel Corp., First
Mortgage Notes, 13.50%,
04/15/03 23,460,000 23,811,900
- ---------------------------------------------------------------
Sheffield Steel Corp., First
Mortgage Notes, 11.50%,
12/01/05(a)
(Acquired 11/26/97-12/12/97;
Cost $16,803,438) 16,750,000 17,168,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
IRON & STEEL-(CONTINUED)
Weirton Steel Corp., Sr. Notes,
11.375%, 07/01/04 $ 19,600,000 $ 20,531,000
- ---------------------------------------------------------------
95,126,769
- ---------------------------------------------------------------
LODGING-HOTELS-1.07%
American Skiing Corp., Series B
Sr. Sub. Notes, 12.00%,
07/15/06 18,000,000 19,980,000
- ---------------------------------------------------------------
Booth Creek Ski Holdings, Sr.
Notes, 12.50%, 03/15/07 17,610,000 17,345,850
- ---------------------------------------------------------------
37,325,850
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.42%
Fairfield Manufacturing Co.,
Inc., Sr. Sub. Notes, 11.375%,
07/01/01 13,725,000 14,548,500
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.81%
Elgin National Industries, Sr.
Notes, 11.00%, 11/01/07(a)
(Acquired 11/03/97-12/08/97;
Cost $12,857,500) 12,840,000 13,385,700
- ---------------------------------------------------------------
Glenoit Corp., Sr. Sub. Notes,
11.00%, 04/15/07(a)
(Acquired 03/26/97-11/17/97;
Cost $14,717,650) 14,690,000 15,865,200
- ---------------------------------------------------------------
Interlake Corp., Sr. Sub. Deb.,
12.125%, 03/01/02 32,050,000 33,332,000
- ---------------------------------------------------------------
62,582,900
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-3.98%
Berry Plastics Corp., Sr. Sub.
Notes, 12.25%, 04/15/04 12,500,000 13,687,500
- ---------------------------------------------------------------
EV International Inc., Sr.
Unsec. Gtd. Sub., 11.00%,
03/15/07 16,850,000 17,271,250
- ---------------------------------------------------------------
Glasstech, Inc., Gtd., 12.75%,
07/01/04(a)
(Acquired 06/27/97; Cost
$12,000,000) 12,000,000 12,420,000
- ---------------------------------------------------------------
MMI Products Inc., Sr. Unsec.
Sub. Notes, 11.25%, 04/15/07 17,140,000 18,768,300
- ---------------------------------------------------------------
Neenah Corp., Sr. Sub. Notes,
11.125%, 05/01/07 4,000,000 4,410,000
- ---------------------------------------------------------------
Series C Sr. Sub. Notes,
11.125%, 05/01/07 15,000,000 16,537,500
- ---------------------------------------------------------------
Omega Cabinets, Sr. Sub Notes,
10.50%, 06/15/07(a)
(Acquired 07/18/97-11/11/97;
Cost $21,367,450) 21,140,000 21,985,600
- ---------------------------------------------------------------
Precise Technology Inc., Sr.
Unsec. Gtd. Sub., 11.125%,
06/15/07(a)
(Acquired 06/10/97-07/17/97;
Cost $14,664,250) 14,400,000 14,760,000
- ---------------------------------------------------------------
</TABLE>
FS-44
<PAGE> 250
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
MANUFACTURING (SPECIALIZED)-(CONTINUED)
Simmons Co., Sr. Sub. Notes,
10.75%, 04/15/06 $ 16,800,000 $ 17,850,000
- ---------------------------------------------------------------
137,690,150
- ---------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.63%
United Stationer Supply, Sr.
Sub. Notes, 12.75%, 05/01/05 19,021,000 21,731,493
- ---------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-0.48%
Rutherford-Moran Oil Corp., Sr.
Sub. Notes, 10.75%, 10/01/04(a)
(Acquired 10/06/97-10/08/97;
Cost $17,230,750) 16,400,000 16,769,000
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.63%
Tokheim Corp., Series B Sr. Sub.
Notes, 11.50%, 08/01/06 18,975,000 21,631,500
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-2.82%
Abraxas Petroleum Corp., Series
B Sr. Notes, 11.50%, 11/01/04 19,290,000 21,219,000
- ---------------------------------------------------------------
Centaur Mining & Exploration,
Ltd. (Australia), Sr. Gtd.
Notes, 11.00%, 12/01/07(a)
(Acquired 11/24/97-12/10/97;
Cost $22,817,500) 22,800,000 23,028,000
- ---------------------------------------------------------------
Gerrity Oil & Gas Corp., Sr.
Sub. Notes, 11.75%, 07/15/04 14,750,000 16,151,250
- ---------------------------------------------------------------
Kelley Oil & Gas Corp., Series B
Sr. Gtd. Sub. Notes, 10.375%,
10/15/06 15,450,000 16,570,125
- ---------------------------------------------------------------
Southwest Royalties, Inc., Sr.
Gtd. Notes, 10.50%, 10/15/04(a)
(Acquired 10/08/97-10/21/97;
Cost $20,882,046) 20,780,000 20,676,100
- ---------------------------------------------------------------
97,644,475
- ---------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.41%
Texas Petrochemical Corp., Sr.
Sub. Notes, 11.125%, 07/01/06 13,000,000 14,235,000
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-3.85%
American Pad & Paper Co., Series
B Sr. Sub. Notes, 13.00%,
11/15/05 21,820,000 25,202,100
- ---------------------------------------------------------------
Indah Kiat Fin Mauritius
(Indonesia), Sr. Gtd. Unsec.
Notes, 10.00%, 07/01/07(a)
(Acquired 06/26/97-10/24/97;
Cost $33,279,148) 33,890,000 28,298,150
- ---------------------------------------------------------------
National Fiberstok Corp., Series
B Sr. Notes, 11.625%, 06/15/02 20,790,000 21,881,475
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
PAPER & FOREST PRODUCTS-(CONTINUED)
Pindo Deli Pulp & Paper
(Indonesia), Sr. Gtd. Notes,
10.75%, 10/01/07(a)
(Acquired 09/25/97-12/08/97;
Cost $27,366,428) $ 27,290,000 $ 23,605,850
- ---------------------------------------------------------------
Tjiwi Kimia International Global
Co., BV, (Indonesia), Sr. Gtd.
Notes, 13.25%, 08/01/01 36,275,000 34,279,875
- ---------------------------------------------------------------
133,267,450
- ---------------------------------------------------------------
POWER PRODUCER (INDEPENDENT)-0.52%
Panda Global Energy Co. (China),
Sr. Yankee Gtd. Sec. Notes,
12.50%, 04/15/04(a)
(Acquired 04/11/97-08/13/97;
Cost $18,819,945) 19,562,000 17,899,230
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.95%
Affiliated Newspaper
Investments, Sr. Disc. Notes,
13.25%, 07/01/06(d) 20,826,000 19,888,830
- ---------------------------------------------------------------
Garden State Newspapers, Inc.,
Sr. Sub. Sec. Notes, 12.00%,
07/01/04 11,500,000 12,937,500
- ---------------------------------------------------------------
32,826,330
- ---------------------------------------------------------------
RAILROADS-0.55%
TFM S.A. de C.V. (Mexico), Sr.
Gtd. Disc. Notes, 11.75%,
06/15/09(a)(d)
(Acquired 06/11/97-10/27/97;
Cost $17,589,557) 30,250,000 18,906,250
- ---------------------------------------------------------------
RESTAURANTS-0.56%
AFC Enterprises, Sr. Sub. Notes,
10.25%, 05/15/07 18,240,000 19,288,800
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.58%
Loehmann's Holdings, Inc., Sr.
Unsec. Notes, 11.875%,
05/15/03 19,110,000 19,922,175
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-2.55%
Carr-Gottstein Foods Co., Sr.
Sub. Notes, 12.00%, 11/15/05 29,955,000 33,250,050
- ---------------------------------------------------------------
Cumberland Farms, Sec. Notes,
10.50%, 10/01/03 16,977,000 17,019,443
- ---------------------------------------------------------------
Jitney-Jungle Stores of America
Inc., Sr. Gtd. Notes, 12.00%,
03/01/06 33,405,000 37,998,187
- ---------------------------------------------------------------
88,267,680
- ---------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.50%
Big 5 Corp., Sr. Notes, 10.875%,
11/15/07(a)
(Acquired 11/07/97-12/19/97;
Cost $17,264,563) 17,350,000 17,350,000
- ---------------------------------------------------------------
</TABLE>
FS-45
<PAGE> 251
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-4.08%
Cabot Safety Corp., Sr. Sub.
Notes, 12.50%, 07/15/05 $ 18,975,000 $ 21,346,875
- ---------------------------------------------------------------
CSK Auto Inc., Sr. Gtd. Sub.
Deb., 11.00%, 11/01/06 22,010,000 24,321,050
- ---------------------------------------------------------------
Icon Fitness Corp., Series B Sr.
Disc. Notes, 14.00%, 11/15/06(d) 14,840,000 8,681,400
- ---------------------------------------------------------------
Icon Health & Fitness, Series B
Sr. Sub. Notes, 13.00%,
07/15/02 20,930,000 23,493,925
- ---------------------------------------------------------------
Selmer Co., Inc., Sr. Gtd. Sub.
Notes, 11.00%, 05/15/05 18,920,000 20,906,600
- ---------------------------------------------------------------
United Auto Group, Inc., Sr.
Sub. Notes, 11.00%, 07/15/07(a)
(Acquired 07/18/97-12/08/97;
Cost $24,120,600) 24,500,000 24,193,750
- ---------------------------------------------------------------
Wilsons-The Leather Experts
Inc., Sr. Notes, 11.25%,
08/15/04(a)
(Acquired 08/14/97; Cost
$18,290,000) 18,290,000 18,107,100
- ---------------------------------------------------------------
141,050,700
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.63%
GFSI Holding Inc., Sr. Sub
Notes, 11.375%, 09/15/09(a)
(Acquired 09/12/97; Cost
$20,000,000) 20,000,000 20,750,000
- ---------------------------------------------------------------
J Crew Group, Deb., 13.125%,
10/15/08(a)(d)
(Acquired 10/14/97-12/16/97;
Cost $15,571,120) 30,780,000 14,158,800
- ---------------------------------------------------------------
J Crew Operating Corp., Sr. Sub.
Notes, 10.375%, 10/15/07(a)
(Acquired 10/14/97-12/09/97;
Cost $12,661,000) 12,745,000 11,343,050
- ---------------------------------------------------------------
Specialty Retailers Inc., Series
B Sec. Notes, 12.50%, 12/15/00 10,000,000 10,275,000
- ---------------------------------------------------------------
56,526,850
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-1.19%
MDC Communications Corp.
(Canada), Sr. Yankee Unsec.
Sub. Notes, 10.50%, 12/01/06 17,470,000 18,561,875
- ---------------------------------------------------------------
Neodata Services, Inc., Series B
Sr. Notes, 12.00%, 05/01/03 21,000,000 22,619,310
- ---------------------------------------------------------------
41,181,185
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-3.83%
Coinmach Corp., Series B Sr.
Notes, 11.75%, 11/15/05 21,850,000 24,362,750
- ---------------------------------------------------------------
Coinmach Laundry Corp., Sr.
Notes, 11.75%, 11/15/05(a)
(Acquired 10/01/97; Cost
$3,845,625) 3,500,000 3,902,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SERVICES (COMMERCIAL & CONSUMER)-(CONTINUED)
Dialog Corp. PLC (United
Kingdom), Sr. Sub. Notes,
11.00%, 11/15/07(a)
(Acquired 11/10/97-12/19/97;
Cost $18,059,375) $ 18,000,000 $ 18,765,000
- ---------------------------------------------------------------
Hydrochem Industrial Service,
Sr. Sec. Gtd. Sub. Notes,
10.375%, 08/01/07 21,300,000 22,152,000
- ---------------------------------------------------------------
Localiza Rent A Car (Brazil),
Sr. Gtd. Notes, 10.25%,
10/01/05(a) (Acquired
09/25/97-10/24/97; Cost
$22,323,438) 22,250,000 19,023,750
- ---------------------------------------------------------------
National Equipment Services, Sr.
Sub. Notes, 10.00%, 11/30/04(a)
(Acquired 12/02/97; Cost
$21,285,000) 22,000,000 21,890,000
- ---------------------------------------------------------------
Pegasus Shipping Hellas
(Bermuda), Sr. Gtd. Mortgage
Notes, 11.875%, 11/15/04(a)
(Acquired 11/19/97-12/19/97;
Cost $21,760,250) 22,500,000 22,387,500
- ---------------------------------------------------------------
132,483,500
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.42%
DecisionOne Holdings Corp., Sr.
Disc. Deb., 11.50%,
08/01/08(d)(g) 22,085,000 14,631,313
- ---------------------------------------------------------------
SHIPPING-1.71%
Gearbulk Holding Ltd., Sr.
Notes, 11.25%, 12/01/04 17,825,000 19,652,063
- ---------------------------------------------------------------
Navigator Gas Transport PLC
(United Kingdom), Notes,
10.50%, 06/30/07(a)
(Acquired 07/31/97-09/04/97;
cost $18,716,250) 18,520,000 19,723,800
- ---------------------------------------------------------------
Stena A.B. (Sweden), Sr. Yankee
Unsec. Notes, 10.50%, 12/15/05 18,150,000 19,828,875
- ---------------------------------------------------------------
59,204,738
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-8.23%
CellNet Data Systems, Sr. Disc.
Notes, 14.00%, 10/01/07(a)(d)
(Acquired 09/24/97-10/15/97;
Cost $14,744,250) 29,000,000 14,065,000
- ---------------------------------------------------------------
Clearnet Communications Inc.
(Canada), Sr. Yankee Disc.
Notes, 14.75%, 12/15/05(d) 34,320,000 27,498,900
- ---------------------------------------------------------------
Dobson Communications, Sr.
Notes, 11.75%, 04/15/07 13,500,000 14,310,000
- ---------------------------------------------------------------
GST Telecommunications, Inc.,
Sr. Sec. Notes, 13.25%,
05/01/07 20,950,000 23,935,375
- ---------------------------------------------------------------
HighwayMaster Communications,
Inc., Sr. Notes, 13.75%,
09/15/05(a)
(Acquired 09/18/97-09/24/97;
Cost $18,739,950) 18,310,000 18,721,975
- ---------------------------------------------------------------
</TABLE>
FS-46
<PAGE> 252
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-(CONTINUED)
McCaw Intl., Ltd., Sr. Disc.
Notes, 13.00%, 04/15/07(d) $ 39,500,000 $ 23,107,500
- ---------------------------------------------------------------
Microcell Telecommunications
Inc., Sr. Disc. Notes, 14.00%,
06/01/06(d) 29,500,000 19,986,250
- ---------------------------------------------------------------
Nextel Communications, Inc., Sr.
Disc. Notes, 10.65%,
09/15/07(a)(d)
(Acquired 10/24/97; Cost
$18,712,500) 30,000,000 18,937,500
- ---------------------------------------------------------------
Nextel Communications, Sr. Disc.
Notes, 9.75%, 10/31/07(a)(d)
(Acquired 10/23/97; Cost
$9,770,625) 16,300,000 10,106,000
- ---------------------------------------------------------------
Orion Network Systems, Inc., Sr.
Gtd. Disc. Notes, 12.50%,
01/15/07(d) 36,000,000 26,910,000
- ---------------------------------------------------------------
Powertel, Inc., Sr. Unsec.
Notes, 11.125%, 06/01/07 26,000,000 28,210,000
- ---------------------------------------------------------------
PriCellular Wireless Corp., Sr.
Disc. Notes, 14.00%, 11/15/01 34,620,000 38,687,850
- ---------------------------------------------------------------
Sygnet Wireless Inc., Sr. Unsec.
Notes, 11.50%, 10/01/06 18,800,000 20,398,000
- ---------------------------------------------------------------
284,874,350
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-3.19%
Esprit Telecom Group PLC (United
Kingdom), Sr. Yankee Notes,
11.50%, 12/15/07 17,500,000 18,112,500
- ---------------------------------------------------------------
Interamericas Communications
Corp., Sr. Notes, 14.00%,
10/27/07(h) 22,990,000 22,990,000
- ---------------------------------------------------------------
PhoneTel Technologies, Inc., Sr.
Gtd. Unsec. Notes, 12.00%,
12/15/06 14,840,000 15,470,700
- ---------------------------------------------------------------
Primus Telecommunications Group,
Inc., Sr. Sec. Notes, 11.75%,
08/01/04 20,000,000 21,800,000
- ---------------------------------------------------------------
RSL Communications, Ltd. (United
Kingdom), Sr. Yankee Gtd.
Notes, 12.25%, 11/15/06 29,620,000 32,137,700
- ---------------------------------------------------------------
110,510,900
- ---------------------------------------------------------------
TELEPHONE-2.98%
Esat Holdings Ltd. (Ireland),
Sr. Yankee Notes, 12.50%,
02/01/07(a)(d)
(Acquired 02/21/97-06/12/97;
cost $15,217,200) 25,530,000 18,381,600
- ---------------------------------------------------------------
Esat Telecom Group PLC
(Ireland), Sr. Yankee Notes ,
12.50%, 02/01/07(d) 4,500,000 3,228,750
- ---------------------------------------------------------------
Hermes Europe Railtel BV
(Netherlands), Sr. Notes,
11.50%, 08/15/07(a)
(Acquired 08/14/97-09/02/97;
Cost $29,303,500) 28,660,000 31,955,900
- ---------------------------------------------------------------
International CableTel, Inc.,
Sr. Notes, 11.50%, 02/01/06(d) 24,200,000 19,118,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELEPHONE-(CONTINUED)
Nextlink Communications Inc.,
Sr. Notes, 12.50%, 04/15/06 $ 26,620,000 $ 30,479,900
- ---------------------------------------------------------------
103,164,150
- ---------------------------------------------------------------
TRUCKERS-1.10%
AmeriTruck Distribution Corp.,
Series B Sr. Sub. Notes,
12.25%, 11/15/05 19,800,000 19,701,000
- ---------------------------------------------------------------
Travelcenters of America Inc.,
Sr. Gtd. Unsec. Sub. Deb.,
10.25%, 04/01/07 17,530,000 18,494,150
- ---------------------------------------------------------------
38,195,150
- ---------------------------------------------------------------
TRUCKS & PARTS-0.48%
Blue Bird Body Co., Series B Sr.
Sub. Notes, 10.75%, 11/15/06 15,425,000 16,659,000
- ---------------------------------------------------------------
WASTE MANAGEMENT-1.11%
Allied Waste Industries, Inc.,
Sr. Disc. Notes, 11.30%,
06/01/07(a)(d)
(Acquired 05/01/97; cost
$17,920,032) 31,200,000 22,074,000
- ---------------------------------------------------------------
Norcal Waste Systems Inc.,
Series B Sr. Gtd. Notes,
13.50%, 11/15/05 14,280,000 16,493,400
- ---------------------------------------------------------------
38,567,400
- ---------------------------------------------------------------
Total Corporate Bonds &
Notes 3,066,873,630
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY INTERESTS-0.37%
PUBLISHING (NEWSPAPERS)-0.05%
Affiliated Newspaper Investments(i) 13,826 1,527,773
- ---------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-0.02%
Cobblestone Holdings Inc.(i) 23,250 813,750
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.30%
Celcaribe S.A. Ordinary Trust
Certificates(i) 2,276,400 9,105,600
- ---------------------------------------------------------------
Nextel Communications, Inc.(i) 52,195 1,357,070
- ---------------------------------------------------------------
10,462,670
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests 12,804,193
- ---------------------------------------------------------------
PREFERRED STOCKS-2.65%
BROADCASTING (TELEVISION, RADIO & CABLE)-0.71%
Cablevision Systems Corp.,
Series M, 11.125% PIK Conv. Pfd.(i) 209,720 24,537,282
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.01%
ICG Holdings, Inc., $14.25 Pfd.(i) 404 481,207
- ---------------------------------------------------------------
</TABLE>
FS-47
<PAGE> 253
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT-0.39%
EchoStar Communications Corp.,
12.1250% PIK Pfd.(i) 13,000 $ 13,422,500
- ---------------------------------------------------------------
ENTERTAINMENT-0.00%
Time Warner Inc.-Series M,
$102.50 PIK Conv. Pfd.(i) 1 1,154
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.24%
Kelley Oil & Gas Corp., $2.625
Conv. Pfd.(i) 370,000 8,140,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.83%
Nextel Communications, Inc.,
13.00% PIK Pfd.(i) 24,831 28,555,596
- ---------------------------------------------------------------
TELEPHONE-0.47%
Intermedia Communications Inc.,
7.00% Conv. Pfd.(a)(i)
(Acquired 10/24/97; Cost
$14,500,000) 580,000 16,385,000
- ---------------------------------------------------------------
Total Preferred Stocks 91,522,739
- ---------------------------------------------------------------
RIGHTS & WARRANTS-0.37%
CHEMICALS-0.01%
Sterling Chemicals Holdings,
expiring 08/15/08(i) 7,500 225,000
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.02%
Electronic Retailing Systems
International, expiring
02/01/04(i) 28,652 573,040
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.01%
Republic Health Corp., expiring
04/03/00(i) 17,500 315,000
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-0.01%
Glasstech Inc., expiring
06/30/04(i) 12,000 12,000
- ---------------------------------------------------------------
Highwaymaster Communication Inc.,
expiring 01/20/49(a)(i)
(Acquired 09/18/97-09/24/97;
Cost $0) 18,310 18,310
- ---------------------------------------------------------------
MVE Inc., expiring 02/15/02(i) 6,750 202,500
- ---------------------------------------------------------------
Primus Telecommunications,
expiring 08/01/04(i) 20,000 200,000
- ---------------------------------------------------------------
Resort At Summerlin Corp.,
expiring 12/15/07(i) 20,000 200
- ---------------------------------------------------------------
433,010
- ---------------------------------------------------------------
IRON & STEEL-0.00%
Bar Technologies Inc., expiring
04/01/01(i) 6,000 36,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURING (SPECIALIZED)-0.01%
Berry Plastics Corp., expiring
04/15/04(i) 6,000 $ 270,120
- ---------------------------------------------------------------
METAL FABRICATORS-0.00%
Gulf States Steel Corp.,
expiring 04/15/03(i) 15,990 71,955
- ---------------------------------------------------------------
PERSONAL CARE-0.04%
IHF Capital Inc., Series H,
expiring 11/14/99(a)(i)
(Acquired 11/04/94; Cost $0) 8,000 1,280,000
- ---------------------------------------------------------------
Series I, expiring 11/14/99(a)(i)
(Acquired 11/04/94-03/01/95;
Cost $0) 7,250 366,125
- ---------------------------------------------------------------
1,646,125
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.14%
Cellnet Data System, expiring
10/01/07(i) 29,000 580,000
- ---------------------------------------------------------------
Clearnet Communications Inc.
expiring 09/15/05(i) 100,716 956,802
- ---------------------------------------------------------------
ICG Communications, Inc.,
expiring 10/15/05(i) 39,600 574,200
- ---------------------------------------------------------------
McCaw Intl. Ltd., expiring
04/15/07(i) 39,500 98,750
- ---------------------------------------------------------------
Microcell Telecommunications
Inc., expiring 06/01/06(a)(i)
(Acquired 12/18/96; Cost
$992,888) 118,000 1,711,000
- ---------------------------------------------------------------
Orion Network Systems, Inc.,
expiring 01/15/07(i) 43,600 538,400
- ---------------------------------------------------------------
Powertel Inc., expiring
02/01/06(i) 42,656 399,900
- ---------------------------------------------------------------
4,859,052
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.12%
RSL Communications, Ltd. (United
Kingdom), expiring 11/15/06(a)(i)
(Acquired 09/30/96-12/08/97;
Cost $2,023,063) 45,145 4,175,912
- ---------------------------------------------------------------
TELEPHONE-0.01%
ESAT Holdings Ltd., expiring
02/01/07(i)
(Acquired 06/16/97; Cost $0) 25,530 95,738
- ---------------------------------------------------------------
Intermedia Communications Inc.,
expiring 06/01/00(a)(i)
(Acquired 10/25/95; Cost $0) 1,500 165,000
- ---------------------------------------------------------------
260,738
- ---------------------------------------------------------------
Total Rights & Warrants 12,865,952
- ---------------------------------------------------------------
</TABLE>
FS-48
<PAGE> 254
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-5.30%
NOTES-5.30%
11.75%, 02/15/01 $ 25,000,000 $ 29,327,500
- ---------------------------------------------------------------
13.125%, 05/15/01 25,000,000 30,672,500
- ---------------------------------------------------------------
15.75%, 11/15/01 25,000,000 33,610,250
- ---------------------------------------------------------------
13.375%, 08/15/01 30,000,000 37,465,500
- ---------------------------------------------------------------
14.25%, 02/15/02 40,000,000 52,389,200
- ---------------------------------------------------------------
Total U.S. Treasury Securities 183,464,950
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT-1.23%(j)
Goldman Sachs & Co., 4.75%,
01/02/98(k) $ 42,498,660 $ 42,498,660
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.55% 3,410,030,124
- ---------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.45% 50,299,302
- ---------------------------------------------------------------
NET ASSETS-100.00% $3,460,329,426
===============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at 12/31/97 was $953,241,762
which represented 27.55% of the Fund's net assets.
(b) Issued as a unit. This unit also includes 15,500 warrants to purchase 31.12
shares of common stock per warrant.
(c) Zero coupon bonds. Interest rate shown represents the rate of original issue
discount.
(d) Discounted bond at purchase. Interest rate shown represents coupon rate at
which the bond will accrue at a specified future date.
(e) Issued as a unit. This unit also includes 35,650 warrants to purchase
.003734 shares of preferred stock per warrant.
(f) Issued as a unit. This unit also includes 9,250 warrants to buy 4.535
shares of common stock per warrant.
(g) Issued as a unit. This unit also includes 22,085 warrants to buy 1.9 shares
of common stock per warrant.
(h) Issued as a unit. This unit also includes 804,650 warrants to buy 1 share of
common stock per warrant.
(i) Non-income producing security.
(j) 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.
(k) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,105,556. Collateralized by $384,914,000 U.S. Government agency
obligations, 5.625% to 6.625% due 11/30/99 to 02/15/27 with an aggregate
market value at 12/31/97 of $408,401,531.
Abbreviations:
Conv. - Convertible
Deb. - Debentures
Disc. - Discounted
Gtd. - Guarantee
PIK - Payment in Kind
Pfd. - Preferred
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Wts. - Warrants
See Notes to Financial Statements.
FS-49
<PAGE> 255
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$3,268,502,635) $3,410,030,124
- ----------------------------------------------------------
Receivables for:
Investments sold 1,941,550
- ----------------------------------------------------------
Fund shares sold 16,416,473
- ----------------------------------------------------------
Dividends and interest 69,937,898
- ----------------------------------------------------------
Investment for deferred compensation plan 60,157
- ----------------------------------------------------------
Other assets 97,377
- ----------------------------------------------------------
Total assets 3,498,483,579
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 19,936,494
- ----------------------------------------------------------
Dividends 12,857,399
- ----------------------------------------------------------
Deferred compensation plan 60,157
- ----------------------------------------------------------
Accrued advisory fees 1,383,818
- ----------------------------------------------------------
Accrued administrative service fees 9,059
- ----------------------------------------------------------
Accrued distribution fees 2,855,006
- ----------------------------------------------------------
Accrued trustees' fees 5,147
- ----------------------------------------------------------
Accrued transfer agent fees 350,310
- ----------------------------------------------------------
Accrued operating expenses 696,763
- ----------------------------------------------------------
Total liabilities 38,154,153
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $3,460,329,426
- ----------------------------------------------------------
NET ASSETS:
Class A $1,786,351,699
==========================================================
Class B $1,647,801,094
==========================================================
Class C $ 26,176,633
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 175,835,012
==========================================================
Class B 162,246,965
==========================================================
Class C 2,581,428
==========================================================
Class A:
Net asset value and redemption price per
share $ 10.16
==========================================================
Offering price per share:
(Net asset value of $10.16
divided by 95.25%) $ 10.67
==========================================================
Class B:
Net asset value and offering price per
share $ 10.16
==========================================================
Class C:
Net asset value and offering price per
share $ 10.14
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $279,638,436
- ---------------------------------------------------------
Dividends 2,764,016
- ---------------------------------------------------------
Total investment income 282,402,452
- ---------------------------------------------------------
EXPENSES:
Advisory fees 13,632,090
- ---------------------------------------------------------
Administrative service fees 111,767
- ---------------------------------------------------------
Custodian fees 197,027
- ---------------------------------------------------------
Transfer agent fees -- Class A 1,720,365
- ---------------------------------------------------------
Transfer agent fees -- Class B 1,564,093
- ---------------------------------------------------------
Transfer agent fees -- Class C 4,991
- ---------------------------------------------------------
Trustees' fees 23,732
- ---------------------------------------------------------
Distribution fees -- Class A 3,699,344
- ---------------------------------------------------------
Distribution fees -- Class B 13,453,229
- ---------------------------------------------------------
Distribution fees -- Class C 42,927
- ---------------------------------------------------------
Other 1,163,559
- ---------------------------------------------------------
Total expenses 35,613,124
- ---------------------------------------------------------
Less: Expenses paid indirectly (224,536)
- ---------------------------------------------------------
Net expenses 35,388,588
- ---------------------------------------------------------
Net investment income 247,013,864
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM
INVESTMENT SECURITIES:
Net realized gain from investment securities 62,942,651
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities 18,112,537
- ---------------------------------------------------------
Net gain on investment securities 81,055,188
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $328,069,052
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-50
<PAGE> 256
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 247,013,864 $ 174,137,830
- ----------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 62,942,651 17,869,656
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 18,112,537 86,550,248
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 328,069,052 278,557,734
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (133,510,208) (102,842,087)
- ----------------------------------------------------------------------------------------------
Class B (111,521,456) (72,629,856)
- ----------------------------------------------------------------------------------------------
Class C (357,582) --
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 469,620,256 327,466,596
- ----------------------------------------------------------------------------------------------
Class B 540,779,350 466,449,407
- ----------------------------------------------------------------------------------------------
Class C 26,215,648 --
- ----------------------------------------------------------------------------------------------
Net increase in net assets 1,119,295,060 897,001,794
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,341,034,366 1,444,032,572
- ----------------------------------------------------------------------------------------------
End of period $3,460,329,426 $2,341,034,366
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,332,603,649 $2,295,988,395
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 4,691,600 2,868,653
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (18,493,312) (81,237,634)
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 141,527,489 123,414,952
- ----------------------------------------------------------------------------------------------
$3,460,329,426 $2,341,034,366
==============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-51
<PAGE> 257
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 three different classes of shares: the Class A shares, the
Class B shares, and the Class C shares. The new Class C shares commenced sales
on August 4, 1997. Class A shares are sold with a front-end sales charge. Class
B and Class C 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 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 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.
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, 1997, undistributed net investment income was increased by
$198,329 and undistributed net realized gains reduced by $198,329 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 $5,680,483 (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 -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
FS-52
<PAGE> 258
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, 1997, AIM
was reimbursed $111,767 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, 1997, the
Fund paid AFS $2,021,415 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted
distribution 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 the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of Class A shares and
1.00% of the average daily net assets of the Class C shares. 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
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee by the Class B or Class C shares
under the 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, 1997, the Class A shares and Class B shares and the
period August 4, 1997 (date sales commenced) through December 31, 1997, the
Class A, Class B and Class C shares paid AIM Distributors $3,699,344,
$13,453,229 and $42,927, respectively, as compensation under the Plans.
AIM Distributors received commissions of $2,043,967 from sales of the Class A
shares of the Fund during the year ended December 31, 1997. 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, 1997,
for the Class A shares and Class B shares, and the period August 4, 1997 (date
sales commenced) through December 31, 1997, for the Class C shares, the Class A,
Class B and Class C shares paid AIM Distributors $3,699,344, $13,453,209, and
$42,927 respectively, as compensation under the Plans.
During the year ended December 31, 1997, the Fund paid legal fees of $10,687
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-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced Fund
expenses by $11,070 during the year ended December 31, 1997. Also during the
year ended December 31, 1997 the Fund received reductions in transfer agency
fees from AFS (an affiliate of AIM) and reductions in custodian fees of $31,501
and $181,965, respectively, under expense offset arrangements. The effect of the
above arrangements resulted in reductions of the Fund's total expenses of
$224,536 during the year ended December 31, 1997.
NOTE 4-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 5-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) $500,000,000 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 15, 1997, the Fund was
limited to borrowing up to the lesser of (i) $325,000,000 or (ii) the limits set
by its prospectus for borrowings. During the year ended December 31, 1997, 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 0.05% 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-53
<PAGE> 259
NOTE 6-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, 1997 was
$3,485,380,448 and $2,193,406,469, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1997 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $174,083,384
- ----------------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (34,437,108)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $139,646,276
======================================================================================================================
</TABLE>
Cost of investments for tax purposes is $3,270,383,848.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Sold:
Class A 93,715,770 $ 935,998,102 76,485,479 $ 725,785,892
- --------------------------------------------------------- ----------- --------------- ------------ -------------
Class B 74,428,033 739,555,783 63,383,789 605,130,108
- --------------------------------------------------------- ----------- --------------- ------------ -------------
Class C* 2,840,747 28,847,843 -- --
- --------------------------------------------------------- ----------- --------------- ------------ -------------
Issued as reinvestment of dividends:
Class A 8,409,927 83,983,856 6,674,252 64,083,963
- --------------------------------------------------------- ----------- --------------- ------------ -------------
Class B 5,178,022 54,019,940 3,798,909 36,390,618
- --------------------------------------------------------- ----------- --------------- ------------ -------------
Class C* 19,254 195,246 -- --
- --------------------------------------------------------- ----------- --------------- ------------ -------------
Reacquired:
Class A (55,082,159) (550,361,702) (48,380,296) (462,403,259)
- --------------------------------------------------------- ----------- --------------- ------------ -------------
Class B (25,424,400) (252,796,373) (18,351,224) (175,071,319)
- --------------------------------------------------------- ----------- --------------- ------------ -------------
Class C* (278,573) (2,827,441) -- --
- --------------------------------------------------------- ----------- --------------- ------------ -------------
103,806,621 $ 1,036,615,254 83,610,909 $ 793,916,003
=========== =============== ============ =============
</TABLE>
* Class C shares commenced sales on August 4, 1997.
FS-54
<PAGE> 260
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during each of the years in the five-year period ended December 31, 1997, for a
share of Class B outstanding during each of the years in the four-year period
ended December 31, 1997 and the period September 1, 1993 (date sales commenced)
through December 31, 1993, and for a share of Class C outstanding during the
period August 4, 1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.88 $ 9.43 $ 8.93 $ 10.05 $ 9.40
- ------------------------------------------------------------ ---------- ---------- -------- -------- --------
Income from investment operations:
Net investment income 0.90 0.92 0.93 0.96 0.97
- ------------------------------------------------------------ ---------- ---------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 0.28 0.46 0.52 (1.12) 0.69
- ------------------------------------------------------------ ---------- ---------- -------- -------- --------
Total from investment operations 1.18 1.38 1.45 (0.16) 1.66
- ------------------------------------------------------------ ---------- ---------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.90) (0.93) (0.95) (0.96) (1.01)
- ------------------------------------------------------------ ---------- ---------- -------- -------- --------
Net asset value, end of period $ 10.16 $ 9.88 $ 9.43 $ 8.93 $ 10.05
============================================================ ========== ========== ======== ======== ========
Total return(a) 12.52% 15.44% 16.86% (1.67)% 18.40%
============================================================ ========== ========== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,786,352 $1,272,974 $886,106 $578,959 $50,760
============================================================ ========== ========== ======== ======== ========
Ratio of expenses to average net assets 0.90%(b)(c) 0.97% 0.96% 1.00% 1.12%
============================================================ ========== ========== ======== ======== ========
Ratio of net investment income to average net assets 9.08%(b) 9.67% 9.95% 10.07% 9.82%
============================================================ ========== ========== ======== ======== ========
Portfolio turnover rate 80% 77% 61% 53% 53%
============================================================ ========== ========== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $1,479,737,639.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly
the ratio of expenses to average net assets would have been 0.89%.
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------------------------- --------
1997 1996 1995 1994 1993 1997
---------- ---------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.88 $ 9.42 $ 8.92 $ 10.04 $ 9.96 $ 10.04
- -------------------------------------------- ---------- ---------- -------- -------- ------- --------
Income from investment operations:
Net investment income 0.83 0.85 0.85 0.87 0.32 0.35
- -------------------------------------------- ---------- ---------- -------- -------- ------- --------
Net gains (losses) on securities (both
realized and unrealized) 0.28 0.47 0.52 (1.10) 0.07 0.10
- -------------------------------------------- ---------- ---------- -------- -------- ------- --------
Total from investment operations 1.11 1.32 1.37 (0.23) 0.39 0.45
- -------------------------------------------- ---------- ---------- -------- -------- ------- --------
Less distributions:
Dividends from net investment income (0.83) (0.86) (0.87) (0.89) (0.31) (0.35)
- -------------------------------------------- ---------- ---------- -------- -------- ------- --------
Net asset value, end of period $ 10.16 $ 9.88 $ 9.42 $ 8.92 $ 10.04 $ 10.14
============================================ ========== ========== ======== ======== ======= ========
Total return(a) 11.71% 14.68% 15.91% (2.48)% 4.00% 4.49%
============================================ ========== ========== ======== ======== ======= ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,647,801 $1,068,060 $557,926 $191,338 $31,264 $ 26,177
============================================ ========== ========== ======== ======== ======= ========
Ratio of expenses to average net assets 1.65%(b)(c) 1.68% 1.73% 1.80% 1.93%(d) 1.68%(b)(c)(d)
============================================ ========== ========== ======== ======== ======= ========
Ratio of net investment income to average
net assets 8.33%(b) 8.95% 9.18% 9.27% 8.99%(d) 8.30%(b)(d)
============================================ ========== ========== ======== ======== ======= ========
Portfolio turnover rate 80% 77% 61% 53% 53% 80%
============================================ ========== ========== ======== ======== ======= ========
</TABLE>
(a) Does not deduct contingent deferred sales charges and for periods less than
one year are not annualized.
(b) Ratios are based on average net assets of $1,345,322,915 and $10,445,598,
respectively, for Class B and Class C.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly
the ratio of expenses to average net assets would have been the same for
Class B and would have been 1.66% (annualized) for Class C.
(d) Annualized.
FS-55
<PAGE> 261
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, 1997, 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 or periods in the five-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 and financial highlights. Our procedures
included confirmation of securities owned as of December
31, 1997, 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 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, 1997, 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 or periods in the five-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
February 6, 1998
FS-56
<PAGE> 262
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE
BONDS & NOTES-70.07%
AGRICULTURAL PRODUCTS-0.24%
Hines Horticulture, Inc.,
Series B Sr. Gtd. Sub. Notes,
11.75%, 10/15/05 $ 1,000,000 $ 1,105,000
- -----------------------------------------------------------
AIRLINES-2.54%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 1,810,000 2,037,390
- -----------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 500,000 591,205
- -----------------------------------------------------------
Equipment Trust Cert., 10.50%
04/30/16 5,000,000 6,430,900
- -----------------------------------------------------------
United Air Lines, Inc., Pass
Through Certificates, 9.56%,
10/19/18 2,325,000 2,859,145
- -----------------------------------------------------------
11,918,640
- -----------------------------------------------------------
AUTOMOBILES-1.75%
General Motors Corp., Deb.,
8.80%, 03/01/21 6,700,000 8,225,657
- -----------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.29%
First Union Bancorp, Sub. Deb.,
7.50%, 04/15/35 5,300,000 6,054,879
- -----------------------------------------------------------
BANKS (MONEY CENTER)-0.66%
Bankers Trust New York Corp.,
Gtd. Notes, 7.875%, 02/25/27 3,000,000 3,092,895
- -----------------------------------------------------------
BANKS (REGIONAL)-1.34%
HSBC Americas Inc., Sub. Notes,
7.00%, 11/01/06 1,000,000 1,020,520
- -----------------------------------------------------------
Mercantile Bancorp Inc., Unsec.
Sub. Notes, 7.30%, 06/15/07 5,000,000 5,264,650
- -----------------------------------------------------------
6,285,170
- -----------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-3.57%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.24%,
06/20/20(b) 74,000,000 16,763,220
- -----------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-3.91%
Diamond Cable Communications
PLC (United Kingdom), Sr.
Yankee Disc. Notes, 11.75%,
12/15/05(c) 4,000,000 3,110,000
- -----------------------------------------------------------
EchoStar DBS Corp., Sr. Gtd.
Notes, 12.50%, 07/01/02 2,340,000 2,550,600
- -----------------------------------------------------------
Kabelmedia Holdings GmbH,
(Germany) Sr. Yankee Unsec.
Disc. Notes, 13.625%,
08/01/06(c) 1,400,000 1,029,000
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE)-(CONTINUED)
Rifkin Acquisition Partners
L.L.P., Sr. Sub. Notes,
11.125%, 01/15/06 $ 630,000 $ 699,300
- -----------------------------------------------------------
TCI Communications Inc., Deb.,
8.75%, 08/01/15 6,000,000 6,969,960
- -----------------------------------------------------------
TeleWest Communications PLC
(United Kingdom), Sr. Yankee
Disc. Deb., 11.00%,
10/01/07(c) 3,000,000 2,347,500
- -----------------------------------------------------------
United International Holdings,
Inc., Sr. Sec. Disc. Notes,
12.78%, 11/15/99(b) 2,000,000 1,650,000
- -----------------------------------------------------------
18,356,360
- -----------------------------------------------------------
CHEMICALS-1.51%
Nova Chemicals Ltd. (Canada),
Yankee Deb., 7.00%, 08/15/26 2,000,000 2,055,800
- -----------------------------------------------------------
Solutia Inc., Bonds, 6.72%,
10/15/37 3,500,000 3,561,355
- -----------------------------------------------------------
Sterling Chemicals, Inc., Sr.
Unsec. Sub. Notes, 11.75%,
08/15/06 1,420,000 1,455,500
- -----------------------------------------------------------
7,072,655
- -----------------------------------------------------------
CHEMICALS (SPECIALTY)-0.26%
Crain Industries, Inc., Sr.
Sub. Notes, 13.50%, 08/15/05 1,070,000 1,225,150
- -----------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.56%
Dialog Corp. PLC (United
Kingdom), Sr. Sub. Notes,
11.00%, 11/15/07
(Acquired 11/10/97; Cost
$1,500,000)(d) 1,500,000 1,563,750
- -----------------------------------------------------------
ProNet, Inc., Sr. Sub. Notes,
11.875%, 06/15/05 1,000,000 1,082,500
- -----------------------------------------------------------
2,646,250
- -----------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.22%
Commemorative Brands, Sr. Sub.
Notes, 11.00%, 01/15/07 1,000,000 1,007,500
- -----------------------------------------------------------
CONSUMER FINANCE-0.34%
Commercial Credit Co., Putable
Notes, 7.875%, 02/01/25 1,400,000 1,612,352
- -----------------------------------------------------------
CONTAINERS & PACKAGING (PAPER)-0.45%
BPC Holding Corp., Series B Sr.
Notes, 12.50%, 06/15/06 1,000,000 1,095,000
- -----------------------------------------------------------
MVE Inc., Sr. Sec. Notes,
12.50%, 02/15/02 1,000,000 1,002,500
- -----------------------------------------------------------
2,097,500
- -----------------------------------------------------------
</TABLE>
FS-57
<PAGE> 263
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
DISTRIBUTORS (FOOD & HEALTH)-0.39%
AmeriServ Food Co., Gtd. Sr.
Sub. Notes, 10.125%, 07/15/07 $ 1,750,000 $ 1,846,250
- -----------------------------------------------------------
ELECTRIC COMPANIES-2.58%
El Paso Electric Co.,
Series D Sec. 1st Mortgage
Bonds, 8.90%, 02/01/06 2,500,000 2,767,875
- -----------------------------------------------------------
Series E Sec. 1st Mortgage
Bonds, 9.40%, 05/01/11 4,600,000 5,201,680
- -----------------------------------------------------------
Western Resources Inc., Sr.
Notes, 7.125%, 08/01/09 4,000,000 4,119,360
- -----------------------------------------------------------
12,088,915
- -----------------------------------------------------------
ELECTRICAL EQUIPMENT-0.52%
Electronic Retailing Systems
International, Inc., Sr.
Disc. Notes, 13.25%,
02/01/04(c) 3,630,000 2,432,100
- -----------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.25%
Advanced Micro Devices, Inc.,
Sr. Sec. Notes, 11.00%,
08/01/03 1,100,000 1,181,125
- -----------------------------------------------------------
ENTERTAINMENT-4.34%
Ascent Entertainment Group, Sr.
Disc. Notes, 11.875%,
12/15/04 (Acquired
12/17/97-12/18/97; Cost
$1,699,385)(c)(d) 3,000,000 1,755,000
- -----------------------------------------------------------
Time Warner, Inc.,
Deb., 9.15%, 02/01/23 8,500,000 10,493,250
- -----------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 4,300,000 4,359,555
- -----------------------------------------------------------
Viacom, Inc., Sr. Notes, 7.75%,
06/01/05 3,650,000 3,751,142
- -----------------------------------------------------------
20,358,947
- -----------------------------------------------------------
FINANCIAL (DIVERSIFIED)-2.04%
Associates Corp. of North
America, Series B Sr. Deb.,
7.95%, 02/15/10 6,000,000 6,713,400
- -----------------------------------------------------------
U.S. West Capital Funding Inc.,
Gtd. Notes, 6.95%, 01/15/37 2,750,000 2,843,142
- -----------------------------------------------------------
9,556,542
- -----------------------------------------------------------
FOODS-3.06%
ConAgra Inc., Sr. Unsec. Notes,
7.125%, 10/01/26 6,100,000 6,500,404
- -----------------------------------------------------------
Del Monte Corp./Foods Co., Sr.
Unsec. Sub. Notes, 12.25%,
04/15/07 2,080,000 2,360,800
- -----------------------------------------------------------
Grand Metro Investment, Gtd.
Bonds, 7.45%, 04/15/35 5,000,000 5,484,650
- -----------------------------------------------------------
14,345,854
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
GAMING, LOTTERY & PARIMUTUEL COMPANIES-1.28%
Coast Hotels & Casinos Inc.,
Series B Sec. 1st Mortgage
Gtd. Notes, 13.00%, 12/15/02 $ 1,160,000 $ 1,316,600
- -----------------------------------------------------------
Showboat, Inc., 1st Mortgage
Notes, 9.25%, 05/01/08 2,000,000 2,170,000
- -----------------------------------------------------------
Venetian Casino Resort LLC,
Mortgage Notes, 12.25%,
11/15/04 (Acquired 11/06/97;
Cost $2,500,000)(d) 2,500,000 2,515,625
- -----------------------------------------------------------
6,002,225
- -----------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.87%
Tenet Healthcare Corp., Sr.
Notes, 8.00%, 01/15/05 4,000,000 4,080,000
- -----------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.69%
Paragon Health Network, Inc.,
Sr. Sub Notes, 10.50%,
11/01/07 (Acquired 10/30/97;
Cost $2,118,851)(c)(d) 3,500,000 2,178,750
- -----------------------------------------------------------
Sun Healthcare Group, Inc., Sr.
Sub. Notes, 9.50%, 07/01/07
(Acquired 10/20/97; Cost
$1,036,250)(d) 1,000,000 1,035,000
- -----------------------------------------------------------
3,213,750
- -----------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.24%
Dade International Inc., Series
B Sr. Sub. Notes, 11.125%,
05/01/06 1,000,000 1,110,000
- -----------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.26%
Dynacare Inc. (Canada), Sr.
Yankee Notes, 10.75%,
01/15/06 1,140,000 1,205,550
- -----------------------------------------------------------
HOMEBUILDING-0.17%
Continental Homes Holdings
Corp., Sr. Unsec. Gtd. Notes,
10.00%, 04/15/06 745,000 804,600
- -----------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.41%
Zeta Consumer Products, Sr.
Notes, 11.25%, 11/30/07
(Acquired 11/20/97; Cost
$1,900,000)(d) 1,900,000 1,942,750
- -----------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.22%
Americo Life Inc., Sr. Sub.
Notes, 9.25%, 06/01/05 1,000,000 1,027,500
- -----------------------------------------------------------
Torchmark Corp., Notes, 7.875%,
05/15/23 4,350,000 4,686,429
- -----------------------------------------------------------
5,713,929
- -----------------------------------------------------------
</TABLE>
FS-58
<PAGE> 264
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
INSURANCE (PROPERTY-CASUALTY)-1.59%
Terra Nova Holdings, Co.
(United Kingdom), Yankee Gtd.
Notes, 7.20%, 08/15/07 $ 2,000,000 $ 2,068,400
- -----------------------------------------------------------
USF&G Corp., Gtd. Bonds, 8.47%,
01/10/27 5,000,000 5,385,800
- -----------------------------------------------------------
7,454,200
- -----------------------------------------------------------
IRON & STEEL-0.59%
GS Industries, Inc., Sr. Gtd.
Notes, 12.00%, 09/01/04 1,000,000 1,098,750
- -----------------------------------------------------------
Gulf States Steel Corp., 1st
Mortgage Notes, 13.50%,
04/15/03 1,650,000 1,674,750
- -----------------------------------------------------------
2,773,500
- -----------------------------------------------------------
LODGING-HOTELS-2.26%
Hilton Hotels Corp., Notes,
7.20%, 12/15/09 5,000,000 5,040,500
- -----------------------------------------------------------
ITT Corp., Unsec. Gtd. Deb.,
7.375%, 11/15/15 3,350,000 3,442,293
- -----------------------------------------------------------
John Q. Hammons Hotels Inc.,
Sec. 1st Mortgage Notes,
9.75%, 10/01/05 2,000,000 2,130,000
- -----------------------------------------------------------
10,612,793
- -----------------------------------------------------------
MACHINERY (DIVERSIFIED)-1.95%
Caterpillar Inc., Deb., 9.375%,
08/15/11 5,000,000 6,326,150
- -----------------------------------------------------------
Elgin National Industries, Sr.
Notes, 11.00%, 11/01/07
(Acquired 11/03/97; Cost
$1,690,000)(d) 1,690,000 1,761,825
- -----------------------------------------------------------
Fairfield Manufacturing Co.,
Inc., Sr. Sub. Notes,
11.375%, 07/01/01 1,000,000 1,060,000
- -----------------------------------------------------------
9,147,975
- -----------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.48%
MMI Products Inc., Sr. Unsec.
Sub. Notes, 11.25%, 04/15/07 2,070,000 2,266,650
- -----------------------------------------------------------
METALS MINING-0.76%
Rio Algom Ltd. (Canada), Yankee
Unsec. Deb., 7.05%, 11/01/05 3,500,000 3,569,405
- -----------------------------------------------------------
NATURAL GAS-1.02%
Enron Corp., Notes, 6.75%,
08/01/09 2,500,000 2,530,175
- -----------------------------------------------------------
Ferrellgas Partners, Series B
Sr. Sec. Gtd. Notes, 9.375%,
06/15/06 2,100,000 2,236,500
- -----------------------------------------------------------
4,766,675
- -----------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.29%
United Stationer Supply, Sr.
Sub. Notes, 12.75%, 05/01/05 1,170,000 1,336,725
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
OIL (INTERNATIONAL INTEGRATED)-1.62%
Gulf Canada Resources, Ltd.
(Canada), Sr. Yankee Unsec.
Notes, 8.35%, 08/01/06 $ 5,100,000 $ 5,558,082
- -----------------------------------------------------------
Husky Oil Ltd. (Canada), Sr.
Yankee Notes, 7.125%,
11/15/06 2,000,000 2,054,840
- -----------------------------------------------------------
7,612,922
- -----------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.09%
Falcon Drilling Co., Inc.,
Series B Sr. Notes, 9.75%,
01/15/01 410,000 431,525
- -----------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-3.34%
Abraxas Petroleum Corp., Series
B Sr. Notes, 11.50%, 11/01/04 900,000 990,000
- -----------------------------------------------------------
Anadarko Petroleum Corp., Deb.,
7.25%, 03/15/25 5,395,000 5,758,569
- -----------------------------------------------------------
Centaur Mining & Exploration,
Ltd., Co. (Australia), Sr.
Gtd. Notes, 11.00%, 12/01/07
(Acquired 11/24/97; Cost
$2,500,000)(d) 2,500,000 2,525,000
- -----------------------------------------------------------
Southwest Royalties, Inc., Sr.
Gtd. Notes, 10.50%, 10/15/04
(Acquired 10/08/97; Cost
$2,550,849)(d) 2,540,000 2,527,300
- -----------------------------------------------------------
Talisman Energy, Inc. (Canada),
Yankee Deb., 7.125%, 06/01/07 3,750,000 3,872,850
- -----------------------------------------------------------
15,673,719
- -----------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-1.05%
Sun Co., Inc., Deb., 9.00%,
11/01/24 4,000,000 4,922,240
- -----------------------------------------------------------
PAPER & FOREST PRODUCTS-0.47%
Pindo Deli Pulp & Paper, Gtd.
Notes, 10.75%, 10/01/07
(Acquired 10/14/97-10/16/97;
Cost $2,557,481)(d) 2,540,000 2,197,100
- -----------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-1.95%
AES Corp., Sr. Sub. Notes,
10.25%, 07/15/06 1,000,000 1,087,500
- -----------------------------------------------------------
Indiana Michigan Power, Sec.
Lease Obligation Bonds,
9.82%, 12/07/22 4,969,574 6,502,738
- -----------------------------------------------------------
Panda Global Energy Co.
(China), Sr. Yankee Sec. Gtd.
Notes, 12.50%, 04/15/04 1,720,000 1,573,800
- -----------------------------------------------------------
9,164,038
- -----------------------------------------------------------
</TABLE>
FS-59
<PAGE> 265
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
PUBLISHING (NEWSPAPERS)-2.02%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%,
02/01/13 $ 7,100,000 $ 8,446,941
- -----------------------------------------------------------
Sr. Gtd. Putable Bonds,
7.43%, 10/01/26 1,000,000 1,048,270
- -----------------------------------------------------------
9,495,211
- -----------------------------------------------------------
RAILROADS-0.62%
Norfolk Southern Corp., Putable
Bonds, 7.05%, 05/01/37 2,750,000 2,915,028
- -----------------------------------------------------------
RETAIL (FOOD CHAINS)-0.86%
Great Atlantic & Pacific Tea
Co., Inc. (Canada), Yankee
Gtd. Notes, 7.78%, 11/01/00
(Acquired 10/18/95; Cost
$3,900,000)(d) 3,900,000 4,028,330
- -----------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.43%
Big 5 Corp., Senior Notes,
10.88%, 11/15/07 (Acquired
11/07/97-11/24/97; Cost
$1,990,110)(d) 2,000,000 2,000,000
- -----------------------------------------------------------
RETAIL (SPECIALTY)-0.60%
CSK Auto Inc., Sr. Gtd. Sub.
Deb., 11.00%, 11/01/06 650,000 718,250
- -----------------------------------------------------------
Icon Health & Fitness, Series B
Sr. Sub. Notes, 13.00%,
07/15/02 1,200,000 1,347,000
- -----------------------------------------------------------
Wilson's-The Leather Experts,
Inc., Sr. Notes, 11.25%,
08/15/04 (Acquired 08/14/97;
Cost $760,000)(d) 760,000 752,400
- -----------------------------------------------------------
2,817,650
- -----------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.24%
J Crew Operating Corp., Sr.
Sub. Notes, 10.375%, 10/15/07
(Acquired 10/14/97; Cost
$1,255,000)(d) 1,255,000 1,116,950
- -----------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.56%
Sovereign Bancorp, Inc., Sub.
Notes, 8.00%, 03/15/03 2,500,000 2,634,300
- -----------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.04%
Laidlaw Inc. (Canada), Yankee
Deb., 6.72%, 10/01/27 2,000,000 2,031,700
- -----------------------------------------------------------
Pegasus Shipping Hellas, Co.
(Bermuda), Gtd. Sr. Mortgage
Notes, 11.875%, 11/15/04
(Acquired 11/19/97; Cost
$2,753,956)(d) 2,850,000 2,835,750
- -----------------------------------------------------------
4,867,450
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SHIPPING-1.58%
Gearbulk Holding Ltd., Sr.
Notes, 11.25%, 12/01/04 $ 1,000,000 $ 1,102,500
- -----------------------------------------------------------
Hutchison Whampoa Ltd. (Cayman
Islands), Series D Sr. Gtd.
Unsec. Unsub. Deb., 6.988%,
08/01/37 (Acquired 12/15/97;
Cost $4,689,900)(d) 5,000,000 4,672,200
- -----------------------------------------------------------
Stena A.B.(Sweden), Sr. Yankee
Unsec. Notes, 10.50%,
12/15/05 1,500,000 1,638,750
- -----------------------------------------------------------
7,413,450
- -----------------------------------------------------------
SOVEREIGN DEBT-2.59%
Province of Manitoba (Canada),
Yankee Bonds, 7.75%, 07/17/16 7,500,000 8,585,250
- -----------------------------------------------------------
Province of Quebec (Canada),
Yankee Deb., 6.29% 03/06/26 3,500,000 3,574,025
- -----------------------------------------------------------
12,159,275
- -----------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-2.28%
Clearnet Communications
Inc.(Canada), Sr. Yankee
Unsec. Disc. Notes, 14.75%,
12/15/05(c) 920,000 737,150
- -----------------------------------------------------------
Nextel Communications, Sr.
Disc. Notes, 9.75%, 10/31/07
(Acquired 10/22/97-10/23/97;
Cost $3,061,031)(c)(d) 5,000,000 3,100,000
- -----------------------------------------------------------
Orion Network Systems, Inc.,
Sr. Notes, 11.25%,
01/15/07(e) 3,400,000 3,867,500
- -----------------------------------------------------------
Pricellular Wireless Corp., Sr.
Notes, 10.75%, 11/01/04 1,425,000 1,556,812
- -----------------------------------------------------------
Sygnet Wireless Inc., Sr.
Unsec. Notes, 11.50%,
10/01/06 1,320,000 1,432,200
- -----------------------------------------------------------
10,693,662
- -----------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.11%
Esprit Telecom Group PLC
(United Kingdom), Sr. Yankee
Notes, 11.50%, 12/15/07 1,500,000 1,552,500
- -----------------------------------------------------------
MCI Communications Corp.,
Putable Sr. Unsec. Deb.,
7.125%, 06/15/27 2,750,000 2,877,985
- -----------------------------------------------------------
PhoneTel Technologies, Inc.,
Sr. Unsec. Gtd. Notes,
12.00%, 12/15/06 740,000 771,450
- -----------------------------------------------------------
5,201,935
- -----------------------------------------------------------
TELEPHONE-0.24%
Hermes Europe Railtel BV
(Netherlands), Sr. Yankee
Notes, 11.50%, 08/15/07
(Acquired 08/14/97; Cost
$1,006,125)(d) 990,000 1,103,850
- -----------------------------------------------------------
</TABLE>
FS-60
<PAGE> 266
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TRUCKERS-0.49%
Travelcenters of America Inc.,
Sr. Gtd. Unsec. Sub. Deb.,
10.25%, 04/01/07 $ 2,180,000 $ 2,299,900
- -----------------------------------------------------------
WASTE MANAGEMENT-0.99%
Allied Waste Industries, Inc.,
Sr. Disc. Notes, 11.30%,
06/01/07 (Acquired 05/01/97;
Cost $2,931,642)(c)(d) 4,930,000 3,487,975
- -----------------------------------------------------------
Norcal Waste Systems Inc.,
Series B Sr. Gtd. Notes,
13.50%, 11/15/05 1,000,000 1,155,000
- -----------------------------------------------------------
4,642,975
- -----------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds & Notes 328,665,198
- -----------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE
BONDS & NOTES-1.28%
COMPUTERS (PERIPHERALS)-0.29%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 (Acquired
03/06/97; Cost $1,000,000)(d) 1,000,000 1,349,750
- -----------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.43%
Omnicare, Inc., Sub. Deb.,
5.00%, 12/01/07 (Acquired
12/04/97; Cost $2,000,000)(d) 2,000,000 2,030,000
- -----------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.29%
U.S. Filter Corp., Conv. Sub.
Notes, 6.00%, 09/15/05 800,000 1,373,528
- -----------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.27%
CUC International, Inc., Conv.
Sub. Notes, 3.00%, 02/15/02
(Acquired 02/05/97; Cost
$1,000,000)(d) 1,000,000 1,255,940
- -----------------------------------------------------------
Total U.S. Dollar
Denominated Convertible
Bonds & Notes 6,009,218
- -----------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS & NOTES(f)-6.58%
CANADA-4.92%
Bank of Montreal (Banks-Money Center),
Sub. Deb., 7.92%, 07/31/12 CAD
4,000,000 3,154,459
- -----------------------------------------------------------
Bell Canada (Telephone), Unsec.
Deb., 10.875, 10/11/04 3,000,000 2,647,885
- -----------------------------------------------------------
Bell Mobility Cellular Inc.
(Telecommunications-Cellular/Wireless),
Deb., 6.55%, 06/02/08 2,250,000 1,584,959
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Clearnet Communications Inc.
(Telecommunications-Cellular/Wireless),
Sr. Disc. Notes, 11.75%,
08/13/07(c) $ 8,200,000 $ 3,643,679
- -----------------------------------------------------------
Microcell Telecommunications
(Telecommunications-Cellular/Wireless),
Sr. Disc. Notes, 11.125%,
10/15/07 (Acquired 10/08/97;
Cost $1,517,301)(c)(d) 3,500,000 1,359,295
- -----------------------------------------------------------
NAV Canada (Services-Commercial
& Consumer), Bonds, 7.40%,
06/01/27 2,500,000 1,996,606
- -----------------------------------------------------------
Teleglobe Canada, Inc.
(Telephone), Unsec. Deb.,
8.35%, 06/20/03 5,000,000 3,882,859
- -----------------------------------------------------------
Trans-Canada Pipelines (Natural
Gas), Series Q Deb., 10.625%,
10/20/09 1,750,000 1,665,834
- -----------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 3,000,000 2,430,209
- -----------------------------------------------------------
Westcoast Energy, Inc.
(Oil & Gas-Exploration &
Production), Deb., 6.45%, 12/18/06
(Acquired 12/03/96; Cost
$739,252)(d) 1,000,000 717,540
- -----------------------------------------------------------
23,083,325
- -----------------------------------------------------------
GERMANY-0.41%
LKB Global (Financial-Diversified),
Gtd. Notes, 6.00%, 01/25/06
DEM 3,300,000 1,901,306
- -----------------------------------------------------------
NEW ZEALAND-0.49%
International Bank for Reconstruction &
Development (Banks-Money Center),
Sr. Notes, 6.77%, 08/20/07(b)
NZD 8,000,000 2,309,547
- -----------------------------------------------------------
UNITED KINGDOM-0.76%
Sutton Bridge Financial
Ltd. (Financial-Diversified), Gtd.
Eurobonds,
8.625%, 06/30/22 (Acquired 05/29/97;
Cost $3,260,479)(d)
GBP 2,000,000 3,551,582
- -----------------------------------------------------------
Total Non-U.S. Dollar Denominated
Non-Convertible Bonds & Notes 30,845,760
- -----------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES(f)-5.10%
GERMANY-1.07%
Daimler-Benz A.G. (Automobiles), Conv. Gtd.
Unsub. Eurobonds, 4.125%, 07/05/03
DEM 6,440,000 $ 5,011,673
- -----------------------------------------------------------
JAPAN-3.05%
Matsushita Electric Industrial Co. Ltd.
(Electrical Equipment), Conv. Bonds,
1.30%, 03/29/02
JPY 250,000,000 2,378,992
- -----------------------------------------------------------
Sony Corp. (Electrical
Equipment),
Conv. Deb., 1.40%, 03/31/05 465,000,000 5,288,543
- -----------------------------------------------------------
</TABLE>
FS-61
<PAGE> 267
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
JAPAN-(CONTINUED)
Toyota Motor Corp.
(Automobiles),
Conv. Bonds, 1.20%, 01/28/98 $455,000,000 $ 6,655,816
- -----------------------------------------------------------
14,323,351
- -----------------------------------------------------------
SWITZERLAND-0.24%
Yamada Denki Co. Ltd.
(Retail-Computers & Electronics),
Unsec. Conv. Notes, 0.25%, 03/31/00
CHF 1,700,000 1,116,661
- -----------------------------------------------------------
UNITED KINGDOM-0.74%
British Airport Authority PLC (Airlines),
Conv. Bonds,
5.75%, 03/29/06
GBP 2,000,000 3,465,359
- -----------------------------------------------------------
Total Non-U.S. Dollar Denominated
Convertible Bonds & Notes 23,917,044
- -----------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS & NOTES-9.84%(f)
CANADA-0.88%
Ontario Province, Sr. Unsec. Unsub. Global
Bonds, 8.00%, 03/11/03
CAD 5,350,000 4,148,183
- -----------------------------------------------------------
ITALY-0.51%
Republic of Italy, Conv. Eurobonds,
6.50%, 06/28/01
ITL 3,050,000,000 2,381,466
- -----------------------------------------------------------
NEW ZEALAND-1.69%
Federal National Mortgage Association,
Notes, 7.25%, 06/20/02
NZD 2,900,000 1,647,547
- -----------------------------------------------------------
New Zealand Government,
Bonds, 10.00%, 03/15/02 6,500,000 4,134,626
- -----------------------------------------------------------
Bonds, 8.00%, 04/15/04 3,500,000 2,119,266
- -----------------------------------------------------------
7,901,439
- -----------------------------------------------------------
SWEDEN-1.71%
Swedish Government,
Bonds, 10.25%, 05/05/03
SEK 19,000,000 2,884,973
- -----------------------------------------------------------
Bonds, 6.00%, 02/09/05 20,000,000 2,540,750
- -----------------------------------------------------------
Bonds, 6.50%, 10/25/06 20,000,000 2,611,720
- -----------------------------------------------------------
8,037,443
- -----------------------------------------------------------
UNITED KINGDOM-5.05%
Federal National Mortgage Association, Sr.
Unsec. Notes, 6.875%, 06/07/02
GBP 2,400,000 3,953,662
- -----------------------------------------------------------
United Kingdom Treasury,
Bonds, 8.00%, 12/07/00 1,500,000 2,548,985
- -----------------------------------------------------------
Bonds, 7.50%, 12/07/06
GBP 3,100,000 5,483,492
- -----------------------------------------------------------
Gtd. Notes, 7.25%, 03/30/98 5,600,000 9,201,483
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Gtd. Notes, 7.00%, 11/06/01 $ 1,500,000 $ 2,492,397
- -----------------------------------------------------------
23,680,019
- -----------------------------------------------------------
Total Non-U.S. Dollar Denominated
Government Bonds & Notes 46,148,550
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
DOMESTIC COMMON STOCK-0.03%
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.03%
Nextel Communications, Inc.(g) 4,601 $ 119,626
- --------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-3.33%
BANKS (REGIONAL)-0.68%
Westpac Banking Corp. STRYPES
Trust-$3.135 Conv. Pfd. 95,000 3,182,500
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.26%
Loral Space & Communications-$3.00
Conv. Pfd. (Acquired 11/01/96;
Cost $1,000,000)(d) 20,000 1,226,820
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-0.35%
Microsoft Corp., Series A-$2.196
Conv. Pfd. 18,000 1,617,750
- --------------------------------------------------------------
ELECTRIC COMPANIES-0.27%
Houston Industries Inc.-$3.22 Conv.
Pfd. 22,000 1,255,375
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.53%
SunAmerica, Inc.-$3.188 Conv. Pfd. 53,350 2,484,109
- --------------------------------------------------------------
FOODS-0.34%
Ralston Purina Co.-$4.34 Conv. Pfd. 23,000 1,601,375
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.42%
Medpartners Inc.-$1.44 Conv. Pfd. 90,000 1,980,000
- --------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.27%
Tosco Financing Trust-$2.875 Conv.
Pfd. (Acquired 12/10/96-12/11/96;
Cost $1,006,950)(d) 20,000 1,281,500
- --------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.21%
Citizens Utilities Co.-$2.50 Conv.
Pfd. 21,100 1,007,525
- --------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 15,636,954
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-0.40%
ELECTRIC COMPANIES-0.40%
National Power PLC-ADR (United
Kingdom) 24,300 962,888
- --------------------------------------------------------------
PowerGen PLC-ADR (United Kingdom) 17,300 919,062
- --------------------------------------------------------------
Total Foreign Stocks & Other Equity
Interests 1,881,950
- --------------------------------------------------------------
WARRANTS-0.06%
BROADCASTING (TELEVISION, RADIO & CABLE)-0.00%
Wireless One, Inc., expiring
10/19/00(h) 2,670 0
- --------------------------------------------------------------
</TABLE>
FS-62
<PAGE> 268
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT-0.02%
Electronic Retailing Systems,
expiring 01/24/98(h) 3,630 $ 72,600
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-0.01%
MVE Inc., expiring 02/15/02(h) 1,000 30,000
- --------------------------------------------------------------
METAL FABRICATORS-0.00%
Gulf States Steel Corp., expiring
04/15/03(h) 1,650 7,425
- --------------------------------------------------------------
PERSONAL CARE-0.01%
IHF Capital Inc., expiring
11/14/99(h) (Acquired
11/04/94-12/07/94; cost $0)(d)(h) 1,200 60,600
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.02%
Clearnet Communications Inc.
(Canada), expiring 09/15/05(h) 5,874 55,803
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-(CONTINUED)
Orion Network Systems, Inc.,
expiring 01/15/07(h) 3,400 $ 47,600
- --------------------------------------------------------------
103,403
- --------------------------------------------------------------
Total Warrants 274,028
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (a)
<S> <C> <C>
REPURCHASE AGREEMENT(i)-1.11%
Smith Barney, Inc., 6.75%,
01/02/98(j) $ 5,213,923 5,213,923
- --------------------------------------------------------------
TOTAL INVESTMENTS-97.80% 458,712,251
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.20% 10,317,580
- --------------------------------------------------------------
NET ASSETS-100.00% $469,029,831
- --------------------------------------------------------------
</TABLE>
Abbreviations:
ADR - American Depositary Receipts
CAD - Canadian Dollar
Cert. - Certificates
CHF - Swiss Franc
Conv. - Convertible
Deb. - Debentures
DEM - German Deutschemark
Disc. - Discounted
GBP - British Pound
Gtd. - Guaranteed
ITL - Italian Lira
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
JPY - Japanese Yen
NZD - New Zealand Dollar
Sec. - Secured
SEK - Swedish Krona
STRYPES - Structured Yield Product Exchangeable for Stock
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by note (f).
(b) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(c) Discounted bond at purchase. The interest rate represents the coupon rate at
which the bond will accrue at a specified future date.
(d) 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 12/31/97 was $55,932,582 which
represented 11.93% of the Fund's net assets.
(e) Issued as a unit. Each unit also includes warrants to purchase 0.8444 shares
of common stock per warrant.
(f) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(g) Non-income producing security.
(h) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(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 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations, 0%
to 13.875%, due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
See Notes to Financial Statements.
FS-63
<PAGE> 269
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$435,939,899) $458,712,251
- ---------------------------------------------------------
Foreign currencies, at value (cost
$301,698) 301,263
- ---------------------------------------------------------
Receivables for:
Forward currency contracts 2,502,706
- ---------------------------------------------------------
Fund shares sold 1,863,627
- ---------------------------------------------------------
Interest and dividends 7,868,466
- ---------------------------------------------------------
Investment for deferred compensation plan 72,139
- ---------------------------------------------------------
Other assets 107,800
- ---------------------------------------------------------
Total assets 471,428,252
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 1,064,087
- ---------------------------------------------------------
Dividends to shareholders 584,641
- ---------------------------------------------------------
Deferred compensation plan 72,139
- ---------------------------------------------------------
Accrued advisory fees 172,603
- ---------------------------------------------------------
Accrued distribution fees 342,659
- ---------------------------------------------------------
Accrued administrative service fees 6,104
- ---------------------------------------------------------
Accrued transfer agent fees 60,223
- ---------------------------------------------------------
Accrued trustees' fees 3,760
- ---------------------------------------------------------
Accrued operating expenses 92,205
- ---------------------------------------------------------
Total liabilities 2,398,421
- ---------------------------------------------------------
Net assets applicable to shares outstanding $469,029,831
=========================================================
NET ASSETS:
Class A $340,607,691
=========================================================
Class B $125,870,516
=========================================================
Class C $ 2,551,624
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE
Class A 39,748,143
- ---------------------------------------------------------
Class B 14,719,515
- ---------------------------------------------------------
Class C 298,700
- ---------------------------------------------------------
CLASS A:
Net asset value and redemption price per
share $ 8.57
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $8.57
divided by 95.25%) $ 9.00
- ---------------------------------------------------------
CLASS B:
Net asset value and offering price per
share $ 8.55
- ---------------------------------------------------------
CLASS C:
Net asset value and offering price per
share $ 8.54
- ---------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 29,179,932
- ---------------------------------------------------------
Dividends (net of $24,339 foreign
withholding tax) 807,572
- ---------------------------------------------------------
Total investment income 29,987,504
- ---------------------------------------------------------
EXPENSES:
Advisory fees 1,801,746
- ---------------------------------------------------------
Administrative service fees 81,464
- ---------------------------------------------------------
Custodian fees 90,793
- ---------------------------------------------------------
Trustees' fees 11,852
- ---------------------------------------------------------
Distribution fees -- Class A 749,562
- ---------------------------------------------------------
Distribution fees -- Class B 1,003,075
- ---------------------------------------------------------
Distribution fees -- Class C 3,040
- ---------------------------------------------------------
Transfer agent fees -- Class A 419,508
- ---------------------------------------------------------
Transfer agent fees -- Class B 145,173
- ---------------------------------------------------------
Transfer agent fees -- Class C 440
- ---------------------------------------------------------
Other 209,214
- ---------------------------------------------------------
Total expenses 4,515,867
- ---------------------------------------------------------
Less: Expenses paid indirectly (11,734)
- ---------------------------------------------------------
Net expenses 4,504,133
- ---------------------------------------------------------
Net investment income 25,483,371
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCY TRANSACTIONS, FORWARD
CURRENCY CONTRACTS AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 10,189,229
- ---------------------------------------------------------
Foreign currency transactions (1,785,693)
- ---------------------------------------------------------
Forward currency contracts 4,303,382
- ---------------------------------------------------------
Futures contracts (1,794,375)
- ---------------------------------------------------------
10,912,543
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 7,163,467
- ---------------------------------------------------------
Foreign currency transactions (27,949)
- ---------------------------------------------------------
Forward currency contracts 1,601,096
- ---------------------------------------------------------
8,736,614
- ---------------------------------------------------------
Net gain from investment securities,
foreign currency transactions, forward
currency contracts and futures
contracts 19,649,157
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 45,132,528
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-64
<PAGE> 270
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 25,483,371 $ 22,816,117
- --------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currency transactions, forward currency contracts and
futures contracts 10,912,543 2,116,227
- --------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currency transactions and forward currency
contracts 8,736,614 4,238,364
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 45,132,528 29,170,708
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (18,740,017) (19,414,227)
- --------------------------------------------------------------------------------------------
Class B (5,379,787) (4,277,769)
- --------------------------------------------------------------------------------------------
Class C (8,381) --
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (3,481,635) --
- --------------------------------------------------------------------------------------------
Class B (1,280,178) --
- --------------------------------------------------------------------------------------------
Class C (19,105) --
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 42,455,896 31,245,815
- --------------------------------------------------------------------------------------------
Class B 36,284,875 39,218,171
- --------------------------------------------------------------------------------------------
Class C 2,539,241
- --------------------------------------------------------------------------------------------
Net increase in net assets 97,503,437 75,942,698
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 371,526,394 295,583,696
============================================================================================
End of period $469,029,831 $371,526,394
- --------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Shares of beneficial interest $441,939,444 $360,736,285
- --------------------------------------------------------------------------------------------
Undistributed net investment income (57,239) 33,129
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from sales of
investment securities, foreign currency transactions,
forward currency contracts and futures contracts 1,908,862 (5,745,170)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currency transactions and forward currency contracts 25,238,764 16,502,150
- --------------------------------------------------------------------------------------------
$469,029,831 $371,526,394
============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 three different classes of shares: the Class A shares, Class B
shares and the Class C shares. The new Class C shares commenced sales on August
4, 1997. Class A shares are sold with a front-end sales charge. The Class B and
Class C 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 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.
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.
FS-65
<PAGE> 271
A. Security Valuations-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.
Investment securities for which prices are not provided by the pricing
service and which are listed or traded on an exchange (except convertible
bonds) are valued at the last sales price on the exchange where the security
is principally traded or, lacking any sales on a particular day, at the mean
between the closing bid and asked prices on that day unless the Board of
Trustees, or persons designated by the Board of Trustees, determines that
the over-the-counter quotations more closely reflect the current market
value of the security. 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 foreign 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 foreign 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 foreign 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. Outstanding contracts at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Contract to
Settlement ------------------------------- Unrealized
Date Deliver Receive Value Appreciation
---------- ------------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
3/10/98 CHF 1,630,000 $1,131,866 $1,124,266 $ 7,600
2/20/98 DEM 8,000,000 4,674,536 4,460,092 214,444
3/2/98 DEM 3,700,000 2,133,672 2,063,917 69,755
1/30/98 GBP 4,300,000 7,182,720 7,090,928 91,792
2/27/98 GBP 7,150,000 11,947,150 11,831,436 115,714
3/31/98 GBP 5,600,000 9,314,200 9,309,535 4,665
1/14/98 JPY 114,500,000 958,159 876,943 81,216
1/20/98 JPY 300,000,000 2,509,410 2,297,687 211,723
2/6/98 JPY 669,000,000 5,565,724 5,123,968 441,756
3/5/98 JPY 718,000,000 5,660,675 5,499,476 161,199
2/18/98 NZD 14,200,000 8,846,600 8,256,202 590,398
3/19/98 NZD 3,500,000 2,037,000 2,036,462 538
1/29/98 SEK 61,000,000 8,201,129 7,689,223 511,906
----------- ----------- ----------
$70,162,841 $67,660,135 $2,502,706
=========== =========== ==========
</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, 1997, undistributed net investment income was decreased by
$1,445,554, undistributed net realized gain(loss) increased by $1,522,407 and
paid-in-capital decreased by $76,853 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.
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.
F. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
FS-66
<PAGE> 272
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, 1997, AIM
was reimbursed $81,464 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, 1997, the
Fund paid AFS $352,055 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted
distribution 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 the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of Class C shares. 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
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee by the Class B or C shares under the 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,
1997 for the Class A shares and Class B shares, and the period August 4, 1997
(date sales commenced) through December 31, 1997 for the Class C shares, the
Class A, Class B and Class C shares paid AIM Distributors $749,562, $1,003,075
and $3,040, respectively, as compensation under the Plans.
AIM Distributors received commissions of $203,261 from sales of the Class A
shares of the Fund during the year ended December 31, 1997. 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, 1997,
AIM Distributors received $45,242 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, 1997, the Fund paid legal fees of $5,159
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-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced the
Fund's expenses by $1,501 during the year ended December 31, 1997. Also during
the year ended December 31, 1997 the Fund received reductions in transfer agency
fees from AFS (an affiliate of AIM) and reductions in custodian fees of $4,486
and $5,747, respectively, under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$11,734 during the year ended December 31, 1997.
NOTE 4-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 5-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) $500,000,000 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 15, 1997, the Fund was
limited to borrowing up to the lesser of (i) $325,000,000 or (ii) the limits set
by its prospectus for borrowings. During the year ended December
31, 1997, 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 0.05% 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 6-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, 1997 was
$288,736,048 and $211,539,995, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $28,297,995
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (5,525,643)
- -----------------------------------------------------------
Net unrealized appreciation of investment
securities $22,772,352
- -----------------------------------------------------------
Investments have the same cost for tax and financial
statement purposes.
</TABLE>
FS-67
<PAGE> 273
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 12,161,983 $101,688,372 10,956,910 $87,131,342
- ------------------------------------------------------------------------------------- -----------------------
Class B 6,428,479 53,514,758 7,662,222 60,657,835
- ------------------------------------------------------------------------------------- -----------------------
Class C* 309,134 2,628,227 -- --
- ------------------------------------------------------------------------------------- -----------------------
Issued as reinvestment of dividends:
Class A 1,967,802 16,363,229 1,985,876 15,762,291
- ------------------------------------------------------------------------------------- -----------------------
Class B 490,120 4,073,672 357,055 2,833,327
- ------------------------------------------------------------------------------------- -----------------------
Class C* 1,676 14,278 -- --
- ------------------------------------------------------------------------------------- -----------------------
Reacquired:
Class A (9,099,096) (75,595,705) (8,997,073) (71,647,818)
- ------------------------------------------------------------------------------------- -----------------------
Class B (2,573,466) (21,303,555) (3,079,249) (24,272,991)
- ------------------------------------------------------------------------------------- -----------------------
Class C* (12,110) (103,264) -- --
- ------------------------------------------------------------------------------------- -----------------------
9,674,522 $81,280,012 8,885,741 $70,463,986
===================================================================================== =======================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during each of the years in the five-year period ended December 31, 1997, for a
share of Class B outstanding during each of the years in the four-year period
ended December 31, 1997 and the period September 7, 1993 (date sales commenced)
through December 31, 1993 and for a share of Class C outstanding during the
period August 4, 1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.24 $ 8.17 $ 7.20 $ 8.45 $ 8.03
- ------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.55 0.57 0.58 0.58 0.60
- ------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 0.39 0.09 1.00 (1.22) 0.61
- ------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 0.94 0.66 1.58 (0.64) 1.21
- ------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.52) (0.59) (0.61) (0.49) (0.60)
- ------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (0.09) -- -- (0.01) (0.19)
- ------------------------------------------------------ -------- -------- -------- -------- --------
Return of capital -- -- -- (0.11) --
- ------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.61) (0.59) (0.61) (0.61) (0.79)
- ------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 8.57 $ 8.24 $ 8.17 $ 7.20 $ 8.45
- ------------------------------------------------------ -------- -------- -------- -------- --------
Total return(a) 11.92% 8.58% 22.77% (7.65)% 15.38%
- ------------------------------------------------------ -------- -------- -------- -------- --------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $340,608 $286,183 $251,280 $201,677 $244,168
- ------------------------------------------------------ -------- -------- -------- -------- --------
Ratio of expenses to average net assets 0.94%(b)(c) 0.98% 0.98% 0.98% 0.98%
- ------------------------------------------------------ -------- -------- -------- -------- --------
Ratio of net investment income to average net assets 6.55%(b) 7.13% 7.52% 7.53% 7.01%
- ------------------------------------------------------ -------- -------- -------- -------- --------
Portfolio turnover rate 54% 80% 227% 185% 99%
- ------------------------------------------------------ -------- -------- -------- -------- --------
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $299,824,848.
(c) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average net assets would have remained the same.
FS-68
<PAGE> 274
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------- -------
1997 1996 1995 1994 1993 1997
-------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.23 $ 8.15 $ 7.18 $ 8.43 $ 8.95 $ 8.38
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Income from investment operations:
Net investment income 0.48 0.50 0.53 0.52 0.19 0.19
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Net gains (losses) on securities (both realized and
unrealized) 0.38 0.11 0.98 (1.23) (0.34) 0.22
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Total from investment operations 0.86 0.61 1.51 (0.71) (0.15) 0.41
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Less distributions:
Dividends from net investment income (0.45) (0.53) (0.54) (0.42) (0.18) (0.16)
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Distributions from net realized gains (0.09) -- -- (0.01) (0.19) (0.09)
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Return of capital -- -- -- (0.11) -- --
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Total distributions (0.54) (0.53) (0.54) (0.54) (0.37) (0.25)
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Net asset value, end of period $ 8.55 $ 8.23 $ 8.15 $ 7.18 $ 8.43 $ 8.54
======================================================= ======== ======= ======= ======= ====== =======
Total return(a) 10.89% 7.87% 21.72% (8.46)% (0.75)% 4.96%
======================================================= ======== ======= ======= ======= ====== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $125,871 $85,343 $44,304 $12,321 $3,602 $ 2,552
======================================================= ======== ======= ======= ======= ====== =======
Ratio of expenses to average net assets 1.69%(b)(c) 1.80% 1.79% 1.83%(d) 1.75%(d)(e) 1.69%(b)(c)(e)
======================================================= ====== ======= ======= ======= ====== =======
Ratio of net investment income to average net assets 5.80%(b) 6.30% 6.71% 6.69%(f) 6.24%(e)(f) 5.80%(b)(e)
======================================================= ====== ======= ======= ======= ====== =======
Portfolio turnover rate 54% 80% 227% 185% 99% 54%
======================================================= ====== ======= ====== ======= ====== =======
</TABLE>
(a) Does 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 $100,307,548 and $739,696,
respectively, for Class B and Class C.
(c) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average net assets would have been 1.68% for Class B
and Class C.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.04% and 2.50% (annualized) for 1994 and 1993, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 6.48% and 5.49% (annualized) for 1994 and 1993,
respectively.
FS-69
<PAGE> 275
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, 1997, 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 or periods in the
five-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 and financial highlights. Our procedures
included confirmation of securities owned as of December
31, 1997, 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, 1997, 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 or periods in the five-year period
then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
February 6, 1998
FS-70
<PAGE> 276
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES-78.59%
FEDERAL HOME LOAN BANK-4.73%
Debentures
5.97%, 12/11/00 $ 5,000,000 $ 5,023,950
- ---------------------------------------------------------------
7.31%, 07/06/01 4,000,000 4,184,040
- ---------------------------------------------------------------
7.36%, 07/01/04 2,800,000 3,007,676
- ---------------------------------------------------------------
12,215,666
- ---------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC")-12.08%
Pass through certificates
9.00%, 12/01/05 to 04/01/25 8,165,358 8,644,311
- ---------------------------------------------------------------
8.00%, 07/01/06 to 12/01/06 29,966 30,968
- ---------------------------------------------------------------
8.50%, 07/01/07 to 12/01/08 4,956,860 5,221,726
- ---------------------------------------------------------------
10.50%, 09/01/09 to 01/01/21 2,991,415 3,294,400
- ---------------------------------------------------------------
7.00%, 11/01/10 to 04/01/11 2,065,329 2,107,877
- ---------------------------------------------------------------
6.50%, 02/01/11 4,314,857 4,343,162
- ---------------------------------------------------------------
10.00%, 11/01/11 to 02/01/16 37,850 41,059
- ---------------------------------------------------------------
12.00%, 02/01/13 24,920 28,487
- ---------------------------------------------------------------
9.50%, 04/01/25 7,005,688 7,525,573
- ---------------------------------------------------------------
31,237,563
- ---------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA")-33.20%
Debentures
8.625%, 11/10/04 3,500,000 3,655,785
- ---------------------------------------------------------------
8.50%, 02/01/05 4,500,000 4,709,745
- ---------------------------------------------------------------
7.875%, 02/24/05 3,000,000 3,325,620
- ---------------------------------------------------------------
Medium term notes
5.97%, 07/31/00 6,000,000 6,024,660
- ---------------------------------------------------------------
Pass through certificates
6.24%, 02/01/06 4,418,679 4,441,479
- ---------------------------------------------------------------
8.50%, 01/01/07 to 03/01/07 36,079 37,488
- ---------------------------------------------------------------
6.625%, 02/01/07 4,466,185 4,620,491
- ---------------------------------------------------------------
7.50%, 06/01/10 to 03/01/27 29,622,511 30,434,149
- ---------------------------------------------------------------
7.00%, 05/01/11 to 10/01/12 11,489,189 11,684,575
- ---------------------------------------------------------------
9.50%, 07/01/16 to 08/01/22 3,004,005 3,234,923
- ---------------------------------------------------------------
8.00%, 04/01/25 to 07/01/26 11,933,045 12,363,889
- ---------------------------------------------------------------
STRIPS(a)
7.37%, 10/09/19 5,000,000 1,305,900
- ---------------------------------------------------------------
85,838,704
- ---------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
("GNMA")-28.58%
Pass through certificates
9.00%, 10/15/08 to 06/15/21 $ 6,514,942 $ 7,076,255
- ---------------------------------------------------------------
9.50%, 06/15/09 to 03/15/23 8,033,006 8,736,245
- ---------------------------------------------------------------
10.00%, 11/15/09 to 07/15/24 4,076,462 4,457,737
- ---------------------------------------------------------------
11.00%, 12/15/09 to 12/15/15 190,254 213,174
- ---------------------------------------------------------------
13.50%, 07/15/10 to 04/15/15 435,562 516,352
- ---------------------------------------------------------------
12.50%, 11/15/10 217,080 252,965
- ---------------------------------------------------------------
13.00%, 01/15/11 to 05/15/15 421,209 493,168
- ---------------------------------------------------------------
12.00%, 01/15/13 to 07/15/15 742,181 850,681
- ---------------------------------------------------------------
10.50%, 07/15/13 to 02/15/16 241,000 266,606
- ---------------------------------------------------------------
8.00%, 03/15/23 to 06/15/27 6,200,612 6,441,766
- ---------------------------------------------------------------
6.50%, 01/22/28 TBA(b) 45,000,000 44,585,159
- ---------------------------------------------------------------
73,890,108
- ---------------------------------------------------------------
Total U.S. Government Agency
Securities 203,182,041
- ---------------------------------------------------------------
U.S. TREASURY SECURITIES-27.18%
U.S. Treasury Notes & Bonds-25.73%
5.625%, 11/30/99 6,000,000 5,997,360
- ---------------------------------------------------------------
6.125%, 12/31/01 10,000,000 10,140,200
- ---------------------------------------------------------------
6.00%, 07/31/02 5,000,000 5,056,000
- ---------------------------------------------------------------
7.00%, 07/15/06 4,000,000 4,319,520
- ---------------------------------------------------------------
6.125%, 08/15/07 14,500,000 14,906,290
- ---------------------------------------------------------------
7.25%, 05/15/16 6,500,000 7,404,345
- ---------------------------------------------------------------
7.50%, 11/15/16 5,500,000 6,420,370
- ---------------------------------------------------------------
8.125%, 08/15/19 4,000,000 5,008,120
- ---------------------------------------------------------------
6.375%, 08/15/27 2,500,000 2,638,350
- ---------------------------------------------------------------
6.125%, 11/15/27 4,500,000 4,625,055
- ---------------------------------------------------------------
66,515,610
- ---------------------------------------------------------------
U.S. Treasury STRIPS(a)-1.45%
6.77%, 11/15/08 4,000,000 2,116,240
- ---------------------------------------------------------------
6.79%, 11/15/18 5,750,000 1,640,705
- ---------------------------------------------------------------
3,756,945
- ---------------------------------------------------------------
Total U.S. Treasury
Securities 70,272,555
- ---------------------------------------------------------------
Total Investments (excluding
Repurchase Agreement) 273,454,596
- ---------------------------------------------------------------
</TABLE>
FS-71
<PAGE> 277
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT-10.09%(c)
Goldman Sachs & Co., 6.53%,
01/02/98(d) $26,089,190 $ 26,089,190
- ---------------------------------------------------------------
TOTAL INVESTMENTS-115.86% 299,543,786
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-(15.86%) (41,000,580)
- ---------------------------------------------------------------
NET ASSETS-100.00% $ 258,543,206
===============================================================
</TABLE>
Notes to Schedule of Investments:
(a) 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.
(b) At 12/31/97, the cost of securities purchased on a when-issued basis
totalled $44,354,688. These securities are also subject to dollar roll
transactions. See Note I section C of Notes to Financial Statements.
(c) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$900,326,500. Collateralized by $856,643,000 U.S. Government obligations, 0%
to 14% due 01/08/98 to 08/15/23 with an aggregate market value at 12/31/97
of $918,902,583.
Abbreviations:
TBA -- To Be Announced
See Notes to Financial Statements.
FS-72
<PAGE> 278
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$290,539,341) $299,543,786
- ---------------------------------------------------------
Receivables for:
Fund shares sold 1,820,448
- ---------------------------------------------------------
Interest 2,545,894
- ---------------------------------------------------------
Investment for deferred compensation plan 27,011
- ---------------------------------------------------------
Other assets 229,658
- ---------------------------------------------------------
Total assets 304,166,797
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 44,354,688
- ---------------------------------------------------------
Fund shares reacquired 410,205
- ---------------------------------------------------------
Dividends 406,499
- ---------------------------------------------------------
Deferred compensation plan 27,011
- ---------------------------------------------------------
Accrued advisory fees 104,069
- ---------------------------------------------------------
Accrued administrative service fees 5,387
- ---------------------------------------------------------
Accrued distribution fees 203,620
- ---------------------------------------------------------
Accrued transfer agent fees 32,966
- ---------------------------------------------------------
Accrued operating expenses 79,146
- ---------------------------------------------------------
Total liabilities 45,623,591
- ---------------------------------------------------------
Net assets applicable to shares outstanding $258,543,206
=========================================================
NET ASSETS:
Class A $167,426,799
=========================================================
Class B $ 89,265,162
=========================================================
Class C $ 1,851,245
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 17,706,225
=========================================================
Class B 9,436,436
=========================================================
Class C 196,010
=========================================================
Class A:
Net asset value and redemption price per
share $ 9.46
=========================================================
Offering price per share:
(Net asset value of $9.46 divided
by 95.25%) $ 9.93
=========================================================
Class B:
Net asset value and offering price per
share $ 9.46
=========================================================
Class C:
Net asset value and offering price per
share $ 9.44
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $19,191,667
- ---------------------------------------------------------
EXPENSES:
Advisory fees 1,174,166
- ---------------------------------------------------------
Administrative service fees 70,736
- ---------------------------------------------------------
Custodian fees 51,111
- ---------------------------------------------------------
Distribution fees -- Class A 405,373
- ---------------------------------------------------------
Distribution fees -- Class B 810,246
- ---------------------------------------------------------
Distribution fees -- Class C 3,829
- ---------------------------------------------------------
Interest (Note C) 278,331
- ---------------------------------------------------------
Transfer agent fees -- Class A 241,066
- ---------------------------------------------------------
Transfer agent fees -- Class B 120,445
- ---------------------------------------------------------
Transfer agent fees -- Class C 565
- ---------------------------------------------------------
Trustees' fees 9,912
- ---------------------------------------------------------
Other 166,284
- ---------------------------------------------------------
Total expenses 3,332,064
- ---------------------------------------------------------
Less: Expenses paid indirectly (3,621)
- ---------------------------------------------------------
Net expenses 3,328,443
- ---------------------------------------------------------
Net investment income 15,863,224
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (73,291)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities 4,443,700
- ---------------------------------------------------------
Net gain on investment securities 4,370,409
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $20,233,633
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-73
<PAGE> 279
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 15,863,224 $ 16,155,081
- --------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities (73,291) (4,339,042)
- --------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities 4,443,700 (6,405,094)
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 20,233,633 5,410,945
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (10,575,295) (11,114,092)
- --------------------------------------------------------------------------------------------
Class B (4,595,241) (3,966,734)
- --------------------------------------------------------------------------------------------
Class C (19,501) --
- --------------------------------------------------------------------------------------------
Return of capital:
Class A (430,314) (712,857)
- --------------------------------------------------------------------------------------------
Class B (214,788) (292,831)
- --------------------------------------------------------------------------------------------
Class C (713) --
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A (9,731,599) 5,857,162
- --------------------------------------------------------------------------------------------
Class B 8,255,456 20,988,143
- --------------------------------------------------------------------------------------------
Class C 1,834,127 --
- --------------------------------------------------------------------------------------------
Net increase in net assets 4,755,765 16,169,736
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 253,787,441 237,617,705
- --------------------------------------------------------------------------------------------
End of period $258,543,206 $253,787,441
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $264,984,880 $265,272,711
- --------------------------------------------------------------------------------------------
Undistributed net investment income (32,484) (19,243)
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (15,413,635) (16,026,772)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 9,004,445 4,560,745
- --------------------------------------------------------------------------------------------
$258,543,206 $253,787,441
============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-74
<PAGE> 280
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 three different classes of shares: the Class A shares,
the Class B shares, and the Class C shares. The new Class C shares commenced
sales on August 4, 1997. Class A shares are sold with a front-end sales charge.
Class B and Class C 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 date and seasoning differential. Securities for
which market prices are not provided by the pricing service are valued at
the mean between the last bid and asked prices based upon quotes furnished
by independent sources. Securities for which market quotations are either
not readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Trust's officers
in a manner specifically authorized by the Board of Trustees. Short-term
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. 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 described
in Note 1 Section "D". On December 31, 1997, $686,428 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. The Fund incurred a return of capital in the amount of $645,815
that is reflected in the Statement of Changes in Net Assets. These
reclassifications were made in order to comply with the requirements of the
American Institute of Certified Public Accountants Statement of Position
93-2. Net assets of the Fund were unaffected by the reclassifications
discussed above.
C. Reverse Repurchase Agreements and Dollar Roll Transactions -- A reverse
repurchase agreement involves the sale of securities held by the Fund, with
an agreement that the Fund will repurchase such securities at an agreed-upon
price and date. Proceeds from reverse repurchase agreements are treated as
borrowings. The agreements are collateralized by the underlying securities
and are carried at the amount at which the securities will subsequently be
repurchased as specified in the agreements. The maximum amount outstanding
during the year ended December 31, 1997 was $20,568,750 while borrowings
averaged $6,673,588 per day with a weighted average interest rate of 5.08%.
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.
FS-75
<PAGE> 281
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 $15,253,330 (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 -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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, 1997, AIM
was reimbursed $70,736 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, 1997, the
Fund paid AFS $213,155 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted
distribution 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 the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of the Class C shares. The Fund
pursuant to the Class B Plan, pays AIM Distributors an annual rate of 1.00% of
the average daily net assets attributable to the Class B shares. Of these
amounts, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class A, Class B or C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee by the Class B or Class C shares under the
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 charged received by
AIM Distributors related to the Class B shares. During the year ended December
31, 1997, the Class A shares and Class B shares, and the period August 4, 1997
through December 31, 1997 for the Class C shares, the Class A, Class B and Class
C shares paid AIM Distributors $405,373, $810,246 and $3,829 respectively, as
compensation under the Plans.
AIM Distributors received commissions of $116,124 from sales of the Class A
shares of the Fund during the year ended December 31, 1997. 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, 1997,
AIM Distributors received $131,697 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, 1997, the Fund paid legal fees of $4,849
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-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced Fund
expenses by $845 during the year ended December 31, 1997. Also during the year
ended
FS-76
<PAGE> 282
December 31, 1997, the Fund received reductions in transfer agency fees from AFS
(an affiliate of AIM) and reductions in custodian fees of $2,756 and $20,
respectively, under expense offset arrangements. The effect of the above
arrangements resulted in a reduction of the Fund's total expenses of $3,621
during the year ended December 31, 1997.
NOTE 4-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 5-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) $500,000,000 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 15, 1997, the Fund was
limited to borrowing up to the lesser of (i) $325,000,000 or (ii) the limits set
by its prospectus for borrowings. During the year ended December 31, 1997, 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 0.05% 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 6-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, 1997 was
$216,459,929 and $234,399,579, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $8,907,017
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (5,411)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $8,901,606
=========================================================
</TABLE>
Cost of investments for tax purposes is $290,642,180.
NOTE 7 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 6,693,588 $ 62,348,371 7,920,265 $ 74,033,231
- --------------------- -----------------------------------------------------
Class B 4,448,136 41,365,183 5,052,488 47,193,668
- --------------------- -----------------------------------------------------
Class C* 734,169 6,890,070 -- --
- --------------------- -----------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 953,629 8,857,846 1,025,026 9,536,042
- --------------------- -----------------------------------------------------
Class B 349,182 3,245,433 314,728 2,925,034
- --------------------- -----------------------------------------------------
Class C* 1,978 18,637 -- --
- --------------------- -----------------------------------------------------
Reacquired:
Class A (8,720,230) (80,937,816) (8,340,854) (77,712,111)
- --------------------- -----------------------------------------------------
Class B (3,920,140) (36,355,160) (3,132,635) (29,130,559)
- --------------------- -----------------------------------------------------
Class C* (540,137) (5,074,580) -- --
- --------------------- -----------------------------------------------------
175 $ 357,984 2,839,018 $ 26,845,305
=====================================================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
FS-77
<PAGE> 283
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during each of the years in the five-year period ended December 31, 1997, for a
share of Class B outstanding during each of the years in the four-year period
ended December 31, 1997 and the period September 7, 1993 (date sales commenced)
through December 31, 1993 and for a share of Class C outstanding during the
period August 4, 1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.28 $ 9.70 $ 8.99 $ 10.05 $ 10.19
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.63 0.63 0.69 0.68 0.74
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 0.18 (0.42) 0.73 (1.02) (0.04)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 0.81 0.21 1.42 (0.34) 0.70
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.61) (0.59) (0.67) (0.58) (0.70)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains -- -- -- (0.04) (0.14)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Return of capital (0.02) (0.04) (0.04) (0.10) --
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.63) (0.63) (0.71) (0.72) (0.84)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 9.46 $ 9.28 $ 9.70 $ 8.99 $ 10.05
============================================================ ======== ======== ======== ======== ========
Total return(a) 9.07% 2.35% 16.28% (3.44)% 7.07%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $167,427 $174,344 $176,318 $158,341 $139,586
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets (exclusive of
interest expense)(b) 1.00%(c)(d) 1.00% 1.08% 1.04% 1.00%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets(e) 6.77%(c) 6.76% 7.36% 7.34% 7.08%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 99% 134% 140% 109% 110%
============================================================ ======== ======== ======== ======== ========
Borrowings for the period:
Amount of debt outstanding at end of period (000s omitted) $ -- -- -- -- --
============================================================ ======== ======== ======== ======== ========
Average amount of debt outstanding during the period (000s
omitted)(f) $ 4,433 -- -- -- --
============================================================ ======== ======== ======== ======== ========
Average number of shares outstanding during the period (000s
omitted)(f) 17,470 -- -- -- --
============================================================ ======== ======== ======== ======== ========
Average amount of debt per share during the period $ 0.2537 -- -- -- --
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratios of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.05% and 1.04%, for 1994-93,
respectively.
(c) Ratios are based on average net assets of $162,149,081.
(d) Includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets
would have remained the same.
(e) After fee waivers and/or expense reimbursements. Ratios of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 7.32% and 7.04%
for 1994-93, respectively.
(f) Averages computed on a daily basis.
FS-78
<PAGE> 284
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------- -------
1997 1996 1995 1994 1993 1997
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.28 $ 9.69 $ 8.99 $ 10.04 $ 10.44 $ 9.33
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.56 0.55 0.63 0.61 0.21 0.24
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 0.17 (0.41) 0.70 (1.02) (0.27) 0.10
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Total from investment operations 0.73 0.14 1.33 (0.41) (0.06) 0.34
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.53) (0.51) (0.59) (0.50) (0.20) (0.22)
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Distributions from net realized gains -- -- -- (0.04) (0.14) --
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Return of capital (0.02) (0.04) (0.04) (0.10) -- (0.01)
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Total distributions (0.55) (0.55) (0.63) (0.64) (0.34) (0.23)
- ------------------------------------------------------------ ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 9.46 $ 9.28 $ 9.69 $ 8.99 $ 10.04 $ 9.44
============================================================ ======= ======= ======= ======= ======= =======
Total return(a) 8.16% 1.61% 15.22% (4.13)% (0.52)% 3.64%
============================================================ ======= ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $89,265 $79,443 $61,300 $23,415 $ 6,160 $ 1,851
============================================================ ======= ======= ======= ======= ======= =======
Ratio of expenses to average net assets (exclusive of
interest expense)(b) 1.76%(c)(d) 1.76% 1.86% 1.82% 1.71%(e) 1.76%(c)(d)(e)
============================================================ ======= ======= ======= ======= ======= =======
Ratio of net investment income to average net assets(f) 6.01%(c) 6.00% 6.58% 6.56% 6.37%(e) 6.01%(c)(e)
============================================================ ======= ======= ======= ======= ======= =======
Portfolio turnover rate 99% 134% 140% 109% 110% 99%
============================================================ ======= ======= ======= ======= ======= =======
Borrowings for the period:
Amount of debt outstanding at ended of period (000s omitted) $ -- -- -- -- -- $ --
============================================================ ======= ======= ======= ======= ======= =======
Average amount of debt outstanding during the period (000s
omitted)(g) $ 2,215 -- -- -- -- $ 25
============================================================ ======= ======= ======= ======= ======= =======
Average number of shares outstanding during the period (000s
omitted)(g) 8,726 -- -- -- -- 99
============================================================ ======= ======= ======= ======= ======= =======
Average amount of debt per share during the period $0.2537 -- -- -- -- $0.2537
============================================================ ======= ======= ======= ======= ======= =======
</TABLE>
(a) Does not deduct contingent deferred sales charges and are
not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.87% and 2.18% (annualized) for
1994-93, respectively.
(c) Ratios are based on average net assets of $81,024,662 and
$931,755, respectively for Class B and Class C.
(d) Includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets
would have remained the same.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 6.50% and 5.90%
(annualized) for 1994-93, respectively.
(g) Averages computed on a daily basis.
FS-79
<PAGE> 285
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, 1997, 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 or periods in the four-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 and financial highlights. Our procedures
included confirmation of securities owned as of December
31, 1997, 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, 1997, 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
or periods in the four-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 6, 1998
FS-80
<PAGE> 286
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER-35.99%(a)
ASSET-BACKED SECURITIES-11.83%
Ciesco, L.P.
5.67% 02/09/98 $ 3,750 $ 3,726,965
- -----------------------------------------------------------------
Delaware Funding Corp.
5.57% 01/23/98 10,000 9,965,961
- -----------------------------------------------------------------
Eiger Capital Corp.
5.92% 02/13/98 11,000 10,922,218
- -----------------------------------------------------------------
Falcon Asset Securitization
Corp.
5.64% 01/23/98 10,000 9,965,533
- -----------------------------------------------------------------
6.00% 01/29/98 5,000 4,976,667
- -----------------------------------------------------------------
Fleet Funding Corp.
5.83% 01/30/98 6,819 6,786,976
- -----------------------------------------------------------------
Preferred Receivable Funding
Corp.
5.64% 01/06/98 8,000 7,993,733
- -----------------------------------------------------------------
5.59% 01/23/98 20,000 19,931,678
- -----------------------------------------------------------------
5.80% 02/11/98 5,050 5,016,642
- -----------------------------------------------------------------
5.75% 03/11/98 4,975 4,920,171
- -----------------------------------------------------------------
Sheffield Receivables Corp.
5.76% 01/23/98 8,700 8,669,376
- -----------------------------------------------------------------
5.81% 02/02/98 7,100 7,063,332
- -----------------------------------------------------------------
99,939,252
- -----------------------------------------------------------------
AUTOMOBILE-2.26%
Daimler-Benz North America
5.62% 04/09/98 19,381 19,084,492
- -----------------------------------------------------------------
CHEMICALS-2.59%
Henkel Corp.
5.60% 02/04/98 22,000 21,883,645
- -----------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES-2.00%
First Data Corp.
5.60% 02/10/98 5,000 4,968,889
- -----------------------------------------------------------------
5.72% 03/03/98 12,000 11,883,693
- -----------------------------------------------------------------
16,852,582
- -----------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.77%
Hitachi America, Inc.
5.89% 01/15/98 15,000 14,965,642
- -----------------------------------------------------------------
FINANCE (BUSINESS CREDIT)-1.53%
National Rural Utilities
Cooperative Finance Corp.
5.54% 01/14/98 8,000 7,983,996
- -----------------------------------------------------------------
5.54% 02/02/98 5,000 4,975,378
- -----------------------------------------------------------------
12,959,374
- -----------------------------------------------------------------
FINANCE (MISCELLANEOUS)-0.60%
USAA Capital Corp.
6.50% 01/16/98 5,050 5,036,323
- -----------------------------------------------------------------
FINANCE (MULTIPLE INDUSTRY)-1.18%
General Electric Capital
Corp.
5.55% 01/28/98 10,000 9,958,375
- -----------------------------------------------------------------
FINANCE (PERSONAL CREDIT)-2.71%
AVCO Financial Services,
Inc.
5.55% 02/11/98 $10,000 $ 9,936,792
- -----------------------------------------------------------------
Associates Corporation of
North America
5.68% 02/11/98 13,000 12,915,905
- -----------------------------------------------------------------
22,852,697
- -----------------------------------------------------------------
INSURANCE (LIFE)-1.84%
MetLife Funding, Inc.
5.71% 03/20/98 15,730 15,535,394
- -----------------------------------------------------------------
MACHINERY-1.39%
Dover Corp.
6.50% 01/16/98 11,795 11,763,055
- -----------------------------------------------------------------
METAL MINING-3.93%
Rio Tinto America, Inc.
5.70% 03/16/98 20,800 20,556,292
- -----------------------------------------------------------------
U.S. Borax, Inc.
5.70% 03/19/98 12,750 12,594,554
- -----------------------------------------------------------------
33,150,846
- -----------------------------------------------------------------
OIL & GAS (INTEGRATED)-1.18%
Shell Oil Co.
5.81% 03/11/98 10,000 10,000,000
- -----------------------------------------------------------------
TRANSPORTATION (EQUIPMENT)-1.18%
Rockwell International Corp.
5.70% 02/03/98 10,000 9,947,750
- -----------------------------------------------------------------
Total Commercial Paper 303,929,427
- -----------------------------------------------------------------
MASTER NOTE AGREEMENTS-18.18%
Citicorp Securities, Inc.(b)
7.00% 01/26/98 20,000 20,000,000
- -----------------------------------------------------------------
Goldman Sachs & Co.(c)
5.6875% 04/20/98 41,000 41,000,000
- -----------------------------------------------------------------
Merrill Lynch Mortgage
Capital, Inc.(d)
7.05% 08/17/98 37,150 37,150,000
- -----------------------------------------------------------------
Morgan (J.P.) Securities,
Inc.(e)
6.82% 04/06/98 18,650 18,650,000
- -----------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co.(f)
6.85% 05/26/98 36,750 36,750,000
- -----------------------------------------------------------------
Total Master Note Agreements 153,550,000
- -----------------------------------------------------------------
MEDIUM-TERM NOTES-1.18%
FINANCE (PERSONAL
CREDIT)-1.18%
Associates Corp. of North
America(g)
6.12% 03/02/98 10,000 9,998,730
- -----------------------------------------------------------------
TAXABLE MUNICIPAL BONDS-2.49%
HEALTH CARE-1.19%
Jacksonville Florida Health
Facilities; Hospital
Series Revenue Bonds
6.00%(h) 08/15/19 10,000 10,000,000
- -----------------------------------------------------------------
</TABLE>
FS-81
<PAGE> 287
<TABLE>
<CAPTION>
MATURITY PAR (000) VALUE
<S> <C> <C> <C>
HOSPITAL MANAGEMENT-1.30%
Illinois Health Facilities
Authority (Loyola
University Health
Systems); Revenue Bond
6.00%(h) 07/01/24 $11,000 $ 11,000,000
- -----------------------------------------------------------------
Total Taxable Municipal Bonds 21,000,000
- -----------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-5.28%
Federal National Mortgage
Association
5.504%(h) 06/02/99 32,000 32,000,000
- -----------------------------------------------------------------
Student Loan Marketing
Association
5.619%(h) 08/20/98 2,600 2,600,000
- -----------------------------------------------------------------
5.639%(h) 02/08/99 10,000 10,001,870
- -----------------------------------------------------------------
Total U.S. Government Agency Securities 44,601,870
- -----------------------------------------------------------------
U.S. TREASURY SECURITIES-0.58%
U.S. Treasury Bills(a)
4.975% 04/30/98 $ 5,000 $ 4,917,774
- -----------------------------------------------------------------
Total Investments (excluding Repurchase
Agreements) 537,997,801
- -----------------------------------------------------------------
REPURCHASE AGREEMENTS-23.88%(i)
Goldman Sachs & Co.(j)
6.53% 01/02/98 21,619 21,619,327
- -----------------------------------------------------------------
SBC Capital Markets, Inc.(k)
6.55% 01/02/98 180,000 180,000,000
- -----------------------------------------------------------------
Total Repurchase Agreements 201,619,327
- -----------------------------------------------------------------
TOTAL INVESTMENTS-87.58% 739,617,128(l)
- -----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-12.42% 104,856,519
- -----------------------------------------------------------------
NET ASSETS-100.00% $844,473,647
=================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Treasury bills and some commercial paper 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.
(b) 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
12/31/97.
(c) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon seven business days prior written notice. Interest
rates on master notes are redetermined periodically. Rate shown is the rate
in effect on 12/31/97.
(d) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement generally upon two business days notice. Interest rates
on master notes are redetermined periodically. Rate shown is the rate in
effect on 12/31/97.
(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 12/31/97.
(f) Master Note Purchase Agreement may be terminated by either party upon three
business days prior written notice. Interest rates on master notes are
redetermined periodically. Rate shown is the rate in effect on 12/31/97.
(g) Interest rates are redetermined daily. Rate shown is rate in effect on
12/31/97.
(h) Interest rates are redetermined weekly. Rates shown are rates in effect on
12/31/97.
(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 12/31/97 with a maturing value of
$900,326,500. Collateralized by $856,643,000 U.S. Government obligations,
0% to 14% due 01/08/98 to 08/15/23 with an aggregate market value at
12/31/97 of $918,902,583.
(k) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$500,181,944. Collateralized by $601,835,000 U.S. Government obligations, 0%
to 10.75%, due 05/21/98 to 08/15/23 with an aggregate market value at
12/31/97 of $510,077,411.
(l) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-82
<PAGE> 288
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase
agreements, at value (amortized cost) $ 537,997,801
- ----------------------------------------------------------
Repurchase agreements 201,619,327
- ----------------------------------------------------------
Receivables for:
Fund shares sold 125,761,897
- ----------------------------------------------------------
Interest 1,228,005
- ----------------------------------------------------------
Investment for deferred compensation plan 89,136
- ----------------------------------------------------------
Other assets 305,351
- ----------------------------------------------------------
Total assets 867,001,517
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 21,090,083
- ----------------------------------------------------------
Dividends 192,464
- ----------------------------------------------------------
Deferred compensation plan 89,136
- ----------------------------------------------------------
Accrued advisory fees 405,694
- ----------------------------------------------------------
Accrued administrative service fees 5,003
- ----------------------------------------------------------
Accrued distribution fees 570,983
- ----------------------------------------------------------
Accrued transfer agent fees 155,291
- ----------------------------------------------------------
Accrued operating expenses 19,216
- ----------------------------------------------------------
Total liabilities 22,527,870
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $ 844,473,647
==========================================================
NET ASSETS:
Class A $ 376,011,656
==========================================================
Class B $ 116,057,949
==========================================================
Class C $ 8,286,877
==========================================================
AIM Cash Reserve Shares $ 344,117,165
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 375,997,608
==========================================================
Class B 116,052,514
==========================================================
Class C 8,286,622
==========================================================
AIM Cash Reserve Shares 344,102,576
==========================================================
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 and offering price per
share $ 1.00
==========================================================
AIM Cash Reserve Shares:
Net asset value, offering and redemption
price per share $ 1.00
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $46,694,810
- ---------------------------------------------------------
EXPENSES:
Advisory fees 4,586,148
- ---------------------------------------------------------
Administrative service fees 68,947
- ---------------------------------------------------------
Custodian fees 33,501
- ---------------------------------------------------------
Distribution fees -- Class A 850,644
- ---------------------------------------------------------
Distribution fees -- Class B 1,195,121
- ---------------------------------------------------------
Distribution fees -- Class C 21,600
- ---------------------------------------------------------
Distribution fees -- AIM Cash Reserve Shares 931,232
- ---------------------------------------------------------
Trustees' fees 14,225
- ---------------------------------------------------------
Transfer agent fees -- Class A 629,608
- ---------------------------------------------------------
Transfer agent fees -- Class B 221,143
- ---------------------------------------------------------
Transfer agent fees -- Class C 4,033
- ---------------------------------------------------------
Transfer agent fees -- AIM Cash Reserve
Shares 689,255
- ---------------------------------------------------------
Other 432,259
- ---------------------------------------------------------
Total expenses 9,677,716
- ---------------------------------------------------------
Less: Expenses paid indirectly (9,867)
- ---------------------------------------------------------
Net expenses 9,667,849
- ---------------------------------------------------------
Net investment income 37,026,961
- ---------------------------------------------------------
Net realized gain on sales of investments 19,347
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $37,046,308
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-83
<PAGE> 289
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 37,026,961 $ 31,806,351
- ------------------------------------------------------------------------------------------
Net realized gain on sales of investments 19,347 108,101
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 37,046,308 31,914,452
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (15,420,950) (11,567,004)
- ------------------------------------------------------------------------------------------
Class B (4,508,913) (3,560,364)
- ------------------------------------------------------------------------------------------
Class C (81,245) --
- ------------------------------------------------------------------------------------------
AIM Cash Reserve Shares (17,015,853) (16,678,983)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 88,133,325 66,344,581
- ------------------------------------------------------------------------------------------
Class B 24,881,617 21,306,761
- ------------------------------------------------------------------------------------------
Class C 8,286,622 --
- ------------------------------------------------------------------------------------------
AIM Cash Reserve Shares 28,629,341 21,970,272
- ------------------------------------------------------------------------------------------
Net increase in net assets 149,950,252 109,729,715
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 694,523,395 584,793,680
- ------------------------------------------------------------------------------------------
End of period $844,473,647 $694,523,395
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $844,439,320 $694,508,415
- ------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investments 34,327 14,980
- ------------------------------------------------------------------------------------------
$844,473,647 $694,523,395
==========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 four different classes of shares: the Class A shares, the Class
B shares, the Class C shares and AIM Cash Reserve Shares. The new Class C shares
commenced sales on August 4, 1997. Class A shares are sold with a front-end
sales charge. Class B shares and Class C shares are sold with a contingent
deferred sales charge. AIM Cash Reserve 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 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 -- The Fund's 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 premiums.
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.
FS-84
<PAGE> 290
Dividends to shareholders are declared daily and are paid monthly.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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, 1997, AIM
was reimbursed $68,947 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, 1997, the Fund paid AFS $784,714 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and the AIM Cash Reserve Shares of the Fund. The Trust
has adopted distribution plans pursuant to Rule 12b-1 under the 1940 Act with
respect to the Fund's Class A shares, Class C shares and the AIM Cash Reserve
Shares (the "Class A and C Plan"), and the Fund's Class B shares (the "Class B
Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A and C
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares and the AIM Cash
Reserve Shares, and 1.00% of the average daily net assets of the Class C shares.
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 these amounts, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class A, Class B, Class C or AIM Cash Reserve Shares to
selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own the appropriate
class of shares of the Fund. Any amounts not paid as a service fee by the Class
B or Class C shares under the 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, 1997, the Class A and Class B
shares and the AIM Cash Reserve Shares, and during the period August 4, 1997
through December 31, 1997 the Class C shares, paid AIM Distributors $850,644,
$1,195,121, $931,232 and $21,600, respectively, as compensation under the Plans.
AIM Distributors received commissions of $443,904 from sales of the Class A
shares of the Fund during the year ended December 31, 1997. 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, 1997,
AIM Distributors received $344,545 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, 1997, the Fund paid legal fees of $6,392
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-INDIRECT EXPENSES
During the year ended December 31, 1997, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $9,526 and $341, respectively under expense offset arrangements. The
effect of the above arrangements resulted in reductions of the Fund's total
expenses of $9,867 during the year ended December 31, 1997.
NOTE 4-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-85
<PAGE> 291
NOTE 5-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 4,653,429,305 $ 4,653,429,305 2,107,832,986 $ 2,107,832,986
- ----------------------------------------------------- --------------------------------- ---------------------------------
Class B 420,215,854 420,215,854 334,518,591 334,518,591
- ----------------------------------------------------- --------------------------------- ---------------------------------
Class C* 61,859,578 61,859,578 -- --
- ----------------------------------------------------- --------------------------------- ---------------------------------
AIM Cash Reserve Shares 4,356,728,398 4,356,728,398 3,871,719,488 3,871,719,488
- ----------------------------------------------------- --------------------------------- ---------------------------------
Issued as reinvestment of dividends:
Class A 13,299,323 13,299,323 10,061,164 10,061,164
- ----------------------------------------------------- --------------------------------- ---------------------------------
Class B 3,988,737 3,988,737 3,197,896 3,197,896
- ----------------------------------------------------- --------------------------------- ---------------------------------
Class C* 75,390 75,390 -- --
- ----------------------------------------------------- --------------------------------- ---------------------------------
AIM Cash Reserve Shares 13,807,718 13,807,718 14,185,926 14,185,926
- ----------------------------------------------------- --------------------------------- ---------------------------------
Reacquired:
Class A (4,578,595,303) (4,578,595,303) (2,051,549,569) (2,051,549,569)
- ----------------------------------------------------- --------------------------------- ---------------------------------
Class B (399,322,974) (399,322,974) (316,409,726) (316,409,726)
- ----------------------------------------------------- --------------------------------- ---------------------------------
Class C* (53,648,346) (53,648,346) -- --
- ----------------------------------------------------- --------------------------------- ---------------------------------
AIM Cash Reserve Shares (4,341,906,775) (4,341,906,775) (3,863,935,142) (3,863,935,142)
- ----------------------------------------------------- --------------------------------- ---------------------------------
149,930,905 $ 149,930,905 109,621,614 $ 109,621,614
================================= =================================
</TABLE>
*Class C shares commenced sales on August 4, 1997.
NOTE 6-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A, Class B and AIM
Cash Reserve Shares outstanding during each of the years in the four-year period
ended December 31, 1997 and the period October 16, 1993 (date operations
commenced) through December 31, 1993 and for a share of Class C outstanding
during the period August 4, 1997 (date sales commenced) through December 31,
1997.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
------------------------------------------------------ -------------------------------
1997 1996 1995 1994 1993 1997 1996 1995
-------- -------- -------- -------- -------- -------- -------- -------
<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 0.0453 0.0433 0.0495 0.0337 0.0048 0.0378 0.0360 0.0419
- --------------------- -------- -------- -------- -------- -------- -------- -------- -------
Less distributions:
Dividends from net
investment income (0.0453) (0.0433) (0.0495) (0.0337) (0.0048) (0.0378) (0.0360) (0.0419)
- --------------------- -------- -------- -------- -------- -------- -------- -------- -------
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) 4.63% 4.42% 5.06% 3.43% 2.27%(e) 3.84% 3.66% 4.27%
===================== ======== ======== ======== ======== ======== ======== ======== =======
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted) $376,012 $287,905 $221,487 $148,886 $ 81,460 $116,058 $ 91,148 $69,857
===================== ======== ======== ======== ======== ======== ======== ======== =======
Ratio of expenses to
average net assets 1.05%(b)(c) 1.07% 1.03% 0.97%(d) 1.00%(d)(e) 1.80%(b)(c) 1.81% 1.78%
===================== ======== ======== ======== ======== ======== ======== ======== =======
Ratio of net
investment income to
average net assets 4.55%(b) 4.34% 4.91% 3.53%(d) 2.27%(d)(e) 3.80%(b) 3.60% 4.14%
===================== ======== ======== ======== ======== ======== ======== ======== =======
<CAPTION>
CLASS C
CLASS B SHARES SHARES AIM CASH RESERVE SHARES
------------------- -------- ------------------------------------------------------
1994 1993 1997 1997 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 0.0259 0.0032 0.0158 0.0456 0.0433 0.0493 0.0337 0.0048
- --------------------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.0259) (0.0032) (0.0158) (0.0456) (0.0433) (0.0493) (0.0337) (0.0048)
- --------------------- -------- -------- -------- -------- -------- -------- -------- --------
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) 2.62% 1.51%(e) 3.92%(e) 4.66% 4.41% 5.04% 3.42% 2.27%(e)
===================== ======== ======== ======= ======== ======== ======== ======== ========
Ratios/supplemental
data:
Net assets, end of
period (000s
omitted) $ 33,999 $ 1,289 $ 8,287 $344,117 $315,470 $293,450 $359,952 $241,778
===================== ======== ======== ======= ======== ======== ======== ======== ========
Ratio of expenses to
average net assets 1.78%(f) 1.75%(e)(f) 1.80%(b)(c)(e) 1.05%(b)(c) 1.08% 1.04% 0.99%(g) 1.00%(e)(g)
===================== ======== ======== ======= ======== ======== ======== ======== ========
Ratio of net
investment income to
average net assets 3.14%(f) 1.54%(e)(f) 3.80%(b)(e) 4.55%(b) 4.32% 4.92% 3.49%(g) 2.27%(e)(g)
===================== ======== ======== ======= ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges where applicable and are annualized for
periods less than one year.
(b) Ratios are based on average net assets as follows: Class A shares -
$340,257,685, Class B shares - $119,512,069, Class C shares - $5,256,063 and
AIM Cash Reserve Shares - $372,492,695.
(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) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average daily net assets prior to fee waivers and/or
expense reimbursements were 1.06% and 3.44%, respectively, for 1994 and
1.20% (annualized) and 2.07% (annualized), respectively, for 1993.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average daily net assets prior to fee waivers and/or
expense reimbursements were 1.87% and 3.05%, respectively, for 1994 and
1.95% (annualized) and 1.34% (annualized), respectively, for 1993.
(g) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average daily net assets prior to fee waivers and/or
expense reimbursements were 1.08% and 3.40%, respectively, for 1994 and
1.20% (annualized) and 2.07% (annualized), respectively, for 1993.
FS-86
<PAGE> 292
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, 1997, 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 or periods in the five-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 and financial highlights. Our procedures
included confirmation of securities owned as of December
31, 1997, 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, 1997, 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 or periods in the five-year period then
ended, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
February 6, 1998
FS-87
<PAGE> 293
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ALABAMA-0.68%
Courtland Industrial
Development Board
(Champion International
Corp. Project); Refunding
PCR
6.40%, 11/01/26(b) - Baa1 $2,315 $ 2,500,617
- ------------------------------------------------------------------
ALASKA-1.78%
Alaska (State of) Housing
Finance Corp.;
Collateralized First
Veterans' Home Mortgage
Series A-2 RB
6.75%, 12/01/24(b) AAA Aaa 4,800 5,107,055
- ------------------------------------------------------------------
Alaska (State of) Housing
Finance Corp.;
Collateralized Mortgage
Program First Series RB
6.875%, 06/01/33 AAA Aaa 1,330 1,411,901
- ------------------------------------------------------------------
6,518,956
- ------------------------------------------------------------------
ARKANSAS-1.43%
Fayetteville (City of);
Water and Sewer Refunding
and Improvement Series
1992 RB
6.15%, 08/15/12 A A 2,000 2,095,820
- ------------------------------------------------------------------
Independence (County of)
(Mississippi Power & Light
Project); PCR
9.50%, 07/01/14 - Baa2 1,000 1,073,330
- ------------------------------------------------------------------
Little Rock (City of); Sewer
Improvement Series B RB
5.75%, 02/01/06 AA+ Aa 2,000 2,055,620
- ------------------------------------------------------------------
5,224,770
- ------------------------------------------------------------------
ARIZONA-2.09%
Arizona (State of)
Educational Loan Marketing
Corp.; RB
6.125%, 09/01/02(b) - Aa 1,900 2,024,070
- ------------------------------------------------------------------
Gila (County of) Industrial
Development Authority
(ASARCO Inc.); Refunding
PCR
8.90%, 07/01/06 BBB Baa2 1,000 1,035,960
- ------------------------------------------------------------------
Mohave (County of) Unified
School District #1 (Lake
Havasu); Series 1996 A GO
5.90%, 07/01/15(c) AAA Aaa 1,000 1,083,340
- ------------------------------------------------------------------
Pima (County of) Unified
School District #10
(Amphitheater); School
Improvement
Series 1992 E GO
6.50%, 07/01/05 A+ A3 3,100 3,521,940
- ------------------------------------------------------------------
7,665,310
- ------------------------------------------------------------------
CALIFORNIA-1.55%
Foothill/Eastern Corridor
Agency (California Toll
Road Project); Senior Lien
Series A RB
6.00%, 01/01/16 BBB- Baa 400 427,536
- ------------------------------------------------------------------
Irvine Ranch Water District
Joint Powers Agency; Issue
II Series RB
8.25%, 08/15/23 A+ - 500 512,365
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
CALIFORNIA-(CONTINUED)
Los Angeles Unified School
District (Multiple
Properties Project);
Refunding Certificates of
Participation
5.625%, 11/01/13(c) AAA Aaa $3,000 $ 3,003,600
- ------------------------------------------------------------------
Sacramento (City of)
California Cogeneration
Authority (Procter &
Gamble Project); Series
1995 RB
7.00%, 07/01/04 BBB- - 500 566,035
- ------------------------------------------------------------------
San Francisco (City and
County of) Parking
Authority; Parking Meter
Series 1994 RB
7.00%, 06/01/13(c) AAA Aaa 1,000 1,167,490
- ------------------------------------------------------------------
5,677,026
- ------------------------------------------------------------------
COLORADO-1.00%
Adams County School District
Number 1; Unlimited Tax
Building Series 1992 A GO
6.625%, 12/01/02(d)(e) AAA Aaa 500 557,270
- ------------------------------------------------------------------
Colorado (State of) Housing
Finance Authority (Single
Family Residential
Housing); Series 1987 B RB
9.00%, 09/01/17 AA Aa1 360 368,212
- ------------------------------------------------------------------
Highlands Ranch Metro
District No. 1; Refunding
& Improvement Unlimited
Tax Series A GO
7.30%, 09/01/02(d)(e) NRR NRR 500 576,060
- ------------------------------------------------------------------
Mesa County School District
#51; 1989 Series B
Certificates of
Participation
6.875%, 12/01/05(c) AAA Aaa 1,465 1,619,323
- ------------------------------------------------------------------
Mountain Village Metro
District (San Miguel
County); Unlimited Tax
Refunding Series GO
7.95%, 12/01/03(f) - - 500 559,005
- ------------------------------------------------------------------
3,679,870
- ------------------------------------------------------------------
CONNECTICUT-3.42%
Bridgeport (City of);
Unlimited Tax Series A GO
6.00%, 09/01/06 AAA Aaa 1,000 1,117,850
- ------------------------------------------------------------------
Connecticut (State of);
General Purpose Public
Improvement Series 1992-A
GO
6.50%, 03/15/02(d)(e) NRR NRR 5,500 6,062,320
- ------------------------------------------------------------------
Connecticut (State of)
Health and Education
Facility Authority;
Special Care Hospital
Series B RB
5.375%, 07/01/17 BBB Baa2 500 496,120
- ------------------------------------------------------------------
Connecticut (State of)
Housing Finance Authority;
Housing Mortgage Financing
Program
Sub-Series C-2 RB
5.85%, 11/15/28(b) AA Aa3 1,000 1,028,350
- ------------------------------------------------------------------
Connecticut Resource
Recovery Authority
(American Ref-Fuel Co.)
(Southeastern Connecticut
Project); Corporate Credit
Series 1988 RB
8.10%, 11/15/15(b) A A2 925 981,555
- ------------------------------------------------------------------
</TABLE>
FS-88
<PAGE> 294
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
CONNECTICUT-(CONTINUED)
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 $ 1,800,742
- ------------------------------------------------------------------
8.00%, 11/15/15(b) AA- Baa1 1,000 1,060,300
- ------------------------------------------------------------------
12,547,237
- ------------------------------------------------------------------
DELAWARE-0.08%
Delaware Economic
Development Authority
(Osteopathic Hospital
Association); Series A RB
6.75%, 01/01/13(d) - Aaa 250 291,015
- ------------------------------------------------------------------
FLORIDA-1.00%
Dade (County of) (Courthouse
Center Project); RB
5.90%, 04/01/10 - A3 500 532,535
- ------------------------------------------------------------------
Escambia (County of)
(Champion International
Corp. Project); PCR
6.90%, 08/01/22(b) BBB Baa1 1,125 1,260,990
- ------------------------------------------------------------------
Leon (County of);
Certificates of
Participation Series A RB
5.875%, 01/01/98 - Baa1 355 355,000
- ------------------------------------------------------------------
Miami (City of) Parking
System; Series 1992 A RB
6.70%, 10/01/06 A A 1,120 1,227,610
- ------------------------------------------------------------------
Plantation (City of) Health
Facilities Authority
(Covenant Retirement
Communities Inc.); RB
7.75%, 12/01/22 A- - 250 276,787
- ------------------------------------------------------------------
3,652,922
- ------------------------------------------------------------------
GEORGIA-0.59%
Georgia (State of) Housing and
Finance
Authority (Home Ownership
Opportunity Program);
Series C RB
6.50%, 12/01/11 AA+ Aa 975 1,050,485
- ------------------------------------------------------------------
Savannah (City of) Economic
Development Authority
(Hershey Foods Corp.
Project); IDR
6.60%, 06/01/12 A+ - 1,000 1,103,640
- ------------------------------------------------------------------
2,154,125
- ------------------------------------------------------------------
ILLINOIS-10.78%
Berwyn (City of) (Macneal
Memorial Hospital
Association); Hospital
Series 1991 RB
7.00%, 06/01/01(d)(e) AAA Aaa 3,250 3,608,443
- ------------------------------------------------------------------
Chicago Emergency Telephone
System; Unlimited Tax
Series GO
5.60%, 01/01/10(c) AAA Aaa 400 432,315
- ------------------------------------------------------------------
Chicago Midway Airport;
Series A RB
5.625%, 01/01/22(c) AAA Aaa 1,000 1,038,610
- ------------------------------------------------------------------
Chicago Wastewater
Transmission; Second Lien
Series RB
5.25%, 01/01/17(c) AAA Aaa 2,500 2,508,800
- ------------------------------------------------------------------
Cook (County of); Series
1992 B GO
5.75%, 11/15/02(d)(e) AAA Aaa 2,000 2,162,920
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ILLINOIS-(CONTINUED)
Crestwood (City of); Revenue
Refunding Non-Qualified
Tax Increment Notes
7.25%, 12/01/08(f) - - $ 100 $ 106,936
- ------------------------------------------------------------------
Illinois (State of); Sales
Tax Series 1993 B RB
6.50%, 06/15/13 AAA Aa3 1,500 1,626,360
- ------------------------------------------------------------------
Illinois (State of);
Unlimited Tax Series GO
5.25%, 07/01/22(c) AAA Aaa 4,475 4,517,244
- ------------------------------------------------------------------
Illinois (State of)
Development Finance
Authority (CPC
International Project); PCR
6.75%, 05/01/16 - A2 2,500 2,703,150
- ------------------------------------------------------------------
Illinois Educational
Facilities Authority
(Northwestern University);
Adjustable Medium Term
Series RB
5.25%, 11/01/14(e) AA+ Aa1 1,000 1,013,330
- ------------------------------------------------------------------
Illinois Educational
Facilities Authority
(Shedd Aquarium Society);
RB
5.60%, 07/01/27(c) AAA Aaa 3,500 3,604,615
- ------------------------------------------------------------------
Illinois Health Facilities
Authority (Evangelical
Hospital Corp.); RB
6.25%, Series A
04/15/22(d) NRR NRR 1,000 1,137,430
- ------------------------------------------------------------------
6.25%, Series 1992-C
04/15/22(d) NRR NRR 1,150 1,308,045
- ------------------------------------------------------------------
Illinois Health Facilities
Authority (Franciscan
Sisters Health Care);
Refunding Series 1992 RB
6.40%, 09/01/04(c) AAA Aaa 2,475 2,725,866
- ------------------------------------------------------------------
Illinois Health Facilities
Authority (Memorial
Hospital); RB
7.25%, 05/01/22 BBB - 200 215,234
- ------------------------------------------------------------------
Illinois Health Facilities
Authority
(Ravenswood Hospital Medical
Center);
Refunding Series 1987 A RB
8.80%, 06/01/06 - Baa1 1,000 1,018,100
- ------------------------------------------------------------------
Kane (County of) School
District No. 131 (Aurora
East Side); Limited GO
5.35%, 01/01/04(c) AAA Aaa 1,000 1,057,050
- ------------------------------------------------------------------
Lake County Community
Consolidated School
District #73 (Hawthorn);
Unlimited Tax Series 1997
GO
5.45%, 01/01/12(c) - Aaa 1,950 2,092,448
- ------------------------------------------------------------------
Peoria and Pekin and
Waukegan (Cities of); GNMA
Collateralized Mortgage
Series 1990 RB
7.875%, 08/01/22(b) AAA - 130 137,912
- ------------------------------------------------------------------
Saint Charles (City of)
(Tri-City Center
Associates Limited
Project); IDR
7.50%, 11/01/13(f) - - 100 107,138
- ------------------------------------------------------------------
Tazewell County Community
High School District #303
(Pekin); Unlimited Tax
Series 1996 GO
5.625%, 01/01/14(c) AAA Aaa 1,435 1,510,940
- ------------------------------------------------------------------
University of Illinois
Auxiliary Facilities
System; Series 1991 RB
5.75%, 04/01/22 AA- Aa 4,750 4,881,100
- ------------------------------------------------------------------
39,513,986
- ------------------------------------------------------------------
</TABLE>
FS-89
<PAGE> 295
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
INDIANA-0.67%
Carmel Retirement Rental
Housing (Beverly
Enterprises Project);
Refunding Series RB
8.75%, 12/01/08(f) - - $ 95 $ 106,523
- ------------------------------------------------------------------
Columbus (City of) Four Star
School Building; First
Mortgage Series RB
6.00%, 01/15/06(b) AAA Aaa 1,000 1,113,610
- ------------------------------------------------------------------
Indiana (State of) Housing
Finance Authority; Series
B-1 RB
6.15%, 07/01/17 - Aaa 185 196,461
- ------------------------------------------------------------------
Indiana Municipal Power
Agency Power Supply;
Refunding Series A RB
5.75%, 01/01/18 A A1 500 501,195
- ------------------------------------------------------------------
Indiana Transportation
Finance Authority (Airport
Lease Facility); Series A
RB
6.25%, 11/01/02(d)(e) NRR Aaa 395 435,518
- ------------------------------------------------------------------
6.25%, 11/01/16 NRR A2 105 112,112
- ------------------------------------------------------------------
2,465,419
- ------------------------------------------------------------------
IOWA-0.33%
Iowa Finance Authority (Park
West Project); Refunding
Multifamily Series RB
8.00%, 10/01/23(f) - - 100 102,203
- ------------------------------------------------------------------
Iowa Finance Authority
(Trinity Regional Hospital
Project); Hospital
Facilities Refunding
Series 1997 RB
6.00%, 07/01/12(c) AAA Aaa 1,000 1,105,460
- ------------------------------------------------------------------
1,207,663
- ------------------------------------------------------------------
KANSAS-0.08%
Newton (City of) (Newton
Healthcare Corp.);
Hospital Series A RB
7.375%, 11/15/14 BBB- - 250 277,928
- ------------------------------------------------------------------
KENTUCKY-1.15%
Kentucky Economic
Development Finance
Authority (Appalachian
Regional Healthcare);
Refunding & Improvement
Hospital Systems Series RB
5.875%, 10/01/22 BBB - 1,000 1,027,590
- ------------------------------------------------------------------
Mount Sterling (City of);
Lease Funding Series 1993
A RB
6.15%, 03/01/13 - Aa 3,000 3,184,710
- ------------------------------------------------------------------
4,212,300
- ------------------------------------------------------------------
LOUISIANA-3.52%
Louisiana Public Facilities
Authority (Medical Center
at New Orleans Project);
RB
6.125%, 10/15/07(c) AAA - 2,775 2,971,498
- ------------------------------------------------------------------
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 2,678,475
- ------------------------------------------------------------------
Louisiana Public Facilities
Authority (Tulane
University of Louisiana);
RB
6.00%, 10/01/16(c) AAA Aaa 2,500 2,735,425
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
LOUISIANA-(CONTINUED)
New Orleans Levee District;
Series 1995 A RB
5.95%, 11/01/07(c) AAA Aaa $1,000 $ 1,108,960
- ------------------------------------------------------------------
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 1,047,880
- ------------------------------------------------------------------
St. John Baptist Parish
(Sales Tax Distribution);
Public Improvement Series
1987 RB
7.60%, 01/01/08(d)(e) - NRR 500 614,505
- ------------------------------------------------------------------
7.60%, 01/01/09(d)(e) - NRR 500 624,780
- ------------------------------------------------------------------
West Feliciana Parish (Gulf
States Utility Co.);
Series A PCR
7.50%, 05/01/15 BB+ Ba1 1,000 1,135,710
- ------------------------------------------------------------------
12,917,233
- ------------------------------------------------------------------
MAINE-0.28%
Maine (State of) Education
Loan Authority; Education
Loan Series A-2 RB
6.95%, 12/01/07(b) - A 955 1,039,126
- ------------------------------------------------------------------
MARYLAND-0.54%
Maryland Health and Higher
Education Facilities
Authority (Doctors
Community Hospital Inc.);
Series 1990 RB
8.75%, 07/01/00(d)(e) AAA Aaa 1,000 1,129,460
- ------------------------------------------------------------------
Maryland State Community
Development Administration
(Department of Economic
and Community
Development); Single
Family Housing Refunding
Series 5 RB
7.70%, 04/01/15(b) - Aa2 790 837,075
- ------------------------------------------------------------------
1,966,535
- ------------------------------------------------------------------
MASSACHUSETTS-4.54%
Massachusetts (State of);
Consolidated Loan Series
1991 C GO
7.00%, 08/01/01(d)(e) NRR NRR 2,450 2,721,656
- ------------------------------------------------------------------
Massachusetts Health and
Education Facilities
Authority (Lowell General
Hospital); Series 1991 A
RB
8.40%, 06/01/01(d)(e) NRR NRR 3,550 4,091,837
- ------------------------------------------------------------------
Massachusetts Health and
Education Facilities
Authority (Valley Regional
Health System Issue);
Series 1990 B RB
8.00%, 07/01/00(d)(e) NRR Aaa 3,000 3,335,640
- ------------------------------------------------------------------
Massachusetts Health and
Education Facilities
Authority (Winchester
Hospital); Series D RB
5.80%, 07/01/09(c) AAA - 1,000 1,068,300
- ------------------------------------------------------------------
Massachusetts Housing
Finance Authority; Single
Family
Series 13 RB
7.95%, 06/01/23(b) A+ Aa 1,675 1,791,932
- ------------------------------------------------------------------
</TABLE>
FS-90
<PAGE> 296
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MASSACHUSETTS-(CONTINUED)
Massachusetts Industrial
Finance Agency (Beverly
Enterprises); Refunding
Series RB
8.00%, 05/01/02(f) - - $ 250 $ 271,213
- ------------------------------------------------------------------
Massachusetts Municipal
Wholesale Electric
Cooperative Power Supply;
System Series 1992 A RB
6.75%, 07/01/08(c) AAA Aaa 3,000 3,374,040
- ------------------------------------------------------------------
16,654,618
- ------------------------------------------------------------------
MICHIGAN-3.94%
Detroit (City of) School
District; School Building
and Site Unlimited Tax
Series 1992 GO
6.00%, 05/01/05 AA Aa2 1,000 1,069,070
- ------------------------------------------------------------------
6.15%, 05/01/07 AA Aa2 1,300 1,392,001
- ------------------------------------------------------------------
Lake Orion Community School
District; School Building
and Site Unlimited Tax
Refunding Series 1994 GO
7.00%, 05/01/05(d)(e) AAA Aaa 2,500 2,938,125
- ------------------------------------------------------------------
Lakeview Community School
District; Unlimited Tax
Series 1996 GO
5.75%, 05/01/16(c) AAA Aaa 1,000 1,060,600
- ------------------------------------------------------------------
Lincoln Park (City of)
School District; Unlimited
Tax Series 1996 GO
6.00%, 05/01/12(c) AAA Aaa 1,210 1,320,158
- ------------------------------------------------------------------
Michigan (State of) Housing
Development Authority;
Refunding Series A RB
6.60%, 04/01/12 A+ - 1,000 1,062,830
- ------------------------------------------------------------------
Michigan (State of)
Underground Storage Tank
Financial Assurance
Authority; Refunding
Series I RB
6.00%, 05/01/05(c) AAA Aaa 1,000 1,105,050
- ------------------------------------------------------------------
Ypsilanti (City of) School
District; Refunding
Unlimited Tax Series 1996
GO
5.75%, 05/01/15(b) AAA Aaa 2,100 2,232,090
- ------------------------------------------------------------------
5.75%, 05/01/16(b) AAA Aaa 2,175 2,303,456
- ------------------------------------------------------------------
14,483,380
- ------------------------------------------------------------------
MINNESOTA-0.32%
Centennial Independent
School District No. 12;
Unlimited Tax Series A GO
5.60%, 02/01/05(c) AAA Aaa 1,000 1,081,650
- ------------------------------------------------------------------
Minneapolis Health Care
Facilities (Ebenezer
Society Project); Series A
RB
7.00%, 07/01/12(f) - - 100 102,012
- ------------------------------------------------------------------
1,183,662
- ------------------------------------------------------------------
MISSISSIPPI-1.57%
Mississippi Higher Education
Assistance Corp.; Student
Loan Series 1994 C RB
7.50%, 09/01/09(b) - A 5,000 5,463,100
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MISSISSIPPI-(CONTINUED)
Ridgeland Urban Renewal (The
Orchard Limited Project);
Refunding Series A RB
7.75%, 12/01/15(f) - - $ 250 $ 273,468
- ------------------------------------------------------------------
5,736,568
- ------------------------------------------------------------------
MISSOURI-1.25%
Joplin Industrial
Development Authority
(Catholic Health
Initiatives); Refunding
Series A RB
5.125%, 12/01/15 AA Aa2 1,350 1,347,570
- ------------------------------------------------------------------
Kansas City Industrial
Development Authority
(General Motors Corp.
Project); PCR
6.05%, 04/01/06 A- A3 1,435 1,480,690
- ------------------------------------------------------------------
Kansas City Municipal
Assistance Corp.(Truman
Medical Center Charitable
Foundation); Leasehold
Improvement Series 1991 A
RB
7.00%, 11/01/08 A A3 605 659,033
- ------------------------------------------------------------------
Missouri (State of)
Environmental Improvement
and Energy Resources;
Series 1995 C PCR
5.85%, 01/01/10 - Aa1 1,000 1,079,990
- ------------------------------------------------------------------
4,567,283
- ------------------------------------------------------------------
NEVADA-1.54%
Humboldt (County of) (Sierra
Pacific Project); Series
1987 PCR
6.55%, 10/01/13(c) AAA Aaa 3,000 3,284,520
- ------------------------------------------------------------------
Las Vegas (City of);
Refunding 1992 Limited Tax
GO
6.50%, 04/01/02(d)(e) AAA Aaa 1,000 1,103,040
- ------------------------------------------------------------------
Reno Redevelopment Agency;
Refunding Sub-Series A Tax
Allocation Notes
6.00%, 06/01/10 - Baa 1,185 1,242,591
- ------------------------------------------------------------------
5,630,151
- ------------------------------------------------------------------
NEW HAMPSHIRE-1.17%
New Hampshire Higher
Educational & Health
Facilities Authority
(Daniel Webster College);
RB
7.625%, 07/01/16(f) - - 100 104,740
- ------------------------------------------------------------------
New Hampshire State Turnpike
System; Series 1990 RB
7.40%, 04/01/00(d)(e) AAA Aaa 3,850 4,194,845
- ------------------------------------------------------------------
4,299,585
- ------------------------------------------------------------------
NEW JERSEY-1.40%
Hudson County Correctional
Facility; Certificates of
Participation Series 1992
RB
6.60%, 12/01/21(c) AAA Aaa 1,250 1,356,075
- ------------------------------------------------------------------
Lacey School District;
Unlimited Tax Series 1996
GO
5.30%, 11/01/06(c) AAA Aaa 1,000 1,074,970
- ------------------------------------------------------------------
New Jersey City Economic
Development Authority
(Atlantic City Sewer Co.);
Sewer Facility Series 1991
RB
7.25%, 12/01/11(b)(f) - - 1,795 1,986,311
- ------------------------------------------------------------------
</TABLE>
FS-91
<PAGE> 297
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW JERSEY-(CONTINUED)
New Jersey City Economic
Development Authority
(Franciscan Oaks Project);
First Mortgage Series RB
5.70%, 10/01/17(f) - - $ 500 $ 504,335
- ------------------------------------------------------------------
New Jersey Health Care
Facility Financing
Authority (St. Peters
Medical Center); Series
1987 C RB
8.60%, 07/01/17(c) AAA Aaa 200 204,500
- ------------------------------------------------------------------
5,126,191
- ------------------------------------------------------------------
NEW MEXICO-1.65%
Albuquerque (City of)
(Albuquerque Academy
Project); Educational
Facilities Series 1995 RB
5.75%, 10/15/15 AA- Aa2 915 960,192
- ------------------------------------------------------------------
Las Cruces South Central Solid Waste
Authority; Environmental
Services RB
5.65%, 06/01/09 - A 575 598,219
- ------------------------------------------------------------------
Los Alamos (County of);
Utility Series A RB
6.00%, 07/01/15(c) AAA Aaa 2,000 2,144,060
- ------------------------------------------------------------------
Santa Fe (City of); Series
1994 A RB
6.25%, 06/01/04(d)(e) AAA Aaa 2,100 2,326,968
- ------------------------------------------------------------------
6,029,439
- ------------------------------------------------------------------
NEW YORK-10.39%
New York (City of); GO
8.25%, Unlimited Tax
Series 1991 F
11/15/01(d)(e) AAA Aaa 1,840 2,133,388
- ------------------------------------------------------------------
7.00%, Unlimited Tax
Series C, Sub-Series C-1
08/01/02(d)(e) NRR Aaa 55 62,022
- ------------------------------------------------------------------
7.00%, Unlimited Tax
Series H 02/01/02(d)(e) NRR NRR 175 195,015
- ------------------------------------------------------------------
7.20%, Unlimited Tax
Series H 02/01/02(d)(e) NRR NRR 335 375,793
- ------------------------------------------------------------------
7.70%, Series D
02/01/02(d)(e) NRR Aaa 1,840 2,101,814
- ------------------------------------------------------------------
7.65%, Series 1992 F
02/01/02(d)(e) NRR NRR 4,295 4,898,190
- ------------------------------------------------------------------
7.375%, Unlimited Tax
Series B, Sub-Series B-1
08/15/04(d)(e) NRR Aaa 60 70,964
- ------------------------------------------------------------------
7.65%, Series 1992 F
02/01/06 BBB+ Baa1 480 540,874
- ------------------------------------------------------------------
7.70%, Series D 02/01/09 BBB+ Baa1 160 180,331
- ------------------------------------------------------------------
7.375%, Unlimited Tax
Series B, Sub-Series B-1
08/15/13 BBB+ Baa1 440 507,778
- ------------------------------------------------------------------
7.20%, Unlimited Tax
Series H 02/01/15 BBB+ Baa1 165 182,741
- ------------------------------------------------------------------
8.25%, Unlimited Tax
Series 1991 F 11/15/15 BBB+ Baa1 160 182,981
- ------------------------------------------------------------------
6.25%, Unlimited Tax
Series A 08/01/17 BBB+ Baa1 3,035 3,260,440
- ------------------------------------------------------------------
7.00%, Unlimited Tax
Series C, Sub-Series C-1
08/01/17 BBB+ Baa1 1,945 2,153,912
- ------------------------------------------------------------------
7.00%, Series B
02/01/18(c) AAA Aaa 1,000 1,112,390
- ------------------------------------------------------------------
7.00%, Unlimited Tax
Series H 02/01/20 BBB+ Baa1 175 192,189
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW YORK-(CONTINUED)
New York City Industrial
Development Agency
(Brooklyn Navy Yard Cogen
Partners); RB
5.65%, 10/01/28(b) BBB- Baa3 $ 500 $ 502,205
- ------------------------------------------------------------------
New York City Industrial
Development Agency (The
Lighthouse Inc. Project);
Series 1992 RB
6.50%, 07/01/22(g) AA Aa2 1,500 1,607,175
- ------------------------------------------------------------------
New York City Industrial
Development Agency
(Marymount Manhattan
College Project); RB
7.00%, 07/01/23(f) - - 150 161,162
- ------------------------------------------------------------------
New York City Municipal
Water Finance Authority;
Water & Sewer Systems
Series A RB
5.00%, 06/15/17 A- A2 1,350 1,333,422
- ------------------------------------------------------------------
New York State Dorm
Authority (City University
System); Series C RB
6.00%, 07/01/16 BBB+ Baa1 500 508,860
- ------------------------------------------------------------------
New York State Dorm
Authority (State
University Educational
Facilities); Refunding
Series A RB
6.50%, 05/15/06 A- A3 1,000 1,136,480
- ------------------------------------------------------------------
New York State Environmental
Facility Corp.; Water
Revenue Series E PCR
6.875%, 06/15/01(d)(e) NRR NRR 2,300 2,542,857
- ------------------------------------------------------------------
6.875%, 06/15/10 A Aa 1,100 1,211,287
- ------------------------------------------------------------------
New York & New Jersey Port
Authority; Consolidated
One Hundred & Ninth Series
RB
5.375%, 07/15/22 AA- A1 2,000 2,042,520
- ------------------------------------------------------------------
New York State Urban
Development Corp.; Capital
Facilities 1991 Series 3
RB
7.375%, 01/01/02(d)(e) NRR Aaa 7,850 8,888,948
- ------------------------------------------------------------------
38,085,738
- ------------------------------------------------------------------
NORTH CAROLINA-2.19%
North Carolina Eastern
Municipal Power Agency;
Series A RB
6.125%, 01/01/10(c) AAA Aaa 1,500 1,638,135
- ------------------------------------------------------------------
North Carolina Housing
Finance Agency; Single
Family-Series II RB
6.20%, 03/01/16 AA Aa2 625 669,181
- ------------------------------------------------------------------
North Carolina Medical Care
Community Health Care
Facilities (Glenaire
Project); First Mortgage
Series RB
5.75%, 07/01/19(f) - - 500 495,250
- ------------------------------------------------------------------
5.85%, 07/01/27(f) - - 500 498,600
- ------------------------------------------------------------------
North Carolina Municipal
Power Agency (No. 1
Catawba Electric Project);
Refunding RB
7.25%, 01/01/07 A- A3 2,750 3,234,880
- ------------------------------------------------------------------
North Carolina Municipal
Power Agency (No. 1
Catawba Electric Project);
Series 1990 RB
6.50%, 01/01/10(c)(d) AAA Aaa 260 297,497
- ------------------------------------------------------------------
6.50%, 01/01/10(c) AAA Aaa 1,115 1,186,984
- ------------------------------------------------------------------
8,020,527
- ------------------------------------------------------------------
</TABLE>
FS-92
<PAGE> 298
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NORTH DAKOTA-0.42%
Grand Forks Senior Housing
(4000 Valley Square
Project); Special Term
Series RB
6.375%, 12/01/34(f) - - $ 500 $ 504,705
- ------------------------------------------------------------------
North Dakota Housing Finance
Agency; Home Mortgage
Series B RB
5.85%, 07/01/28(b) - Aa3 1,000 1,026,930
- ------------------------------------------------------------------
1,531,635
- ------------------------------------------------------------------
OHIO-2.63%
Cleveland (City of) Parking
Facilities; Improvement
Series RB
8.00%, 09/15/02(d)(e) NRR NRR 500 587,155
- ------------------------------------------------------------------
Fairfield (City of) Economic
Development (Beverly
Enterprises Project);
Refunding Series RB
8.50%, 01/01/03(f) - - 190 207,343
- ------------------------------------------------------------------
Fairfield (City of) School
District; Unlimited Tax
Series 1995 GO
6.10%, 12/01/15(c) AAA Aaa 1,000 1,092,160
- ------------------------------------------------------------------
Findlay (City of); Limited
Tax Series 1996 GO
5.875%, 07/01/17 AA- A1 1,000 1,055,680
- ------------------------------------------------------------------
Hamilton (County of);
Electric System Mortgage
Series 1998 RB
8.00%, 10/15/98(d)(e) AAA Aaa 1,000 1,052,300
- ------------------------------------------------------------------
Mason (City of) Health Care
Facilities (MCV Health
Care Facilities, Inc.);
Series 1990 RB
7.625%, 02/01/40(c) AAA - 2,170 2,401,170
- ------------------------------------------------------------------
Montgomery (County of)
(Grandview Hospital &
Medical Center); Refunding
Hospital Series RB
5.50%, 12/01/10 BBB - 1,000 1,013,020
- ------------------------------------------------------------------
Ohio Department of
Transportation (Panhandle
Rail Line Project); Series
1992 Certificates of
Participation
6.50%, 04/15/12(c) AAA Aaa 1,100 1,203,235
- ------------------------------------------------------------------
Washington (County of)
(Marietta Memorial
Hospital); Series B RB
7.00%, 09/01/12(c) AAA Aaa 1,000 1,013,650
- ------------------------------------------------------------------
9,625,713
- ------------------------------------------------------------------
OKLAHOMA-1.77%
McAlester (City of) Public
Works Authority; Refunding
and Improvement Series
1995 RB
5.50%, 12/01/10(c) AAA Aaa 975 1,058,636
- ------------------------------------------------------------------
Southern Oklahoma Memorial
Hospital Authority; Series
1993 A RB
5.60%, 02/01/00(d) NRR NRR 1,250 1,288,550
- ------------------------------------------------------------------
Tulsa (City of) Industrial
Authority (St. Johns
Hospital); RB
6.25%, 02/15/14 AA Aa3 2,000 2,162,940
- ------------------------------------------------------------------
Tulsa (City of) Industrial
Authority (Tulsa Regional
Medical Center); Hospital
Series RB
7.20%, 06/01/03(d)(e) AAA NRR 500 578,475
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
OKLAHOMA-(CONTINUED)
Tulsa Public Facilities
Authority-Capital
Improvements-Water System;
Series 1988 B RB
6.00%, 03/01/08 A+ - $1,305 $ 1,396,076
- ------------------------------------------------------------------
6,484,677
- ------------------------------------------------------------------
OREGON-0.96%
Marion (County of) (Ogden
Martin Systems); Refunding
Solid Waste & Electric
Series RB
5.50%, 10/01/06(c) AAA Aaa 1,000 1,089,590
- ------------------------------------------------------------------
Portland (City of) Sewer
System; Series 1994 A RB
6.20%, 06/01/04(d)(e) A+ A1 1,200 1,331,952
- ------------------------------------------------------------------
6.25%, 06/01/04(d)(e) A+ A1 1,000 1,112,730
- ------------------------------------------------------------------
3,534,272
- ------------------------------------------------------------------
PENNSYLVANIA-3.81%
Chester (County of) Health
and Educational Facilities
Authority (Jefferson
Health Systems); Series B
RB
5.375%, 05/15/27 AA- A1 4,000 4,019,440
- ------------------------------------------------------------------
Chester Upland School
Authority; Refunding
School Series B RB
5.25%, 09/01/21(c) AAA Aaa 1,000 1,007,460
- ------------------------------------------------------------------
Doylestown Hospital
Authority (Pine Run
Hospital); Hospital Series
A RB
7.20%, 07/01/23(f) - - 150 163,046
- ------------------------------------------------------------------
Lancaster (County of) Solid
Waste Management
Authority; Resource
Recovery System Series
1988 A RB
8.50%, 12/15/10(b) BBB A 3,500 3,626,210
- ------------------------------------------------------------------
Montgomery County Industrial
Development Authority
(Meadowood Corp. Project);
Refunding First Mortgage
Series A RB
10.25%, 12/01/00(d)(e) NRR NRR 100 113,502
- ------------------------------------------------------------------
Montgomery County Industrial
Development
Authority (Pennsburg
Nursing & Rehabilitation
Center); RB
7.625%, 07/01/18 - Ba3 100 111,242
- ------------------------------------------------------------------
Pennsylvania (State of);
Third Series GO
6.75%, 11/15/13(c) AAA Aaa 1,250 1,421,750
- ------------------------------------------------------------------
Pennsylvania Economic
Development Finance
Authority (Colver
Project); Resource
Recovery Series 1994 D RB
7.05%, 12/01/10(b) BBB- - 2,900 3,223,292
- ------------------------------------------------------------------
Scranton-Lackawanna Health &
Welfare Authority (Moses
Taylor Hospital Project);
Series B RB
8.50%, 07/01/01(d)(e) AAA NRR 250 289,290
- ------------------------------------------------------------------
13,975,232
- ------------------------------------------------------------------
</TABLE>
FS-93
<PAGE> 299
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
PUERTO RICO-1.51%
Puerto Rico (Commonwealth
of) Electric Power
Authority; Series 1991 P
RB 7.00%, 07/01/01(d)(e) NRR Aaa $1,325 $ 1,476,222
- ------------------------------------------------------------------
6.00%, Series 1989
07/01/10 BBB+ Baa1 4,000 4,057,680
- ------------------------------------------------------------------
5,533,902
- ------------------------------------------------------------------
RHODE ISLAND-0.68%
Rhode Island Depositors
Economic Protection Corp.;
Special Obligation Series
1992 A RB
6.95%, 08/01/02(d)(e) AAA Aaa 1,250 1,409,400
- ------------------------------------------------------------------
Rhode Island Housing and
Mortgage Finance Agency;
Homeownership Opportunity
Series 15 B RB
6.00%, 10/01/04 AA+ Aa2 1,000 1,079,020
- ------------------------------------------------------------------
2,488,420
- ------------------------------------------------------------------
SOUTH CAROLINA-0.60%
Piedmont Municipal Power
Agency; Refunding Electric
Series A RB
5.75%, 01/01/24 BBB Baa1 1,150 1,150,955
- ------------------------------------------------------------------
South Carolina State
Education Assistance
Authority; Guaranteed
Student Loan Series 1990
RB
6.60%, 09/01/01(b) AA - 500 529,010
- ------------------------------------------------------------------
South Carolina State Housing
Finance and Development
Authority; Homeownership
Mortgage Series 1990 C RB
7.50%, 07/01/05(b) AA Aa2 500 529,755
- ------------------------------------------------------------------
2,209,720
- ------------------------------------------------------------------
SOUTH DAKOTA-0.03%
South Dakota Health &
Educational Facilities
Authority (Huron Regional
Medical Center); RB
7.25%, 04/01/20 BBB - 100 110,939
- ------------------------------------------------------------------
TENNESSEE-1.20%
Franklin Industrial
Development Board
(Landings Apartment
Project); Multifamily
Housing Series A RB
5.75%, 04/01/10(c) AAA Aaa 1,165 1,224,928
- ------------------------------------------------------------------
Nashville and Davidson
(Counties of) Metropolitan
Government; Water and
Sewer Refunding Series
1986 RB
7.25%, 01/20/98(e) A A1 145 145,580
- ------------------------------------------------------------------
Shelby (County of);
Unlimited Tax School GO
6.00%, 03/01/02(d)(e) NRR NRR 1,000 1,074,310
- ------------------------------------------------------------------
Shelby County Health,
Educational & Housing
Facilities Board (Kirby
Pines); Health Care
Facilities Series A RB
6.25%, 11/15/16(f) - - 1,000 1,014,960
- ------------------------------------------------------------------
Tennessee Housing
Development Agency;
Homeownership Progressive
Series Q RB
6.80%, 07/01/17 AA Aa2 895 953,614
- ------------------------------------------------------------------
4,413,392
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS-14.66%
Arlington Independent School
District; Refunding Series
1995 GO
5.75%, 02/15/21(c) - Aaa $1,000 $ 1,041,910
- ------------------------------------------------------------------
Austin (City of); Utility
System RB
6.50%, 05/15/01(d)(e) AAA Aaa 1,380 1,506,919
- ------------------------------------------------------------------
Austin Community College
District; Combined Fee
Revenue Building and
Refunding Series 1995 RB
6.10%, 02/01/13(c) AAA Aaa 1,115 1,205,839
- ------------------------------------------------------------------
Bellville Independent School
District; Unlimited Tax
School Building and
Refunding Series 1995 GO
6.125%, 02/01/20(c) - Aaa 830 897,637
- ------------------------------------------------------------------
Brazos (County of) Health
Facilities Development
Corp. (Franciscan Services
Corp.); Series A RB
5.375%, 01/01/22(c) AAA Aaa 2,000 2,026,500
- ------------------------------------------------------------------
Brazos Higher Education Loan
Authority Inc.; Student
Loan Refunding RB
6.30%, Refunding Series
1992 C-1 11/01/01(b) - Aa 325 343,888
- ------------------------------------------------------------------
6.45%, Series 1992 C-1
11/01/02(b) - Aa 1,135 1,216,141
- ------------------------------------------------------------------
6.50%, Series 1994 B-1
06/01/04(b) - A 260 280,831
- ------------------------------------------------------------------
Carrollton (City of); GO
5.75%, 08/15/16 AA- Aa 1,000 1,049,750
- ------------------------------------------------------------------
Comal County Industrial
Development Authority (The
Coleman Company, Inc.
Project); Industrial
Development Series 1980 RB
9.25%, 08/01/00(d) NRR NRR 840 907,158
- ------------------------------------------------------------------
Dallas (City of); Waterworks
and Sewer System Refunding
and Improvement Series RB
5.35%, 04/01/14 AA Aa 3,055 3,134,430
- ------------------------------------------------------------------
Dallas (City of); Waterworks
and Sewer System Series A
RB
6.00%, 10/01/14 AA Aa2 2,030 2,130,607
- ------------------------------------------------------------------
Dallas-Fort Worth Regional
Airport Authority; Airport
Series 1985 RB
6.10%, 11/01/07 AAA Aaa 200 200,496
- ------------------------------------------------------------------
6.10%, 11/01/07(c) A+ A1 430 433,255
- ------------------------------------------------------------------
Georgetown (City of);
Utility System Series 1995
A RB
6.20%, 08/15/15(c) AAA Aaa 1,500 1,618,560
- ------------------------------------------------------------------
Harris County; Toll Road
Unlimited Tax General
Obligation and Subordinate
Lien Refunding Series 1991
RB
6.75%, 08/01/14 AA Aa2 3,850 4,234,654
- ------------------------------------------------------------------
5.375%, 08/15/20(c) AAA Aaa 1,000 1,012,650
- ------------------------------------------------------------------
Harris County Health
Facilities Development
Corp. (Saint Luke's
Episcopal Hospital
Project); Series 1991 RB
6.70%, 02/15/03(d)(e) AAA NRR 1,000 1,108,960
- ------------------------------------------------------------------
</TABLE>
FS-94
<PAGE> 300
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS-(CONTINUED)
Harris County Mental Health
and Mental Retardation
Authority; Refunding
Series 1992 RB
6.25%, 09/15/10(c) AAA Aaa $4,500 $ 4,817,565
- ------------------------------------------------------------------
Houston (City of); Refunding
Series 1992 C GO
6.25%, 03/01/02(d)(e) NRR NRR 1,470 1,577,854
- ------------------------------------------------------------------
Hurst, Euless, Bedford,
Texas Independent School
District; Refunding RB
6.50%, 08/15/04(c)(d)(e) AAA Aaa 640 718,253
- ------------------------------------------------------------------
6.50%, 08/15/24(c) AAA Aaa 360 396,636
- ------------------------------------------------------------------
Keller (City of) Independent
School District;
Certificates of
Participation Series 1994
RB
6.00%, 08/15/05(c) AAA Aaa 1,000 1,107,900
- ------------------------------------------------------------------
Lockhart (City of);
Certificates of
Participation Tax and
Utility Systems Series
1996 GO
5.85%, 08/01/11(c) AAA Aaa 605 653,146
- ------------------------------------------------------------------
5.90%, 08/01/16(c) AAA Aaa 1,100 1,161,204
- ------------------------------------------------------------------
North Texas Higher Education
Authority Inc.; Student
Loan Refunding Series D RB
6.10%, 04/01/08(b) - Aa 1,000 1,041,970
- ------------------------------------------------------------------
6.30%, 04/01/09(b) - A 500 523,865
- ------------------------------------------------------------------
Plano (City of) Independent
School District; Unlimited
Tax Series 1991 B GO
5.625%, 02/15/01(d)(e) AAA Aaa 2,500 2,610,075
- ------------------------------------------------------------------
Tarrant (County of) Texas
Water Control and
Improvement District #1;
Refunding Series 1993 RB
5.20%, 03/01/10 AAA Aaa 2,000 2,035,080
- ------------------------------------------------------------------
Texas (State of) Public
Property Finance Corp.
(Mental Health Mental
Retardation); Series 1996
RB
6.20%, 09/01/16 BBB+ - 1,590 1,665,541
- ------------------------------------------------------------------
Texas (State of); Unlimited
Tax Veteran's Land GO
6.40%, 12/01/24(b) AA Aa2 2,000 2,131,600
- ------------------------------------------------------------------
Texas (State of) Department
of Housing and Community
Affairs (Asmara Project);
Multifamily Housing Series
1996 A RB
6.30%, 01/01/16 A - 310 335,832
- ------------------------------------------------------------------
Texas (State of) Housing
Agency; Residential
Development Mortgage
Series 1987 D RB
8.40%, 07/01/20(b) A+ Aa 3,045 3,220,209
- ------------------------------------------------------------------
Texas (State of) Public
Finance Authority (General
Services Community
Projects); Refunding
Building Series A RB
5.00%, 02/01/15(c) AAA Aaa 1,500 1,493,115
- ------------------------------------------------------------------
Texas National Research
Laboratory Community
Financing Corp.
(Superconducting Super
Collider); Lease RB
7.10%, 12/01/01(d)(e) AAA Aaa 600 673,356
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS-(CONTINUED)
Tyler Health Facilities
Development Corp. (Mother
Frances Hospital);
Hospital Series A RB
5.625%, 07/01/13 - Baa2 $1,000 $ 1,004,110
- ------------------------------------------------------------------
Victoria (County of) Texas
Hospital Citizens Medical
Center; RB
6.20%, 01/01/10(c) - Aaa 1,000 1,092,060
- ------------------------------------------------------------------
Weatherford (City of)
Independent School
District; Refunding Series
1994 GO
6.40%, 02/15/05(d)(e) AAA Aaa 1,000 1,101,020
- ------------------------------------------------------------------
53,710,576
- ------------------------------------------------------------------
UTAH-1.88%
Intermountain Power Agency
(Utah Power Supply); RB
5.00%, Series 1986 B,
07/01/16 A+ A1 1,550 1,492,061
- ------------------------------------------------------------------
5.00%, Series 1986 C,
07/01/18 A+ A1 950 906,633
- ------------------------------------------------------------------
Salt Lake (County of)
(Westminster College
Project); RB
5.75%, 10/01/27 BBB - 1,000 1,029,860
- ------------------------------------------------------------------
Utah (State of) Housing
Finance Agency; Federally
Insured Term Subordinate
Single Family Mortgage RB
6.30%, Series 1994 E-1,
07/01/06 A+ - 615 667,077
- ------------------------------------------------------------------
7.15%, Series 1994 G-1,
07/01/06 A+ A1 530 588,607
- ------------------------------------------------------------------
Utah (State of) Housing
Finance Agency; Series
1994 C RB
6.05%, 07/01/06 - A1 810 864,756
- ------------------------------------------------------------------
Utah (State of) Housing
Finance Agency; Single
Family Mortgage Series G2
RB
6.45%, 07/01/27(b) AAA Aaa 1,235 1,325,192
- ------------------------------------------------------------------
6,874,186
- ------------------------------------------------------------------
VIRGIN ISLANDS-1.08%
Virgin Islands Public
Finance Authority;
Matching Fund Loan Notes
Series A RB
7.25%, 10/01/18(f) - - 1,000 1,129,480
- ------------------------------------------------------------------
Virgin Islands Territory
(Hugo Insurance Claims
Fund); Special Tax Bond
Series 1991 GO
7.75%, 10/01/06(f) - - 2,565 2,838,532
- ------------------------------------------------------------------
3,968,012
- ------------------------------------------------------------------
VIRGINIA-0.67%
Covington-Alleghany (County
of) Industrial Development
Authority (Beverly
Enterprises); Refunding
Series RB
9.375%, 09/01/01(f) - - 55 61,612
- ------------------------------------------------------------------
Richmond (City of); Public
Improvement Refunding
Series B GO
6.25%, 01/15/18 AA A1 2,000 2,138,760
- ------------------------------------------------------------------
Virginia Housing Development
Authority; Commonwealth
Mortgage Series A RB
7.10%, 01/01/17 AA+ Aa1 250 264,552
- ------------------------------------------------------------------
2,464,924
- ------------------------------------------------------------------
</TABLE>
FS-95
<PAGE> 301
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WASHINGTON-2.95%
Clark (County of) Gamas
School District #117; GO
6.00%, 12/01/14(c) AAA Aaa $1,000 $ 1,085,620
- ------------------------------------------------------------------
King (County of); Unlimited
Tax GO
5.50%, 07/01/07(d) AAA Aaa 500 533,480
- ------------------------------------------------------------------
King (County of); Unlimited
Tax Refunding GO
6.50%, 12/01/11 AA+ Aa1 500 500,975
- ------------------------------------------------------------------
Pend Oreille (County of)
Public Utility District
#1; Electric Series B RB
6.30%, 01/01/17 BBB+ A 1,400 1,477,448
- ------------------------------------------------------------------
Seattle (City of)
Metropolitan Municipality;
Refunding Unlimited Sales
Tax Series GO
6.875%, 01/01/20 A+ Aa 1,450 1,491,514
- ------------------------------------------------------------------
Seattle (City of)
Metropolitan Municipality
Sewer District; Series T
RB
6.80%, 01/01/00(d)(e) NRR NRR 1,780 1,904,296
- ------------------------------------------------------------------
Washington State Public
Power Supply System
(Nuclear Project No. 1);
Refunding Series A RB
6.00%, 07/01/07(c) AAA Aaa 1,000 1,109,880
- ------------------------------------------------------------------
5.75%, 07/01/12(c) AAA Aaa 2,000 2,131,320
- ------------------------------------------------------------------
West Richland (City of);
Water & Sewer Series RB
7.00%, 12/01/04(d)(e) AAA Aaa 500 578,250
- ------------------------------------------------------------------
10,812,783
- ------------------------------------------------------------------
WEST VIRGINIA-0.14%
Ohio County Board of
Education; Unlimited Tax
Refunding Series GO
5.125%, 06/01/18 A+ A 500 497,155
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WISCONSIN-1.11%
Wisconsin Housing and
Economic Development
Authority; Home Ownership
RB
7.40%, Series 1994 F
07/01/13(b) AA Aa2 $1,000 $ 1,096,150
- ------------------------------------------------------------------
7.35%, Series 1994 E
01/01/17 AA Aa2 500 545,340
- ------------------------------------------------------------------
8.00%, Series 1990 E
03/01/21(b) AA Aa 300 316,472
- ------------------------------------------------------------------
Wisconsin Health and
Educational Facilities
Authority (Sinai Samaritan
Medical Center); Series
1994 F RB 5.75%,
08/15/16(c) AA Aa 1,500 1,576,515
- ------------------------------------------------------------------
Wisconsin Health and
Educational Facilities
Authority (Wheaton
Franciscan Services Inc.);
RB
8.20%, 08/15/98(d)(e) NRR Aaa 500 523,155
- ------------------------------------------------------------------
4,057,632
- ------------------------------------------------------------------
WYOMING-0.96%
Campbell (County of) School
District No. 1 (Gillette);
Unlimited Tax Series GO
5.35%, 06/01/04 AAA Aaa 1,000 1,064,510
- ------------------------------------------------------------------
Laramie (County of)
(Memorial Hospital
Project); Hospital
Series RB
6.70%, 05/01/12(c) AAA Aaa 250 276,915
- ------------------------------------------------------------------
Natrona (County of) Wyoming
Medical Center; RB
6.00%, 09/15/11(c) AAA Aaa 1,000 1,086,470
- ------------------------------------------------------------------
Sweetwater (County of)
(Idaho Power Company
Project); PCR
Series 1996 A RB
6.05%, 07/15/26 A A3 1,000 1,073,240
- ------------------------------------------------------------------
3,501,135
- ------------------------------------------------------------------
TOTAL INVESTMENTS-97.99% 359,123,485
- ------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.01% 7,355,322
- ------------------------------------------------------------------
NET ASSETS-100.00% $366,478,807
==================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Ratings assigned by Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P"). NRR indicates a security that is not re-rated
subsequent to funding of an escrow fund (consisting of U.S. Treasury
obligations); this funding is pursuant to an advance refunding for the
security. Ratings are not covered by Independent Auditors' Report.
(b) Security subject to the alternative minimum tax.
(c) Secured by bond insurance.
(d) Secured by an escrow fund of U.S. Treasury obligations.
(e) Security has an irrevocable call or mandatory put by the issuer. Maturity
date reflects such call or put.
(f) 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.
(g) Secured by a letter of credit.
Investment Abbreviations:
GO - General Obligation Bonds
IDR - Industrial Development Revenue Bonds
NRR - Not Re-Rated
PCR - Pollution Control Revenue Bonds
RB - Revenue Bonds
See Notes to Financial Statements.
FS-96
<PAGE> 302
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$331,790,903) $359,123,485
- ----------------------------------------------------------
Cash 787,976
- ----------------------------------------------------------
Receivables for:
Fund shares sold 488,687
- ----------------------------------------------------------
Interest 6,554,748
- ----------------------------------------------------------
Investments sold 830,750
- ----------------------------------------------------------
Investment for deferred compensation plan 65,053
- ----------------------------------------------------------
Other assets 28,067
- ----------------------------------------------------------
Total assets 367,878,766
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 95,828
- ----------------------------------------------------------
Dividends 699,674
- ----------------------------------------------------------
Deferred compensation plan 65,053
- ----------------------------------------------------------
Accrued advisory fees 140,726
- ----------------------------------------------------------
Accrued administrative service fees 5,442
- ----------------------------------------------------------
Accrued distribution fees 251,546
- ----------------------------------------------------------
Accrued trustees' fees 2,970
- ----------------------------------------------------------
Accrued transfer agent fees 106,994
- ----------------------------------------------------------
Accrued operating expenses 31,726
- ----------------------------------------------------------
Total liabilities 1,399,959
- ----------------------------------------------------------
Net assets applicable to shares outstanding $366,478,807
==========================================================
NET ASSETS:
Class A $318,468,805
==========================================================
Class B $ 47,185,232
==========================================================
Class C $ 824,770
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 38,171,168
==========================================================
Class B 5,647,120
==========================================================
Class C 98,779
==========================================================
Class A:
Net asset value and redemption price per
share $ 8.34
==========================================================
Offering price per share:
(Net asset value of $8.34
divided by 95.25%) $ 8.76
==========================================================
Class B:
Net asset value and offering price per
share $ 8.36
==========================================================
Class C:
Net asset value and offering price per
share $ 8.35
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $20,118,944
- ----------------------------------------------------------
EXPENSES:
Advisory fees 1,532,157
- ----------------------------------------------------------
Administrative service fees 70,780
- ----------------------------------------------------------
Custodian fees 17,893
- ----------------------------------------------------------
Transfer agent fees - Class A 240,369
- ----------------------------------------------------------
Transfer agent fees - Class B 32,698
- ----------------------------------------------------------
Transfer agent fees - Class C 124
- ----------------------------------------------------------
Trustees' fees 10,573
- ----------------------------------------------------------
Distribution fees - Class A 732,575
- ----------------------------------------------------------
Distribution fees - Class B 398,613
- ----------------------------------------------------------
Distribution fees - Class C 1,511
- ----------------------------------------------------------
Other 268,154
- ----------------------------------------------------------
Total expenses 3,305,447
- ----------------------------------------------------------
Less: Expenses paid indirectly (4,966)
- ----------------------------------------------------------
Net expenses 3,300,481
- ----------------------------------------------------------
Net investment income 16,818,463
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
SECURITIES:
Net realized gain on sales of investment
securities 114,781
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities 9,751,922
- ----------------------------------------------------------
Net gain on investment securities 9,866,703
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $26,685,166
==========================================================
</TABLE>
See Notes to Financial Statements.
FS-97
<PAGE> 303
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 16,818,463 $ 15,871,748
- ------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 114,781 118,748
- ------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities 9,751,922 (4,496,798)
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 26,685,166 11,493,698
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (15,139,605) (14,634,820)
- ------------------------------------------------------------------------------------------
Class B (1,703,002) (1,210,672)
- ------------------------------------------------------------------------------------------
Class C (5,880) --
- ------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A (152,238) --
- ------------------------------------------------------------------------------------------
Class B (20,640) --
- ------------------------------------------------------------------------------------------
Class C (62) --
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 30,852,332 (1,870,211)
- ------------------------------------------------------------------------------------------
Class B 12,563,423 12,523,478
- ------------------------------------------------------------------------------------------
Class C 817,511 --
- ------------------------------------------------------------------------------------------
Net increase in net assets 53,897,005 6,301,473
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 312,581,802 306,280,329
- ------------------------------------------------------------------------------------------
End of period $366,478,807 $312,581,802
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $340,696,817 $296,629,932
- ------------------------------------------------------------------------------------------
Undistributed net investment income (71,348) (34,765)
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on investment
securities (1,479,244) (1,594,025)
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 27,332,582 17,580,660
- ------------------------------------------------------------------------------------------
$366,478,807 $312,581,802
==========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 three different classes of shares: the Class A shares,
the Class B shares, and the Class C shares. The new Class C shares commenced
sales on August 4, 1997. Class A shares are sold with a front-end sales charge.
Class B and Class C 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 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 -- Portfolio securities are valued based on market
quotations or at fair value determined by a pricing service approved by the
Board of Trustees, provided that securities with a demand feature exercisable
within one to seven days will be valued at par. Prices provided by the
pricing service may be determined without exclusive reliance on quoted prices
and may reflect appropriate factors such as institution-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, individual trading characteristics and other market data. Portfolio
securities for which prices are not provided by the pricing service are
valued at the mean between the last available bid and asked prices, unless
the Board of Trustees, or persons designated by the Board of Trustees,
determines that the mean between the last available bid and asked prices does
not accurately reflect the current market value of the security. Securities
for which market quotations either are not readily available or are
questionable are valued at fair value as determined in good faith by or under
the supervision of the Trust's officers in a manner specifically authorized
by the Board of Trustees. Notwithstanding the above, short-term
FS-98
<PAGE> 304
obligations with maturities of 60 days or less are valued at amortized cost.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. It is the policy of the Fund to declare
daily dividends from net investment income. Such dividends are paid monthly.
Distributions from net realized capital gains, if any, are recorded on
ex-dividend date and are paid annually. On December 31, 1997, undistributed
net investment income was increased by $166,381 and paid-in capital reduced
by $166,381 in order to comply with the requirements of the American
Institute of Certified Public Accountants Statement of Position 93-2. Net
assets of the Fund were unaffected by the reclassifications discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $1,479,245 (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 -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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, 1997, AIM
was reimbursed $70,780 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, 1997, AFS
was paid $113,921 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted
distribution 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 the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of the Class C shares. The Fund,
pursuant to the Class B Plan, pays AIM Distributors an annual rate of 1.00% of
the average daily net assets attributable to the Class B shares. Of these
amounts, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class A, Class B or Class C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee by the Class B or Class C shares under the
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, 1997, for the Class A shares and Class B shares and the period August 4,
1997 (date sales commenced) through December 31, 1997, the Class A, Class B and
Class C shares paid AIM Distributors $732,575, $398,613, and $1,511
respectively, as compensation under the Plans.
AIM Distributors received commissions of $87,434 from sales of the Class A
shares of the Fund during the year ended December 31, 1997. 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, 1997,
AIM Distributors received $44,830 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, 1997, the Fund paid legal fees of $5,021
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) $500,000,000 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 15, 1997, the Fund was
limited to borrowing up to the lesser of (i) $325,000,000 or (ii) the limits set
by its prospectus for borrowings. During the year ended December 31, 1997, 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 0.05% 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-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced Fund
expenses by $1,233 during the year ended December 31, 1997. Also during the year
ended December 31, 1997, the Fund received a reduction in transfer agency fees
from AFS (an affiliate of AIM) of $3,733, under an expense offset arrangement.
The effect of the above arrangements resulted in reductions of the Fund's total
expenses of $4,966 during the year ended December 31, 1997.
FS-99
<PAGE> 305
NOTE 6-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, 1997 was
$94,911,754 and $78,890,833, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1997 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $27,334,470
- ------------------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,888)
- ------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $27,332,582
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 10,031,224 $ 79,386,539 5,797,996 $ 47,332,136
- ------------------------------------------------------------ -------------------------- ---------------------------
Class B 2,368,696 19,504,059 2,660,265 21,695,791
- ------------------------------------------------------------ -------------------------- ---------------------------
Class C* 111,584 923,229 -- --
- ------------------------------------------------------------ -------------------------- ---------------------------
Issued as reinvestment of dividends:
Class A 1,051,195 8,642,466 1,054,624 8,611,381
- ------------------------------------------------------------ -------------------------- ---------------------------
Class B 131,460 1,082,551 85,876 701,022
- ------------------------------------------------------------ -------------------------- ---------------------------
Class C* 510 4,239 -- --
- ------------------------------------------------------------ -------------------------- ---------------------------
Reacquired:
Class A (6,962,233) (57,176,673) (7,075,891) (57,813,728)
- ------------------------------------------------------------ -------------------------- ---------------------------
Class B (975,132) (8,023,187) (1,208,742) (9,873,335)
- ------------------------------------------------------------ -------------------------- ---------------------------
Class C* (13,315) (109,957) -- --
- ------------------------------------------------------------ -------------------------- ---------------------------
5,743,989 $ 44,233,266 1,314,128 $ 10,653,267
============================================================ ========================== ===========================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during each of the years in the five-year period ended December 31, 1997, for a
share of Class B outstanding during each of the years in the four-year period
ended December 31, 1997 and the period September 1, 1993 (date sales commenced)
through December 31, 1993, and for a share of Class C outstanding during the
period August 4, 1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.19 $ 8.31 $ 7.78 $ 8.61 $ 8.27
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.42 0.43 0.43 0.46 0.48
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) 0.16 (0.12) 0.56 (0.78) 0.46
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 0.58 0.31 0.99 (0.32) 0.94
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.43) (0.43) (0.43) (0.45) (0.48)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains -- -- -- (0.03) (0.11)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Returns of capital -- -- (0.03) (0.03) (0.01)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.43) (0.43) (0.46) (0.51) (0.60)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 8.34 $ 8.19 $ 8.31 $ 7.78 $ 8.61
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total return(a) 7.27% 3.90% 13.05% (3.79)% 11.66%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $318,469 $278,812 $284,803 $257,456 $294,209
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.90%(b)(c) 0.80% 0.88% 0.89% 0.91%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 5.14%(b) 5.29% 5.26% 5.61% 5.65%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 24% 26% 36% 43% 24%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average daily net assets of $293,030,139.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
FS-100
<PAGE> 306
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------------- -------
1997 1996 1995 1994 1993 1997
---- ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.19 $ 8.31 $ 7.78 $ 8.61 $ 8.71 $ 8.30
- -------------------------------------------------------- ------- ------- ------- ------ ------ ------
Income from investment operations:
Net investment income 0.36 0.37 0.39 0.39 0.14 0.15
- -------------------------------------------------------- ------- ------- ------- ------ ------ ------
Net gains (losses) on securities (both realized and
unrealized) 0.17 (0.13) 0.54 (0.78) 0.01 0.04
- -------------------------------------------------------- ------- ------- ------- ------ ------ ------
Total from investment operations 0.53 0.24 0.93 (0.39) 0.15 0.19
- -------------------------------------------------------- ------- ------- ------- ------ ------ ------
Less distributions:
Dividends from net investment income (0.36) (0.36) (0.37) (0.38) (0.13) (0.14)
- -------------------------------------------------------- ------- ------- ------- ------ ------ ------
Distributions from net realized gains -- -- -- (0.03) (0.11) --
- -------------------------------------------------------- ------- ------- ------- ------ ------ ------
Returns of capital -- -- (0.03) (0.03) (0.01) --
- -------------------------------------------------------- ------- ------- ------- ------ ------ ------
Total distributions (0.36) (0.36) (0.40) (0.44) (0.25) (0.14)
- -------------------------------------------------------- ------- ------- ------- ------ ------ ------
Net asset value, end of period $ 8.36 $ 8.19 $ 8.31 $ 7.78 $ 8.61 $ 8.35
======================================================== ======= ======= ======= ====== ====== ======
Total return(a) 6.59% 2.99% 12.14% (4.57)% 1.95% 2.36%
======================================================== ======= ======= ======= ====== ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $47,185 $33,770 $21,478 $9,175 $2,319 $ 825
======================================================== ======= ======= ======= ====== ====== ======
Ratio of expenses to average net assets(b) 1.66%(c)(d) 1.61% 1.68% 1.67% 1.65%(e) 1.67%(c)(d)(e)
======================================================== ======= ======= ======= ====== ====== ======
Ratio of net investment income to average net assets(f) 4.38%(c) 4.49% 4.46% 4.83% 4.91%(e) 4.37%(c)(e)
======================================================== ======= ======= ======= ====== ====== ======
Portfolio turnover rate 24% 26% 36% 43% 24% 24%
======================================================== ======= ======= ======= ====== ====== ======
</TABLE>
(a) Does not deduct contingent deferred sales charges and are not annualized for
periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average daily net assets prior to fee waivers and/or expense reimbursements
were 1.77%, 1.84% and 3.08% (annualized) for the periods 1995-1993,
respectively.
(c) Ratios are based on average daily net assets of $39,861,298 and $367,550,
respectively for Class B and Class C.
(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) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average daily net assets prior to fee waivers and/or expense
reimbursements are 4.37%, 4.66% and 3.48% (annualized) for the periods
1995-1993, respectively.
FS-101
<PAGE> 307
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, 1997, 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 or periods in the five-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 and financial highlights. Our procedures
included confirmation of securities owned as of December
31, 1997, 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, 1997, 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 or periods in the five-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
February 6, 1998
FS-102
<PAGE> 308
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-66.18%
AEROSPACE/DEFENSE-0.43%
Boeing Co. (The) 47,500 $ 2,324,530
- -------------------------------------------------------------
Lockheed Martin Corp. 34,900 3,437,650
- -------------------------------------------------------------
Orbital Sciences Corp.(a) 271,200 8,068,200
- -------------------------------------------------------------
Precision Castparts Corp. 738,300 44,528,718
- -------------------------------------------------------------
58,359,098
- -------------------------------------------------------------
AIRFREIGHT-0.24%
Airborne Freight Corp. 331,800 20,613,075
- -------------------------------------------------------------
Federal Express Corp.(a) 188,700 11,522,493
- -------------------------------------------------------------
32,135,568
- -------------------------------------------------------------
AIRLINES-0.64%
Continental Airlines,
Inc.(a) 1,800,000 86,625,000
- -------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.85%
Banc One Corp. 2,000,000 108,625,000
- -------------------------------------------------------------
Wachovia Corp. 87,400 7,090,325
- -------------------------------------------------------------
115,715,325
- -------------------------------------------------------------
BANKS (MONEY CENTER)-5.03%
BankAmerica Corp.(b) 3,300,000 240,900,000
- -------------------------------------------------------------
Chase Manhattan Corp. 1,855,400 203,166,300
- -------------------------------------------------------------
Citicorp (b) 1,900,000 240,231,250
- -------------------------------------------------------------
684,297,550
- -------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.28%
US West Media Group(a) 1,292,300 37,315,162
- -------------------------------------------------------------
BUILDING MATERIALS-0.19%
Masco Corp. 500,000 25,437,500
- -------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.41%
Cytec Industries Inc.(a) 1,178,000 55,292,375
- -------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.32%
Comverse Technology,
Inc.(a) 1,100,000 42,900,000
- -------------------------------------------------------------
COMPUTERS (HARDWARE)-1.73%
Compaq Computer Corp. 1,000,000 56,437,500
- -------------------------------------------------------------
Stratus Computer, Inc.(a) 700,000 26,468,750
- -------------------------------------------------------------
Sun Microsystems, Inc.(a) 3,800,000 151,525,000
- -------------------------------------------------------------
234,431,250
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (NETWORKING)-0.32%
Bay Networks, Inc.(a) 1,700,000 $ 43,456,250
- -------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.94%
Adaptec, Inc.(a) 1,000,000 37,125,000
- -------------------------------------------------------------
Quantum Corp.(a)(b) 4,500,000 90,281,250
- -------------------------------------------------------------
127,406,250
- -------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-3.25%
America Online, Inc.(a) 250,000 22,296,875
- -------------------------------------------------------------
American Management
Systems, Inc.(a) 750,000 14,625,000
- -------------------------------------------------------------
Autodesk, Inc. 200,000 7,400,000
- -------------------------------------------------------------
Avant! Corp.(a) 65,600 1,098,800
- -------------------------------------------------------------
Computer Associates
International, Inc. 4,500,000 237,937,500
- -------------------------------------------------------------
Network Associates, Inc.(a) 891,690 47,148,108
- -------------------------------------------------------------
Sybase, Inc.(a) 3,000,000 39,937,500
- -------------------------------------------------------------
Unisys Corp.(a) 5,200,000 72,150,000
- -------------------------------------------------------------
442,593,783
- -------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.29%
American Greetings
Corp.-Class A 1,000,000 39,125,000
- -------------------------------------------------------------
CONSUMER FINANCE-1.24%
Household International,
Inc. 490,500 62,569,406
- -------------------------------------------------------------
MBNA Corp. 1,747,800 47,736,787
- -------------------------------------------------------------
SLM Holding Corp. 421,000 58,571,625
- -------------------------------------------------------------
168,877,818
- -------------------------------------------------------------
ELECTRIC COMPANIES-0.31%
Allegheny Energy, Inc. 653,400 21,235,500
- -------------------------------------------------------------
Carolina Power & Light Co. 262,400 11,135,600
- -------------------------------------------------------------
Wisconsin Energy Corp. 339,400 9,757,750
- -------------------------------------------------------------
42,128,850
- -------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.83%
American Power Conversion
Corp.(a) 2,700,000 63,787,500
- -------------------------------------------------------------
AVX Corp. 189,000 3,484,687
- -------------------------------------------------------------
SCI Systems, Inc.(a) 800,000 34,850,000
- -------------------------------------------------------------
Symbol Technologies, Inc. 302,200 11,408,050
- -------------------------------------------------------------
113,530,237
- -------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-0.13%
Waters Corp.(a) 466,100 17,537,012
- -------------------------------------------------------------
</TABLE>
FS-103
<PAGE> 309
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-0.68%
Maxim Integrated Products,
Inc.(a) 1,249,000 $ 43,090,500
- -------------------------------------------------------------
Microchip Technology,
Inc.(a) 800,000 24,000,000
- -------------------------------------------------------------
National Semiconductor
Corp.(a) 1,000,000 25,937,500
- -------------------------------------------------------------
93,028,000
- -------------------------------------------------------------
ENTERTAINMENT-0.51%
Viacom, Inc.-Class B(a) 1,675,100 69,411,957
- -------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.95%
Ambac Financial Group, Inc. 1,200,000 55,200,000
- -------------------------------------------------------------
Fannie Mae 3,963,000 226,138,688
- -------------------------------------------------------------
Freddie Mac 5,182,000 217,320,125
- -------------------------------------------------------------
MBIA, Inc. 1,032,600 68,990,587
- -------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 1,794,000 106,070,250
- -------------------------------------------------------------
673,719,650
- -------------------------------------------------------------
FOODS-0.19%
Interstate Bakeries Corp. 708,000 26,461,500
- -------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-0.76%
Bristol-Myers Squibb Co. 1,100,000 104,087,500
- -------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.92%
ICN Pharmaceuticals, Inc. 1,660,035 81,030,458
- -------------------------------------------------------------
Watson Pharmaceuticals,
Inc.(a) 1,371,400 44,484,787
- -------------------------------------------------------------
125,515,245
- -------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.64%
Quorum Health Group,
Inc.(a) 2,700,000 70,537,500
- -------------------------------------------------------------
Tenet Healthcare
Corp.(a)(b) 500,000 16,562,500
- -------------------------------------------------------------
87,100,000
- -------------------------------------------------------------
HEALTH CARE (LONG-TERM CARE)-0.57%
Genesis Health Ventures,
Inc.(a) 1,420,000 37,452,500
- -------------------------------------------------------------
Health Care and Retirement
Corp.(a) 1,000,000 40,250,000
- -------------------------------------------------------------
77,702,500
- -------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-2.13%
MedPartners, Inc.(a) 9,100,000 203,612,500
- -------------------------------------------------------------
PhyCor, Inc.(a) 3,200,000 86,400,000
- -------------------------------------------------------------
290,012,500
- -------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-1.56%
Allegiance Corp. 549,000 19,455,188
- -------------------------------------------------------------
Baxter International Inc. 1,682,000 84,835,875
- -------------------------------------------------------------
Becton, Dickinson & Co. 800,000 40,000,000
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-(CONTINUED)
Sybron International
Corp.(a) 1,445,000 $ 67,824,687
- -------------------------------------------------------------
212,115,750
- -------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.26%
FPA Medical Management,
Inc.(a) 225,300 4,196,212
- -------------------------------------------------------------
Omnicare, Inc. 1,000,000 31,000,000
- -------------------------------------------------------------
35,196,212
- -------------------------------------------------------------
HOMEBUILDING-0.08%
Clayton Homes, Inc. 600,000 10,800,000
- -------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.45%
Colgate-Palmolive Co. 840,000 61,740,000
- -------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.57%
Conseco, Inc. 2,550,000 115,865,625
- -------------------------------------------------------------
Equitable Companies, Inc. 400,000 19,900,000
- -------------------------------------------------------------
Provident Companies, Inc. 2,000,000 77,250,000
- -------------------------------------------------------------
213,015,625
- -------------------------------------------------------------
INSURANCE (MULTI-LINE)-5.31%
Ace, Ltd. 1,292,800 124,755,200
- -------------------------------------------------------------
American International
Group, Inc.(b) 3,400,000 369,750,000
- -------------------------------------------------------------
CIGNA Corp. 198,600 34,370,212
- -------------------------------------------------------------
Hartford Financial Services
Group Inc. (The) 1,420,700 132,924,244
- -------------------------------------------------------------
Travelers Group, Inc. 1,125,000 60,609,375
- -------------------------------------------------------------
722,409,031
- -------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-5.46%
Allstate Corp. 5,305,000 482,091,875
- -------------------------------------------------------------
Chubb Corp. 300,000 22,687,500
- -------------------------------------------------------------
Exel Ltd. 2,000,000 126,750,000
- -------------------------------------------------------------
Progressive Corp. 600,000 71,925,000
- -------------------------------------------------------------
Transatlantic Holdings,
Inc. 562,000 40,183,000
- -------------------------------------------------------------
743,637,375
- -------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-1.12%
Merrill Lynch & Co., Inc. 2,081,800 151,841,288
- -------------------------------------------------------------
LODGING-HOTELS-2.09%
Carnival Corp.-Class A 2,986,100 165,355,288
- -------------------------------------------------------------
Host Marriott Corp.(a) 700,000 13,737,500
- -------------------------------------------------------------
Promus Hotel Corp.(a) 1,125,000 47,250,000
- -------------------------------------------------------------
Royal Caribbean Cruises
Ltd. 1,094,000 58,323,875
- -------------------------------------------------------------
284,666,663
- -------------------------------------------------------------
</TABLE>
FS-104
<PAGE> 310
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURING (DIVERSIFIED)-0.62%
Eaton Corp. 355,600 $ 31,737,300
- -------------------------------------------------------------
Hillenbrand Industries,
Inc. 400,000 20,475,000
- -------------------------------------------------------------
Tyco International Ltd.
(Bermuda) 723,800 32,616,237
- -------------------------------------------------------------
84,828,537
- -------------------------------------------------------------
NATURAL GAS-1.05%
El Paso Natural Gas Co. 1,486,400 98,845,600
- -------------------------------------------------------------
Williams Companies, Inc.
(The) 1,540,000 43,697,500
- -------------------------------------------------------------
142,543,100
- -------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.16%
Wallace Computer Services,
Inc. 575,300 22,364,789
- -------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.79%
Baker Hughes, Inc. 500,000 21,812,500
- -------------------------------------------------------------
BJ Services Co.(a) 600,000 43,162,500
- -------------------------------------------------------------
Cooper Cameron Corp.(a) 400,000 24,400,000
- -------------------------------------------------------------
Noble Drilling Corp.(a) 600,000 18,375,000
- -------------------------------------------------------------
107,750,000
- -------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.58%
Tosco Corp. 2,100,221 79,414,607
- -------------------------------------------------------------
PHOTOGRAPHY/IMAGING-1.19%
Xerox Corp. 2,200,000 162,387,500
- -------------------------------------------------------------
PUBLISHING-0.04%
Meredith Corp. 135,800 4,846,363
- -------------------------------------------------------------
RAILROADS-0.26%
Kansas City Southern
Industries, Inc. 1,111,100 35,277,425
- -------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST-0.30%
Cali Realty Corp. 1,000,000 41,000,000
- -------------------------------------------------------------
RESTAURANTS-0.33%
Cracker Barrel Old Country
Store, Inc. 1,143,900 38,177,662
- -------------------------------------------------------------
Papa John's International,
Inc.(a) 192,400 6,709,950
- -------------------------------------------------------------
44,887,612
- -------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.61%
CompUSA, Inc.(a) 800,000 24,800,000
- -------------------------------------------------------------
Ingram Micro, Inc.-Class
A(a) 1,200,000 34,950,000
- -------------------------------------------------------------
Tech Data Corp.(a)(b) 607,400 23,612,676
- -------------------------------------------------------------
83,362,676
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (FOOD CHAINS)-0.87%
Kroger Co.(a) 1,500,000 $ 55,406,250
- -------------------------------------------------------------
Safeway, Inc.(a) 1,000,100 63,256,326
- -------------------------------------------------------------
118,662,576
- -------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.40%
Dayton-Hudson Corp. 800,000 54,000,000
- -------------------------------------------------------------
RETAIL (SPECIALTY)-0.47%
Corporate Express, Inc.(a) 5,000,000 64,375,000
- -------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.95%
Charter One Financial, Inc. 420,000 26,512,500
- -------------------------------------------------------------
Washington Mutual, Inc. 1,600,080 102,105,105
- -------------------------------------------------------------
128,617,605
- -------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.90%
Cendant Corp.(a) 961,240 33,042,626
- -------------------------------------------------------------
Service Corp. International 3,600,000 132,975,000
- -------------------------------------------------------------
Stewart Enterprises,
Inc.-Class A 2,000,000 93,250,000
- -------------------------------------------------------------
259,267,626
- -------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.16%
National Data Corp. 600,000 21,675,000
- -------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.37%
AccuStaff, Inc.(a) 2,200,000 50,600,000
- -------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.12%
Nextel Communications,
Inc.(a) 650,900 16,923,400
- -------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-6.21%
AT&T Corp.(b) 1,416,100 86,736,125
- -------------------------------------------------------------
LCI International, Inc.(a) 1,273,400 39,157,050
- -------------------------------------------------------------
MCI Communications Corp. 6,000,000 256,875,000
- -------------------------------------------------------------
Sprint Corp. 654,200 38,352,475
- -------------------------------------------------------------
WorldCom, Inc.(a) 14,000,093 423,502,814
- -------------------------------------------------------------
844,623,464
- -------------------------------------------------------------
TOBACCO-1.66%
Philip Morris Companies,
Inc.(b) 5,000,000 226,562,500
- -------------------------------------------------------------
WASTE MANAGEMENT-0.46%
USA Waste Services, Inc.(a) 1,600,000 62,800,000
- -------------------------------------------------------------
Total Domestic Common Stocks 9,006,394,604
- -------------------------------------------------------------
</TABLE>
FS-105
<PAGE> 311
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS-13.16%
BRAZIL-0.33%
Uniao de Bancos Brasileiros
S.A.-GDR
(Banks-Regional)(a) 1,400,000 $ 45,062,500
- -------------------------------------------------------------
CANADA-4.76%
Bank of Montreal
(Banks-Money Center) 1,200,000 53,196,179
- -------------------------------------------------------------
Canadian National Railway
Co.-ADR (Railroads) 700,000 33,075,000
- -------------------------------------------------------------
Philip Services Corp.-ADR
(Waste Management)(a) 2,300,000 33,062,500
- -------------------------------------------------------------
Royal Bank of Canada
(Banks-Major Regional) 10,001,800 529,118,001
- -------------------------------------------------------------
648,451,680
- -------------------------------------------------------------
DENMARK-0.34%
Novo Nordisk A/S (Health
Care-Drugs-Generic &
Other) 321,000 45,911,353
- -------------------------------------------------------------
FINLAND-0.77%
Nokia Oyj A.B.-Class A-ADR
(Communications
Equipment) 1,500,000 105,000,000
- -------------------------------------------------------------
ITALY-1.45%
Credito Italiano S.p.A.
(Banks-Major Regional) 30,000,000 92,798,191
- -------------------------------------------------------------
Istituto Mobiliare Italiano
S.p.A. (Banks-Major
Regional) 5,000,000 59,279,254
- -------------------------------------------------------------
Telecom Italia S.p.A.
(Telephone) 7,079,638 45,287,272
- -------------------------------------------------------------
197,364,717
- -------------------------------------------------------------
NETHERLANDS-0.33%
Akzo Nobel N.V. (Chemicals-
Diversified) 259,000 44,655,833
- -------------------------------------------------------------
PHILIPPINES-0.01%
Metro Pacific Corp.
(Manufacturing-
Diversified) 28,646,870 792,210
- -------------------------------------------------------------
PORTUGAL-0.08%
Portugal Telecom S.A.
(Telephone) 223,750 10,382,097
- -------------------------------------------------------------
SPAIN-0.15%
Endesa S.A. (Electric
Companies) 445,300 7,906,377
- -------------------------------------------------------------
Telefonica de Espana
(Telephone) 415,300 11,857,926
- -------------------------------------------------------------
19,764,303
- -------------------------------------------------------------
SWEDEN-1.62%
Nordbanken Holding A.B.
(Banks-Major Regional) 16,438,800 92,961,136
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SWEDEN-(CONTINUED)
Sparbanken Sverige
A.B.-Class A (Banks-Major
Regional) 4,980,850 $ 113,231,077
- -------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson-ADR
(Communications
Equipment) 400,000 14,925,000
- -------------------------------------------------------------
221,117,213
- -------------------------------------------------------------
SWITZERLAND-0.71%
Novartis A.G. (Health Care-
Diversified) 60,000 97,297,297
- -------------------------------------------------------------
UNITED KINGDOM-2.61%
Danka Business Systems
PLC-ADR (Office Equipment
& Supplies) 1,207,500 19,244,531
- -------------------------------------------------------------
Ladbroke Group PLC (Leisure
Time-Products) 6,750,000 29,266,677
- -------------------------------------------------------------
Railtrack Group PLC
(Shipping) 3,857,100 61,256,628
- -------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Health Care-Drugs-Major
Pharmaceuticals)(b) 4,667,200 240,069,100
- -------------------------------------------------------------
Standard Chartered PLC
(Banks-Major Regional) 460,100 4,911,694
- -------------------------------------------------------------
354,748,630
- -------------------------------------------------------------
Total Foreign Stocks & Other Equity
Interests 1,790,547,833
- -------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS-0.48%
HEALTH CARE (MANAGED CARE)-0.15%
Medpartners Inc.-$1.44
Conv. Pfd. 903,000 19,866,000
- -------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.12%
Conseco Inc.-$4.278 Conv.
PRIDES 105,000 16,380,000
- -------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.21%
WorldCom, Inc.-$2.68 Conv.
Pfd. 283,100 29,725,500
- -------------------------------------------------------------
Total Convertible Preferred Stocks 65,971,500
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
TIME DEPOSIT-0.62%
Deutsche Bank Securities
Corp.
6.75%, 01/02/98 $ 85,000,000 85,000,000
- ------------------------------------------------------------
Total Investments (excluding
Repurchase Agreements) 10,947,913,937
- ------------------------------------------------------------
REPURCHASE AGREEMENTS(c)-20.79%
Barclays De Zoete Wedd,
6.60%(d), 01/02/98 70,469,028 70,469,028
- ------------------------------------------------------------
CBIC Wood Gundy Securities
Corp.,
6.75%(e), 01/02/98 400,000,000 400,000,000
- ------------------------------------------------------------
</TABLE>
FS-106
<PAGE> 312
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENTS-(CONTINUED)
Dresdner Bank AG,
5.25%(f), 01/02/98 $ 100,000,000 $ 100,000,000
- -------------------------------------------------------------
Goldman Sachs & Co.,
5.25%(g), 01/02/98 300,000,000 300,000,000
- -------------------------------------------------------------
6.53%(h), 01/02/98 396,659,217 396,659,217
- -------------------------------------------------------------
6.80%(i), 01/02/98 312,824,281 312,824,281
- -------------------------------------------------------------
Merrill Lynch & Co. Inc.,
5.50%(j) 200,000,000 200,000,000
- -------------------------------------------------------------
SBC Capital Markets, Inc.,
4.25%(k), 01/02/98 150,000,000 150,000,000
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENTS-(CONTINUED)
5.15%(l), 01/02/98 $ 400,000,000 $ 400,000,000
- -------------------------------------------------------------
6.75%(m), 01/02/98 500,000,000 500,000,000
- -------------------------------------------------------------
Total Repurchase Agreements 2,829,952,526
- -------------------------------------------------------------
TOTAL INVESTMENTS-101.23% 13,777,866,463
- -------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(1.23%) (167,917,952)
- -------------------------------------------------------------
NET ASSETS-100.00% $13,609,948,511
=============================================================
</TABLE>
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
GDR - Global Depositary Receipt
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
Sub. - Subordinated
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of these securities are subject to call options written. See Note
8.
(c) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$300,110,000. Collateralized by $299,790,000 U.S. Government obligations, 0%
to 7.025% due 01/15/98 to 11/13/07 with an aggregate market value at
12/31/97 of $306,000,850.
(e) Repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $399,965,000 U.S. Government obligations, 0%
to 11.25% due 06/01/98 to 02/15/15 with an aggregate market value at
12/31/97 of $408,000,501.
(f) Repurchase agreement entered into 12/31/97 with a maturing value of
$100,029,167. Collateralized by $101,670,000 U.S. Government obligations, 0%
to 6.25% due 05/07/98 to 08/31/02 with an aggregate market value at 12/31/97
of $102,000,802.
(g) Repurchase agreement entered into 12/31/97 with a maturing value of
$300,087,500. Collateralized by $293,402,000 U.S. Government obligations,
5.625% to 6.50% due 08/15/99 to 10/15/06 with an aggregate market value at
12/31/97 of $306,301,187.
(h) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$900,326,500. Collateralized by $856,643,000 U.S. Government obligations, 0%
to 14% due 01/08/98 to 08/15/23 with an aggregate market value at 12/31/97
of $918,902,583.
(i) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$800,302,222. Collateralized by $1,489,204,572 U.S. Government obligations,
5.107% to 9.136% due 08/01/02 to 05/01/35 with an aggregate market value at
12/31/97 of $816,000,078.
(j) Open repurchase agreement entered into 12/31/97. Collateralized by
$469,973,264 U.S. Government obligations, 0% to 16.50% due 05/01/98 to
08/01/31 with an aggregate market value at 12/31/97 of $204,001,008.
(k) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$500,118,056. Collateralized by $503,848,000 U.S. Government obligations,
3.375% to 6.50% due 05/31/98 to 01/15/07 with an aggregate market value at
12/31/97 of $510,059,173.
(l) Repurchase agreement entered into 12/31/97 with a maturing value of
$400,114,444. Collateralized by $337,547,000 U.S. Government obligations, 0%
to 12% due 08/31/98 to 08/15/25 with an aggregate market value at 12/31/97
of $408,282,570.
(m) Repurchase agreement entered into 12/31/97 with a maturing value of
$500,187,500. Collateralized by $511,195,000 U.S. Government obligations,
6.50% to 7% due 12/01/12 to 10/01/27 with an aggregate market value at
12/31/97 of $512,386,030.
See Notes to Financial Statements.
FS-107
<PAGE> 313
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments (excluding repurchase
agreements), at market value (cost
$8,628,039,403) $10,947,913,937
- ----------------------------------------------------------
Repurchase agreements (cost
2,829,952,526) 2,829,952,526
- ----------------------------------------------------------
Foreign currencies, at value (cost
$7,797,037) 7,683,993
- ----------------------------------------------------------
Receivables for:
Investments sold 59,096,899
- ----------------------------------------------------------
Fund shares sold 41,392,487
- ----------------------------------------------------------
Dividends and interest 12,832,137
- ----------------------------------------------------------
Investment for deferred compensation plan 93,487
- ----------------------------------------------------------
Other assets 144,622
- ----------------------------------------------------------
Total assets 13,899,110,088
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 233,364,138
- ----------------------------------------------------------
Fund shares reacquired 18,366,529
- ----------------------------------------------------------
Options written 14,124,863
- ----------------------------------------------------------
Deferred compensation plan 93,487
- ----------------------------------------------------------
Accrued advisory fees 6,940,004
- ----------------------------------------------------------
Accrued administrative service fees 17,368
- ----------------------------------------------------------
Accrued distribution fees 12,229,970
- ----------------------------------------------------------
Accrued transfer agent fees 2,386,762
- ----------------------------------------------------------
Accrued trustees' fees 14,896
- ----------------------------------------------------------
Accrued operating expenses 1,623,560
- ----------------------------------------------------------
Total liabilities 289,161,577
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $13,609,948,511
==========================================================
NET ASSETS:
Class A $ 6,745,252,900
==========================================================
Class B $ 6,831,795,749
==========================================================
Class C $ 32,899,862
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 208,074,043
==========================================================
Class B 214,229,189
==========================================================
Class C 1,031,375
==========================================================
Class A:
Net asset value and redemption price
per share $ 32.42
==========================================================
Offering price per share:
(Net asset value of $32.42 divided
by 94.50%) $ 34.31
==========================================================
Class B:
Net asset value and offering price per
share $ 31.89
==========================================================
Class C:
Net asset value and offering price per
share $ 31.90
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $5,373,214 foreign
withholding tax) $ 147,003,956
- ----------------------------------------------------------
Interest 46,029,269
- ----------------------------------------------------------
Total investment income 193,033,225
- ----------------------------------------------------------
EXPENSES:
Advisory fees 75,312,449
- ----------------------------------------------------------
Custodian fees 1,562,667
- ----------------------------------------------------------
Distribution fees -- Class A 15,098,832
- ----------------------------------------------------------
Distribution fees -- Class B 59,621,333
- ----------------------------------------------------------
Distribution fees -- Class C 63,254
- ----------------------------------------------------------
Administrative service fees 225,784
- ----------------------------------------------------------
Trustees' fees 77,336
- ----------------------------------------------------------
Transfer agent fees -- Class A 8,289,133
- ----------------------------------------------------------
Transfer agent fees -- Class B 11,799,719
- ----------------------------------------------------------
Transfer agent fees -- Class C 15,522
- ----------------------------------------------------------
Other 3,414,777
- ----------------------------------------------------------
Total expenses 175,480,806
- ----------------------------------------------------------
Less: Fees waived by advisor (2,501,999)
- ----------------------------------------------------------
Expenses paid indirectly (260,298)
- ----------------------------------------------------------
Net expenses 172,718,509
- ----------------------------------------------------------
Net investment income 20,314,716
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 1,420,125,127
- ----------------------------------------------------------
Foreign currencies (2,453,966)
- ----------------------------------------------------------
Option contracts 32,600,560
- ----------------------------------------------------------
1,450,271,721
- ----------------------------------------------------------
Net unrealized appreciation of:
Investment securities 951,396,114
- ----------------------------------------------------------
Foreign currencies 718,971
- ----------------------------------------------------------
Option contracts 9,872,222
- ----------------------------------------------------------
961,987,307
- ----------------------------------------------------------
Net gain from investment securities,
foreign currencies and option contracts 2,412,259,028
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $2,432,573,744
==========================================================
</TABLE>
See Notes to Financial Statements.
FS-108
<PAGE> 314
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 20,314,716 $ 103,535,521
- -------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 1,450,271,721 379,159,846
- -------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and option contracts 961,987,307 687,919,898
- -------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,432,573,744 1,170,615,265
- -------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (7,048,371) (68,036,562)
- -------------------------------------------------------------------------------------------------
Class B -- (33,169,539)
- -------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (677,329,447) (182,879,810)
- -------------------------------------------------------------------------------------------------
Class B (697,438,107) (175,428,877)
- -------------------------------------------------------------------------------------------------
Class C (2,766,027) --
- -------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 1,076,707,236 1,320,636,081
- -------------------------------------------------------------------------------------------------
Class B 1,473,648,468 1,674,774,506
- -------------------------------------------------------------------------------------------------
Class C 35,606,705 --
- -------------------------------------------------------------------------------------------------
Net increase in net assets 3,633,954,201 3,706,511,064
- -------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 9,975,994,310 6,269,483,246
- -------------------------------------------------------------------------------------------------
End of period $13,609,948,511 $9,975,994,310
=================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $11,116,186,261 $8,530,223,852
- -------------------------------------------------------------------------------------------------
Undistributed net investment income 17,752,405 6,940,026
- -------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign
currencies, futures and option contracts 151,380,707 76,188,601
- -------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and option contracts 2,324,629,138 1,362,641,831
- -------------------------------------------------------------------------------------------------
$13,609,948,511 $9,975,994,310
=================================================================================================
</TABLE>
See Notes to Financial Statements.
FS-109
<PAGE> 315
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 three different classes of shares: the Class A shares, the
Class B shares and the Class C shares. The new Class C shares commenced sales on
August 4, 1997. Class A shares are sold with a front-end sales charge. Class B
and Class C 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 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 foreign 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 foreign 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 foreign 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, 1997,
$2,453,966 was reclassified from undistributed net investment income to
undistributed net realized gains as a result of differing book/tax treatment
of foreign currency transactions in order to comply with the requirements of
the American Institute of Certified Public Accountants Statement of Position
93-2. Net
FS-110
<PAGE> 316
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 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 -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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, 1997, AIM
voluntarily waived advisory fees in the amount of $2,501,999.
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, 1997, AIM
was reimbursed $225,784 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, 1997, AFS was paid
$11,353,884 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted
distribution 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 the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of the Class C shares. The Fund
pursuant to the Class B Plan, pays AIM Distributors compensation at an annual
rate of 1.00% of
FS-111
<PAGE> 317
the average daily net assets attributable to the Class B shares. Of these
amounts, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class A, Class B or Class C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee by the Class B or Class C shares under the
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, 1997, for the Class A shares and Class B shares and the period August 4,
1997 (date sales commenced) through December 31, 1997, for the Class C shares,
the Class A, Class B and Class C shares, paid AIM Distributors $15,098,832,
$59,621,333 and $63,254, respectively, as compensation under the Plans.
AIM Distributors received commissions of $4,660,735 from sales of the Class A
shares of the Fund during the year ended December 31, 1997. 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, 1997,
AIM Distributors received $1,752,662 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, 1997, the Fund paid legal fees of $22,577
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-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced Fund
expenses by $45,555 during the year ended December 31, 1997. Also during the
year ended December 31, 1997 the Fund received reductions in transfer agency
fees from AFS (an affiliate of AIM) and reductions in custodian fees of $133,849
and $80,894, respectively, under expense offset arrangements. The effect of the
above arrangements resulted in reductions of the Fund's total expenses of
$260,298 during the year ended December 31, 1997.
NOTE 4-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 5-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) $500,000,000 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 15, 1997, the Fund was
limited to borrowing up to the lesser of (i) $325,000,000 or (ii) the limits set
by its prospectus for borrowings. During the year ended December 31, 1997, 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 0.05% 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 6-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, 1997 was
$14,975,071,788 and $15,170,340,041, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $2,583,202,659
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (299,435,866)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $2,283,766,793
==========================================================
</TABLE>
Cost of investments for tax purposes is $8,664,147,144
FS-112
<PAGE> 318
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold:
Class A 56,549,515 $ 1,862,338,902 83,369,308 $2,309,759,146
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Class B 44,494,521 1,452,059,926 73,576,913 2,011,544,498
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Class C* 982,300 34,164,971 -- --
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Issued as reinvestment of dividends:
Class A 20,397,239 655,150,256 8,503,122 239,780,446
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Class B 20,756,501 656,098,487 7,058,251 197,560,616
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Class C* 82,603 2,611,962 -- --
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Reacquired:
Class A (43,852,562) (1,440,781,922) (44,030,263) (1,228,903,511)
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Class B (19,618,229) (634,509,945) (19,368,345) (534,330,608)
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
Class C* (33,528) (1,170,228) -- --
- ------------------------------------------------------------ ----------- --------------- ----------- --------------
* Class C shares commenced sales on August 4, 1997. 79,758,360 $ 2,585,962,409 109,108,986 $2,995,410,587
============================================================ =========== =============== =========== ==============
</TABLE>
NOTE 8-OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of period 100,123 $ 31,917,627
- ------------------------------------------------------ --------- ------------
Written 174,516 72,203,112
- ------------------------------------------------------ --------- ------------
Closed (41,450) (18,916,369)
- ------------------------------------------------------ --------- ------------
Exercised (126,094) (39,884,228)
- ------------------------------------------------------ --------- ------------
Expired (63,194) (26,236,892)
- ------------------------------------------------------ --------- ------------
End of period 43,901 $ 19,083,250
====================================================== ========= ============
</TABLE>
Open call option contracts written at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
NUMBER DECEMBER 31, UNREALIZED
CONTRACT STRIKE OF PREMIUM 1997 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
AT&T Corp. Apr. 60 4,000 $ 2,397,960 $ 2,075,000 $ 322,960
AT&T Corp. Apr. 65 1,075 413,324 335,938 77,386
American International Group, Inc. Feb. 100 5,000 3,229,892 5,250,000 (2,020,108)
BankAmerica Corp. Apr. 80 2,850 1,603,546 855,000 748,546
Citicorp Apr. 135 5,000 5,116,728 3,375,000 1,741,728
Philip Morris Companies, Inc. Jan. 45 5,000 797,473 546,875 250,598
Quantum Corp. Feb. 27.5 9,000 2,897,903 337,500 2,560,403
SmithKline Beecham PLC Jan. 50 4,000 1,212,959 887,500 325,459
Tech Data Corp. Jan. 45 2,976 617,251 55,800 561,451
Tenet Healthcare Corp. Feb. 35 5,000 796,214 406,250 389,964
- -------------------------------------------------------------------------------------------------------------------------------
43,901 $19,083,250 $14,124,863 $ 4,958,387
===============================================================================================================================
</TABLE>
FS-113
<PAGE> 319
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during each of the years in the five-year period ended December 31, 1997, for a
share of Class B outstanding during each of the years in the four-year period
ended December 31, 1997 and the period October 18, 1993 (date sales commenced)
through December 31, 1993, and for a share of Class C outstanding during the
period August 4, 1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 29.15 $ 26.81 $ 21.14 $ 20.82 $ 18.24
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Income from investment operations:
Net investment income 0.17 0.43(a) 0.14 0.16 0.04
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Net gains on securities (both realized and
unrealized) 6.78 3.42 7.21 0.52 3.34
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Total from investment operations 6.95 3.85 7.35 0.68 3.38
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Less distributions:
Dividends from net investment income (0.04) (0.41) (0.09) (0.16) (0.03)
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Distributions from net realized gains (3.64) (1.10) (1.59) (0.20) (0.77)
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Total distributions (3.68) (1.51) (1.68) (0.36) (0.80)
- -------------------------------------------------- ------------ ------------ ------------ ------------ ---------
Net asset value, end of period $ 32.42 $ 29.15 $ 26.81 $ 21.14 $ 20.82
================================================== ============ ============ ============ ============ =========
Total return(b) 23.95% 14.52% 34.85% 3.28% 18.71%
================================================== ============ ============ ============ ============ =========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 6,745,253 $5,100,061 $ 3,408,952 $ 1,358,725 $765,305
================================================== ============ ============ ============ ============ =========
Ratio of expenses to average net assets(c) 1.04%(d)(e) 1.11% 1.12% 0.98% 1.09%
================================================== ============ ============ ============ ============ =========
Ratio of net investment income to average net
assets(f) 0.57%(d) 1.65% 0.74% 0.92% 0.30%
================================================== ============ ============ ============ ============ =========
Portfolio turnover rate 137% 126% 151% 127% 177%
================================================== ============ ============ ============ ============ =========
Average brokerage commission rate paid(g) $ 0.0481 $ 0.0436 N/A N/A N/A
================================================== ============ ============ ============ ============ =========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers. Ratios of expenses to average net assets prior to fee
waivers were 1.06%, 1.13% and 1.13%, for 1997-1995, respectively.
(d) Ratios are based on average net assets of $6,039,532,925.
(e) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have been the same.
(f) After fee waivers. Ratios of net investment income to average net assets
prior to fee waivers were 0.55%, 1.63% and 0.73%, for 1997-1995,
respectively.
(g) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
FS-114
<PAGE> 320
NOTE 9-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------------------------------- ----------
1997 1996 1995 1994 1993 1997
---------- ------------ ------------ --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 28.92 $ 26.65 $ 21.13 $ 20.82 $ 21.80 $ 35.60
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Income from investment operations:
Net investment income (loss) (0.07) 0.20(a) (0.01) -- 0.02 (0.01)
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Net gains (losses) on securities
(both realized and unrealized) 6.68 3.38 7.12 0.51 (0.21) (0.05)
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Total from investment operations 6.61 3.58 7.11 0.51 (0.19) (0.06)
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Less distributions:
Dividends from net investment income -- (0.21) -- -- (0.02) --
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Distributions from net realized gains (3.64) (1.10) (1.59) (0.20) (0.77) (3.64)
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Total distributions (3.64) (1.31) (1.59) (0.20) (0.79) (3.64)
- -------------------------------------- ---------- ------------ ------------ --------- -------- ----------
Net asset value, end of period $ 31.89 $ 28.92 $ 26.65 $ 21.13 $ 20.82 $ 31.90
====================================== ========== ============ ============ ========= ======== ==========
Total return(b) 22.96% 13.57% 33.73% 2.46% (0.74)% (0.08)%
====================================== ========== ============ ============ ========= ======== ==========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $6,831,796 $ 4,875,933 $ 2,860,531 $ 680,119 $ 63,215 $ 32,900
====================================== ========== ============ ============ ========= ======== ==========
Ratio of expenses to average net
assets(c) 1.85%(d)(e) 1.94% 1.94% 1.90% 1.85%(f) 1.84%(d)(e)(f)
====================================== ========== ============ ============ ========= ======== ==========
Ratio of net investment income (loss)
to average net assets(c) (0.24)%(d) 0.82% (0.08)% 0.00% (0.46)%(f) (0.23)%(d)(f)
====================================== ========== ============ ============ ========= ======== ==========
Portfolio turnover rate 137% 126% 151% 127% 177% 137%
====================================== ========== ============ ============ ========= ======== ==========
Average brokerage commission rate
paid(g) $ 0.0481 $ 0.0436 N/A N/A N/A $ 0.0481
====================================== ========== ============ ============ ========= ======== ==========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and are not annualized for
periods less than one year .
(c) After fee waivers. Ratios of expenses to average net assets prior to fee
waivers were 1.87%, 1.96% and 1.96% for 1997-1995, respectively for Class B
and 1.86% for 1997 for Class C. Ratios of net investment income (loss) to
average net assets prior to fee waivers were (0.26)%, 0.81% and (0.09)% for
1997-1995, respectively for Class B and (0.25)% for 1997 for Class C.
(d) Ratios are based on average net assets of $5,962,133,311 for Class B and
$15,391,746 for Class C, respectively.
(e) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have been the same for Class B
and would have been 1.83% for Class C.
(f) Annualized.
(g) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
FS-115
<PAGE> 321
APPENDIX II
AIM MONEY
MARKET FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT JUNE 30, 1998
<PAGE> 322
Chairman's Letter
Dear Fellow Shareholder:
The fixed-income markets continued to be buffeted by overseas
[PHOTO OF turmoil during the first half of 1998, the period covered by
Charles T. this report. Early in January, the market was expecting an
Bauer, imminent reduction in rates by the Federal Reserve Board (the
Chairman of Fed) to counteract the negative effects from the Asian
the Board of economic crises. However, as it became apparent that the U.S.
THE FUND economy was going to shrug off the Asian influence and
APPEARS HERE] continue its strong growth, interest rates rose. The one-year
Treasury bill, whose yield had dropped as low as 5.10% in
January, backed up to the 5.45% area by late February.
Fueled by low interest rates and strong stock and labor
markets, the U.S. economy continued its solid growth in the
first quarter of 1998, rising at a 5.4% annual rate. Despite
this rapid growth, inflation remained contained, the
annualized rate running between 1% and 2%. As the second
quarter came to a close, it appeared that the economy was
finally slowing in response to the Asian influence and the
strike at General Motors; second-quarter economic growth was at an annual rate
of 1.4%.
During this reporting period, the Fed remained on watch for signs of
incipient inflation, which never appeared. As the Asia situation continued to
unfold, the Fed remained hesitant to raise rates. As a result, the Federal Funds
target remained at 5.5% throughout the reporting period.
YOUR INVESTMENT PORTFOLIO
In light of the continued asset volatility and uncertainty in the markets, the
Fund maintained a weighted average maturity (WAM) in the 13- to 29-day range. As
of June 30, the WAM stood at 19 days. This strategy produced competitive yields.
At the end of the reporting period, seven-day yields were as follows: Class A
shares, 4.67%; Class B shares, 3.89%; Class C shares, 3.89%; and AIM Cash
Reserve Shares, 4.74%.
AIM Money Market Fund seeks to provide as high a level of current income as
possible consistent with preservation of capital and liquidity by investing in
high-quality money market instruments including commercial paper, repurchase
agreements, and U.S. Treasury and U.S. government agency securities. An
investment in the Fund is neither insured nor guaranteed by the U.S. government,
and there can be no assurance that the Fund will be able to maintain a stable
net asset value of $1.00 per share.
OUTLOOK FOR THE FUTURE
As the third quarter opened, most market participants were expecting the Fed to
remain on the sidelines for the foreseeable future, though opinion remained
divided about its next move. Some were concerned that strong U.S. growth would
generate inflationary pressures, leading to a tighter Fed policy. Others
remained concerned that Asia's dampening effects on the U.S. would eventually
encourage the Fed to lower rates. With the flat yield curve and all the
uncertainty about the future direction of rates and where the stock market is
headed, Fund managers will continue to maintain the WAM toward the shorter end
of the spectrum.
We are pleased to send you this report on AIM Money Market Fund. As always,
we are ready to respond to any questions or comments. Please contact our Client
Services department at 800-959-4246. Automated information about your AIM
account is available 24 hours a day on the AIM Investor Line, 800-246-5463. Or
visit our Web site at www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE> 323
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
BANK NOTES-0.71%
BANKS-DOMESTIC-0.71%
Morgan Guaranty Trust
5.81%(a) 10/16/98 $ 8,000 $ 8,000,052
- ----------------------------------------------------------------
COMMERCIAL PAPER-36.18%(B)
ASSET-BACKED
SECURITIES-18.01%
Centric Capital Corp.
5.50% 07/17/98 9,250 9,227,389
- ----------------------------------------------------------------
5.53% 08/04/98 15,000 14,921,658
- ----------------------------------------------------------------
5.50% 08/14/98 4,000 3,973,111
- ----------------------------------------------------------------
Clipper Receivables Corp.
5.47% 07/02/98 10,000 9,998,481
- ----------------------------------------------------------------
5.59% 08/10/98 18,332 18,218,138
- ----------------------------------------------------------------
Falcon Asset Securitization
Corp.
5.52% 07/22/98 15,130 15,081,282
- ----------------------------------------------------------------
Monte Rosa Capital Corp.
5.60% 08/28/98 25,000 24,774,444
- ----------------------------------------------------------------
5.54% 09/11/98 20,000 19,778,400
- ----------------------------------------------------------------
Preferred Receivable Funding
Corp.
5.405% 07/06/98 3,000 2,997,748
- ----------------------------------------------------------------
5.51% 07/10/98 16,000 15,977,960
- ----------------------------------------------------------------
5.405% 07/15/98 17,500 17,463,216
- ----------------------------------------------------------------
Receivables Capital Corp.
5.53% 07/06/98 25,000 24,980,799
- ----------------------------------------------------------------
Sheffield Receivables Corp.
5.57% 09/08/98 25,000 24,733,104
- ----------------------------------------------------------------
202,125,730
- ----------------------------------------------------------------
AUTOMOBILE-3.55%
Daimler-Benz North America
5.52% 07/14/98 25,000 24,950,167
- ----------------------------------------------------------------
Toyota Motor Credit Corp.
5.53% 07/24/98 15,000 14,947,004
- ----------------------------------------------------------------
39,897,171
- ----------------------------------------------------------------
BEVERAGES-3.45%
Diageo Capital PLC
5.50% 07/31/98 24,000 23,890,000
- ----------------------------------------------------------------
5.48% 08/31/98 15,000 14,860,717
- ----------------------------------------------------------------
38,750,717
- ----------------------------------------------------------------
CHEMICALS-2.21%
Du Pont (E.I.) de Nemours
and Co.
5.495% 08/27/98 25,000 24,782,490
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
COMPUTER SOFTWARE & SERVICES-2.56%
First Data Corp.
5.52% 08/18/98 $ 9,000 $ 8,933,760
- ----------------------------------------------------------------
5.51% 09/01/98 20,000 19,810,211
- ----------------------------------------------------------------
28,743,971
- ----------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.51%
Hitachi America, Ltd.
5.52% 07/08/98 17,000 16,981,753
- ----------------------------------------------------------------
INSURANCE (PROPERTY &
CASUALTY)-1.75%
A.I. Credit Corp.
5.45% 10/05/98 20,000 19,709,333
- ----------------------------------------------------------------
MACHINERY-0.40%
Dover Corp.
5.59% 08/28/98 4,540 4,499,112
- ----------------------------------------------------------------
METAL MINING-1.85%
Rio Tinto America, Inc.
5.54% 08/18/98 10,000 9,926,134
- ----------------------------------------------------------------
5.46% 09/04/98 11,000 10,891,558
- ----------------------------------------------------------------
20,817,692
- ----------------------------------------------------------------
OIL & GAS (INTEGRATED)-0.89%
Shell Martinez Refining
Co.(c)
5.60% 07/14/98 10,000 10,000,000
- ----------------------------------------------------------------
Total Commercial Paper 406,307,969
- ----------------------------------------------------------------
MASTER NOTE AGREEMENTS-14.81%
Citicorp Securities, Inc.(d)
6.75% 01/25/99 29,000 29,000,000
- ----------------------------------------------------------------
The Goldman Sachs Group,
L.P.(e)
5.6523% 10/19/98 50,000 50,000,000
- ----------------------------------------------------------------
Merrill Lynch Mortgage
Capital, Inc.(f)
6.80% 08/17/98 37,400 37,400,000
- ----------------------------------------------------------------
Morgan Stanley Dean Witter &
Co.(g)
6.60% 11/23/98 50,000 50,000,000
- ----------------------------------------------------------------
Total Master Note
Agreements 166,400,000
- ----------------------------------------------------------------
TAXABLE MUNICIPAL BONDS-2.76%
HEALTH CARE-0.89%
Jacksonville Florida Health
Facilities; Hospital
Series Revenue Bonds
5.70%(h) 08/15/19 10,000 10,000,000
- ----------------------------------------------------------------
</TABLE>
2
<PAGE> 324
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
HOSPITAL MANAGEMENT-0.98%
Illinois Health Facilities
Authority (Loyola
University Health
Systems); Revenue Bonds
5.70%(h) 07/01/24 $ 11,000 $ 11,000,000
- ----------------------------------------------------------------
MULTIPLE INDUSTRY-0.89%
Mississippi Business Finance
Corp. (Mississippi
Industrial Development);
Revenue Bonds
5.64%(h) 02/01/23 10,000 10,000,000
- ----------------------------------------------------------------
Total Taxable Municipal
Bonds 31,000,000
- ----------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES-3.97%
Fannie Mae(i)
5.261% 06/02/99 32,000 32,000,000
- ----------------------------------------------------------------
Sallie Mae(i)
5.321% 08/20/98 2,600 2,600,000
- ----------------------------------------------------------------
5.341% 02/08/99 10,000 10,001,028
- ----------------------------------------------------------------
Total U.S. Government
Agency Securities 44,601,028
- ----------------------------------------------------------------
Total Investments
(excluding repurchase
agreements) 656,309,049
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENTS-25.97%(j)
Greenwich Capital Markets,
Inc.(k)
6.00% 07/01/98 $197,100 $ 197,100,000
- ----------------------------------------------------------------
SBC Warburg Dillon Read
Inc.(l)
5.85% 07/01/98 44,611 44,611,446
- ----------------------------------------------------------------
Salomon Smith Barney
Holdings, Inc.(m)
6.125% -- 50,000 50,000,000
- ----------------------------------------------------------------
Total Repurchase
Agreements 291,711,446
- ----------------------------------------------------------------
TOTAL INVESTMENTS-84.40% 948,020,495(n)
- ----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-15.60% 175,259,142
- ----------------------------------------------------------------
NET ASSETS-100.00% $1,123,279,637
================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Interest rates are redetermined daily. Rate shown is the rate in effect on
06/30/98.
(b) Treasury bills and some commercial paper are traded on a discount basis. In
such cases the interest rate shown represents the rate of discount paid or
received at the time of purchase by the Fund.
(c) Trust certificates representing an interest in a trust (comprised of
eligible debt obligations) entitling the Fund to receive 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 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. Rates shown are the rates in effect on
06/30/98.
(d) 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 06/30/98.
(e) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon seven days' prior notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
06/30/98.
(f) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement generally upon two business days notice. Interest rates
on master notes are redetermined periodically. Rate shown is the rate in
effect on 06/30/98.
(g) Master Note Purchase Agreement may be terminated by any party upon three
business days' prior written notice. Interest rates on master notes are
redetermined periodically. Rate shown is the rate in effect on 06/30/98.
(h) Demand security; payable upon demand by the Fund with usually no more than
seven calendar days notice. Interest rates are redetermined weekly. Rates
shown are rates in effect on 06/30/98.
(i) Interest rates are redetermined weekly. Rates shown are rates in effect on
06/30/98.
(j) 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.
(k) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,333. Collateralized by $205,565,153 U.S. Government obligations,
6.00% to 12.25% due 09/01/01 to 06/01/28 with an aggregate market value at
06/30/98 of $204,004,737.
(l) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$1,000,162,500. Collateralized by $3,590,870,000 U.S. Government
obligations, 0% due 08/15/00 to 11/15/24 with an aggregate market value at
06/30/98 of $1,148,593,549.
(m) Open repurchase agreement entered into 06/30/98. Collateralized by
$622,412,000 U.S. Government obligations, 0% to 9.65% due 09/18/98 to
12/15/43 with an aggregate market value at 06/30/98 of $612,000,396.
(n) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
3
<PAGE> 325
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase
agreements, at value (amortized cost) $ 656,309,049
- ----------------------------------------------------------
Repurchase agreements 291,711,446
- ----------------------------------------------------------
Receivables for:
Fund shares sold 202,850,311
- ----------------------------------------------------------
Interest 1,482,457
- ----------------------------------------------------------
Investment for deferred compensation plan 84,451
- ----------------------------------------------------------
Other assets 422,815
- ----------------------------------------------------------
Total assets 1,152,860,529
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 27,963,831
- ----------------------------------------------------------
Dividends 169,779
- ----------------------------------------------------------
Deferred compensation plan 84,451
- ----------------------------------------------------------
Accrued advisory fees 503,290
- ----------------------------------------------------------
Accrued administrative services fees 5,442
- ----------------------------------------------------------
Accrued distribution fees 708,700
- ----------------------------------------------------------
Accrued transfer agent fees 127,998
- ----------------------------------------------------------
Accrued operating expenses 17,401
- ----------------------------------------------------------
Total liabilities 29,580,892
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $1,123,279,637
==========================================================
NET ASSETS:
Class A $ 504,181,590
==========================================================
Class B $ 155,215,789
==========================================================
Class C $ 14,913,208
==========================================================
AIM Cash Reserve Shares $ 448,969,050
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 504,165,604
==========================================================
Class B 155,209,764
==========================================================
Class C 14,912,713
==========================================================
AIM Cash Reserve Shares 448,954,447
==========================================================
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 and offering price per
share $ 1.00
==========================================================
AIM Cash Reserve Shares:
Net asset value, offering and redemption
price per share $ 1.00
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $25,732,095
- ---------------------------------------------------------
EXPENSES:
Advisory fees 2,508,465
- ---------------------------------------------------------
Administrative services fees 32,652
- ---------------------------------------------------------
Custodian fees 13,969
- ---------------------------------------------------------
Distribution fees -- Class A 523,080
- ---------------------------------------------------------
Distribution fees -- Class B 606,632
- ---------------------------------------------------------
Distribution fees -- Class C 61,156
- ---------------------------------------------------------
Distribution fees -- AIM Cash Reserve Shares 450,185
- ---------------------------------------------------------
Trustees' fees 5,474
- ---------------------------------------------------------
Transfer agent fees -- Class A 337,539
- ---------------------------------------------------------
Transfer agent fees -- Class B 97,864
- ---------------------------------------------------------
Transfer agent fees -- Class C 9,866
- ---------------------------------------------------------
Transfer agent fees -- AIM Cash Reserve
Shares 290,508
- ---------------------------------------------------------
Other 231,938
- ---------------------------------------------------------
Total expenses 5,169,328
- ---------------------------------------------------------
Less: Expenses paid indirectly (5,506)
- ---------------------------------------------------------
Net expenses 5,163,822
- ---------------------------------------------------------
Net investment income 20,568,273
- ---------------------------------------------------------
Net realized gain from investments 2,781
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $20,571,054
==========================================================
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 326
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 20,568,273 $ 37,026,961
- --------------------------------------------------------------------------------------------
Net realized gain from investments 2,781 19,347
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 20,571,054 37,046,308
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (9,620,725) (15,420,950)
- --------------------------------------------------------------------------------------------
Class B (2,340,027) (4,508,913)
- --------------------------------------------------------------------------------------------
Class C (234,940) (81,245)
- --------------------------------------------------------------------------------------------
AIM Cash Reserve Shares (8,372,581) (17,015,853)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 128,167,996 88,133,325
- --------------------------------------------------------------------------------------------
Class B 39,157,250 24,881,617
- --------------------------------------------------------------------------------------------
Class C 6,626,091 8,286,622
- --------------------------------------------------------------------------------------------
AIM Cash Reserve Shares 104,851,872 28,629,341
- --------------------------------------------------------------------------------------------
Net increase in net assets 278,805,990 149,950,252
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 844,473,647 694,523,395
- --------------------------------------------------------------------------------------------
End of period $1,123,279,637 $844,473,647
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,123,242,529 $844,439,320
- --------------------------------------------------------------------------------------------
Undistributed net realized gain from investments 37,108 34,327
- --------------------------------------------------------------------------------------------
$1,123,279,637 $844,473,647
============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
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 four different classes of shares: Class A shares, Class B
shares, Class C shares and AIM Cash Reserve Shares. Class A shares are sold with
a front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. AIM Cash Reserve 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 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 -- The Fund's 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 premiums.
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
5
<PAGE> 327
premiums and discounts on investments, is recorded as earned from settlement
date and is recorded on the accrual basis. Dividends to shareholders are
declared daily and are paid monthly.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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 six months ended June 30, 1998, AIM
was reimbursed $32,652 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 six months
ended June 30, 1998, the Fund paid AFS $395,131 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B, Class C and the AIM Cash Reserve Shares of the Fund. The Trust
has adopted distribution plans pursuant to Rule 12b-1 under the 1940 Act with
respect to the Fund's Class A shares, Class C shares and the AIM Cash Reserve
Shares (the "Class A and C Plan"), and the Fund's Class B shares (the "Class B
Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A and C
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets of the Class A shares and the AIM Cash Reserve Shares,
and 1.00% of the average daily net assets of the Class C shares. 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 of the Class B shares. Of these
amounts, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class A, Class B, Class C or AIM Cash Reserve Shares to selected dealers
and financial institutions who furnish continuing personal shareholder services
to their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the 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. During the six months ended June 30, 1998, the Class A, Class B, Class
C, and AIM Cash Reserve Shares paid AIM Distributors $523,080, $606,632, $61,156
and $450,185, respectively, as compensation under the Plans.
AIM Distributors received commissions of $177,624 from sales of the Class A
shares of the Fund during the six months ended June 30, 1998. 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 six months ended June 30,
1998, AIM Distributors received $126,074 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 six months ended June 30, 1998, the Fund paid legal fees of $2,069
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-INDIRECT EXPENSES
During the six months ended June 30, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $5,498 and $8, respectively under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $5,506 during the six months ended June 30, 1998.
NOTE 4-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.
6
<PAGE> 328
NOTE 5-SHARE INFORMATION
Changes in shares outstanding during the six months ended June 30, 1998 and the
year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 6,245,461,052 $ 6,245,461,052 4,653,429,305 $ 4,653,429,305
- -------------------------------------------------------------------------------------------------------------------------------
Class B 237,742,598 237,742,598 420,215,854 420,215,854
- -------------------------------------------------------------------------------------------------------------------------------
Class C* 172,036,489 172,036,489 61,859,578 61,859,578
- -------------------------------------------------------------------------------------------------------------------------------
AIM Cash Reserve Shares 2,901,371,082 2,901,371,082 4,356,728,398 4,356,728,398
- -------------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 7,516,019 7,516,019 13,299,323 13,299,323
- -------------------------------------------------------------------------------------------------------------------------------
Class B 2,066,312 2,066,312 3,988,737 3,988,737
- -------------------------------------------------------------------------------------------------------------------------------
Class C* 205,417 205,417 75,390 75,390
- -------------------------------------------------------------------------------------------------------------------------------
AIM Cash Reserve Shares 6,699,820 6,699,820 13,807,718 13,807,718
- -------------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (6,124,809,074) (6,124,809,074) (4,578,595,303) (4,578,595,303)
- -------------------------------------------------------------------------------------------------------------------------------
Class B (200,651,661) (200,651,661) (399,322,974) (399,322,974)
- -------------------------------------------------------------------------------------------------------------------------------
Class C* (165,615,815) (165,615,815) (53,648,346) (53,648,346)
- -------------------------------------------------------------------------------------------------------------------------------
AIM Cash Reserve Shares (2,803,219,030) (2,803,219,030) (4,341,906,775) (4,341,906,775)
- -------------------------------------------------------------------------------------------------------------------------------
278,803,209 $ 278,803,209 149,930,905 $ 149,930,905
===============================================================================================================================
</TABLE>
*Class C shares commenced sales on August 4, 1997.
NOTE 6-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A, Class B and AIM
Cash Reserve Shares outstanding during the six months ended June 30, 1998, each
of the years in the four-year period ended December 31, 1997 and the period
October 16, 1993 (date operations commenced) through December 31, 1993; and for
a share of Class C outstanding during the six months ended June 30, 1998 and the
period August 4, 1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------------------
DECEMBER 31,
JUNE 30, ------------------------------------------------------
1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.0228 0.0453 0.0433 0.0495 0.0337 0.0048
- -------------------------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.0228) (0.0453) (0.0433) (0.0495) (0.0337) (0.0048)
- -------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====================================== ======== ======== ======== ======== ======== ========
Total return(a) 4.64% 4.63% 4.42% 5.06% 3.43% 2.27%(b)
====================================== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $504,182 $376,012 $287,905 $221,487 $148,886 $ 81,460
====================================== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets 1.02%(c) 1.05% 1.07% 1.03% 0.97%(d) 1.00%(b)(d)
====================================== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 4.62%(c) 4.55% 4.34% 4.91% 3.53%(d) 2.27%(b)(d)
====================================== ======== ======== ======== ======== ======== ========
<CAPTION>
CLASS B SHARES
------------------------------------------------------------------
DECEMBER 31,
JUNE 30, -----------------------------------------------------
1998 1997 1996 1995 1994 1993
-------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------- -------- -------- -------- ------- -------- --------
Income from investment operations:
Net investment income 0.0189 0.0378 0.0360 0.0419 0.0259 0.0032
- -------------------------------------- -------- -------- -------- ------- -------- --------
Less distributions:
Dividends from net investment income (0.0189) (0.0378) (0.0360) (0.0419) (0.0259) (0.0032)
- -------------------------------------- -------- -------- -------- ------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====================================== ======== ======== ======== ======= ======== ========
Total return(a) 3.85% 3.84% 3.66% 4.27% 2.62% 1.51%(b)
====================================== ======== ======== ======== ======= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $155,216 $116,058 $ 91,148 $69,857 $ 33,999 $ 1,289
====================================== ======== ======== ======== ======= ======== ========
Ratio of expenses to average net
assets 1.77%(c) 1.80% 1.81% 1.78% 1.78%(e) 1.75%(b)(e)
====================================== ======== ======== ======== ======= ======== ========
Ratio of net investment income to
average net assets 3.87%(c) 3.80% 3.60% 4.14% 3.14%(e) 1.54%(b)(e)
====================================== ======== ======== ======== ======= ======== ========
</TABLE>
(a) Does not deduct sales charges where applicable and is annualized for periods
less than one year.
(b) Annualized.
(c) Ratios are annualized and based on average net assets of $421,931,673 and
$122,331,933 for Class A and Class B, respectively.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average daily net assets prior to fee waivers and/or
expense reimbursements were 1.06% and 3.44%, respectively, for 1994 and
1.20% (annualized) and 2.07% (annualized), respectively, for 1993.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average daily net assets prior to fee waivers and/or
expense reimbursements were 1.87% and 3.05%, respectively, for 1994 and
1.95% (annualized) and 1.34% (annualized), respectively, for 1993.
7
<PAGE> 329
NOTE 6-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS C SHARES AIM CASH RESERVE SHARES
----------------------- --------------------------------------------------------------
DECEMBER 31,
JUNE 30, DECEMBER 31, JUNE 30, --------------------------------------------------
1998 1997 1998 1997 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 0.0190 0.0158 0.0231 0.0456 0.0433 0.0493 0.0337 0.0048
- ----------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.0190) (0.0158) (0.0231) (0.0456) (0.0433) (0.0493) (0.0337) (0.0048)
- ----------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
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) 3.85% 3.92% 4.72% 4.66% 4.41% 5.04% 3.42% 2.27%
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $ 14,913 $ 8,287 $448,969 $344,117 $315,470 $293,450 $359,952 $241,778
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets 1.77%(b) 1.80%(c) 1.02%(b) 1.05% 1.08% 1.04% 0.99%(d) 1.00%(c)(d)
=================================== ======== ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 3.87%(b) 3.80%(c) 4.62%(b) 4.55% 4.32% 4.92% 3.49%(d) 2.27%(c)(d)
=================================== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges where applicable and is annualized for periods
less than one year.
(b) Ratios are annualized and based on average net assets of $12,332,618 and
$363,132,327 for Class C and AIM Cash Reserve Shares, respectively.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average daily net assets prior to fee waivers and/or
expense reimbursements were 1.08% and 3.40%, respectively, for 1994 and
1.20% (annualized) and 2.07% (annualized), respectively, for 1993.
8
<PAGE> 330
Trustees & Officers
<TABLE>
<CAPTION>
<S> <C> <C>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II TRANSFER AGENT
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Robert G. Alley
President, Mercantile Bankshares Vice President State Street Bank and Trust Company
225 Franklin Street
Jack Fields Stuart W. Coco Boston, MA 02110
Chief Executive Officer Vice President
Texana Global, Inc.; COUNSEL TO THE FUND
Formerly Member Melville B. Cox
of the U.S. House of Representatives Vice President Ballard Spahr
Andrews & Ingersoll, LLP
Carl Frischling Karen Dunn Kelley 1735 Market Street
Partner Vice President Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel
Jonathan C. Schoolar COUNSEL TO THE TRUSTEES
Robert H. Graham Vice President
President and Chief Executive Officer Kramer, Levin, Naftalis & Frankel
A I M Management Group Inc. Renee A. Friedli 919 Third Avenue
Assistant Secretary New York, NY 10022
Lewis F. Pennock
Attorney P. Michelle Grace DISTRIBUTOR
Assistant Secretary
Ian W. Robinson A I M Distributors, Inc.
Consultant; Formerly Executive Jeffrey H. Kupor 11 Greenway Plaza
Vice President and Assistant Secretary Suite 100
Chief Financial Officer Houston, TX 77046
Bell Atlantic Management Nancy L. Martin
Services, Inc. Assistant Secretary
Louis S. Sklar Ofelia M. Mayo
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
<PAGE> 331
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund
AIM Blue Chip Fund AIM Asian Growth Fund
AIM Capital Development Fund AIM Developing Markets Fund(2)
AIM Constellation Fund AIM Emerging Markets Fund(2)
AIM Mid Cap Growth Fund(2) AIM Europe Growth Fund(2)
AIM Select Growth Fund(3) AIM European Development Fund
[PHOTO OF AIM Small Cap Equity Fund(2) AIM International Equity Fund
11 GREENWAY PLAZA AIM Small Cap Opportunities Fund AIM International Growth Fund(2)
APPEARS HERE] AIM Value Fund AIM Weingarten Fund AIM Japan Growth Fund(2)
AIM Latin American Growth Fund(2)
GROWTH & INCOME FUNDS AIM New Pacific Growth Fund(2)
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM America Value Fund(2) AIM Worldwide Growth Fund(2)
AIM Balanced Fund
AIM Charter Fund GLOBAL GROWTH & INCOME FUNDS
INCOME FUNDS AIM Global Growth & Income Fund(2)
AIM Global Utilities Fund
AIM Floating Rate Fund(2)
AIM High Yield Fund GLOBAL INCOME FUNDS
AIM Income Fund
AIM Intermediate Government Fund AIM Global Government Income Fund(2)
AIM Limited Maturity Treasury Fund AIM Global High Income Fund(2)
AIM Global Income Fund
TAX-FREE INCOME FUNDS AIM Strategic Income Fund(2)
AIM High Income Municipal Fund THEME FUNDS
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Consumer Products and Services Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Financial Services Fund(2)
AIM Global Health Care Fund(2)
MONEY MARKET FUNDS AIM Global Infrastructure Fund(2)
AIM Global Resources Fund(2)
AIM Dollar Fund(2) AIM Global Telecommunications Fund(2)
AIM Money Market Fund AIM New Dimension Fund(2)
AIM Tax-Exempt Cash Fund
</TABLE>
(1) AIM Aggressive Growth Fund was closed to new investors on June 5, 1997.
(2) Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3) On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. For more complete information about any AIM Fund(s), including sales
charges and expenses, ask your financial consultant or securities dealer for a
free prospectus(es). Please read the prospectus(es) carefully before you invest
or send money.
A I M Management Group Inc. has provided leadership in the mutual fund industry
since 1976 and managed approximately $101 billion in assets for more than 5.2
million shareholders, including individual investors, corporate clients, and
financial institutions, as of June 30, 1998. The AIM Family of Funds--Registered
Trademark-- is distributed nationwide, and AIM today is the ninth-largest mutual
fund complex in the U.S. in assets under management, according to Strategic
Insight, an independent mutual fund monitor.
INVEST WITH DISCIPLINE(SM)
<PAGE> 332
APPENDIX III
GT GLOBAL DOLLAR FUND
Fifty California Street, 27th Floor
San Francisco, California 94111
General Telephone No. 415/392-6181
General Fund Information 800/824-1580
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE FUND MANAGER
The Fund's total return for the 12 months ended December 31, 1997, was 4.62%
for Class A shares and 3.84% for Class B shares. As of December 31, the Fund's
SEC seven-day yield was 4.55% for Class A shares and 3.82% for Class B shares.
Because the Fund invests only in short-term debt obligations with remaining
maturities of 13 months or less, its performance generally reflects the level of
short-term interest rates. Please bear in mind that an investment in the Fund is
neither insured nor guaranteed by the U.S. government and that there can be no
assurance that the Fund will be able to maintain a stable net asset value of
$1.00 per share.
The U.S. bond market produced excellent returns in 1997. After a 25-basis
point increase in the Federal funds rate in March, the market began an upswing
in the second quarter that lasted throughout the last three quarters of the
year. In addition, interest rates fell after it became clear that the benign
economic environment in the U.S. would forestall additional interest rate
increases by the Fed in 1997.
In total, 1997 produced the lowest rates of U.S. inflation in decades, while
the economy enjoyed continued good growth. That combination, along with a stable
dollar, beckoned global investors in the fourth quarter. In addition, yields on
money market instruments have been fairly stable throughout the period and the
90-day Treasury bill yield ended the year about 18 basis points higher than it
began, at 5.35%.
We believe the overall environment for U.S. fixed income markets should
continue to be attractive in 1998. Short-term rates have remained in a narrow
range for some time, and we feel the economic environment augurs well for
continued stability. We concur with Federal Reserve (the Fed) Chairman
Greenspan's recent comments that effects of the Asian crisis have not yet fully
impacted U.S. markets. We expect weakness in Asia to moderate economic growth
somewhat, but believe its potential negative effect on U.S. profits and growth
in 1998 will be counterbalanced by its positive effect on inflation and interest
rates.
Additionally, we see reasonable potential for further declines in interest
rates. Inflation is at its lowest level in over 40 years, and productivity is
strong -- all positive cost factors we think will support U.S. profitability
even as product pricing remains under pressure. This environment (a new one for
investors) may necessitate a shift in policy stance by the Fed, whereby, instead
of constantly fighting inflation, they must also be concerned with deflation.
Our concerns about Fed tightening have been virtually erased, and we feel
the potential grows that the Fed may soon lower interest rates. In keeping with
our outlook, the average maturity of holdings in the Fund has been increased
moderately while still maintaining a high degree of liquidity for investors.
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
GT Investment Portfolios, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Dollar Fund, a series of shares of common stock of GT Investment
Portfolios, Inc., including the schedule of portfolio investments, as of
December 31, 1997, the related statement of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of GT Global Dollar Fund as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND, L.L.P.
BOSTON, MASSACHUSETTS
FEBRUARY 17, 1998
[LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 333
GT GLOBAL DOLLAR FUND
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS YIELD DATE AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------------- --------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Commercial Paper - Discounted (47.4%)
John Deere Capital Corp. ...................................... 5.73% 19-Mar-98 12,000,000 $ 11,854,982 4.3
Walt Disney Co. ............................................... 5.59% 14-Apr-98 12,000,000 11,812,884 4.3
American Express Credit Corp. ................................. 5.71% 21-May-98 12,000,000 11,740,067 4.2
Kingdom of Sweden ............................................. 5.62% 26-Jan-98 10,000,000 9,961,875 3.6
AIG Funding, Inc. ............................................. 5.73% 30-Jan-98 10,000,000 9,954,245 3.6
E.I. DuPont de Nemours & Co. .................................. 5.62% 09-Feb-98 10,000,000 9,940,742 3.6
Ford Motor Credit Corp. ....................................... 5.63% 13-Feb-98 10,000,000 9,934,544 3.6
Bellsouth Telecommunications, Inc. ............................ 5.78% 25-Feb-98 10,000,000 9,912,611 3.6
General Electric Capital Corp. ................................ 5.71% 11-Mar-98 10,000,000 9,893,625 3.6
3M Corp. ...................................................... 5.68% 24-Apr-98 10,000,000 9,824,850 3.5
AT&T Corp. .................................................... 5.58% 15-Jan-98 9,500,000 9,479,902 3.4
Motorola, Inc. ................................................ 5.59% 09-Feb-98 9,000,000 8,946,375 3.2
Emerson Electric Co. .......................................... 5.66% 05-Jan-98 8,000,000 7,995,111 2.9
------------ -----
Total Commercial Paper - Discounted (amortized cost
$131,251,813) .................................................. 131,251,813 47.4
------------ -----
Government & Government Agency Obligations (3.6%)
Federal Home Loan Bank ........................................ 5.59% 06-Mar-98 10,000,000 9,903,289 3.6
------------ -----
Total Government & Government Agency Obligations (amortized cost
$9,903,289) .................................................... 9,903,289 3.6
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $141,155,102) ................ 141,155,102 51.0
------------ -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENTS (NOTE 1) ASSETS
- ----------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Dated December 31, 1997, with State Street Bank & Trust Co.,
due January 2, 1998, for an effective yield of 5.80%,
collateralized by $45,775,000 U.S. Treasury Bills, 6.25% due
6/30/98 (market value of collateral is $45,946,656 including
accrued interest) ........................................... 45,041,000 16.3
Dated December 31, 1997, with BancAmerica Robertson Stephens,
due January 2, 1998, for an effective yield of 6.10%,
collateralized by $40,190,000 U.S. Treasury Bills and Notes,
6.25% due 6/30/98 & 3/31/99, respectively (market value of
collateral is $40,808,921 including accrued interest) ....... 40,000,000 14.4
------------ -----
TOTAL REPURCHASE AGREEMENTS (cost $85,041,000) .................. 85,041,000 30.7
------------ -----
TOTAL INVESTMENTS (cost $226,196,102) * ........................ 226,196,102 81.7
Other Assets and Liabilities .................................... 50,692,653 18.3
------------ -----
NET ASSETS ...................................................... $276,888,755 100.0
------------ -----
------------ -----
</TABLE>
- --------------
* For Federal income tax purposes, cost is $226,196,102
The accompanying notes are an integral part of the financial statements.
F2
<PAGE> 334
GT GLOBAL DOLLAR FUND
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (amortized cost $141,155,102) (Note 1)....................... $141,155,102
Repurchase agreement, at value and cost (Note 1)................................................. 85,041,000
U.S. currency.................................................................................... 22,315
Receivable for Fund shares sold.................................................................. 72,954,035
Interest receivable.............................................................................. 14,034
-----------
Total assets................................................................................... 299,186,486
-----------
Liabilities:
Payable for Fund shares repurchased.............................................................. 21,805,756
Payable for investment management and administration fees (Note 2)............................... 134,841
Distribution payable............................................................................. 97,586
Payable for registration and filing fees......................................................... 91,486
Payable for service and distribution expenses (Note 2)........................................... 65,528
Payable for transfer agent fees (Note 2)......................................................... 35,773
Payable for printing and postage expenses........................................................ 26,318
Payable for professional fees.................................................................... 24,747
Payable for fund accounting fees (Note 2)........................................................ 4,326
Payable for Directors' fees and expenses (Note 2)................................................ 3,682
Payable for custodian fees....................................................................... 1,701
Other accrued expenses........................................................................... 5,987
-----------
Total liabilities.............................................................................. 22,297,731
-----------
Net assets......................................................................................... $276,888,755
-----------
-----------
Class A:
Net asset value and redemption price per share ($186,610,657 DIVIDED BY 186,670,776 shares
outstanding)...................................................................................... $ 1.00
-----------
-----------
Class B:+
Net asset value and offering price per share ($83,498,094 DIVIDED BY 83,456,702 shares
outstanding)...................................................................................... $ 1.00
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($6,780,004 DIVIDED BY
6,779,978 shares outstanding)..................................................................... $ 1.00
-----------
-----------
Net assets: At December 31, 1997, net assets consisted of paid-in capital of
$276,888,755.
<FN>
- --------------
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE> 335
GT GLOBAL DOLLAR FUND
STATEMENT OF OPERATIONS
Year ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income.............................................................................. $15,170,711
Expenses:
Service and distribution expenses: (Note 2)
Class A......................................................................... $ 422,808
Class B......................................................................... 995,797 1,418,605
---------
Investment management and administration fees (Note 2)....................................... 1,384,735
Transfer agent fees (Note 2)................................................................. 725,305
Registration and filing fees................................................................. 400,217
Professional fees............................................................................ 102,864
Printing and postage expenses................................................................ 101,842
Fund accounting fees (Note 2)................................................................ 69,517
Custodian fees (Note 4)...................................................................... 43,930
Directors' fees and expenses (Note 2)........................................................ 13,971
Other expenses............................................................................... 13,326
----------
Total expenses before reductions........................................................... 4,274,312
----------
Expenses waived by Chancellor LGT Asset Management, Inc. (Note 2)........................ (671,757)
Expenses reimbursed by Chancellor LGT Asset Management, Inc. (Note 2).................... (88,707)
Expense reductions (Note 2).............................................................. (43,916)
----------
Total net expenses......................................................................... 3,469,932
----------
Net investment income.......................................................................... 11,700,779
----------
Net increase in net assets resulting from operations........................................... $11,700,779
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE> 336
GT GLOBAL DOLLAR FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
-------------- ---------------
Increase (Decrease) in net assets
Operations:
Net investment income................................................... $ 11,700,779 $ 15,135,332
-------------- ---------------
Net increase in net assets resulting from operations.................. 11,700,779 15,135,332
-------------- ---------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income.............................................. (7,587,680) (11,055,154)
Class B:
Distributions to shareholders: (Note 1)
From net investment income.............................................. (3,720,785) (3,791,539)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income.............................................. (392,314) (288,639)
-------------- ---------------
Total distributions................................................... (11,700,779) (15,135,332)
-------------- ---------------
Capital share transactions: (Note 3)
Increase from capital shares sold and reinvested........................ 8,215,928,197 16,871,270,679
Decrease from capital shares repurchased................................ (8,474,948,990) (16,620,368,622)
-------------- ---------------
Net increase (decrease) from capital share transactions............... (259,020,793) 250,902,057
-------------- ---------------
Total increase (decrease) in net assets................................... (259,020,793) 250,902,057
Net assets:
Beginning of year....................................................... 535,909,548 285,007,491
-------------- ---------------
End of year *........................................................... $ 276,888,755 $ 535,909,548
-------------- ---------------
-------------- ---------------
<FN>
- --------------
* Includes undistributed net investment income of $0.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F5
<PAGE> 337
GT GLOBAL DOLLAR FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net investment income................... 0.045 0.044 0.050 0.032 0.022
Distributions from net investment
income................................. (0.045) (0.044) (0.050) (0.032) (0.022)
---------- ---------- ---------- ---------- ----------
Net asset value (unchanged during the
period)................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (b)............. 4.62% 4.50% 5.08% 3.3% 2.2%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 186,611 $ 392,623 $ 183,761 $ 320,858 $ 87,822
Ratio of net investment income to
average net assets:
With expense reductions, waivers, and
reimbursement by Chancellor LGT Asset
Management, Inc. (a) (Notes 2 & 4)... 4.50% 4.39% 4.94% 3.40% 2.17%
Without expense reductions, waivers,
and reimbursement by Chancellor LGT
Asset Management, Inc. (a)........... 4.20% 4.08% 4.66% 3.15% 1.46%
Ratio of expenses to average net
assets: (a)
With expense reductions, waivers, and
reimbursement by Chancellor LGT Asset
Management, Inc. (a) (Notes 2 & 4)... 0.98% 0.99% 0.97% 0.92% 1.00%
Without expense reductions, waivers,
and reimbursement by Chancellor LGT
Asset Management, Inc. (a)........... 1.28% 1.30% 1.25% 1.17% 1.72%
</TABLE>
- ----------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
The accompanying notes are an integral part of the financial statements.
F6
<PAGE> 338
GT GLOBAL DOLLAR FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++
-------------------------------------------------------------
APRIL 1, 1993
YEAR ENDED DECEMBER 31, TO
---------------------------------------------- DECEMBER 31,
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Net investment income................... 0.038 0.037 0.040 0.025 0.010
Distributions from net investment
income................................. (0.038) (0.037) (0.040) (0.025) (0.010)
---------- ---------- ---------- ---------- -------------
Net asset value (unchanged during the
period)................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- -------------
---------- ---------- ---------- ---------- -------------
Total investment return (b)............. 3.84% 3.73% 4.29% 2.53% 1.4%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 83,498 $ 128,308 $ 99,151 $ 109,936 $ 3,478
Ratio of net investment income to
average net assets:
With expense reductions, waivers, and
reimbursement by Chancellor LGT Asset
Management, Inc. (a) (Notes 2 & 4)... 3.75% 3.64% 4.19% 2.65% 1.42%
Without expense reductions, waivers,
and reimbursement by Chancellor LGT
Asset Management, Inc. (a)........... 3.45% 3.33% 3.91% 2.40% 0.86%
Ratio of expenses to average net
assets: (a)
With expense reductions, waivers, and
reimbursement by Chancellor LGT Asset
Management, Inc. (a) (Notes 2 & 4)... 1.73% 1.74% 1.72% 1.67% 1.75%
Without expense reductions, waivers,
and reimbursement by Chancellor LGT
Asset Management, Inc. (a)........... 2.03% 2.05% 2.00% 1.92% 2.31%
</TABLE>
- ----------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
The accompanying notes are an integral part of the financial statements.
F7
<PAGE> 339
GT GLOBAL DOLLAR FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+++
-------------------------------------
YEAR ENDED DECEMBER JUNE 1, 1995
31, TO
---------------------- DECEMBER 31,
1997 1996 1995
---------- ---------- -------------
<S> <C> <C> <C>
Net investment income................... 0.045 0.044 0.030
Distributions from net investment
income................................. (0.045) (0.044) (0.030)
---------- ---------- -------------
Net asset value (unchanged during the
period)................................ $ 1.00 $ 1.00 $ 1.00
---------- ---------- -------------
---------- ---------- -------------
Total investment return (b)............. 4.61% 4.50% 2.92%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 6,780 $ 14,978 $ 2,096
Ratio of net investment income to
average net assets:
With expense reductions, waivers, and
reimbursement by Chancellor LGT Asset
Management, Inc. (a) (Notes 2 & 4)... 4.50% 4.39% 4.94%
Without expense reductions, waivers,
and reimbursement by Chancellor LGT
Asset Management, Inc. (a)........... 4.45% 4.33% 4.91%
Ratio of expenses to average net
assets: (a)
With expense reductions, waivers, and
reimbursement by Chancellor LGT Asset
Management, Inc. (a) (Notes 2 & 4)... 0.98% 0.99% 0.97%
Without expense reductions, waivers,
and reimbursement by Chancellor LGT
Asset Management, Inc. (a)........... 1.03% 1.05% 1.0%
</TABLE>
- ----------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
The accompanying notes are an integral part of the financial statements.
F8
<PAGE> 340
GT GLOBAL DOLLAR FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Dollar Fund ("Fund") is a diversified series of GT Investment
Portfolios, Inc. ("Company"). The Company is registered under the Investment
Company Act of 1940, as amended (1940 Act), as an open-end management investment
company.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Each class has exclusive voting
rights with respect to its distribution plan. Investment income, realized and
unrealized capital gains and losses, and the common expenses of the Fund are
allocated on a pro rata basis to each class based on the relative net assets of
each class to the total net assets of the Fund. Each class of shares differs in
its respective distribution expenses, and may differ in its transfer agent,
registration, and certain other class-specific fees and expenses.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
Securities are valued at amortized cost, which approximates market value.
(B) FEDERAL INCOME TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or for excise tax on
income and capital gains. The Fund currently has a capital loss carryforward of
$3,382 which expires in 2005.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, U.S. government securities or other
high quality debt securities of which the value, including accrued interest, is
at least equal to the amount to be repaid to the Fund under each agreement at
its maturity. Chancellor LGT Asset Management, Inc. (the "Manager") is
responsible for determining that the value of these underlying securities
remains at least equal to the resale price.
(D) OTHER
Security transactions are recorded on the trade date (date the order to buy or
sell is executed). Interest income is recorded on an accrual basis. Dividends to
shareholders from net investment income are declared daily and paid or
reinvested monthly.
2. RELATED PARTIES
The Manager serves as the investment manager and administrator of the Fund. The
Fund pays the Manager investment management and administration fees at the
annualized rate of 0.50% of the Fund's average daily net assets. These fees are
computed daily and paid monthly, and are subject to reduction in any year to the
extent that the Fund's expenses (exclusive of brokerage commissions, taxes,
interest, distribution-related expenses and extraordinary expenses) exceed the
most stringent limits prescribed by the laws or regulations of any state in
which the Fund's shares are sold.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Fund's
distributor. The Fund offers Class A shares for purchase. Certain redemptions of
Class A shares made within two years of purchase are subject to contingent
deferred sales charges ("CDSCs"), in accordance with the Fund's current
prospectus. Class B shares of the Fund are available only through an exchange of
Class B shares of other GT Global Mutual Funds. Certain redemptions of Class B
shares made within six years of purchase are also subject to CDSCs, in
accordance with the Fund's current prospectus. For the year ended December 31,
1997, GT Global collected CDSCs in the amount of $1,241,407. In addition, GT
Global may, from time to time, make ongoing payments to brokerage firms,
financial institutions (including banks) and others that facilitate the
administration and servicing of shareholder accounts.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares less any amounts paid by the Fund as the aforementioned service
fee for GT Global's expenditures incurred in providing services as distributor.
GT Global does not currently intend to seek reimbursement of any amounts under
the Class A Plan. All expenses for which GT Global is reimbursed under the Class
A Plan will have been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. GT Global does not currently intend to seek reimbursement of any
F9
<PAGE> 341
GT GLOBAL DOLLAR FUND
amounts in excess of 0.75% of average daily net assets under the Class B Plan.
Expenses incurred under the Class B Plan in excess of 1.00% annually may be
carried forward for reimbursement in subsequent years as long as that Plan
continues in effect.
The Manager and GT Global have voluntarily undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, interest, taxes and extraordinary
expenses) to the annual rate of 1.00%, 1.75%, and 1.00% of the average daily net
assets of the Fund's Class A, Class B, and Advisor Class shares, respectively.
If necessary, this limitation will be effected by waivers by the Manager of its
investment management and administration fees, waivers by GT Global of payments
under the Class A Plan and/or Class B Plan and/or reimbursements by the Manager
or GT Global of portions of the Fund's other operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent for the Fund. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services receives
an annual maintenance fee of $17.50 per account, a new account fee of $4.00 per
account, a per transaction fee of $1.75 for all transactions other than
exchanges and a per exchange fee of $2.25. The Transfer Agent also is reimbursed
by the Fund for its out-of-pocket expenses for such items as postage, forms,
telephone charges, stationery and office supplies.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $1,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by LGT and 0.02% to the assets in excess of $5 billion and allocating
the result according to the Fund's average daily net assets.
3. CAPITAL SHARES
At December 31, 1997, there were 2,000,000,000 shares of the Company's common
stock authorized, at $0.001 per share. Of this number, 1,500,000,000 shares have
been classified as shares of the Fund; 500 million shares have been classified
as Class A shares, 500 million have been classified as Class B shares, and 500
million have been classified as Advisor Class shares. These amounts may be
increased from time to time at the discretion of the Board of Directors.
Transactions in capital shares of the Fund were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------- ----------------------
CLASS A SHARES & AMOUNT SHARES & AMOUNT
- ---------------------------------------- ---------------------- ----------------------
<S> <C> <C>
Shares sold............................. 6,222,351,251 14,275,856,684
Shares issued in connection with
reinvestment of distributions......... 4,193,093 7,664,536
---------------------- ----------------------
6,226,544,344 14,283,521,220
Shares repurchased...................... (6,432,557,179) (14,074,631,817)
---------------------- ----------------------
Net increase (decrease)................. (206,012,835) 208,889,403
---------------------- ----------------------
---------------------- ----------------------
<CAPTION>
CLASS B SHARES & AMOUNT SHARES & AMOUNT
- ---------------------------------------- ---------------------- ----------------------
<S> <C> <C>
Shares sold............................. 1,763,392,144 2,348,173,773
Shares issued in connection with
reinvestment of distributions......... 2,479,264 2,261,688
---------------------- ----------------------
1,765,871,408 2,350,435,461
Shares repurchased...................... (1,810,681,116) (2,321,320,722)
---------------------- ----------------------
Net increase (decrease)................. (44,809,708) 29,114,739
---------------------- ----------------------
---------------------- ----------------------
<CAPTION>
ADVISOR CLASS SHARES & AMOUNT SHARES & AMOUNT
- ---------------------------------------- ---------------------- ----------------------
<S> <C> <C>
Shares sold............................. 223,289,952 237,098,781
Shares issued in connection with
reinvestment of distributions......... 222,493 215,804
---------------------- ----------------------
223,512,445 237,314,585
Shares repurchased...................... (231,710,695) (224,416,508)
---------------------- ----------------------
Net increase (decrease)................. (8,198,250) 12,898,077
---------------------- ----------------------
---------------------- ----------------------
</TABLE>
4. EXPENSE REDUCTIONS
For the year ended December 31, 1997, the Fund's custody fees were offset by
$43,916 of credits on cash held at the custodian.
5. SUBSEQUENT EVENT
On January 30, 1998, Liechtenstein Global Trust ("LGT") and AMVESCAP PLC
("AMVESCAP") entered into an agreement by which AMVESCAP will acquire LGT's
Asset Management Division, including Chancellor LGT Asset Management, Inc.
AMVESCAP is the holding company of the AIM and INVESCO asset management
businesses.
F10
<PAGE> 342
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GT GLOBAL DOLLAR FUND
NOTES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 343
APPENDIX IV
AIM DOLLAR FUND
Fifty California Street, 27th Floor
San Francisco, California 94111
General Telephone No. 415/392-6181
General Fund Information 800/824-1580
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT FROM THE FUND MANAGER
The Fund's total return for the six months ended June 30, 1998, was 2.30%
for Class A shares and 1.99% for Class B shares. As of June 30, the Fund's SEC
seven-day yield was 4.66% for Class A shares and 3.92% for Class B shares.
Because the Fund invests only in short-term debt obligations with remaining
maturities of 13 months or less, its performance generally reflects the level of
short-term interest rates. Please bear in mind that an investment in the Fund is
neither insured nor guaranteed by the U.S. government, and there can be no
assurance the Fund will be able to maintain a stable net asset value of $1.00
per share.
Fixed income markets continued to be buffeted by overseas turmoil during the
first half of 1998. Early in January, the market was expecting an imminent
reduction in rates by the Federal Reserve Board (the Fed) to counteract negative
effects from the Asian economic crises. However, as it became apparent that the
U.S. economy was going to shrug off the Asian influence and continue its strong
growth, interest rates rose. The one-year Treasury bill, whose yield had dropped
as low as 5.10% in January, backed up to the 5.45% area by late February.
Fueled by low interest rates and strong stock and labor markets, the U.S.
economy continued its solid growth in the first quarter of 1998, rising at a
5.4% annual rate. Despite this rapid growth, inflation remained contained, with
the annualized rate running between 1% and 2%. During the 12 months ended May
31, the Consumer Price Index rose 1.7%. As the second quarter came to a close,
the economy appeared finally to be slowing in response to the Asian influence
and the strike at General Motors.
During this period, the Fed remained on watch for signs of incipient
inflation, which never appeared. As the Asian situation continued to unfold, the
Fed remained hesitant to raise rates. As a result, the Federal funds target
remained at 5.5% throughout the reporting period.
As the third quarter opened, most market participants were expecting the Fed
to remain on the sidelines for the foreseeable future, though opinion remained
divided about its next move. Some were concerned that strong U.S. growth would
generate inflationary pressures, leading to a tighter Fed policy. Others
remained concerned that Asia's dampening effects on the U.S. would eventually
encourage the Fed to lower rates. With the flat yield curve and all the
uncertainty about the future direction of rates and where the stock market is
headed, Fund managers will likely continue to maintain the weighted average
maturity toward the shorter end of the spectrum for the foreseeable future.
<PAGE> 344
AIM DOLLAR FUND
(FORMERLY GT GLOBAL DOLLAR FUND)
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS YIELD DATE AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------------- --------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Commercial Paper - Discounted (42.9%)
Shell Oil Co. ................................................. 5.52% 27-Aug-98 15,000,000 $ 14,870,325 3.7
Associates Corp. .............................................. 5.58% 09-Nov-98 15,000,000 14,702,521 3.7
Kingdom of Sweden ............................................. 5.52% 06-Jul-98 12,000,000 11,990,950 3.0
Coca Cola Co. ................................................. 5.51% 14-Jul-98 12,000,000 11,976,470 3.0
International Lease Finance Corp. ............................. 5.53% 17-Jul-98 12,000,000 11,971,040 3.0
Household Finance Corp. ....................................... 5.54% 20-Jul-98 12,000,000 11,965,230 3.0
Walt Disney Co. ............................................... 5.58% 21-Oct-98 12,000,000 11,797,280 2.9
E.I. Dupont de Nemours & Co. .................................. 5.59% 21-Oct-98 12,000,000 11,796,906 2.9
American Express Credit Corp. ................................. 5.58% 23-Oct-98 12,000,000 11,792,900 2.9
Motorola Inc. ................................................. 5.52% 13-Jul-98 10,000,000 9,981,767 2.5
Ford Motor Credit Corp. ....................................... 5.51% 11-Aug-98 10,000,000 9,938,956 2.5
General Electric Co. .......................................... 5.56% 28-Aug-98 10,000,000 9,912,678 2.5
John Deere Capital Corp. ...................................... 5.57% 11-Sep-98 10,000,000 9,891,400 2.5
United States Automobile Association Capital Corp. ............ 5.58% 25-Sep-98 10,000,000 9,868,611 2.5
Minnesota Mining & Manufacturing Co. .......................... 5.61% 22-Sep-98 9,000,000 8,886,290 2.2
------------ -----
Total Commercial Paper - Discounted (amortized cost
$171,343,324) .................................................. 171,343,324 42.8
------------ -----
<CAPTION>
REPURCHASE AGREEMENTS
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dated June 30, 1998, with State Street Bank & Trust Co., due
July 1, 1998, for an effective yield of 5.70%, collateralized
by $54,775,000 U.S. Treasury Notes, 5.375% due 1/31/00 (market
value of collateral is $55,815,232 including accrued interest)
............................................................. 54,720,000 13.7
Dated June 30, 1998, with BancAmerica Robertson Stephens, due
July 1, 1998, for an effective yield of 5.55%, collateralized
by $50,730,000 of U.S. Treasury Notes & Bills, 6.25% and 8.75%
due 6/30/02 & 11/15/08, respectively (market value of
collateral is $51,242,992 including accrued interest) ....... 51,000,000 12.8
------------ -----
TOTAL REPURCHASE AGREEMENTS (cost $105,720,000) ................. 105,720,000 26.5
------------ -----
TOTAL INVESTMENTS (cost $277,063,324) * ........................ 277,063,324 69.3
Other Assets and Liabilities .................................... 122,880,385 30.7
------------ -----
NET ASSETS ...................................................... $399,943,709 100.0
------------ -----
------------ -----
</TABLE>
- --------------
* For Federal income tax purposes, cost is $277,063,324
The accompanying notes are an integral part of the financial statements.
F1
<PAGE> 345
AIM DOLLAR FUND
(FORMERLY GT GLOBAL DOLLAR FUND)
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (amortized cost $171,343,324) (Note 1)....................... $171,343,324
Repurchase agreements, at value and cost (Note 1)................................................ 105,720,000
U.S. currency.................................................................................... 20,244
Receivable for Fund shares sold.................................................................. 129,613,171
Interest receivable.............................................................................. 16,527
-----------
Total assets................................................................................... 406,713,266
-----------
Liabilities:
Payable for Fund shares repurchased.............................................................. 6,121,295
Distribution payable............................................................................. 219,677
Payable for investment management and administration fees (Note 2)............................... 150,888
Payable for transfer agent fees (Note 2)......................................................... 67,596
Payable for registration and filing fees......................................................... 64,830
Payable for service and distribution expenses (Note 2)........................................... 60,672
Payable for printing and postage expenses........................................................ 48,995
Payable for professional fees.................................................................... 13,679
Payable for custodian fees....................................................................... 9,830
Payable for fund accounting fees (Note 2)........................................................ 6,015
Payable for Directors' fees and expenses (Note 2)................................................ 3,059
Other accrued expenses........................................................................... 3,021
-----------
Total liabilities.............................................................................. 6,769,557
-----------
Net assets......................................................................................... $399,943,709
-----------
-----------
Class A:
Net asset value and redemption price per share ($291,300,510 DIVIDED BY 291,360,629 shares
outstanding)...................................................................................... $ 1.00
-----------
-----------
Class B:+
Net asset value and offering price per share ($101,012,198 DIVIDED BY 100,970,806 shares
outstanding)...................................................................................... $ 1.00
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($7,631,001 DIVIDED BY
7,630,975 shares outstanding)..................................................................... $ 1.00
-----------
-----------
Net assets: At June 30, 1998, net assets consisted of paid-in capital of $399,943,709.
<FN>
- --------------
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE> 346
AIM DOLLAR FUND
(FORMERLY GT GLOBAL DOLLAR FUND)
STATEMENT OF OPERATIONS
Six months ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income............................................................................... $8,298,701
Expenses:
Service and distribution expenses:(Note 2)
Class A.......................................................................... $ 251,824
Class B.......................................................................... 456,424 708,248
---------
Investment management and administration fees (Note 2)........................................ 747,972
Transfer agent fees (Note 2).................................................................. 345,900
Registration and filing fees.................................................................. 139,200
Professional fees............................................................................. 52,074
Printing and postage expenses................................................................. 49,775
Fund accounting fees.......................................................................... 40,604
Custodian fees................................................................................ 10,000
Directors' fees and expenses (Note 2)......................................................... 8,465
Other expenses................................................................................ 4,196
---------
Total expenses before reductions............................................................ 2,106,434
---------
Expenses waived by A I M Advisors, Inc. (Note 2).......................................... (365,930)
---------
Total net expenses.......................................................................... 1,740,504
---------
Net investment income........................................................................... 6,558,197
---------
Net increase in net assets resulting from operations............................................ $6,558,197
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE> 347
AIM DOLLAR FUND
(FORMERLY GT GLOBAL DOLLAR FUND)
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income............................................... $ 6,558,197 $ 11,700,779
---------------- -----------------
Net increase in net assets resulting from operations.............. 6,558,197 11,700,779
---------------- -----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income.......................................... (4,644,385) (7,587,680)
Class B:
Distributions to shareholders: (Note 1)
From net investment income.......................................... (1,765,418) (3,720,785)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income.......................................... (148,394) (392,314)
---------------- -----------------
Total distributions............................................... (6,558,197) (11,700,779)
---------------- -----------------
Capital share transactions: (Note 3)
Increase from capital shares sold and reinvested.................... 5,510,183,410 8,215,928,197
Decrease from capital shares repurchased............................ (5,387,128,456) (8,474,948,990)
---------------- -----------------
Net increase (decrease) from capital share transactions........... 123,054,954 (259,020,793)
---------------- -----------------
Total increase (decrease) in net assets............................... 123,054,954 (259,020,793)
Net assets:
Beginning of period................................................. 276,888,755 535,909,548
---------------- -----------------
End of period *..................................................... $ 399,943,709 $ 276,888,755
---------------- -----------------
---------------- -----------------
<FN>
- --------------
* Includes undistributed net investment income of $0.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE> 348
AIM DOLLAR FUND
(FORMERLY GT GLOBAL DOLLAR FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
-----------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1998 ----------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net investment income................... 0.023 0.045 0.044 0.050 0.032 0.022
Distributions from net investment
income................................. (0.023) (0.045) (0.044) (0.050) (0.032) (0.022)
----------- ---------- ---------- ---------- ---------- ----------
Net asset value (unchanged during the
period)................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ---------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ---------- ----------
Total investment return (b)............. 2.30% 4.62% 4.50% 5.08% 3.3% 2.2%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 291,301 $ 186,611 $ 392,623 $ 183,761 $ 320,858 $ 87,822
Ratio of net investment income to
average net assets:
With expense reductions, waivers,
and/or reimbursement (a) (Note 2).... 4.61% 4.50% 4.39% 4.94% 3.40% 2.17%
Without expense reductions, waivers,
and/or reimbursement (a)............. 4.36% 4.20% 4.08% 4.66% 3.15% 1.46%
Ratio of operating expenses to average
net assets: (a)
With expense reductions, waivers,
and/or reimbursement (a) (Note 2).... 0.93% 0.98% 0.99% 0.97% 0.92% 1.00%
Without expense reductions, waivers,
and/or reimbursement (a)............. 1.18% 1.28% 1.30% 1.25% 1.17% 1.72%
</TABLE>
- ----------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
The accompanying notes are an integral part of the financial statements.
F5
<PAGE> 349
AIM DOLLAR FUND
(FORMERLY GT GLOBAL DOLLAR FUND)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++
--------------------------------------------------------------------------
SIX MONTHS
ENDED APRIL 1, 1993
JUNE 30, YEAR ENDED DECEMBER 31, TO
1998 ---------------------------------------------- DECEMBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income................... 0.019 0.038 0.037 0.040 0.025 0.010
Distributions from net investment
income................................. (0.019) (0.038) (0.037) (0.040) (0.025) (0.010)
----------- ---------- ---------- ---------- ---------- -------------
Net asset value (unchanged during the
period)................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ---------- ---------- ---------- ---------- -------------
----------- ---------- ---------- ---------- ---------- -------------
Total investment return (b)............. 1.99% 3.84% 3.73% 4.29% 2.53% 1.4%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 101,012 $ 83,498 $ 128,308 $ 99,151 $ 109,936 $ 3,478
Ratio of net investment income to
average net assets:
With expense reductions, waivers,
and/or reimbursement (a) (Note 2).... 3.86% 3.75% 3.64% 4.19% 2.65% 1.42%
Without expense reductions, waivers,
and/or reimbursement (a)............. 3.61% 3.45% 3.33% 3.91% 2.40% 0.86%
Ratio of operating expenses to average
net assets: (a)
With expense reductions, waivers,
and/or reimbursement (a) (Note 2).... 1.68% 1.73% 1.74% 1.72% 1.67% 1.75%
Without expense reductions, waivers,
and/or reimbursement (a)............. 1.93% 2.03% 2.05% 2.00% 1.92% 2.31%
</TABLE>
- ----------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
The accompanying notes are an integral part of the financial statements.
F6
<PAGE> 350
AIM DOLLAR FUND
(FORMERLY GT GLOBAL DOLLAR FUND)
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+++
---------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER JUNE 1, 1995
JUNE 30, 31, TO
1998 ---------------------- DECEMBER 31,
(UNAUDITED) 1997 1996 1995
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
Net investment income................... 0.023 0.045 0.044 0.030
Distributions from net investment
income................................. (0.023) (0.045) (0.044) (0.030)
------------ ---------- ---------- -------------
Net asset value (unchanged during the
period)................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ---------- ---------- -------------
------------ ---------- ---------- -------------
Total investment return (b)............. 2.25 % 4.61% 4.50% 2.92%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 7,631 $ 6,780 $ 14,978 $ 2,096
Ratio of net investment income to
average net assets:
With expense reductions, waivers,
and/or reimbursement (a) (Note 2).... 4.61 % 4.50% 4.39% 4.94%
Without expense reductions, waivers,
and/or reimbursement (a)............. 4.61 % 4.45% 4.33% 4.91%
Ratio of operating expenses to average
net assets: (a)
With expense reductions, waivers,
and/or reimbursement (a) (Note 2).... 0.93 % 0.98% 0.99% 0.97%
Without expense reductions, waivers,
and/or reimbursement (a)............. 0.93 % 1.03% 1.05% 1.00%
</TABLE>
- ----------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
The accompanying notes are an integral part of the financial statements.
F7
<PAGE> 351
AIM DOLLAR FUND
(FORMERLY GT GLOBAL DOLLAR FUND)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM Dollar Fund (the "Fund", formerly GT Global Dollar Fund) is a diversified
series of AIM Investment Portfolios, Inc. (the "Company"). The Company is
registered under the Investment Company Act of 1940, as amended ("1940 Act"), as
an open-end management investment company.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Each class has exclusive voting
rights with respect to its distribution plan. Investment income, realized and
unrealized capital gains and losses, and the common expenses of the Fund are
allocated on a pro rata basis to each class based on the relative net assets of
each class to the total net assets of the Fund. Each class of shares differs in
its respective distribution expenses, and may differ in its transfer agent,
registration, and certain other class-specific fees and expenses.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
Securities in the Fund are valued utilizing the amortized cost valuation method
permitted in accordance with Rule 2a-7 under the 1940 Act. This method involves
valuing a portfolio security initially at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium.
(B) FEDERAL INCOME TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or for excise tax on
income and capital gains. The Fund currently has a capital loss carryforward of
$3,382 which expires in 2005.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, U.S. government securities or other
high quality debt securities of which the value, including accrued interest, is
at least equal to the amount to be repaid to the Fund under each agreement at
its maturity. A I M Advisors, Inc. is responsible for determining that the value
of these underlying securities remains at least equal to the resale price.
(D) OTHER
Security transactions are recorded on the trade date (date the order to buy or
sell is executed). Interest income is recorded on an accrual basis. Dividends to
shareholders from net investment income are declared daily and paid or
reinvested monthly.
2. RELATED PARTIES
A I M Advisors, Inc. ("AIM" or the "Manager") is the Fund's investment manager
and administrator, and INVESCO (NY), Inc., (formerly, Chancellor LGT Asset
Management, Inc.) is the Fund's investment sub-adviser and/or sub-administrator.
As of the close of business on May 29, 1998, Liechtenstein Global Trust AG
("LGT"), the former indirect parent organization of Chancellor LGT Asset
Management, Inc. ("Chancellor LGT"), consummated a purchase agreement with
AMVESCAP PLC pursuant to which AMVESCAP PLC acquired LGT's Asset Management
Division, which included Chancellor LGT and certain other affiliates. As a
result of this transaction, Chancellor LGT was renamed INVESCO (NY), Inc., and
is now an indirect wholly-owned subsidiary of AMVESCAP PLC. In connection with
this transaction, AIM, an indirect wholly-owned subsidiary of AMVESCAP PLC,
became the investment manager and administrator of the Funds and INVESCO (NY),
Inc. became the sub-adviser and sub-administrator of the Funds. All of the
changes became effective as of the close of business on May 29, 1998.
The Fund pays the Manager investment management and administration fees at the
annualized rate of 0.50% of the Fund's average daily net assets. These fees are
computed daily and paid monthly, and are subject to reduction in any year to the
extent that the Fund's expenses (exclusive of brokerage commissions, taxes,
interest, distribution-related expenses and extraordinary expenses) exceed the
most stringent limits prescribed by the laws or regulations of any state in
which the Fund's shares are sold.
A I M Distributors, Inc. ("AIM Distributors"), an affiliate of the Manager,
serves as the Fund's distributor. For the period ended May 29, 1998, GT Global,
Inc. ("GT Global") served as the Fund's distributor. The Fund offers Class A,
Class B, and Advisor Class shares for purchase. Certain redemptions of Class A
shares made within two years of purchase are subject to contingent deferred
sales charges ("CDSCs"), in accordance with the Fund's current prospectus. Class
B shares of the Fund are available only through an exchange of Class B shares of
other AIM Mutual Funds. Certain redemptions of Class B shares made within six
years of purchase are also subject to CDSCs, in accordance with the Fund's
current prospectus. For the period ended June 30, 1998, AIM Distributors and GT
Global collected CDSCs in the amount of $53,658 and $384,193, respectively. In
addition, AIM Distributors may, from time to time, make ongoing payments to
brokerage firms, financial institutions (including banks)
F8
<PAGE> 352
AIM DOLLAR FUND
(FORMERLY GT GLOBAL DOLLAR FUND)
and others that facilitate the administration and servicing of shareholder
accounts.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Company's Board
of Directors with respect to the Fund's Class A shares ("Class A Plan") and
Class B shares ("Class B Plan"), the Fund reimbursed GT Global for a portion of
its shareholder servicing and distribution expenses. Under the Class A Plan, the
Fund was permitted to pay GT Global a service fee at the annualized rate of up
to 0.25% of the average daily net assets of the Fund's Class A shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares less any amounts paid by the Fund as the aforementioned service
fee for GT Global's expenditures incurred in providing services as distributor.
GT Global does not currently intend to seek reimbursement of any amounts under
the Class A Plan. All expenses for which GT Global is reimbursed under the Class
A Plan will have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Fund's Class B Plan, the Fund
was permitted to pay GT Global a service fee at the annualized rate of up to
0.25% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. GT Global does not currently intend to seek reimbursement of any
amounts in excess of 0.75% of average daily net assets under the Class B Plan.
Expenses incurred under the Class B Plan in excess of 1.00% annually were
permitted to be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1 under
the 1940 Act, the Company's Board of Directors adopted a Master Distribution
Plan applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which a Fund compensates AIM Distributors for the
purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Funds. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.25% of the average
daily net assets of the Fund's Class A shares.
Pursuant to the Fund's Class B Plan, the Fund compensates AIM Distributors at an
annualized rate of 1.00% of the average daily net assets of the Fund's Class B
shares.
The Manager and AIM Distributors have voluntarily undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
items) to the maximum annual level of 1.00%, 1.75%, and 1.00% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by AIM
Distributors of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or AIM Distributors of portions of the Fund's
other operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and AIM Distributors, is the transfer agent of the Fund. For performing
shareholder servicing, reporting, and general transfer agent services, GT
Services receives an annual maintenance fee of $17.50 per account, a new account
fee of $4.00 per account, a per transaction fee of $1.75 for all transactions
other than exchanges and a per exchange fee of $2.25. GT Services is also
reimbursed by the Funds for its out-of-pocket expenses for such items as
postage, forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $1,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director.
F9
<PAGE> 353
AIM DOLLAR FUND
(FORMERLY GT GLOBAL DOLLAR FUND)
3. CAPITAL SHARES
At June 30, 1998, there were 2,000,000,000 shares of the Company's common stock
authorized, at $0.001 per share. Of this number, 1,500,000,000 shares have been
classified as shares of the Fund; 500 million shares have been classified as
Class A shares, 500 million have been classified as Class B shares, and 500
million have been classified as Advisor Class shares. These amounts may be
increased from time to time at the discretion of the Board of Directors.
Transactions in capital shares of the Fund were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
--------------------- ----------------------
CLASS A SHARES & AMOUNT SHARES & AMOUNT
- ---------------------------------------- --------------------- ----------------------
<S> <C> <C>
Shares sold............................. $ 4,604,406,284 $ 6,222,351,251
Shares issued in connection with
reinvestment of distributions......... 2,445,437 4,193,093
--------------------- ----------------------
4,606,851,721 6,226,544,344
Shares repurchased...................... (4,502,161,868) (6,432,557,179)
--------------------- ----------------------
Net increase (decrease)................. $ 104,689,853 $ (206,012,835)
--------------------- ----------------------
--------------------- ----------------------
<CAPTION>
CLASS B SHARES & AMOUNT SHARES & AMOUNT
- ---------------------------------------- --------------------- ----------------------
<S> <C> <C>
Shares sold............................. $ 747,831,959 $ 1,763,392,144
Shares issued in connection with
reinvestment of distributions......... 1,327,518 2,479,264
--------------------- ----------------------
749,159,477 1,765,871,408
Shares repurchased...................... (731,645,373) (1,810,681,116)
--------------------- ----------------------
Net increase (decrease)................. $ 17,514,104 $ (44,809,708)
--------------------- ----------------------
--------------------- ----------------------
<CAPTION>
ADVISOR CLASS SHARES & AMOUNT SHARES & AMOUNT
- ---------------------------------------- --------------------- ----------------------
<S> <C> <C>
Shares sold............................. $ 154,115,624 $ 223,289,952
Shares issued in connection with
reinvestment of distributions......... 56,588 222,493
--------------------- ----------------------
154,172,212 223,512,445
Shares repurchased...................... (153,321,215) (231,710,695)
--------------------- ----------------------
Net increase (decrease)................. $ 850,997 $ (8,198,250)
--------------------- ----------------------
--------------------- ----------------------
</TABLE>
F10
<PAGE> 354
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AIM DOLLAR FUND
NOTES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 355
APPENDIX V
<TABLE>
<CAPTION>
AIM MONEY MARKET FUND
AIM DOLLAR FUND
PRO FORMA COMBINING SCHEDULE
OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
PRINCIPAL AMOUNTS(000) SECURITY MATURITY VALUE VALUE
MONEY COMBINING MONEY MONEY PRO FORMA
DOLLAR MARKET PRO FORMA DOLLAR MARKET DOLLAR MARKET
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BANKS NOTES-0.53%
Banks-Domestic-0.53%
Morgan Guaranty Trust
- $8,000 $8,000 5.81%(a) - 10/16/98 - $8,000,052 $8,000,052
----------
COMMERCIAL PAPER-37.92%(b)
Asset-Backed Securities-13.27%
Centric Capital Corp.
- 9,250 9,260 5.50% - 7/17/98 - 9,227,389 9,227,389
- 15,000 15,000 5.53% - 8/4/98 - 14,921,658 14,921,658
- 4,000 4,000 6.60% - 8/14/98 - 3,973,111 3,973,111
Clipper Receivables Corp.
- 10,000 10,000 5.47% - 7/2/98 - 9,998,481 9,998,481
- 18,332 18,332 5.59% - 8/10/98 - 18,218,138 18,218,138
Falcon Asset Securitization Corp.
- 15,130 15,130 5.52% - 7/22/98 - 15,081,282 15,081,282
Monte Rosa Capital Corp.
- 25,000 25,000 5.60% - 8/28/98 - 24,774,444 24,774,444
- 20,000 20,000 5.54% - 9/11/98 - 19,778,400 19,778,400
Preferred Receivable Funding Corp.
- 3,000 3,000 5.405% - 7/8/98 - 2,997,748 2,997,748
- 16,000 16,000 5.51% - 7/10/98 - 15,977,960 15,977,960
- 17,500 17,500 5.405% - 7/15/98 - 17,483,216 17,483,216
Receivables Capital Corp.
- 25,000 25,000 6.63% - 7/6/98 - 24,980,799 24,980,799
Sheffield Receivables Corp.
- 25,000 25,000 5.57% - 9/8/98 - 24,733,104 24,733,104
----------
202,125,730
-----------
Automobile-3.27%
Daimlar-Benz North America
- 25,000 25,000 5.52% - 7/14/98 - 24,950,167 24,950,167
Ford Motor Credit Corp.
10,000 - 10,000 5.51% 8/11/98 - 9,938,956 - 9,938,956
Toyota Motor Credit Corp.
- 15,000 15,000 5.53% - 7/24/98 - 14,947,004 14,947,004
49,836,127
Beverages-3.33%
Coca Cola Co.
12,000 - 12,000 5.51% 7/14/98 - 11,976,470 - 11,976,470
Diageo Capital PLC
- 24,000 24,000 5.50% - 7/31/98 - 23,890,000 23,890,000
- 15,000 15,000 5.50% - 8/31/98 - 14,860,717 14,860,717
----------
50,727,187
----------
Chemicals-2.40%
Du Pont (E.I.) de Nemoura and Co.
- 25,000 25,000 5.495% - 8/27/98 - 24,782,490 24,782,490
12,000 - 12,000 5.59% 10/21/98 - 11,796,906 - 11,796,906
----------
38,579,398
----------
Communications Equipment-0.66%
Motorola Inc.
10,000 - 10,000 5.52% 7/13/98 - 9,981,767 - 9,981,767
---------
</TABLE>
<PAGE> 356
AIM MONEY MARKET FUND
AIM DOLLAR FUND
PRO FORMA COMBINING SCHEDULE
OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNTS(000) SECURITY MATURITY VALUE VALUE
MONEY COMBINING MONEY MONEY PRO FORMA
DOLLAR MARKET PRO FORMA DOLLAR MARKET DOLLAR MARKET
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Computer Software & Services-1.89%
First Data Corp.
- - $9,000 $9,000 5.52% - 8/18/98 - $8,933,760 $8,933,760
- - 20,000 20,000 5.51% - 9/1/98 - 19,810,211 19,810,211
----------
28,743,971
----------
Electrical Equipment-1.11%
Hitachi America, Ltd.
- - 17,000 17,000 5.52% - 7/8/98 - 16,981,753 16,981,753
----------
Entertainment-0.78%
Walt Disney
12,000 - 12,000 5.58% 10/21/98 - 11,797,280 - 11,797,280
----------
Foreign Government-0.79%
Kingdom of Sweden
12,000 - 12,000 5.52% 7/6/98 - 11,990,950 - 11,990,950
----------
Insurance (Property & Casualty)-1.29%
A.I. Credit Corp.
- - 20,000 20,000 5.45% - 10/5/98 - 19,709,333 19,709,333
----------
Leasing-0.79%
International Lease Finance Corp.
12,000 - 12,000 5.53% 7/17/98 - 11,971,040 - 11,971,040
----------
Machinery-0.94%
Dover Corp.
- - 4,540 4,540 5.59% - 8/28/98 - 4,499,112 4,499,112
John Deere Capital Corp.
10,000 - 10,000 5.57% 9/11/98 - 9,891,400 - 9,891,400
---------
14,390,612
----------
Manufacturing-Diversified-0.58%
Minnesota Mining & Manufacturing Co.
9,000 - 9,000 5.61% 9/22/98 - 8,886,290 - 8,886,290
---------
Metal Mining-1.37%
Rio Tinto America, Inc.
- 10,000 10,000 5.54% - 8/18/98 - 9,926,134 9,926,134
- 11,000 11,000 5.46% - 9/4/98 - 10,891,558 10,891,558
----------
20,817,692
Multiple Industry-0.65%
General Electric Co.
10,000 - 10,000 5.56% 8/28/98 - 9,912,678 - 9,912,678
---------
Oil & Gas(Integrated)-1.63%
Shell Martinez Refining Co. (c)
- - 10,000 10,000 5.60% - 7/14/98 - 10,000,000 10,000,000
Shell Oil Co.
15,000 - 15,000 5.52% - 8/27/98 - 14,870,325 14,870,325
----------
24,870,325
----------
Personal Credit-2.52%
American Express Credit Corp.
12,000 - 12,000 5.58% 10/23/98 - 11,792,900 - 11,792,900
Associates Corp.
15,000 - 15,000 5.58% 11/9/98 - 14,702,521 14,702,521
Household Finance Corp.
12,000 - 12,000 5.54% 7/20/98 - 11,965,230 - 11,965,230
----------
38,480,651
----------
</TABLE>
<PAGE> 357
AIM MONEY MARKET FUND
AIM DOLLAR FUND
PRO FORMA COMBINING SCHEDULE
OF INVESTMENTS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNTS(000) SECURITY MATURITY VALUE VALUE
MONEY COMBINING MONEY MONEY PRO FORMA
DOLLAR MARKET PRO FORMA DOLLAR MARKET DOLLAR MARKET
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Miscellaneous - 0.65%
United States Automobile Association Capital Corp.
$10,000 -- $10,000 5.58% 9/25/98 -- $9,868,611 -- $ 9,868,611
--------------
Total Commercial Paper 577,651,293
--------------
MASTER NOTE AGREEMENTS-10.92%
Citicorp Securities, Inc. (d)
-- 29,000 29,000 6.75% -- 1/25/98 -- 29,000,000 29,000,000
Goldman Sachs & Co (e)
-- 60,000 50,000 5.6523% -- 10/19/98 -- 50,000,000 50,000,000
Merrill Lynch Mortgage Capital, Inc (f)
-- 37,400 37,400 6.80% -- 8/17/98 -- 37,400,000 37,400,000
Morgan Stanley, Dean Witter, Discover & Co. (g)
-- 50,000 50,000 6.60% -- 11/23/98 -- 50,000,000 50,000,000
--------------
Total Master Note Agreements 166,400,000
--------------
TAXABLE MUNICIPAL BONDS-2.04%
Health Care-0.66%
Jacksonville Florida Health Facilities; Hospital Series
Revenue Bonds
-- 10,000 10,000 5.70%(h) -- 8/15/98 -- 10,000,000 10,000,000
--------------
Hospital Management-0.72%
Illinois Health Facilities Authority (Loyola University
Health Systems); Revenue Bond
-- 11,000 11,000 5.70% (h) -- 7/1/24 -- 11,000,000 11,000,000
--------------
Multiple Industry-0.66%
Mississippi Business Finance Corp. (Mississippi
Industrial Development); Revenue Bond
-- 10,000 10,000 5.64% (h) -- 2/1/23 -- 10,000,000 10,000,000
--------------
Total Taxable Municipal Bonds 31,000,000
--------------
U.S. GOVERNMENT AGENCY SECURITIES-2.93%
Fannie Mae (i)
-- 32,000 32,000 5.261% -- 6/2/99 -- 32,000,000 32,000,000
Sallie Mae (i)
-- 2,600 2,600 5.321% -- 8/20/98 -- 2,600,000 2,600,000
-- 10,000 10,000 5.341% -- 2/8/99 -- 10,001,028 10,001,028
--------------
Total U.S. Government Agency Securities 44,601,028
--------------
Total Investments (excluding repurchase agreements) 827,652,373
--------------
REPURCHASE AGREEMENTS-26.09% (j)
BancAmerica Robertson Stephens (k)
50,730 -- 50,730 5.55% 7/1/98 -- 51,000,000 -- 51,000,000
Greenwich Capital Markets, Inc. (l)
-- 197,100 197,100 6.00% -- 7/1/98 -- 197,100,000 197,100,000
SBC Warburg Dillon Read Inc. (m)
-- 44,611 44,611 5.85% -- 7/1/98 -- 44,611,446 44,611,446
Salomon Smith Barney, Inc. (n)
-- 50,000 50,000 6.125% -- NONE -- 50,000,000 50,000,000
State Street Bank & Trust Co. (o)
54,775 -- 54,775 5.70% 7/1/98 -- 54,720,000 -- 54,720,000
--------------
Total Repurchase Agreements 397,431,446
--------------
TOTAL INVESTMENTS-80.43% (p) 1,225,083,819
OTHER ASSETS LESS LIABILITIES-19.57% 298,139,627
--------------
NET ASSETS-100.00% $1,523,223,346
==============
</TABLE>
<PAGE> 358
Notes to Schedule of Investments:
(a) Interest rates are redetermined daily. Rate shown is the rate in effect on
6/30/98.
(b) Treasury bills and some commercial paper are traded on a discount basis. In
such cases the interest rate shown represents the rate of discount paid or
received at the time of purchase by the Fund.
(c) Trust certificates representing an interest in a trust (comprised of
eligible debt obligations) entitling the fund to receive interest. The
Fund has the right, upon seven calendar day's notice to the trustee, to put
its certificates to the trust at par value plus accrued interest. Because
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. Rates shown are the rates in effect on
6/30/98.
(d) 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 6/30/98.
(e) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement generally upon seven business days' notice. Interest
rates on master notes are redetermined periodically. Rate shown in the
rate in effect on 06/30/98.
(f) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement generally upon two days' business notice. Interest
rates on master notes are redetermined periodically. Rate shown is the
rate in effect on 06/30/98.
(g) Master Note Purchase Agreement may be terminated by any party upon three
business days' prior written notice. Interest rates on master notes are
redetermined periodically. Rate shown is the rate in effect on 06/30/98.
(h) Demand security; payable upon demand by the Fund with usually no more than
seven calendar days notice. Interest rates are redetermined weekly.
Rates shown are rates in effect on 06/30/98.
(i) Interest rates are redetermined weekly. Rates shown are rates in effect
on 06/30/98.
(j) 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.
(k) Repurchase agreement entered into 06/30/98. Collateralized by $50,730,000
U.S. Government obligations, 6.25% to 8.76% due 03/30/02 to 11/15/08 with
an aggregate market value at 06/30/98 of $51,242,992.
(l) Joint Repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,333. Collateralized by %205,565,153 U.S. Government obligations,
6.00% to 12.25% due 09/01/01 to 06/01/28 with an aggregate market value at
06/30/98 of $204,004,737.
(m) Joint Repurchase agreement entered into 06/30/98 with a maturing value of
$1,000,162,500. Collateralized by $3,590,870,000 U.S. Government
obligations, 0% due 08/15/00 to 11/15/24 with an aggregate market value at
06/30/98 of $1,148,593,549.
(n) Open Repurchase agreement entered into 06/30/98. Collateralized by
$622,412,000 U.S. Government obligations 0% to 9.65% due 09/18/98 to
12/15/43 with an aggregate market value at 06/30/98 of $612,000,396.
(o) Joint Repurchase agreement entered into 06/30/98. Collateralized by
$54,775,000 U.S. Government obligations, 5.375% due 01/31/00 with an
aggregate market value at 06/30/98 of $55,815,232.
(p) Also represents cost for federal income tax purposes.
See accompanying notes to Pro Forma Financial Statements.
<PAGE> 359
AIM Money Market Fund
AIM Dollar Fund
Pro Forma Combining Statements of Assets and Liabilities
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
AIM Money Pro forma
Assets: AIM Dollar Fund Market Fund combining
--------------- ------------- --------------
<S> <C> <C> <C>
Investments, excluding repurchase agreements at value (amortized cost) $ 171,343,324 $ 656,309,049 $ 827,652,373
Repurchase agreements, at value and cost 105,720,000 291,711,446 397,431,446
U.S. currency 20,244 -- 20,244
Receivables for:
Fund shares sold 129,613,171 202,850,311 332,463,482
Interest 16,527 1,482,457 1,498,984
Investments sold -- -- --
Investments for deferred compensation plan -- 84,451 84,451
Other assets -- 422,815 422,815
--------------- -------------- --------------
Total Assets 406,713,266 1,152,860,529 1,559,573,795
--------------- -------------- --------------
Liabilities:
Payables for:
Investments purchased -- -- --
Fund shares reacquired 6,121,295 27,963,831 34,085,126
Investment management and administration fees 150,888 5,442 156,330
Transfer agent fees 67,596 127,998 195,594
Registration and filing fees 64,830 -- 64,830
Service and distribution expenses 60,672 -- 60,672
Printing and postage expenses 48,995 -- 48,995
Professional fees 13,679 -- 13,679
Custodian fees 9,830 -- 9,830
Fund accounting fees 6,015 -- 6,015
Directors' fees and expenses 3,059 -- 3,059
Dividends -- 169,779 169,779
Deferred compensation plan -- 84,451 84,451
Accrued advisory fees -- 503,290 503,290
Accrued distribution fees 219,677 708,700 928,377
Accrued operating expenses and other payables 3,021 17,401 20,422
--------------- -------------- --------------
Total liabilities 6,769,557 29,580,892 36,350,449
--------------- -------------- --------------
Net assets applicable to shares outstanding $ 399,943,709 $1,123,279,637 $1,523,223,346
=============== ============== ==============
Net Assets:
Class A $ 291,300,510 $ 504,181,590 $ --
=============== ============== ==============
Class B $ 101,012,198 $ 155,215,789 $ 256,227,987
=============== ============== ==============
Class C $ -- $ 14,913,208 $ 14,913,208
=============== ============== ==============
Advisor Class $ 7,631,001 $ -- $ --
=============== ============== ==============
AIM Cash Reserve Shares $ -- $ 448,969,050 $1,252,082,151
=============== ============== ==============
Shares outstanding, $.01 par value per share:
Class A 291,360,629 504,165,604 --
=============== ============== ==============
Class B 100,970,805 155,209,764 256,180,569
=============== ============== ==============
Class C -- 14,912,713 14,912,713
=============== ============== ==============
Advisor Class 7,630,975 -- --
=============== ============== ==============
AIM Cash Reserve Shares -- 448,954,447 1,252,111,655
=============== ============== ==============
Class A:
Net asset value and redemption price per share $ 1.00 $ 1.00 --
=============== ============== ==============
Offering price per share:
(Net asset value of $1.00+94.50%) $ -- $ 1.06 $ --
=============== ============== ==============
Class B:
Net asset value and offering price per share $ 1.00 $ 1.00 $ 1.00
=============== ============== ==============
Class C:
Net asset value and offering price per share $ -- $ 1.00 $ 1.00
=============== ============== ==============
Advisor Class:
Net asset value, offering price per share and
redemption price per share $ 1.00 $ -- $ --
=============== ============== ==============
AIM Cash Reserve Shares
Net asset value, offering price per share and
redemption price per share $ -- $ 1.00 $ 1.00
=============== ============== ==============
</TABLE>
See accompanying notes to Pro Forma Financial Statements.
<PAGE> 360
AIM Money Market Fund
AIM Dollar Fund
Pro Forma Combining Statement of Operations
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
AIM Money Pro forma
AIM Dollar Fund Market Fund Adjustments combining
--------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Investment income:
Interest $ 15,170,711 $ 46,694,810 $ - $61,865,521
Expenses:
Advisory fees/Investment and management fees 1,384,735 4,586,148 86,157 6,057,040
Administrative services/Fund accounting fees 69,517 68,947 (66,464) 72,000
Transfer agent fees 725,305 1,544,039 (214,689) 2,054,655
Registration and filing fees 400,217 365,618 (278,851) 486,984
Custodian fees 43,930 33,501 77,431
Directors'/Trustees' fees and expenses 13,971 14,225 (10,802) 17,394
Distribution fees:
Class A 422,808 850,644 (1,273,452) --
Class B 995,797 1,195,121 2,190,918
Cash Reserves n/a 931,232 1,294,159 2,225,391
Class C n/a 21,600 21,600
Other 218,032 66,641 (99,232) 185,441
--------------- ------------- ----------- -----------
Total expenses 4,274,312 9,677,716 (563,174) 13,388,854
--------------- ------------- ----------- -----------
Expenses waived by (Chancellor LGT Asset Management, Inc.) (671,757) -- 671,757 --
Expenses reimbursed by (Chancellor LGT Asset Management, Inc.) (88,707) -- 88,707 --
Expense reductions (43,916) -- -- (43,916)
Indirect expenses -- (9,867) -- (9,867)
--------------- ------------- ----------- -----------
Total net expenses 3,469,932 9,667,849 197,290 13,335,071
--------------- ------------- ----------- -----------
Net investment income 11,700,779 37,026,961 (197,290) 48,530,450
--------------- ------------- ----------- -----------
Realized gain on sales of Investments securities -- 19,347 19,347
--------------- ------------- ----------- -----------
Net increase in net assets resulting from operations $ 11,700,779 $ 37,046,308 $ (197,290) $48,549,797
=============== ============= =========== ===========
</TABLE>
See accompanying notes to Pro Forma Financial Statements.
<PAGE> 361
AIM Money Market Fund
AIM Dollar Fund
Pro Forma Combining Statement of Operations
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
AIM Money Pro forma
AIM Dollar Fund Market Fund Adjustments combining
--------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
$ 8,298,701 $ 25,732,095 $ -- $ 34,030,796
Investment income:
Interest
747,972 2,508,465 19,903 3,276,340
Expenses: 40,604 32,652 (37,256) 36,000
Advisory fees/Investment and management fees 345,900 735,777 (166,442) 915,235
Administrative services/Fund accounting fees 139,200 186,677 (91,200) 234,677
Transfer agent fees 10,000 13,969 23,969
Registration and filing fees 8,465 5,474 (7,553) 6,386
Custodian fees
Directors'/Trustees' fees and expenses 251,824 523,080 (774,904) --
Distribution fees: 456,424 606,632 1,063,056
Class A 450,185 782,931 1,233,116
Class B 61,156 61,156
Cash Reserves 106,045 45,261 (49,874) 101,432
--------------- ------------ ------------ ------------
Class C 2,106,434 5,169,328 (324,395) 6,951,367
--------------- ------------ ------------ ------------
Other (365,930) -- 365,930 --
Total expenses -- (5,506) -- (5,506)
--------------- ------------ ------------ ------------
Expenses waived by A I M Advisors, Inc. 1,740,504 5,163,822 41,535 6,945,861
--------------- ------------ ------------ ------------
Indirect expenses 6,558,197 20,568,273 (41,535) 27,084,935
--------------- ------------ ------------ ------------
Total net expenses
Net investment income -- 2,781 2,781
--------------- ------------ ------------ ------------
$ 6,558,197 $ 20,571,054 $ (41,535) $ 27,087,716
=============== ============ ============ ============
Realized gain on sales of investment securities
Net increase in net assets resulting from operations
</TABLE>
See accompanying notes to Pro Forma Financial Statements.
<PAGE> 362
AIM MONEY MARKET FUND
AIM DOLLAR FUND
Notes to Pro Forma Combining Financial Statements
June 30, 1998
(Unaudited)
Note 1 - Basis of Pro Forma Presentation
The pro forma financial statements and the accompanying pro forma schedule of
investments give effect to the proposed acquisition of the assets of AIM Dollar
Fund by AIM Money Market Fund accounted for as a tax-free merger of investment
companies. The acquisition would be accomplished by an exchange of shares of AIM
Money Market Fund for the net assets of AIM Dollar Fund and the distribution of
AIM Money Market Fund shares to AIM Dollar Fund shareholders. If the acquisition
were to have taken place at June 30, 1998, AIM Dollar Fund shareholders would
have received 399,962,396 shares of beneficial interest of AIM Money Market
Fund.
Note 2 - Pro Forma Adjustments
Pro forma adjustments have been made to reflect the expenses of the combined
entities, assuming the merger was effective January 1, 1997. Expense reductions
relate to expenses incurred by AIM Dollar Fund that would not have been required
or would contractually be incurred at a lower rate.
<PAGE> 363
PART C. OTHER INFORMATION
Item 15. Indemnification
The Registrant's Agreement and Declaration of Trust (the "Agreement"),
dated May 5, 1993, as amended, provides, among other things, as
follows:
(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 or 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 with 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 employee (the "Insured Parties") are insured under an
Investment Advisory Professional and Directors and Officers Liability
Policy, issued by ICI Mutual Insurance Company, with a $25,000,000
limit of liability.
To the extent that the Declaration of Trust or any other instrument
pursuant to which the Registrant is organized or administered indemnify
any director or officer of the Registrant, or that any contract or
agreement indemnifies any person who undertakes to act as investment
adviser or principal underwriter to the Registrant, any such provision
protecting or purporting to protect such persons against any liability
to the Registrant or its security holders to which he would otherwise
by subject by reason or willful misfeasance, bad faith or gross
negligence, in the performance of his duties, or by reason of his
contract or agreement, will be interpreted and enforced in a manner
consistent with the provisions of Sections 17(h) and (i) of the
Investment Company Act of 1940, as amended, and Release No. IC-11330
issued thereunder.
Item 16. Exhibits.
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) was filed electronically as an Exhibit
to
<PAGE> 364
Item 16. Exhibits.
Post-Effective Amendment No. 73 of July 25, 1997, and is
hereby incorporated by reference.
(f) Fifth Amendment to Agreement and Declaration of Trust of
the Registrant (designation of Class C shares of the
Funds) was filed electronically as an Exhibit to
Post-Effective Amendment No. 73 of July 25, 1997, and is
hereby incorporated by reference.
(g) Sixth Amendment to Agreement and Declaration of Trust of
the Registrant (name change of AIM Growth Fund) was filed
electronically as an Exhibit to Post-Effective Amendment
No. 74 on February 27, 1998, and is hereby incorporated
by reference.
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.
(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 copy of the form of Agreement and Plan of
Reorganization between the Registrant and AIM Investment
Portfolios is attached as Appendix 1 to the Prospectus
contained in this Registration Statement.
5 (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.
<PAGE> 365
Item 16. Exhibits.
6 (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,
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.
7 (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
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.
(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.
<PAGE> 366
Item 16. Exhibits.
(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.
(8) Amended and Restated Master Distribution
Agreement, dated August 4, 1997, between the
Registrant (on behalf of its Class A Shares, Class C
Shares and AIM Cash Reserve Shares) and A I M
Distributors, Inc. was filed electronically as an
Exhibit to Post-Effective Amendment No. 74 on
February 27, 1998, and is hereby incorporated by
reference.
(b) Form of Selected Dealer Agreement between A I M
Distributors, Inc. and selected dealers was filed
electronically as an Exhibit to Post-Effective Amendment
No. 74 on February 27, 1998, and is hereby incorporated
by reference.
(c) Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks was filed electronically as
an Exhibit to Post-Effective Amendment No. 74 on February
27, 1998, and is hereby incorporated by reference.
8 (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 Agreement for
Non-Affiliated Directors, approved March 12, 1997,
was filed electronically as an Exhibit to
Post-Effective Amendment No. 74 on February 27, 1998,
and is hereby incorporated by reference.
(2) 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.
(3) Form of Deferred Compensation Plan for Eligible
Directors/Trustees was filed as an Exhibit to
Post-Effective Amendment No. 69 on February 28,
1995.
9 (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.
<PAGE> 367
Item 16. Exhibits.
(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.
10 (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 was filed electronically as an Exhibit to
Post-Effective Amendment No. 73 on July 25, 1997, and
is hereby incorporated by reference.
(4) Second Amended and Restated Master Distribution
Plan for Registrant's Class A Shares, Class C Shares
and AIM Cash Reserve Shares was filed electronically
as an Exhibit to Post-Effective Amendment No. 74 on
February 27, 1998, and is hereby incorporated by
reference.
(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.
(7) Second Amended and Restated Master Distribution
Plan for Registrant's Class B Shares was filed
electronically as an Exhibit to Post-Effective
Amendment No. 73 on July 25, 1997, and is hereby
incorporated by reference.
(b) Form of Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed electronically as an Exhibit to Post-Effective
Amendment No. 74 on February 27, 1998, and is hereby
incorporated by reference.
(c) Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed electronically as an Exhibit to Post-Effective
Amendment No. 74 on February 27, 1998, and is hereby
incorporated by reference.
(d) Form of Variable Group Annuity Contractholder Service
Agreement to be used in connection with Registrant's
Master Distribution Plan was filed electronically as an
Exhibit to Post-Effective Amendment No. 74 on February
27, 1998, and is hereby incorporated by reference.
(e) Form of Agency Pricing Agreement to be used in connection
with Registrant's Master Distribution Plan was filed
electronically as an Exhibit to Post-Effective Amendment
No. 74 on February 27, 1998, and is hereby incorporated
by reference.
(f) 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
were filed electronically as an Exhibit to Post-Effective
Amendment No. 74 on February 27, 1998, and is hereby
incorporated by reference.
(g) Rule 18f-3 Amended and Restated Multiple Class Plan
(effective July 1, 1997) was filed electronically as an
Exhibit to Post-Effective Amendment No. 73 on July 25,
1997.
(h) Rule 18f-3 Second Amended and Restated Multiple Class
Plan (effective September 1, 1997) was filed
electronically as an Exhibit to Post-Effective Amendment
No. 74 on February 27, 1998, and is hereby incorporated
by reference.
<PAGE> 368
Item 16. Exhibits.
11 Opinion and consent of Ballard Spahr Andrews & Ingersoll,
LLP, as to the legality of the securities being
registered is filed herewith electronically.
12 Opinion and consent of Ballard Spahr Andrews & Ingersoll,
LLP, supporting the tax matters and consequences to
shareholders discussed in the prospectus is filed
herewith electronically.
13 (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.
(3) Amendment No. 1, dated August 4, 1997, to the
Transfer Agency and Service Agreement, dated as of
November 1, 1994, between Registrant and A I M Fund
Services, Inc. was filed electronically as an Exhibit
to Post-Effective Amendment No. 74 on February 27,
1998, and is hereby incorporated by reference.
(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.) was filed
electronically as an Exhibit to Post-Effective
Amendment No. 73 on July 25, 1997, and is hereby
incorporated by reference.
(5) Exhibit 1, effective as of August 4, 1997, to
the Remote Access and Related Services Agreement,
dated December 23, 1994, between the Registrant and
First Data Investor Services Group, Inc. was filed
electronically as an Exhibit to Post-Effective
Amendment No. 74 on February 27, 1998, and is hereby
incorporated by reference.
(6) Preferred Registration Technology Escrow
Agreement, dated September 10, 1997, between the
Registrant and First Data Investor Services Group,
Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 74 on February 27, 1998,
and is hereby incorporated by reference.
<PAGE> 369
Item 16. Exhibits.
(7) 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.
(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.
14 (a) Consent of KPMG Peat Marwick LLP is filed herewith
electronically.
(b) Consent of Price Waterhouse LLP is filed herewith
electronically.
15 Financial Statements - None.
16 None
17 (a) Form of Proxy
(b) Prospectus of AIM Dollar Fund
Item 17. Undertakings
Not applicable.
<PAGE> 370
SIGNATURES
Pursuant to the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant has duly caused this Registration Statement on Form
N-14 to be signed on its behalf by the undersigned thereto duly authorized, in
the City of Houston, State of Texas, on the 18th day of September 1998.
AIM FUNDS GROUP
Registrant
By: /s/ ROBERT H. GRAHAM
----------------------------
Robert H. Graham
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-14 has been signed below by the following persons on the
18th day of September, 1998 in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ CHARLES T. BAUER Chairman & Trustee September 18, 1998
- ---------------------------------
Charles T. Bauer
/s/ ROBERT H. GRAHAM Trustee & President September 18, 1998
- ---------------------------------
Robert H. Graham
Trustee
- ---------------------------------
Bruce L. Crockett
/s/ OWEN DALY II Trustee September 18, 1998
- ---------------------------------
Owen Daly II
/s/ PREMA MATHAI-DAVIS Trustee September 18, 1998
- ---------------------------------
Prema Mathai-Davis
Trustee
- ---------------------------------
Edward K. Dunn, Jr.
/s/ JACK FIELDS Trustee September 18, 1998
- ---------------------------------
Jack Fields
/s/ CARL FRISCHLING Trustee September 18, 1998
- ---------------------------------
Carl Frischling
/s/ LEWIS F. PENNOCK Trustee September 18, 1998
- ---------------------------------
Lewis F. Pennock
/s/ IAN W. ROBINSON Trustee September 18, 1998
- ---------------------------------
Ian W. Robinson
/s/ LOUIS SKLAR Trustee September 18, 1998
- ---------------------------------
Louis Sklar
/s/ JOHN J. ARTHUR Senior Vice President & September 18, 1998
- --------------------------------- Treasurer (Principal
John J. Arthur Financial Officer)
</TABLE>
<PAGE> 371
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
11 Opinion of Counsel and Consent of Ballard Spahr Andrews &
Ingersoll, LLP as to securities registered
12 Opinion of Ballard Spahr Andrews & Ingersoll, LLP as to
tax matters
14(a) Consent of KPMG Peat Marwick
14(b) Consent of PricewaterhouseCoopers LLP
17(a) Form of Proxy
17(b) Prospectus of AIM Dollar Fund
</TABLE>
<PAGE> 1
EXHIBIT 11
[BALLARD SPAHR ANDREWS & INGERSOLL LETTERHEAD]
September 18, 1998
AIM Funds Group
11 Greenway Plaza
Suite 100
Houston, Texas 77046
Re: Shares of Beneficial Interest
AIM Funds Group
Gentlemen:
We have acted as counsel to AIM Funds Group, a Delaware
business trust (the "Trust"), in connection with the Agreement and Plan of
Reorganization to be dated September 25, 1998, between the Trust, acting on
behalf of AIM Money Market Fund, one of its investment portfolios, and AIM
Investment Portfolios, a Delaware business trust ("AIP"), acting on behalf of
AIM Dollar Fund, its investment portfolio (the "Agreement"), and the
consummation of the transaction contemplated therein.
The Agreement contemplates the acquisition of all of the
assets of AIM Dollar Fund by AIM Money Market Fund, in exchange for (i) the
assumption by AIM Money Market Fund of all of the liabilities of AIM Dollar
Fund, (ii) issuance by the Trust of AIM Money Market Fund Cash Reserve Shares to
the holders of Class A shares and Advisor Class shares of Dollar Fund and (iii)
issuance by the Trust of AIM Money Market Fund Class B shares to the holders of
Class B shares of AIM Dollar Fund (the "Dollar Transaction"). Each shareholder
of AIM Dollar Fund will receive that number of AIM Money Market Cash Reserve
Shares or AIM Money Market Fund Class B shares (the "Money Market Shares")
representing interests with an aggregate net asset value equal to the aggregate
net asset value of his or her shares of AIM Dollar Fund as of the close of
business on the business day next preceding the closing of the Dollar
Transaction.
1
<PAGE> 2
AIM Funds Group
September 16, 1998
Page 2
The opinion expressed below is based on the assumption that a
Registration Statement on Form N-14 with respect to the Money Market Shares will
have been filed by the Trust with the Securities and Exchange Commission and
will have become effective before the Transaction occurs.
Based on the foregoing, we are of the opinion that the Money
Market Shares, when issued by the Trust directly to the shareholders of AIM
Dollar Fund in accordance with the terms and conditions of the Agreement, will
be legally issued, fully paid and nonassessable.
Both the Delaware Business Trust Act and the Trust's Agreement
and Declaration of Trust, as amended (the "Trust Agreement"), provide that
shareholders of the Trust shall be entitled to the same limitation on personal
liability as is extended under the Delaware General Corporation Law to
stockholders of private corporations for profit. There is a remote possibility,
however, that, under certain circumstances, shareholders of a Delaware business
trust may be held personally liable for that trust's obligations to the extent
that the courts of another state which does not recognize such limited liability
were to apply the laws of such state to a controversy involving such
obligations. The Trust Agreement also requires that notice of such disclaimer of
shareholder liability be given in each note, bond, contract or other undertaking
made or issued by the Trustees or Officers of the Trust. Such disclaimer is
contained in the Agreement. The Trust Agreement also provides for
indemnification out of property belonging to the applicable investment portfolio
of the Trust for all loss and expense of any shareholder held personally liable
for the obligations of the Trust. Therefore, the risk of any shareholder
incurring financial loss beyond his investment due to shareholder liability is
limited to circumstances in which an investment portfolio of the Trust is unable
to meet its obligations and the express disclaimer of shareholder liabilities is
determined not to be effective.
2
<PAGE> 3
AIM Funds Group
September 16, 1998
Page 3
We consent to the filing of this opinion as Exhibit 11 to the
Trust's Registration Statement on Form N-14 and to the references to this firm
in such Registration Statement.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
3
<PAGE> 1
EXHIBIT 12
[BALLARD SPAHR ANDREWS & INGERSOLL, LLP LETTERHEAD]
September 18, 1998
AIM Investment Portfolios
AIM Funds Group
Eleven Greenway Plaza, Suite 100
Houston, TX 77046
RE: PROPOSED FUND REORGANIZATION -
FEDERAL INCOME TAX CONSEQUENCES
Gentlemen:
With reference to the Registration Statement on Form N-14 (the
"Registration Statement") to be filed by AIM Funds Group ("AFG"), a Delaware
business trust, with the Securities and Exchange Commission in connection with
the transaction contemplated by the Agreement and Plan of Reorganization (the
"Agreement") to be dated as of September 25, 1998, by and between AFG acting on
behalf of AIM Money Market Fund ("Money Market Fund"), and AIM Investment
Portfolios ("AIP"), a Delaware Business Trust, acting on behalf of AIM Dollar
Fund ("Dollar Fund"), which Agreement is described in the Registration Statement
and filed as an Exhibit thereto, we hereby confirm that the discussion set forth
under the caption "Additional Information about the Agreement -- Federal Tax
Consequences" in the Registration Statement provides an accurate summary of the
material federal income tax consequences that would be generally relevant to the
shareholders of Dollar Fund receiving shares of Money Market Fund in the
proposed transaction contemplated by the Agreement.
We hereby consent to the filing of this opinion as Exhibit 12
to the Registration Statement and to the use of our name in the Registration
Statement and in the Combined Proxy Statement and Prospectus included therein.
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll, LLP
<PAGE> 1
Exhibit 14(a)
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees and Shareholders of
AIM Funds Group:
We consent to the use of our report on AIM Money Market Fund (a series portfolio
of AIM Funds Group) dated February 6, 1998 incorporated herein by reference and
to the reference to our firm under the heading "Financial Information" in the
Statement of Additional Information.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Houston, Texas
September 16, 1998
<PAGE> 1
EXHIBIT 14(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the registration
statement of AIM Funds Group on Form N-14 of our report dated February 17,
1998, relating to the Financial Statements and related Financial Highlights
appearing in the December 31, 1997 Annual Report to Shareholders of AIM Dollar
Fund (formerly G.T. Global Dollar Fund). We also consent to the reference to
our firm under the heading "Financial Information" in the Statement of
Additional Information.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 18, 1998
<PAGE> 1
Exhibit 17(a)
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
................................................................................
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES. THE TRUSTEES RECOMMEND VOTING
FOR THE PROPOSAL. TO VOTE, FILL IN BOX COMPLETELY.
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
1. Proposal to approve an Agreement and Plan of [ ] [ ] [ ]
Reorganization between AIM Investment Portfolios, on
behalf of AIM Dollar Fund, and AIM Funds Group, on
behalf of AIM Money Market Fund, and the consummation
of the transactions contemplated therein.
2. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
</TABLE>
<PAGE> 2
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
................................................................................
PROXY SOLICITED BY THE BOARD OF TRUSTEES
OF AIM DOLLAR FUND
(a portfolio of AIM Investment Portfolios)
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS DECEMBER 11, 1998
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Special
Meeting of Shareholders of the AIM Dollar Fund, a portfolio of AIM Investment
Portfolios, on December 11, 1998 at 3:00 p.m. Central time, and at any
adjournment thereof, all of the shares of the Fund which the undersigned
would be entitled to vote if personally present. IF THIS PROXY IS SIGNED
AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED FOR THE
APPROVAL OF THE PROPOSAL.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY CARD. All joint
owners should sign. When signing as
executor, administrator, attorney,
trustee or guardian or as custodian
for a minor, please give full title as
such, if a corporation, please sign in
full corporate name and indicate the
signer's office. If a partner, sign in
the partnership name.
--------------------------------------
Signature
--------------------------------------
Signature (if held jointly)
Dated
---------------------------------
<PAGE> 1
EXHIBIT 17(b)
[APPLICATION INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
CLASS A AND CLASS B SHARES OF
AIM DOLLAR FUND
(A SERIES PORTFOLIO OF AIM INVESTMENT PORTFOLIOS)
PROSPECTUS
SEPTEMBER 8, 1998
This Prospectus contains information about AIM DOLLAR FUND (the "Fund"), which
is a diversified series of AIM Investment Portfolios (the "Trust"), an open-end,
series management investment company. The Fund seeks maximum current income
consistent with liquidity and conservation of capital. The Fund may invest in a
wide variety of high quality, U.S. dollar-denominated money market instruments,
including obligations issued or guaranteed by the U.S. and foreign governments,
their agencies and instrumentalities; U.S. and non-U.S. corporate obligations;
and instruments of U.S. and foreign banks.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
September 8, 1998, has been filed with the Securities and Exchange Commission
(the "SEC") and is incorporated herein by reference. The Statement of Additional
Information is available without charge upon written request to the Fund at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173 or by calling
1-800-347-4246. 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 Fund. Additional information about the Fund may
also be obtained on the Web at http://www.aimfunds.com.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THERE CAN BE NO ASSURANCE THAT THE 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 2
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................ 2
THE FUND............................... 4
Table of Fees and Expenses........... 4
Financial Highlights................. 5
Performance.......................... 6
Investment Program................... 6
Management........................... 8
Organization of the Trust............ 10
INVESTOR'S GUIDE TO THE AIM FAMILY OF
FUNDS--Registered Trademark--........ A-1
Introduction to The AIM Family of
Funds............................. A-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
How to Purchase Shares............... A-1
Terms and Conditions of Purchase of
the AIM Funds..................... A-2
Special Plans........................ A-9
Exchange Privilege................... A-12
How to Redeem Shares................. A-14
Determination of Net Asset Value..... A-19
Dividends, Distributions and Tax
Matters........................... A-19
General Information.................. A-23
APPLICATION INSTRUCTIONS............... B-1
</TABLE>
SUMMARY
- --------------------------------------------------------------------------------
THE FUND
The Fund is a diversified series of the Trust.
INVESTMENT OBJECTIVE. The Fund seeks maximum current income consistent with
liquidity and conservation of capital.
PRINCIPAL INVESTMENTS. The Fund invests in a wide variety of high quality U.S.
dollar-denominated money market instruments of U.S. and non-U.S. issuers.
INVESTMENT MANAGERS. The Fund is managed by A I M Advisors, Inc. ("AIM") and
is sub-advised by INVESCO (NY), Inc. (the "Sub-Advisor"). AIM and the
Sub-advisor and their worldwide asset management affiliates provide investment
management and/or administrative services to institutional, corporate and
individual clients around the world. AIM and the Sub-advisor are both indirect
wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are
an independent investment management group that has a significant presence in
the institutional and retail segment of the investment management industry in
North America and Europe, and a growing presence in Asia. AIM was organized in
1976 and, together with its subsidiaries, currently advises approximately 90
investment company portfolios.
PURCHASING SHARES. Investors may select Class A or Class B shares of the Fund
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." Pursuant to
a separate prospectus, the Fund also offers Advisor Class shares, which
represent interests in the Fund. The Advisor Class has different distribution
arrangements.
CLASS A SHARES -- Shares are offered at net asset value without an initial
sales charge and without contingent deferred sales charges.
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 Fund
eight years following the end of the calendar month in which a purchase was
made. Class B shares are subject to higher annual expenses than Class A 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
Fund's shares is A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, TX 77210-4739. See "How to Purchase Shares" and "Special Plans."
SUITABILITY FOR INVESTORS. An investor in Class A or Class B shares of the
Fund should consider 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, and other circumstances. Investors should consider whether, during the
anticipated life of their investment in the Fund, the accumulated distribution
fees and any applicable contingent deferred sales charges on Class B shares
prior to conversion would be less than the initial sales charge and accumulated
distribution fees on Class A shares purchased at the same time, and to what
extent such differential would be offset by the higher return on Class A shares.
To assist investors in making this determination, the table under the caption
"Table of Fees and Expenses" sets forth examples of the charges applicable to
each class of shares. Class A shares will normally be more beneficial than Class
B shares to the investor who qualifies for reduced initial sales charges, as
described below. Therefore, AIM Distributors will reject any order for purchase
of more than $250,000 for Class B shares.
2
<PAGE> 3
EXCHANGE PRIVILEGE. The Fund is among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds" or the "AIM Funds"). Class
A and Class B shares of the 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. Class A shareholders of the Fund 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 where a purchase of more than $1 million is made at net asset value.
See "How to Redeem Shares -- Contingent Deferred Sales Charge Program for Large
Purchases."
Class B shareholders of the Fund 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."
DISTRIBUTIONS. Dividends are declared daily and paid monthly from available
net investment income and any realized net short-term capital gain. Dividends
may be reinvested automatically in Fund shares of the distributing class without
a sales charge.
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
3
<PAGE> 4
THE FUND
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The expenses and maximum transaction costs associated with investing in the
Class A and Class B shares of the Fund are reflected in the following table(1):
<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
<S> <C> <C>
Shareholder Transaction Costs(2):
Sales charge on purchases of shares....................... None None
Sales charges on reinvested distributions to
shareholders........................................... None None
Maximum contingent deferred sales charge (as a % of net
asset value at time of purchase or sale, whichever is
less).................................................. None 5.00%
Redemption charges........................................ None None
Exchange fees............................................. None None
Annual Fund Operating Expenses(3): (as a % of average net
assets)
Investment management and administration fees............. 0.50% 0.50%
12b-1 distribution and service fees (after waivers)....... 0.00% 0.75%
Other expenses (after reimbursements and waivers)......... 0.50% 0.50%
---- ----
Total Fund Operating Expenses (after
reimbursements and waivers)..................... 1.00% 1.75%
==== ====
</TABLE>
(1)This table is intended to assist investors in understanding the various costs
and expenses associated with investing in the Fund. Long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charges permitted by the National Association of Securities Dealers, Inc.
rules regarding investment companies.
(2)The maximum 5% contingent deferred sales charge on Class B shares applies to
redemptions during the first year after purchase. The charge generally
declines by 1% annually thereafter, reaching zero after six years. See "Terms
and Conditions of Purchase of the AIM Funds -- Reductions in Initial Sales
Charges."
(3)Expenses are based on the Fund's fiscal year ended December 31, 1997. "Other
expenses" include custody, transfer agent, legal, audit and other expenses.
AIM has undertaken to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate
of 1.00% and 1.75% of the average daily net assets of the Fund's Class A and
Class B shares, respectively. AIM has voluntarily agreed to continue this
limitation through May 31, 2000. See "Management" herein and the Statement of
Additional Information for more information.
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES. An investor would directly or
indirectly pay the following expenses at the end of the periods shown on a
$1,000 investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS(2)
------ ------- ------- -----------
<S> <C> <C> <C> <C>
Class A shares...................................... $10 $32 $ 55 $123
Class B shares
Assuming complete redemption at end of
period(1)...................................... 70 89 119 188
Assuming no redemption............................ 18 56 96 188
</TABLE>
(1)Assumes deduction of the applicable contingent deferred sales charge.
(2)For Class B shares, this number reflects the conversion to Class A shares
eight years following the end of the calendar month in which a purchase was
made.
THE "HYPOTHETICAL EXAMPLE" SET FORTH ABOVE IS NOT A REPRESENTATION OF PAST OR
FUTURE EXPENSES. THE FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND
INDIRECT EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE ABOVE TABLE AND THE
ASSUMPTION IN THE HYPOTHETICAL EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY
REGULATION OF THE SEC APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS
NOT A PREDICTION OF AND DOES NOT REPRESENT THE FUND'S PROJECTED OR ACTUAL
PERFORMANCE.
4
<PAGE> 5
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The table below provides condensed financial information concerning income and
capital changes for one Class A and Class B share of the Fund. This information
is supplemented by the financial statements and notes thereto included in the
Statement of Additional Information. The financial statements and notes for the
fiscal year ended December 31, 1997, have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report thereon also appears in the Statement
of Additional Information. Information presented below for the fiscal years
ended December 31, 1988 to 1991 was audited by other auditors that served as the
Fund's independent accountants for those periods. The unaudited financial
statements and notes, for the semi-annual period ended June 30, 1998, are also
included in the Statement of Additional Information.
AIM DOLLAR FUND
(FORMERLY GT GLOBAL DOLLAR FUND)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1998 -----------------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993 1992 1991
----------- -------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A+
Net investment income........... $ 0.023 $ 0.045 $ 0.044 $ 0.050 $ 0.032 $ 0.022 $ 0.028 $ 0.051
Distributions from net
investment income.............. (0.023) (0.045) (0.044) (0.050) (0.032) (0.022) (0.028) (0.051)
Net asset value (unchanged
during the period)............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Investment
Return(b).............. 2.30% 4.62% 4.50% 5.08% 3.3% 2.2% 2.8% 5.1%
Ratios and supplemental data:
Net assets at end of the period
(in 000's)..................... $291,301 $186,611 $392,623 $183,761 $320,858 $87,822 $81,674 $70,295
Ratio of net investment income
to average net assets:
With expense waivers,
reductions and/or
reimbursement(a)............. 4.61% 4.50% 4.39% 4.94% 3.40% 2.17% 2.78% 5.10%
Without expense waivers,
reductions and/or
reimbursement(a)............. 4.36% 4.20% 4.08% 4.66% 3.15% 1.46% 2.47% 4.90%
Ratio of operating expenses to
average net assets:
With expense waivers,
reductions and/or
reimbursement(a)............. 0.94% 0.98% 0.99% 0.97% 0.92% 1.00% 1.25% 1.25%
Without expense waivers,
reductions and/or
reimbursement(a)............. 1.19% 1.28% 1.30% 1.25% 1.17% 1.72% 1.56% 1.45%
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1990 1989 1988
-------- ------- -------
<S> <C> <C> <C>
CLASS A+
Net investment income........... $ 0.069 $ 0.075 $ 0.058
Distributions from net
investment income.............. (0.069) (0.075) (0.058)
Net asset value (unchanged
during the period)............. $ 1.00 $ 1.00 $ 1.00
Total Investment
Return(b).............. 6.9% 7.6% 5.9%
Ratios and supplemental data:
Net assets at end of the period
(in 000's)..................... $123,218 $13,143 $11,628
Ratio of net investment income
to average net assets:
With expense waivers,
reductions and/or
reimbursement(a)............. 6.95% 7.60% 5.72%
Without expense waivers,
reductions and/or
reimbursement(a)............. 6.64% 7.17% --%
Ratio of operating expenses to
average net assets:
With expense waivers,
reductions and/or
reimbursement(a)............. 1.25% 1.19% 1.03%
Without expense waivers,
reductions and/or
reimbursement(a)............. 1.56% 1.62% --%
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31, APRIL 1, 1993
1998 --------------------------------------- TO DEC. 31,
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ------- -------- ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
CLASS B++
Net investment income.................................... $ 0.019 $ 0.038 $ 0.037 $ 0.040 $ 0.025 $0.010
Distributions from net investment income................. (0.019) (0.038) (0.037) (0.040) (0.025) (0.010)
Net asset value (unchanged during the period)............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Investment Return(b)....................... 1.99% 3.84% 3.73% 4.29% 2.53% 1.4%
Ratios and supplemental data:
Net assets at end of the period (in 000's)............... $101,012 $83,498 $128,308 $99,151 $109,936 $3,478
Ratio of net investment income to average net assets:
With expense waivers, reductions and/or
reimbursement(a)..................................... 3.86% 3.75% 3.64% 4.19% 2.65% 1.42%
Without expense waivers, reductions and/or
reimbursement(a)..................................... 3.61% 3.45% 3.33% 3.91% 2.40% 0.86%
Ratio of operating expenses to average net assets:
With expense waivers, reductions and/or
reimbursement(a)..................................... 1.69% 1.73% 1.74% 1.72% 1.67% 1.75%
Without expense waivers, reductions and/or
reimbursement(a)..................................... 1.94% 2.03% 2.05% 2.00% 1.92% 2.31%
</TABLE>
- ---------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
(a)Annualized for periods of less than one year.
(b)Not annualized.
5
<PAGE> 6
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Fund will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Fund's shares. 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 Fund. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
The Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. 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.
The 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, the 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, 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.
Yield is a function of the type and quality of the Fund's investments, the
maturity of the securities held in the Fund's portfolio and the operating
expense ratio of the Fund. A shareholder's investment in the Fund is not insured
or guaranteed. These factors should be carefully considered by the investor
before making an investment in the Fund.
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 the Fund. Such practices will
have the effect of increasing the Fund's yield and total return. The performance
of the Fund will vary from time to time and past results are not necessarily
representative of future results. The 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.
- --------------------------------------------------------------------------------
INVESTMENT PROGRAM
INVESTMENT OBJECTIVE. The Fund's investment objective is to seek maximum
current income consistent with liquidity and conservation of capital. The Fund
seeks this objective by investing in high quality, U.S. dollar-denominated money
market instruments, i.e., debt obligations with remaining maturities of 13
months or less. There can be no assurance that the Fund will achieve its
investment objective.
INVESTMENT POLICIES. The Fund seeks to maintain a net asset value of $1.00 per
share. To do so, the Fund uses the amortized cost method of valuing its
securities pursuant to Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "1940 Act"), certain requirements of which are summarized below.
In accordance with Rule 2a-7, the Fund will (i) maintain a dollar-weighted
average portfolio maturity of 90 days or less and (ii) purchase only instruments
having remaining maturities of 13 months or less.
The Fund will invest only in high quality, U.S. dollar-denominated money
market instruments determined by the Sub-advisor to present minimal credit risks
in accordance with procedures established by the Trust's Board of Trustees (the
"Board"). To be considered high quality, a security must be rated in accordance
with applicable rules in one of the two highest rating categories for short-
term securities by at least two nationally recognized statistical rating
organizations ("NRSROs") (or one, if only one such NRSRO has rated the security)
or, if the issuer has no applicable short-term rating, determined by the
Sub-advisor to be of equivalent credit quality.
High quality securities are divided into "first tier" and "second tier"
securities. The Fund will limit its purchases of Municipal Securities to those
which are "First Tier" securities as defined in Rule 2a-7 under the 1940 Act.
Generally, "First Tier" securities are securities that are rated in the highest
rating category for short-term debt obligations 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 the Fund's Sub-advisor (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 forego-
6
<PAGE> 7
ing quality standards, as well as securities issued by a registered investment
company that is a money market fund and U.S. government securities.
The rating criteria of Standard & Poor's Corporation ("S&P") and Moody's
Investment Service, Inc. ("Moody's"), two NRSROs currently rating instruments of
the type the Fund may purchase, are more fully described in "Description of Debt
Ratings" in the Statement of Additional Information.
CERTAIN INVESTMENT STRATEGIES AND POLICIES. In pursuit of its objectives and
policies, the Fund may employ one or more of the following strategies in order
to enhance investment results:
PERMITTED INVESTMENTS. The Fund may invest in the following types of money
market instruments:
- Obligations issued or guaranteed by the U.S. and foreign governments, their
agencies and instrumentalities. These include: direct obligations of the U.S.
Treasury, such as Treasury bills and notes; obligations backed by the full faith
and credit of the U.S. government, such as those issued by the Government
National Mortgage Association; obligations supported primarily or solely by the
creditworthiness of the issuer, such as securities of Fannie Mae (also known as
the Federal National Mortgage Association), Freddie Mac (also known as the
Federal Home Loan Mortgage Corporation) and the Tennessee Valley Authority; and
similar U.S.-dollar denominated instruments of foreign governments, their
agencies, authorities and instrumentalities.
- Obligations of U.S. and non-U.S. banks, including certificates of deposit,
bankers' acceptances and similar instruments, when such banks have total assets
at the time of purchase equal to at least $1 billion.
- Interest-bearing deposits in U.S. commercial and savings banks having total
assets of $1 billion or less, in principal amounts at each such bank not greater
than are insured by an agency of the U.S. government, provided that the
aggregate amount of such deposits (including interest earned) does not exceed 5%
of the Fund's assets.
- Commercial paper and other short-term debt obligations of U.S. and foreign
companies, rated at least A-1 by S&P or Prime-1 by Moody's or, if not rated,
determined by the Sub-advisor to be of equivalent quality, provided that any
outstanding intermediate- or long-term debt of the issuer is rated at least AA
by S&P or Aa by Moody's. These instruments may include corporate bonds and notes
(corporate obligations that mature, or that may be redeemed, in one year or
less). These corporate obligations include variable rate master notes, which are
redeemable upon notice and permit investment of fluctuating amounts at varying
rates of interest pursuant to direct arrangements with the issuer of the
instrument.
- Repurchase agreements secured by any of the foregoing. A repurchase
agreement is a transaction in which the Fund purchases a security from a bank or
recognized securities dealer and simultaneously commits to resell that security
to the bank or dealer at an agreed-upon price, date and market rate of interest
unrelated to the coupon rate or maturity of the purchased security. Although
repurchase agreements carry certain risks not associated with direct investments
in securities, including possible decline in the market value of the underlying
securities and delays and costs to the Fund if the other party to the repurchase
agreement becomes bankrupt, the Fund will enter into repurchase agreements only
with banks and dealers believed by the Sub-advisor to present minimal credit
risks in accordance with guidelines approved by the Board. The Sub-advisor will
review and monitor the creditworthiness of such institutions under the Board's
general supervision. The Fund will not enter into repurchase agreements with
maturities of more than seven days if, as a result, more than 10% of the value
of its net assets would be invested in such repurchase agreements and other
illiquid securities.
INVESTMENT TECHNIQUES. In managing the Fund, the Sub-advisor may employ a
number of professional money management techniques, including varying the
composition of the Fund's investments and the average weighted maturity of the
Fund's portfolio within the limitations described above. Determinations to use
such techniques will be based on the Sub-advisor's identification and assessment
of the relative values of various money market instruments and the future of
interest rate patterns, economic conditions and shifts in fiscal and monetary
policy. The Sub-advisor also may seek to improve the Fund's yield by purchasing
or selling securities in order to take advantage of yield disparities that
regularly occur in the market. For example, frequently there are yield
disparities between different types of money market instruments, and market
conditions from time to time result in similar securities trading at different
prices.
RISKS AND OTHER CONSIDERATIONS. Investors should recognize that in periods of
declining interest rates, the Fund's yield will tend to be somewhat higher than
prevailing market rates; conversely, in periods of rising interest rates, the
Fund's yield will tend to be somewhat lower than those rates. Also, when
interest rates are falling, the net new money flowing into the Fund from the net
sale of its shares likely will be invested in instruments producing lower yields
than the balance of the Fund's portfolio, thereby reducing its yield. The
opposite generally will be true in periods of rising interest rates. The Fund is
designed to provide maximum current income consistent with the liquidity and
safety of principal afforded by investment in a portfolio of high quality money
market instruments; the Fund's yield may be lower than that produced by funds
investing in lower quality and/or longer-term securities.
Although the Fund may invest in instruments of non-U.S. issuers, all such
instruments will be denominated in U.S. dollars and will be first tier
securities. Obligations of non-U.S. issuers are subject to the same risks that
pertain to domestic issues, notably credit risk, market risk and liquidity risk.
Nonetheless, these instruments present risks that are different from those
presented by investment in instruments of U.S. issuers. Obligations of foreign
entities may be subject to certain sovereign risks, including adverse political
and economic developments in a foreign country, the extent and quality of
government regulation of financial markets and institutions,
7
<PAGE> 8
interest limitations, currency controls, foreign withholding taxes, and
expropriation or nationalization of foreign issuers and their assets. There may
be less publicly available information about foreign issuers than about domestic
issuers, and foreign issuers may not be subject to the same accounting, auditing
and financial recordkeeping standards and requirements as are domestic issuers.
Accordingly, while the Fund's ability to invest in these instruments may provide
it with the potential to produce a higher yield than money market funds
investing solely in instruments of domestic issuers, the Fund presents greater
risk than such other funds.
VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase variable and
floating rate securities with remaining maturities in excess of 13 months. Such
securities must comply with conditions established by the SEC under which they
may be considered to have remaining maturities of 13 months or less. The yield
of these securities varies in relation to changes in specific money market rates
such as the prime rate. These changes are reflected in adjustments to the yields
of the variable and floating rate securities, and different securities may have
different adjustment rates. To the extent that the Fund invests in such variable
and floating rate securities, it is the Sub-advisor's view that the Fund may be
able to take advantage of the higher yield that is usually paid on longer-term
securities. The Sub-advisor further believes that the variable and floating
rates paid on such securities may substantially reduce the wide fluctuations in
market value caused by interest rate changes and other factors which are typical
of longer-term debt securities.
OTHER INFORMATION. The Fund may acquire participation interests in securities
in which it is permitted to invest. Participation interests are pro rata
interests in securities held by others. Pending investment of proceeds from new
sales of Fund shares or for temporary defensive purposes, the Fund may hold any
portion of its assets in cash. The Fund may borrow money from banks as a
temporary measure (a) for extraordinary or emergency purposes in amounts up to
5% of its net assets (taken at market value) or (b) in amounts up to 33 1/3% of
its net assets in order to meet redemption requests. The Fund will not purchase
securities while borrowings remain outstanding. The Fund may invest no more than
5% of its total assets in the securities of a single issuer (other than
securities issued or guaranteed by the U.S. government, its agencies, or
instrumentalities).
The Fund's investment objective and policies with respect to borrowing as
stated above are fundamental and may not be changed without the approval of a
majority of its outstanding voting securities. A "majority of the Fund's
outstanding voting securities" means the lesser of (i) 67% of its shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, and (ii) more than 50% of its outstanding shares. In addition, the
Fund has adopted certain investment limitations that also may not be changed
without shareholder approval. A description of these limitations is included in
the Statement of Additional Information. The Fund's other investment policies
described herein are not fundamental and may be changed by vote of the Board
without shareholder approval.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of the Fund's investment policies or restrictions.
- --------------------------------------------------------------------------------
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Fund. The Trust's Board of Trustees has approved all significant agreements
between the Trust on the one side and persons or companies furnishing services
to the Fund on the other, including the investment management and administrative
services agreement with AIM, the investment sub-advisory and sub-administration
agreement between AIM and the Sub-advisor, the agreements with AIM Distributors
regarding distribution of the Fund's shares, the custody agreement and the
transfer agency agreement. The day-to-day operations of the Fund are delegated
to the officers of the Trust, subject always to the investment objective and
policies of the Fund and to the general supervision of the Trust's Board of
Trustees. See "Trustees and Executive Officers" in the Statement of Additional
Information for information on the Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-advisor as the Fund's investment managers and administrators include
determining the composition of the Fund's portfolio and placing orders to buy,
sell or hold particular securities; furnishing corporate officers and clerical
staff; providing office space, services and equipment; and supervising all
matters relating to the Fund's operation. For these services, the Fund pays AIM
management and administration fees, computed daily and paid monthly, at the
annualized rate of 0.50% of the Fund's average daily net assets. Out of the
aggregate fees payable by the Fund, AIM pays the Sub-advisor sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from the
Fund. The Fund pays all expenses not assumed by AIM, the Sub-advisor, AIM
Distributors or other agents. AIM has undertaken to limit the Fund's expenses
(exclusive of brokerage commissions, interest, taxes and extraordinary expenses)
to the annual rate of 1.00% and 1.75% of the average daily net assets of the
Fund's Class A and Class B shares, respectively.
AIM also serves as the Fund's pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, G.T. Global
Variable Investment Series and G.T. Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to an paid by each
such fund based on its relative average net assets.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment manager to the Fund pursuant to a master investment management and
administration agreement (the "Advisory Agreement"). AIM was organized in 1976
and, together with
8
<PAGE> 9
its subsidiaries, manages or advises approximately 90 investment company
portfolios encompassing a broad range of investment objectives. The Sub-advisor,
50 California Street, 27th Floor, San Francisco, California 94111, and 1166
Avenue of the Americas, New York, New York 10036, serves as the sub-advisor to
the Fund pursuant to an investment sub-advisory and sub-administration
agreement. Prior to May 29, 1998, the Sub-advisor was known as Chancellor LGT
Asset Management, Inc. On May 29, 1998, Liechtenstein Global Trust AG ("LGT"),
the former indirect parent organization of the Sub-advisor, consummated a
purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP PLC acquired
LGT's Asset Management Division, which included the Sub-advisor and certain
other affiliates. As a result of this transaction, the Sub-advisor is now an
indirect wholly owned subsidiary of AMVESCAP PLC. Prior to the sale, the
Sub-advisor and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
AIM and the Sub-advisor and their worldwide asset management affiliates
provide investment management and/or administrative services to institutional,
corporate and individual clients around the world. AIM and the Sub-advisor are
both indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and
New York offices, AIM and the Sub-advisor draw upon the expertise, personnel,
data and systems of other offices in Atlanta, Boston, Dallas, Denver,
Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong, London, Singapore,
Sydney, Tokyo and Toronto. In managing the Fund, the Sub-advisor employs a team
approach, taking advantage of its investment resources around the world.
In placing orders for the Fund's portfolio securities transactions, the
Sub-advisor seeks to obtain the best net results. Consistent with its obligation
to obtain the best net results, the Sub-advisor may consider a broker/dealer's
sale of shares of the AIM Funds as a factor in considering through whom
portfolio transactions will be effected.
DISTRIBUTOR. The Trust has entered into master distribution agreements
relating to the Fund (the "Distribution Agreements.") with AIM Distributors, a
registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which
AIM Distributors acts as the distributor of Class A and Class B shares of the
Fund. 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 Fund 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
the Fund's average daily net assets attributable to Class B shares attributable
to the sales efforts of AIM Distributors and its predecessor. 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 and its predecessor; provided, however, that a complete termination
of the Class B shares master distribution plan (as defined in the plan) would
terminate all payments by the Fund of asset based sales charges and service fees
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 Plan. The Trust has adopted a Master Distribution
Plan applicable to Class A shares of the Fund (the "Class A 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 shares
of the Fund.
Under the Class A Plan, the Trust may compensate AIM Distributors an aggregate
amount of 0.25% of the average daily net assets of Class A shares of the Fund on
an annualized basis.
The Class A 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 shares of the Fund. Payments can also be directed
by AIM Distributors to selected institutions who have entered into service
agreements with respect to Class A shares of the Fund and who provide continuing
personal shareholder services to their customers who own Class A shares of the
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 Plan, payments to dealers
and other financial institutions that provide continuing personal shareholder
services to their customers who purchase and own shares of the 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 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 Plan. The Class A 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 the Fund. The Class A
Plan does not obligate the Fund to reimburse AIM Distributors for the actual
expenses AIM Distributors may incur in fulfilling its obligations under the
Class A
9
<PAGE> 10
Plan on behalf of the Fund. Thus, under the Class A Plan, even if AIM
Distributors' actual expenses exceed the fee payable to AIM Distributors
thereunder at any given time, the Fund 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.
Class B Plan. The Trust has also adopted a Master Distribution Plan applicable
to Class B shares of the Fund (the "Class B Plan"). Under the Class B Plan, the
Fund pays distribution expenses at an annual rate of 1.00% of the average daily
net assets attributable to the 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 the
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 the Fund may be used to finance any activity
primarily intended to result in the sale of Class B shares of the Fund.
Both Plans. Activities that may be financed under the Class A 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 the Fund under the Plans need not be directly
related to the expenses actually incurred by AIM Distributors on behalf of the
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 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, certain financial institutions which have entered into
service agreements and which sell shares of the Fund on an agency basis, may
receive payments from the Fund pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent for the Fund, in
making such payments.
For additional information concerning the operation of the Plans see the
Statement of Additional Information.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST
The Trust was organized as a Delaware business trust on May 7, 1998. On
September 8, 1998, the Trust acquired the assets of and assumed the liabilities
of AIM Investment Portfolios, Inc., a Maryland Corporation.
From time to time the Trust may establish additional funds, each corresponding
to a distinct investment portfolio and a distinct series of the Trust's shares
of beneficial interest. Shares of each fund are entitled to one vote per share
(with proportional voting for fractional shares) and are freely transferable.
Shareholders have no preemptive rights. Other than the automatic conversion of
Class B shares to Class A shares, there are no conversion rights.
On any matter submitted to a vote of shareholders, shares of the Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of its investment
management arrangements. In addition, shares of a particular class of the Fund
may vote on matters affecting only that class. The shares of the Fund and the
Trust's other series will be voted in the aggregate on other matters, such as
the election of Trustees and ratification of the selection of the Trust's
independent accountants.
Normally there will be no annual meeting of shareholders in any year, except
as required under the 1940 Act. Shares of the Fund and the Trust's other series
do not have cumulative voting rights, which means that the holders of a majority
of the shares voting for the election of Trustees can elect all the Trustees. A
Trustee may be removed at any meeting of the shareholders of the Trust by a vote
of the shareholders owning at least two-thirds of the outstanding shares. Any
Trustee may call a special meeting of shareholders for any purpose. Furthermore,
Trustees shall promptly call a meeting of shareholders solely for the purpose of
removing one or more Trustees when requested in writing to do so by shareholders
holding 10% of the Trust's outstanding shares.
Pursuant to the Trust's Agreement and Declaration of Trust, the Trust may
issue an unlimited number of shares for the Fund. Each share of the Fund
represents an interest in the Fund only, has a par value of $0.01 per share,
represents an equal proportionate interest in the Fund with other shares of the
Fund and is entitled to such dividends and distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
by the Board of Trustees. Each share of the Fund is equal as to earnings, assets
and voting privileges to each other share in the Fund, except that each normally
has exclusive voting rights with respect to its distribution plan and bears the
expenses, if any, related to the distribution of its shares. Shares of the Fund,
when issued, are fully paid and nonassessable.
LEGAL COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800 acts as counsel to the Trust and the
Fund.
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<PAGE> 11
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND TO
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 FLEX FUND AIM GLOBAL INFRASTRUCTURE FUND
AIM ADVISOR INTERNATIONAL VALUE FUND AIM GLOBAL RESOURCES FUND
AIM ADVISOR LARGE CAP VALUE FUND AIM GLOBAL TELECOMMUNICATIONS FUND
AIM ADVISOR MULTIFLEX FUND AIM GLOBAL TRENDS FUND
AIM ADVISOR REAL ESTATE FUND AIM GLOBAL UTILITIES FUND
AIM AGGRESSIVE GROWTH FUND AIM HIGH INCOME MUNICIPAL FUND
AIM ASIAN GROWTH FUND AIM HIGH YIELD FUND
AIM BALANCED FUND AIM INCOME FUND
AIM BASIC VALUE FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM BLUE CHIP FUND AIM INTERNATIONAL EQUITY FUND
AIM CAPITAL DEVELOPMENT FUND AIM INTERNATIONAL GROWTH FUND
AIM CHARTER FUND AIM JAPAN GROWTH FUND
AIM CONSTELLATION FUND AIM LATIN AMERICAN GROWTH FUND
AIM DEVELOPING MARKETS FUND AIM LIMITED MATURITY TREASURY FUND
AIM DOLLAR FUND(*) AIM MID CAP EQUITY FUND
AIM EMERGING MARKETS FUND AIM MONEY MARKET FUND(*)
AIM EMERGING MARKETS DEBT FUND AIM MUNICIPAL BOND FUND
AIM EUROPEAN DEVELOPMENT FUND AIM NEW PACIFIC GROWTH FUND
AIM EUROPE GROWTH FUND AIM SELECT GROWTH FUND
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM SMALL CAP GROWTH FUND
AIM GLOBAL CONSUMER PRODUCTS AND AIM SMALL CAP OPPORTUNITIES FUND
SERVICES FUND AIM STRATEGIC INCOME FUND
AIM GLOBAL FINANCIAL SERVICES FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM GLOBAL GOVERNMENT INCOME FUND AIM TAX-EXEMPT CASH FUND(*)
AIM GLOBAL GROWTH FUND AIM TAX-FREE INTERMEDIATE FUND
AIM GLOBAL GROWTH & INCOME FUND AIM VALUE FUND
AIM GLOBAL HEALTH CARE FUND AIM WEINGARTEN FUND
AIM GLOBAL INCOME FUND AIM WORLDWIDE GROWTH FUND
</TABLE>
(*) Class A shares of AIM TAX-EXEMPT CASH FUND and AIM DOLLAR FUND and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND are offered to investors at net
asset value, without payment of a sales charge, as described below. Other
funds, including the Class A, 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.
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 Internal Revenue Service ("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 IRS 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") or Roth IRA is $250.
There are no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, Simplified Employee Pension
("SEP") accounts, Savings Incentive Match Plans for Employee IRA ("SIMPLE IRA")
accounts, 403(b) plans or 457 (state deferred compensation) plans (except that
the minimum initial investment for salary deferrals for such plans is $25 per
fund investment), or for investment of dividends and distributions of any of the
AIM Funds into any existing AIM
A-1
<PAGE> 12
Funds account. Notwithstanding the foregoing, the minimum initial investment
applicable to AIM Small Cap Opportunities Fund is $10,000.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus, as well as
Advisor Class shares of certain AIM Funds, are offered pursuant to separate
prospectuses. Copies of other prospectuses may be obtained by calling (800)
347-4246.
INITIAL AND SUBSEQUENT 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>
HOW TO PURCHASE ADDITIONAL SHARES. Additional shares may be purchased directly
through AIM Distributors or through any dealer who has entered into an agreement
with AIM Distributors. 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. Notwithstanding the foregoing, the minimum subsequent purchases of shares
of AIM Small Cap Opportunities Fund is $1,000. 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.
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.
BY AIM BANK CONNECTION(SM): To purchase additional shares by electronic funds
transfer, please contact the Client Services Department of AFS for details.
- --------------------------------------------------------------------------------
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 FLEX 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 ASIAN GROWTH FUND, AIM BALANCED FUND, AIM BASIC
VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND,
AIM CONSTELLATION FUND, AIM DEVELOPING MARKETS FUND, AIM DOLLAR FUND, AIM
EMERGING MARKETS FUND, AIM EMERGING MARKETS DEBT FUND, AIM EUROPEAN DEVELOPMENT
FUND, AIM EUROPE GROWTH FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL SERVICES FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL GROWTH &
INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL
INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND, AIM GLOBAL TELECOMMUNICATIONS
FUND, AIM GLOBAL TRENDS FUND, AIM GLOBAL UTILITIES FUND, AIM HIGH INCOME
MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM INTERNATIONAL GROWTH FUND,
AIM JAPAN GROWTH FUND, AIM LATIN AMERICAN GROWTH FUND, AIM LIMITED MATURITY
TREASURY FUND, AIM MID CAP EQUITY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL
BOND FUND, AIM NEW PACIFIC GROWTH FUND, AIM SELECT GROWTH FUND, AIM SMALL CAP
GROWTH FUND, AIM SMALL CAP OPPORTUNITIES FUND, AIM STRATEGIC INCOME FUND,AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND, AIM TAX-FREE
INTERMEDIATE FUND, AIM VALUE FUND, AIM WEINGARTEN FUND and AIM WORLDWIDE GROWTH
FUND, collectively (other than AIM AGGRESSIVE GROWTH FUND, AIM LIMITED MATURITY
TREASURY FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND
and AIM TAX-FREE INTERMEDIATE 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 DOLLAR FUND and AIM TAX-EXEMPT CASH
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 (the
"Class C shares") of the Multiple Class Funds which offer such classes are sold
at net asset value subject to a contingent deferred sales charge payable upon
certain redemptions. Class B shares of AIM DOLLAR FUND, however, may be acquired
only by an exchange of shares of another AIM Fund. 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
A-2
<PAGE> 13
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 Multiple Class Funds sometimes are referred to herein as the
"AIM/GT Funds": AIM AMERICA VALUE FUND, AIM DEVELOPING MARKETS FUND, AIM DOLLAR
FUND, AIM EMERGING MARKETS FUND, AIM EMERGING MARKETS DEBT FUND, AIM EUROPE
GROWTH FUND, AIM GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL
FINANCIAL SERVICES FUND, AIM GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH &
INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL INFRASTRUCTURE FUND, AIM
GLOBAL RESOURCES FUND, AIM GLOBAL TELECOMMUNICATIONS FUND, AIM GLOBAL TRENDS
FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM LATIN AMERICAN
GROWTH FUND, AIM MID CAP GROWTH FUND, AIM NEW PACIFIC GROWTH FUND, AIM SMALL CAP
EQUITY FUND, AIM STRATEGIC INCOME FUND and AIM WORLDWIDE GROWTH FUND.
The following tables show the sales charge and dealer concession at various
investment levels for the AIM Funds.
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 BASIC VALUE FUND, AIM ASIAN
GROWTH FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND,
AIM CONSTELLATION FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM EUROPE GROWTH FUND,
AIM GLOBAL UTILITIES FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM INTERNATIONAL
EQUITY FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM MID CAP
EQUITY FUND, AIM MONEY MARKET FUND, AIM NEW PACIFIC GROWTH FUND, AIM SELECT
GROWTH FUND, AIM SMALL CAP GROWTH FUND, AIM SMALL CAP OPPORTUNITIES FUND, AIM
VALUE FUND, AIM WEINGARTEN FUND and AIM WORLDWIDE GROWTH 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(1) PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <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>
- ---------------
(1) AIM Small Cap Opportunities Fund will not accept any single purchase in
excess of $250,000.
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."
A-3
<PAGE> 14
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 ADVISOR REAL ESTATE FUND,
AIM BALANCED FUND, AIM DEVELOPING MARKETS FUND, AIM EMERGING MARKETS FUND, AIM
EMERGING MARKETS DEBT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL SERVICES FUND, AIM
GLOBAL GOVERNMENT INCOME FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE
FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL
RESOURCES FUND, AIM GLOBAL TELECOMMUNICATIONS FUND, AIM GLOBAL TRENDS FUND, AIM
HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM LATIN AMERICAN GROWTH FUND, AIM MUNICIPAL BOND
FUND, AIM STRATEGIC INCOME FUND and AIM TAX-EXEMPT BOND FUND OF CONNECTICUT.
<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> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are the Class A shares of each of AIM LIMITED MATURITY TREASURY
FUND and AIM TAX-FREE INTERMEDIATE 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> <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 of 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-4
<PAGE> 15
a contingent deferred sales charge, for all AIM Funds other than Class A shares
of each of AIM LIMITED MATURITY TREASURY FUND and AIM TAX-FREE INTERMEDIATE FUND
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 Class A shares of AIM LIMITED MATURITY TREASURY FUND,
and in an amount up to 0.25% of such purchases of Class A shares of AIM TAX-FREE
INTERMEDIATE FUND.
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 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 of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. 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. These commissions
on Class C shares are not paid on sales to investors exempt from the CDSC,
including Class C shareholders of record on April 30, 1995 who purchase
additional shares in any of the Funds on or after May 1, 1995, and in
circumstances where AIM Distributors grants an exemption on particular
transactions.
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 regular trading on 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. Certain financial
institutions (or their designees) may be authorized to accept purchase orders on
behalf of the AIM Funds. Orders received by authorized institutions (or their
designees) before NYSE Close will be deemed to have been received by an AIM Fund
on such day and will be effected that day, provided that such orders are
transmitted to the Transfer Agent prior to the time set for receipt of such
orders. It is the responsibility of the dealer/financial institution to ensure
that all orders are transmitted on a timely basis to the Transfer Agent. Any
loss resulting from the dealer/financial institution's failure to submit an
order within the prescribed time frame will be borne by that dealer/financial
institution. 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 generally 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."
A-5
<PAGE> 16
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 other distributions)
eight years from the end of the calendar month in which the purchase of
Class B shares was made. Class B shares of AIM GLOBAL TRENDS FUND that were
outstanding on May 29, 1998 and which are continuously held by the
shareholder, automatically convert to Class A shares of AIM GLOBAL TRENDS
FUND seven years from the end of the calendar month in which the purchase
of such Class B shares was made. If a shareholder exchanges Class B shares
of AIM GLOBAL TRENDS FUND that were outstanding on, and continuously held
since, May 29, 1998 for Class B shares of any other AIM Fund, such Class B
shares will be subject to the eight year conversion feature applicable to
Class B shares of all other AIM Funds. 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."
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; however, they are subject to the other fees and expenses described
in the prospectus for AIM MONEY MARKET FUND.
TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon 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 MONEY MARKET FUND, AIM TAX-EXEMPT CASH
FUND and AIM DOLLAR 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 Class A 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 and AIM DOLLAR 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.
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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, Roth 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"), or Savings Incentive Match
Plans for Employees IRA ("SIMPLE IRA") where the employer has notified AIM
Distributors in writing that all of its related employee SEP, SARSEP or
SIMPLE IRA accounts should be linked;
- 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 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 DOLLAR FUND, AIM TAX-EXEMPT CASH 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 gain 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 with 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.
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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.
Any investor who purchased shares of the AIM/GT Funds pursuant to a LOI
entered into prior to June 1, 1998 may continue to make such purchases under the
terms of such LOI. See "How to Purchase and Redeem Shares" in the Statement of
Additional Information.
(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 DOLLAR FUND, AIM TAX-EXEMPT CASH 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 DOLLAR FUND, AIM TAX-EXEMPT CASH
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
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 other 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 Class A 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 Shareholder 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; (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; (i) any employee or any
member of the immediate family (including spouse, children, parents and parents
of spouse) of any employee, of Triformis Inc.; (j) shareholders of the AIM/GT
Funds as of April 30, 1987 who since that date continually have owned shares of
one or more of the AIM/GT Funds; and (k) certain former AMA Investment Advisers'
shareholders who became shareholders of the AIM Global Health Care Fund in
October 1989, and who have continuously held shares in the AIM/GT Funds since
that time.
In addition, shares of any AIM Fund (except AIM Small Cap Opportunities 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
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<PAGE> 19
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 under the caption "Exchange Privilege") 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 Class A shares of AIM LIMITED MATURITY TREASURY FUND
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 sales of Class A shares of
AIM WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such
trusts; and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided: (a) that the investment in Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND is effected within 30 days of such
redemption or repurchase; and (b) that the unit holder or his dealer provides
AIM Distributors with a letter which: (i) identifies the name, address and
telephone number of the dealer who sold to the unit holder the units to be
redeemed or repurchased; and (ii) states that the investment in Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND is being funded exclusively by
the proceeds from the redemption or repurchase of units of such trusts.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns shares which are not subject to a contingent deferred sales charge, can
arrange for monthly, quarterly or annual amounts (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
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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 to 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, and AIM Cash
Reserve Shares of AIM MONEY MARKET 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 regular systematic
investments may establish an Automatic Investment Plan. Under this plan
withdrawal is made on the shareholder's bank account in the amount specified by
the shareholder (minimum $50 per investment, per account) and on a day or
date(s) specified by the shareholder. The proceeds are invested in shares of the
designated AIM Fund at the applicable offering price determined on the date of
the withdrawal. An Automatic Investment Plan may be discontinued upon 10 days'
prior notice to the Transfer Agent or AIM Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; 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. Sale charges may apply, as described under the caption
"Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM
TAX-EXEMPT CASH 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; Roth IRA plans;
SARSEP plans; SEP plans; and SIMPLE IRA 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).
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders with a minimum account balance of $5,000 to
establish and maintain an allocation across a range of AIM Funds. The Program
automatically rebalances holdings of AIM Funds to the established allocation on
a periodic basis. Under the Program, a shareholder may predesig-
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nate, on a percentage basis, how the total value of his or her holdings in a
minimum of two, and a maximum of ten, AIM Funds ("Personal Portfolio") is to be
rebalanced on a quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares
of one or more AIM Funds in the shareholder's Personal Portfolio for shares of
the same class(es) of one or more other AIM Funds in the shareholder's Personal
Portfolio. See "Exchange Privilege." If shares of the AIM Fund(s) in a
shareholder's Personal Portfolio have appreciated during a rebalancing period,
the Program will result in shares of AIM Fund(s) that have appreciated most
during the period being exchanged for shares of AIM Fund(s) that have
appreciated least. SUCH EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A
SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE MAY BE, FOR FEDERAL INCOME
TAX PURPOSES. See "Dividends, Distributions and Tax Matters -- Dividends and
Distributions." Participation in the Program does not assure that a shareholder
will profit from purchases under the Program nor does it prevent or lessen
losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio
on the 28th day of the last month of the period chosen (or the immediately
preceding business day if the 28th is not a business day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular AIM Fund would be 2% or less.
In predesignating percentages, shareholders must use whole percentages and
totals must equal 100%. Shareholders participating in the Program may not
request issuance of physical certificates representing an AIM Fund's shares. The
AIM Funds and AIM Distributors reserve the right to modify, suspend, or
terminate the Program at any time on sixty (60) days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which AIM Funds
or what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Shareholders participating in
the Program may also participate in the Right of Accumulation, LOI, and
Automatic Investment Plan. Certain dealers/financial institutions may charge a
fee for establishing accounts relating to the Program. Investors should contact
their dealers/financial institutions or AIM Distributors for more information.
A-11
<PAGE> 22
- --------------------------------------------------------------------------------
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, 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 INCOME AIM LIMITED MATURITY TREASURY FUND
CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR INTERNATIONAL AIM GLOBAL INFRASTRUCTURE AIM TAX-FREE INTERMEDIATE FUND
VALUE FUND -- CLASS A FUND -- CLASS A -- CLASS A
AIM ADVISOR LARGE CAP AIM GLOBAL RESOURCES NO LOAD FUNDS:
VALUE FUND -- CLASS A FUND -- CLASS A --------------
AIM ADVISOR MULTIFLEX AIM GLOBAL TELECOMMUNICATIONS AIM MONEY MARKET FUND
FUND -- CLASS A FUND -- CLASS A -- AIM CASH RESERVE SHARES
AIM ADVISOR REAL ESTATE AIM GLOBAL TRENDS AIM TAX-EXEMPT CASH FUND -- CLASS A
FUND -- CLASS A FUND -- CLASS A AIM DOLLAR FUND -- CLASS A
AIM AGGRESSIVE GROWTH AIM GLOBAL UTILITIES
FUND -- CLASS A FUND -- CLASS A
AIM ASIAN GROWTH AIM HIGH INCOME MUNICIPAL
FUND -- CLASS A FUND -- CLASS A
AIM BALANCED FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A
AIM BASIC VALUE AIM INCOME FUND -- CLASS A
FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT
AIM BLUE CHIP FUND -- CLASS A FUND -- CLASS A
AIM CAPITAL DEVELOPMENT AIM INTERNATIONAL EQUITY
FUND -- CLASS A FUND -- CLASS A
AIM CHARTER FUND -- CLASS A AIM INTERNATIONAL GROWTH
AIM CONSTELLATION FUND -- CLASS A
FUND -- CLASS A AIM JAPAN GROWTH FUND -- CLASS A
AIM DEVELOPING MARKETS AIM LATIN AMERICAN GROWTH
FUND -- CLASS A FUND -- CLASS A
AIM EMERGING MARKETS AIM MID CAP EQUITY
FUND -- CLASS A FUND -- CLASS A
AIM EMERGING MARKETS DEBT AIM MONEY MARKET
FUND -- CLASS A FUND -- CLASS A
AIM EUROPE GROWTH AIM MUNICIPAL BOND
FUND -- CLASS A FUND -- CLASS A
AIM EUROPEAN DEVELOPMENT AIM NEW PACIFIC GROWTH
FUND -- CLASS A FUND -- CLASS A
AIM GLOBAL AGGRESSIVE GROWTH AIM SELECT GROWTH FUND -- CLASS A
FUND -- CLASS A AIM SMALL CAP GROWTH
AIM GLOBAL CONSUMER PRODUCTS FUND -- CLASS A
AND SERVICES FUND -- CLASS A AIM SMALL CAP OPPORTUNITIES
AIM GLOBAL FINANCIAL SERVICES FUND -- CLASS A
FUND -- CLASS A AIM STRATEGIC INCOME
AIM GLOBAL GOVERNMENT INCOME FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM GLOBAL GROWTH OF CONNECTICUT -- CLASS A
FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM GLOBAL GROWTH & AIM WEINGARTEN FUND -- CLASS A
INCOME FUND -- CLASS A AIM WORLDWIDE GROWTH
AIM GLOBAL HEALTH CARE FUND -- CLASS A
FUND -- CLASS A
</TABLE>
A-12
<PAGE> 23
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) 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
(AND CLASS A SHARES OF AIM DOLLAR FUND); (II) LOWER LOAD FUND SHARE PURCHASES OF
$1,000,000 OR MORE AND AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND, AIM
TAX-EXEMPT CASH FUND AND AIM DOLLAR 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 CHARGES ON THE LOAD FUND SHARES ACQUIRED, THE 18-MONTH
PERIOD SHALL BE COMPUTED FROM THE DATE OF SUCH EXCHANGE; (iii) Class A shares
may be exchanged for Class A shares; (iv) Class B shares may be exchanged only
for Class B shares; (v) Class C shares may only be exchanged for Class C shares;
and (vi) AIM Cash Reserve Shares of AIM MONEY MARKET FUND may not be exchanged
for Class A, Class B or Class C shares of AIM MONEY MARKET FUND. Class C shares
of AIM Small Cap Opportunities Fund are currently not available.
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,
apply if No Load shares were Offering 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 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 busi-
A-13
<PAGE> 24
ness 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.
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 or 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 acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer/financial institution 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.
A-14
<PAGE> 25
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 attributable to Class B shares or (iii) on amounts that
represent capital appreciation in the shareholder's account above the purchase
price of the Class B shares.
<TABLE>
<CAPTION>
YEARS 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 other 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 B shares that are acquired during a tender offer by AIM Floating Rate
Fund ("Floating Rate Fund") pursuant to an exchange will be subject, in lieu of
the contingent deferred sales charge described above, to a contingent deferred
sales charge equivalent to the early withdrawal charge on the shares of the
Floating Rate Fund. For purposes of computing such early withdrawal charge, the
holding period of Class B shares being redeemed will include the holding period
of the Floating Rate Fund shares prior to exchange.
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 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).
Waivers. 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 IRAs, 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 last 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 in a particular AIM Fund;
A-15
<PAGE> 26
(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;
(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 the 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 gains distributions) or the total original cost of such shares. In
determining whether a contingent deferred sales charge is payable, and the
amount of any such charge, shares not subject to the contingent deferred sales
charge are redeemed first (including shares purchased by reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-MONTH PERIOD, (i) shares of any
Load Fund or AIM Cash Reserve shares of AIM MONEY MARKET FUND or Class A shares
of AIM DOLLAR 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 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: (l)
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.
Shareholders who purchased $500,000 or more of Class A shares of the AIM/GT
Funds prior to June 1, 1998 are entitled to certain waivers of the contingent
deferred sales charge on those shares as described in the Statement of
Additional Information under "How to Purchase and Redeem Shares."
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, partnership, 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 as 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.
A-16
<PAGE> 27
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
this 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 transferred electronically or wired
to the pre-authorized bank account; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the shares to be
redeemed are not in certificate form; (d) the person requesting the redemption
can provide proper identification information, and (e) the proceeds of the
redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM Distributors has made arrangements with
certain dealers and investment advisors to accept telephone instructions for the
redemption of shares. AIM Distributors reserves the right to impose conditions
on these dealers and investment advisors, including the condition that they
enter into agreements (which contain additional conditions with respect to the
redemption of shares) with AIM Distributors. The Transfer Agent and AIM
Distributors will not be liable for any loss, expense or cost arising out of any
telephone redemption request effected in accordance with the authorization set
forth in the appropriate form 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 taxpayer identification number and current
address, and mailings of confirmations promptly after the transaction.
EXPEDITED REDEMPTIONS (AIM Cash Reserve shares of 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 Cash Reserve Shares of AIM
MONEY MARKET FUND and Class A shares of AIM DOLLAR FUND). After completing the
appropriate authorization form, shareholders may use checks to effect
redemptions from AIM TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM MONEY
MARKET FUND and Class A shares of AIM DOLLAR 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 on 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 or certain financial institutions (or their designees) who
are authorized to accept redemption orders on behalf of the AIM Funds, provided
that such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders, 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/financial institution to
ensure that all orders are transmitted on a timely basis. Any resulting loss
from the dealer/financial institution's failure to submit a request for
redemption within the prescribed time frame will be borne by that
dealer/financial institution. 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 made 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 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
A-17
<PAGE> 28
exchange and telephone redemption authorization forms; (7) changes in previously
designated wiring or electronic funds transfer 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 in defined in rules adopted by the Securities and
Exchange Commission (the "SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the NYSE Medallion Signature Program,
provided that in either event, the amount of the transaction involved does not
exceed the surety coverage amount indicated on the medallion. For information
regarding whether a particular institution or organization qualifies as an
"eligible guarantor institution," an investor should contact the Client Services
Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY). Within ninety (90) days of a
redemption, a shareholder may invest all or part of the redemption proceeds in
Class A shares of any AIM Fund 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 Class A shares of either AIM LIMITED MATURITY
TREASURY FUND or AIM TAX-FREE INTERMEDIATE FUND, 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 will not alter the taxes due on any
capital gains, except under the circumstances described below. 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 shares of the same fund, 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 the 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
ninety (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.
A-18
<PAGE> 29
- --------------------------------------------------------------------------------
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 defining 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 HIGH INCOME MUNICIPAL FUND, AIM
MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT and AIM TAX-FREE
INTERMEDIATE FUND 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. Securities listed primarily on foreign exchanges may trade
on days when the NYSE is closed (such as a Saturday). As a result, the net asset
value of a fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that fund.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund generally pays dividends and distributions as 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 FLEX FUND..................... declared and paid quarterly quarterly 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 ASIAN GROWTH FUND..................... declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BASIC VALUE FUND...................... declared and paid annually 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 DEVELOPING MARKETS FUND............... declared and paid annually annually annually
AIM DOLLAR FUND........................... declared daily; paid monthly annually annually
AIM EMERGING MARKETS FUND................. declared and paid annually annually annually
AIM EMERGING MARKETS DEBT FUND............ declared and paid monthly annually annually
AIM EUROPE GROWTH FUND.................... declared and paid annually annually annually
AIM EUROPEAN DEVELOPMENT FUND............. declared and paid annually annually annually
AIM GLOBAL AGGRESSIVE GROWTH FUND......... declared and paid annually annually annually
AIM GLOBAL CONSUMER PRODUCTS AND SERVICES
FUND.................................... declared and paid annually annually annually
AIM GLOBAL FINANCIAL SERVICES FUND........ declared and paid annually annually annually
</TABLE>
A-19
<PAGE> 30
<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 GLOBAL GOVERNMENT INCOME FUND......... declared and paid monthly annually annually
AIM GLOBAL GROWTH FUND.................... declared and paid annually annually annually
AIM GLOBAL GROWTH & INCOME FUND........... declared and paid quarterly annually annually
AIM GLOBAL HEALTH CARE FUND............... declared and paid annually annually annually
AIM GLOBAL INCOME FUND.................... declared daily; paid monthly annually annually
AIM GLOBAL INFRASTRUCTURE FUND............ declared and paid annually annually annually
AIM GLOBAL RESOURCES FUND................. declared and paid annually annually annually
AIM GLOBAL TELECOMMUNICATIONS FUND........ declared and paid annually annually annually
AIM GLOBAL TRENDS FUND.................... declared and paid annually annually annually
AIM GLOBAL UTILITIES FUND................. declared daily; paid monthly annually annually
AIM HIGH INCOME MUNICIPAL FUND............ declared daily; paid monthly 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 INTERNATIONAL GROWTH FUND............. declared and paid annually annually annually
AIM JAPAN GROWTH FUND..................... declared and paid annually annually annually
AIM LATIN AMERICAN GROWTH FUND............ declared and paid annually annually annually
AIM LIMITED MATURITY TREASURY FUND........ declared daily; paid monthly annually annually
AIM MID CAP EQUITY FUND................... declared and paid annually 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 NEW PACIFIC GROWTH FUND............... declared and paid annually annually annually
AIM SELECT GROWTH FUND.................... declared and paid annually annually annually
AIM SMALL CAP GROWTH FUND................. declared and paid annually annually annually
AIM SMALL CAP OPPORTUNITIES FUND.......... declared and paid annually annually annually
AIM STRATEGIC INCOME FUND................. declared and 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 FUND............ declared daily; paid monthly annually annually
AIM VALUE FUND............................ declared and paid annually annually annually
AIM WEINGARTEN FUND....................... declared and paid annually annually annually
AIM WORLDWIDE GROWTH 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. Each AIM Fund may make
additional distributions, if necessary, to avoid a non-deductible 4% federal
excise tax on certain undistributed income and capital gain (the "Excise Tax").
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, (iii) dividends and distributions attributable
to Class A shares may not be reinvested in 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 of an AIM Fund are expected to be
lower than dividends for Class A shares of that fund or AIM Cash Reserve Shares
because of higher distribution fees paid by Class B and Class C shares.
Dividends on all shares may also be affected by other class-specific expenses.
A-20
<PAGE> 31
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 continue 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 tax
on net investment income, net capital gains and net gains from foreign currency
transactions, if any, that are distributed to its shareholders. Each fund, for
all federal tax purposes (including 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 that are applicable to its operations.
TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS -- GENERAL. Because each AIM Fund
intends to distribute to its shareholders substantially all of its net
investment income, net realized capital gains and net gains from foreign
currency transactions, if any, it is not expected that any such fund will be
required to pay any federal income tax on amounts that it has distributed. Each
AIM Fund also intends to meet the distribution requirements of the Code to avoid
imposition of the Excise Tax. Nevertheless, shareholders normally are subject to
federal income tax, 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 fund shares, except for "exempt-interest dividends" paid by
AIM HIGH INCOME MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND
FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE FUND
(the "Tax-Exempt Funds"), which are exempt from federal income tax. With respect
to tax-exempt shareholders, dividends and distributions from the AIM Funds are
not subject to federal income taxation to the extent permitted under the
applicable tax exemption.
Dividends from an AIM Fund's net investment income, net short-term capital
gain and net gains from certain foreign currency transactions are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) are taxable as long-term capital gains,
regardless of the length of time the shareholder held his shares. Under the
Taxpayer Relief Act of 1997, different maximum tax rates apply to a
non-corporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on capital assets held for more than one year but not more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months. An AIM Fund may
divide each net capital gain distribution into a 28% rate gain distribution and
a 20% rate gain distribution (in accordance with its holding periods for the
securities it sold that generated the distributed gain), in which event its
shareholders must treat those portions accordingly; thus, the relevant holding
period is determined by how long the fund has held the securities on which the
gain was realized, not by how long a shareholder has held fund shares. Recent
legislation provides that a maximum tax rate of 20% (10% for taxpayers in the
15% marginal tax bracket) will apply to gain recognized after December 31, 1997
on capital assets held for more than one year.
Dividends paid by a fund (but not other 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
INTERNATIONAL VALUE FUND, AIM ADVISOR REAL ESTATE FUND, AIM ASIAN GROWTH FUND,
AIM DEVELOPING MARKETS FUND, AIM DOLLAR FUND, AIM EMERGING MARKETS FUND, AIM
EMERGING MARKETS DEBT FUND, AIM EUROPEAN DEVELOPMENT FUND, AIM EUROPE GROWTH
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GOVERNMENT INCOME FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL TRENDS FUND, AIM HIGH
YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL
EQUITY FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM LATIN
AMERICAN GROWTH FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MONEY MARKET FUND,
AIM NEW PACIFIC GROWTH FUND, AIM STRATEGIC INCOME FUND or any of the Tax-Exempt
Funds 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 dividends and
distributions paid during the year. The information regarding capital gain
distributions will designate the portions thereof subject to the different
maximum rates of tax applicable to non-corporate taxpayers' net capital gain
indicated above. Certain dividends and distributions 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 them 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.
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.
A-21
<PAGE> 32
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
TAXABLE DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, INDIVIDUALS AND
CERTAIN OTHER NON-CORPORATE 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 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. Under applicable treaty law, residents of
treaty countries may qualify for a reduced rate of withholding or a withholding
exemption.
DIVIDENDS AND 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
STATEMENTS OF ADDITIONAL INFORMATION. INVESTORS SHOULD CONSULT THEIR TAX
ADVISORS BEFORE INVESTING.
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 affect the amount of social security and railroad retirement
benefits subject to federal income tax, may affect the deductibility of interest
on certain indebtedness of a shareholder, and may have other collateral federal
income tax consequences. In addition, 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 certain shareholders; each Tax-Exempt Fund may invest up to
20% of its net assets in such securities and 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 that are taxable, but
will endeavor to avoid investments that would result in taxable dividends. The
percentage of dividends that constitutes exempt-interest dividends, and the
percentage thereof (if any) that constitutes items of tax preference, will be
determined annually. These percentages 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 fund shares.
Distributions of net capital gain will be taxable as long-term capital gains,
whether received in cash or additional fund shares and regardless of the length
of time a 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 BASIC VALUE FUND, AIM DOLLAR FUND, AIM GLOBAL GOVERNMENT INCOME FUND, AIM
GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HIGH INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP EQUITY FUND,
AIM SMALL CAP GROWTH FUND, AIM STRATEGIC INCOME FUND -- SPECIAL TAX INFORMATION.
Certain states exempt from income taxes dividends paid by mutual funds
attributable to interest on U.S. Treasury and certain other U.S. government
obligations. Investors should consult with their own tax advisors concerning the
availability of such exemption.
AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ASIAN GROWTH FUND, AIM DEVELOPING
MARKETS FUND, AIM EMERGING MARKETS FUND, AIM EUROPE GROWTH FUND, AIM EUROPEAN
DEVELOPMENT FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL CONSUMER
PRODUCTS AND SERVICES FUND, AIM GLOBAL FINANCIAL SERVICES FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM GLOBAL HEALTH CARE FUND, AIM
GLOBAL INCOME FUND, AIM GLOBAL INFRASTRUCTURE FUND, AIM GLOBAL RESOURCES FUND,
AIM GLOBAL TELECOMMUNICATIONS FUND, AIM GLOBAL UTILITIES FUND, AIM INTERNATIONAL
EQUITY FUND, AIM INTERNATIONAL GROWTH FUND, AIM JAPAN GROWTH FUND, AIM LATIN
AMERICAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND, AIM WORLDWIDE GROWTH
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 its shareholders credits
for foreign taxes paid. If a 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,
for any fund, such losses exceed other income during a taxable year, the fund
would not be able to pay ordinary income dividends for that year.
A-22
<PAGE> 33
- --------------------------------------------------------------------------------
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 HIGH INCOME
MUNICIPAL FUND, AIM MUNICIPAL BOND FUND, AIM LIMITED MATURITY TREASURY FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE
INTERMEDIATE FUND, for which The Bank of New York, 90 Washington Street, 11th
Floor, New York, New York 10286, serves as custodian. Chase Bank of Texas, N.A.,
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.
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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the AIM Funds, AIM
Management and its subsidiaries rely on both internal software systems as well
as external software systems provided by third parties. Many software systems in
use today are unable to distinguish the year 2000 from the year 1900. This
defect if not cured will likely adversely affect the services that AIM
Management, its subsidiaries and other service providers to the AIM Funds
provide the AIM Funds and their shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and Phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be viewed to confirm year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the AIM Funds will not otherwise be adversely affected by the year 2000
issue.
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.
A-23
<PAGE> 34
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>
<S> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Give Social Security GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for 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-07/98
B-1
<PAGE> 35
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. 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").
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 redemptions must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "How to Redeem
Shares -- Redemptions by Mail").
MCF-07/98
B-2
<PAGE> 36
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
Investment Manager
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Sub-Advisor
INVESCO (NY), Inc.
50 California Street, 27th Floor
San Francisco, CA 94111
Principal Underwriter
A I M Distributors, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Independent Accountants
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
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.
DOL-PRO-1
